Michael Burry has closed his Scion Asset Management fund, launched a Substack newsletter and in a rare interview with Michael Lewis warned the market may face a prolonged downturn driven not just by froth—particularly around AI—but by a structural shift toward passive investing (he says over half of assets are passive and under 10% are long-term active managers), which could make declines broad and cascading rather than sector-specific. Burry compared current AI enthusiasm to the dot‑com bubble and flagged large AI capex and aggressive accounting (lengthening chip/server useful lives to reduce depreciation) as risks; he said these dynamics and the investor pressures he experienced during his mortgage‑CDS trade are why he exited. The piece notes practical defensive moves for investors—shifting to equal‑weighted S&P strategies and trimming extreme multi‑baggers—while observing that long-horizon buy‑and‑hold investors may still opt to stay the course.
Michael Burry has closed Scion Asset Management, launched a Substack newsletter and gave a rare interview with Michael Lewis in which he stated he exited because he fears a prolonged market downturn. He cited his past experience shorting the housing market—where investor pressure and monthly CDS premiums were intolerable during a multi-year drawdown—as a reason he will no longer manage outside capital under similar conditions. Burry identifies a structural risk: he estimates over half of invested capital is now passive while under 10% is actively managed by long-term investors, a shift he argues can make declines broad and cascading rather than sector-specific. He warned that unlike 2000, there may not be a separate cohort of ignored stocks to cushion a sector collapse, which raises downside correlation risk across the market. He explicitly compared current AI exuberance to the dot-com bubble, flagging outsized AI capital expenditure and asserted accounting practices that extend chip/server useful lives to reduce reported depreciation as potential earnings distortion. The article relays practical defensive steps: moving to equal-weighted S&P exposure to reduce megacap AI concentration, trimming extreme multi-baggers trading at 100x–200x forward earnings, and employing systematic partial sales to lock gains, while noting multi-decade investors may reasonably stay the course.
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