'Big Short' Investor's Billion Dollar Bet Raises Huge Red Flags

Michael Burry, a well-known investor and hedge-fund manager raised red flags with his latest investments.

Burry, who correctly predicted the 2008 market crash and was the subject of the book The Big Short by Michael Lewis, revealed his latest investments in a new filing with the Securities and Exchange Commission (SEC) on Monday. The 13F filing showed that his fund, Scion Asset Management, bet big on stocks that would benefit from a Wall Street crash.

The investments come as many Americans remain uncertain about the country's economic prospects. High inflation and home prices, as well as recession concerns, have plagued the economy in the years since the COVID-19 pandemic, which caused a massive, yet temporary, global economic downturn in 2020.

According to the 13F filing, Burry has bought put options valued at $738.8 million in NASDAQ 100 (QQQ), and $886.5 million in S&P 500 (SPY). A put option gives the buyer an option to sell "a specified amount of an underlying security" at a specific price in a specific time frame, according to Investopedia.

Put options become more valuable as the value of the stock decreases, and they lose value when the value of the stock increases, according to Investopedia.

By investing $1.6 billion into these two put options, Burry is essentially betting $1.6 billion on these funds, which track two of the largest U.S. stock indexes, decreasing in value over the coming months, which could be an indicator of an economic downturn.

Burry has not publicly commented on why he bought he bought these put options. Newsweek reached out to Scion Asset Management for comment via email.

The U.S. economy has seen a tumultuous few years as authorities attempt to navigate a recovery from the COVID-19 pandemic. High inflation, gas prices, and housing prices fueled economic uncertainty. The U.S. treasury has implemented interest rate hikes aimed at reducing inflation.

According to U.S. Bureau of Labor Statistics data, the inflation rate has declined since the first interest rate hike was implemented in March 2022. At that point, the U.S. inflation rate was 8.5 percent. That figure had dropped to 3.2 percent in July 2023.

There have been other troubling signs for the U.S. economy. Rating agency Fitch announced earlier this month that the country's credit score would be downgraded from AAA to AA+. In the spring, the collapse of both the Silicon Valley Bank and First Republic Bank led to concerns about the economy as well.

According to CNN, Burry urged his followers on social media platform X, formerly known as Twitter, to "sell" assets in January. By March, however, he wrote that he "was wrong to say sell."

Both funds have increased in value this year. Stocks of QQQ currently sell at $366.60 per share, up more than 38 percent from January 1, when they were valued at $264.48 per share, according to MarketWatch.

Meanwhile, S&P 500 stock has increased from $380.82 to $442.995 per share since January, equating to a 16 percent increase, according to MarketWatch.