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‘The Big Short’ investor Michael Burry warns the stock-market boom reminds him of the dot-com bubble – and rings the alarm on options mania

Michael Burry big short
Michael Burry.

  • Michael Burry said the recent surge in stocks reminded him of the dot-com bubble.
  • “The Big Short” investor compared the options-trading boom to debt-fueled speculation in the 1920s.
  • Burry has warned several times that a historic market crash is coming.
  • See more stories on Insider’s business page.

Michael Burry said the current market boom reminds him of the dot-com bubble, and compared the current options-trading frenzy to the rampant speculation that precipitated the Great Depression, in a flurry of recent tweets that have since been deleted.

The Scion Asset Management chief tweeted a screenshot of Financialweb.com’s stock chart. The defunct company behind Stock Detective and other financial-information websites saw its share price nosedive from a high of $28 to a fraction of a cent following the dot-com crash.

“A very common chart back in the day,” Burry said. “Looks vaguely familiar.”

Moreover, the hedge fund manager compared the bull market during the 15 years to 2000 to the run up in stocks over the past 15 years. He highlighted a 94% correlation between the Nasdaq 100’s performance in each of those periods, and a 95% correlation for the S&P 500 index.

The Scion chief also drew a parallel between the surge in people trading options on meme stocks such as AMC Entertainment, and the mass speculation that preceded the Wall Street Crash of 1929. He juxtaposed an article about the options mania with a quote by a statistician named Leroy Peavey in November 1929. Peavey blamed the market crash that year on a wave of leveraged speculation that pulled in “elevator boys, typewriter girls, and even schoolchildren.”

Burry is best known for predicting the collapse of the US housing bubble in the mid-2000s, and making a fortune by betting on a spike in subprime-mortgage defaults. His massive wager was chronicled in the book and the movie “The Big Short.”

The investor also bought a stake in GameStop and wrote several letters to the video-game retailer’s board in 2019, laying the groundwork for the short squeeze on the stock this year and the broader meme-stock trend. He recently tweeted a picture of a subpoena he received from the Securities and Exchange Commission, ordering him to cooperate with the regulator’s investigation into the GameStop saga.

Burry has been sounding the alarm over Twitter for several months. He’s warned dangerous levels of speculation in meme stocks, cryptocurrencies, and other assets will lead to the “mother of all crashes.” Scion was betting against Elon Musk’s Tesla and Cathie Wood’s Ark Invest as of June 30.

Read the original article on Business Insider

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