Michael Burry of “Big Short” fame is betting more than 90% of his portfolio on a stock market crash, according to the latest SEC filings.

From CNN, “Michael Burry of ‘Big Short’ fame just bet $1.6 billion on a stock market crash”:

Michael Burry, the “Big Short” investor who became famous for correctly predicting the epic housing market collapse of 2008, has bet more than $1.6 billion on a Wall Street crash.

Burry is placing his short bets against the S&P 500 and Nasdaq 100, according to Securities Exchange Commission filings released Monday. Burry’s fund, Scion Asset Management, bought $866 million in put options (that’s the right to sell an asset at a certain price) against a fund that tracks the S&P 500 and $739 million in options of selling against a fund that tracks the Nasdaq 100.

Burry is using more than 90% of his portfolio to bet on a market decline, according to the filings.

[…] The S&P 500 and Nasdaq 100 have made big gains so far this year. They have increased by almost 16% and 38%, respectively.

From Newsweek, “Warren Buffett Selling $8B Worth of Stock Raises Fears of Falling Economy”:

Warren Buffett’s company, Berkshire Hathaway, sold a net $8 billion of shares between April and June, in a move that suggests the US economy is still not out of the doldrums, despite steadily rising inflation slower

According to Berkshire Hathaway’s second-quarter earnings, released earlier this month, the company sold nearly $13 billion in shares and bought less than $5 billion. The Nebraska investor’s company spent just $1.4 billion on buybacks, a modest sum for the stock market and far less than the $4 billion it spent in the first quarter.

[…] Buffett “has always acted as a trusted voice for the markets in turbulent times,” David Nicholas, chairman and founder of Nicholas Wealth Management, previously told Newsweek, commenting on sales of Berkshire Hathaway shares in the first quarter. “But this marks a significant change in his tone and stance towards US stocks.”

As a result of its share sales in the second quarter, Berkshire Hathaway swelled its cash pile by 13 percent to $147 billion between April and June.

“When a recession is around the corner, Buffett knows that cash is king, especially when he can earn a decent interest rate on it,” Steve H. Hanke, professor of applied economics, previously said at Johns Hopkins University, in Newsweek.

“Apparently, Buffett anticipates that the US economy is headed for troubled waters. I think he’s right,” Hanke, who served on President Ronald Reagan’s Council of Economic Advisers, told Newsweek on Wednesday.

“The money supply is fuel for the economy, and it has been contracting over the past year. Now, the rate of contraction is -3.6%/year, which we haven’t seen since 1938. Then significant changes in the money supply, the economy reverses course with a lag of 6-18 months. Currently, the economy is running on fumes and a 2024 recession is inevitable.”

[…] So what might Buffett see threatening the US economy that others don’t?

In May, Nicholas told Newsweek that “the three biggest risks for Buffett were China, US banking and commercial real estate. These are very real risks to economic growth, and just one would be enough to derail growth, but we’re dealing with all three at the same time.”

From MarketWatch, “Mortgage rates could hit 8%, economists say, citing worrisome sign not seen since Great Recession.”:

With mortgage rates firmly above 7%, home ownership has become very expensive. But will rates be even higher?

Three experts told MarketWatch that if the economy continues to show signs of strength and the US Federal Reserve raises its benchmark interest rate again, rates could rise to 8%.

High rates have already affected the US real estate market. Even homebuilders, which have seen strong demand from homebuyers in recent months, are reporting a drop in buyer traffic as these rising rates shake their customers.

[…] Currently, the spread between the 30-year fixed-rate mortgage and a 10-year Treasury bond is about 300 basis points, which is “high and very unusual,” he said.

Historically, the mortgage rate spread has stayed around this level only during periods of financial crisis such as the Great Recession or the recession of the early 1980s,” deRitis added. “The historical average is closer to 175 basis points”.

If the 10-year continues to rise — and the US Federal Reserve chooses to return to interest rates — it could go beyond 5%. If the spread remains elevated by 300 basis points, deRitis added, “a mortgage rate of 8% or more is a clear possibility in the near term.”

Several US banks have collapsed over the past year, including Bitcoin.com reported in July:

A regional US bank, Heartland Tri-State Bank, was shut down Friday by the Kansas Office of the State Bank Commissioner. [July 28].

[…] On March 10, Silicon Valley Bank was shut down by the California Department of Financial Protection and Innovation. On March 12, Signature Bank was shut down by the New York State Department of Financial Services. On May 1, the California Department of Financial Protection and Innovation shut down First Republic Bank. In addition, Silvergate Bank announced voluntary liquidation.

Does this sound like a strong economy to anyone?

The only aspect I can see is that the war in Ukraine, at the moment, seems to be hurting the EU economy (and that of Russia) more than the US.

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