‘Big Short’ Michael Burry warns the S&P 500 is overvalued, about to drop

• Michael Burry warned that US stocks are grossly overvalued and their price could plummet.
• Investor “The Big Short” noted that the price-to-sales ratio of the S&P 500 has almost doubled in 10 years.
• Burry has been sounding the alarm about a historic market bubble and predicting an epic crash.

Michael Burry, the investor of “The Big Short” fame, warned that US stocks are grossly overvalued and about to plunge into a tweet now deleted on Monday night.

“Almost perched with a multiple problem,” Burry tweeted, attaching a chart tracking the price-to-sales ratio of the equal-weighted S&P 500 index. The ratio was below 1.0 for most of the 1990s and 2000s. , but has nearly doubled in the past decade to north of the current 1.9, the chart shows.

Presumably, Burry wanted to show that the index trades at almost twice the earnings of its components, indicating that the valuation multiples of America’s largest public companies have stretched to unsustainable levels.

The investor may have used the price-to-sales ratio because it is more speculative than the price-to-earnings or price-to-book ratio. Compare a company’s market capitalization to its revenue, rather than its profit or net assets.

Burry is best known for his huge bet against the US housing bubble of the mid-2000s, which was immortalized in the book and movie “The Big Short.” He also paved the way for the meme stock craze by investing in GameStop before its stock skyrocketed in January 2021, and made high-profile bets against Elon Musk’s Tesla and Cathie Wood’s Ark Innovation ETF last year. last.

The head of Scion Asset Management has repeatedly sounded the alarm over excessive asset valuations and predicted a historic sell-off in the market, in deleted tweets over the past 18 months.

“The biggest speculative bubble of all time in all things,” Burry declared in June. He also predicted “the mother of all crashes” that month and warned that the market was “dancing on a knife edge” in February 2021.

Additionally, Burry warned in June 2021 that the prices of bitcoin, meme stocks and electric vehicle companies had been “driven by speculative fervor to insane heights from which the fall will be dramatic and painful.”

Here’s a screenshot of Burry’s now-deleted tweet:

Read more: The founder of a Michael Burry subreddit discusses the latest changes in ‘The Big Short’ investor’s portfolio and explains why it’s so important to follow his movements