Michael Burry, the hedge fund manager that inspired Martin Lewis’s book The Big Short, held more than $1.6bn in bets against the S&P 500 and Nasdaq 100 benchmarks at the end of Q2 following a blistering start to the year for US equities.
According to 13F filings, Burry’s firm Scion Asset Management held $886m of put options against the SPDR S&P 500 ETF (SPY) and separate put options with a notional value of $739m against the Invesco QQQ Trust ETF (QQQ) at the end of the last quarter.
Given regulatory filings do not require disclosure of option strikes or purchase prices, the notional value of the puts may not be what Scion originally paid to enter the position or their current value. The filing also does not disclose precisely when the firm bought the put contracts during the quarter.
Burry’s recent bets come after he took to Twitter at the end of March to say he was wrong to tell investors to “sell” at the start of the year.
“Going back to the 1920s, there has been no [buy the f****** dip] generation like you. Congratulations,” Burry said. “I was wrong to say sell.”
However, his recent positioning indicates a return to the sentiment he expressed in January, albeit with another half year of stellar broad market returns to support the view of investors being overly speculative.
Markets have priced in the possibility a ‘soft landing’, US inflation reducing at a consistent pace and the Federal Reserve eyeing interest rate cuts in H1 2024; a combination which has seen the S&P 500 and Nasdaq 100 rally 17.4% and 40% so far in 2023, respectively.
A large part of these returns owes to the recovery of the large cap tech names ailed in 2022 hawkish monetary policy and market volatility, with the US ‘magnificent seven’ megacaps adding $3.6trn in combined market cap in H1.
This surge prompted only the third ever ‘special rebalance’ of the Nasdaq 100 to be conducted on 24 June, which saw the weight of the seven-strong group chopped from 56% to 44% of the headline tech index.
Burry’s recent allocations are not the first time the Scion founder has bet against over-exuberance in tech names in recent years.
Filings at the end of Q2 2021 revealed the firm had taken out a $31m position against the ARK Innovation ETF (ARKK). In 2021 starting 1 March, ARKK fell 48.6%.
Outside of large cap US indices, Scion’s recent 13-F filing revealed it had liquidated its positions in Chinese eCommerce firms Alibaba and JD.com as well as Q1 bets on US regional banks including PacWest and Western Alliance Bancorp.
The firm also increased its stake in online luxury goods market RealReal and bought 10,000 shares of the iShares MSCI Japan ETF (EWJ).