Is the market in a bubble? A cryptic message has just arrived

After two years of silence, the famed investor who predicted the 2008 financial crisis is back to talking about a "bubble." And he does so in the most enigmatic way possible: with a cryptic post on X, accompanied by a picture of Christian Bale as his cinematic alter ego in The Big Short. A few words are enough to reignite a fierce debate among analysts, traders, and investors around the world: "Sometimes we see bubbles. Sometimes, there’s something to be done about them."

Those who know Michael Burry know that every statement he makes carries weight. He’s not only legendary for having predicted the collapse of subprime mortgages, but also a figure capable of influencing market sentiment and capital flows globally. However, this time, his message leaves room for interpretation.

An enigmatic message that divides the market

It’s unclear what Burry was referring to. But the timing, as always, is perfect. Attention has immediately shifted to the potential AI bubble, which many see as the new "dot-com" of the 21st century. Record-high valuations of giants like Nvidia, Meta, and Microsoft, combined with the S&P 500’s forward P/E ratio returning to levels last seen in 1999, have been fueling fears of an imminent correction for months.

Macro indicators seem to support the pessimists’ case: the CAPE Shiller index has returned above 35, the so-called "Buffett Indicator" (the ratio of market capitalization to GDP) has exceeded 200%, and the real yield on 10-year Treasuries has returned to positive territory. These are all signs that historically have historically preceded market corrections or periods of stagnation.

Who still believes in Burry

There’s a clear school of thought that says Burry was never truly wrong—only early. In 2008, when no one wanted to hear about a mortgage crisis, he was the first to buy credit default swaps against mortgage-backed securities and banks. He was mocked, abandoned by his fund’s investors, and accused of being crazy. But later, reality proved him right, and Scion Capital posted returns exceeding 400%.

Today, his supporters see the same pattern: a new bubble, this time in technology, swelling amid general indifference. "He just anticipated it again," they argue, recalling how in 2023 he had already launched a famous "SELL" call on the American markets, only to be contradicted by the ensuing bull market. For them, 2023 wasn’t a mistake, but a warning. And today, with valuations skyrocketing and liquidity once again pushing risky assets, the systemic risk is higher than it appears.

Those who instead consider it a contrarian signal

On the other hand, there are those who interpret Burry’s words as a contrary signal: if even the most famous prophet of doom returns to talk about a bubble, perhaps the market is destined to rise further.

Moreover, his 2023 forecast was widely considered one of the least accurate in recent years, a "sell" launched shortly before one of the strongest rallies of the last decade.
Many professional investors, particularly quantitative hedge funds and macro desks, interpret Burry’s comments as a barometer of excessive retail pessimism: "By the time the average investor begins to fear a bubble, it’s usually too late to sell it."

From this perspective, Burry’s post would not signal the end of the cycle, but rather an intermediate point, the moment when fear re-enters pricing and offers new room for further equity expansion.

What the data show about his fund

A look at Scion Asset Management’s 13F filings as of June 30, 2025, reveals much more than meets the eye.

Here are the main positions:

Top Holdings (Long positions):

• UnitedHealth Group (UNH)
• Regeneron Pharmaceuticals (REGN)
• Lululemon Athletica (LULU)
• Meta Platforms (META)
• Estee Lauder (EL)

Top Shorts (Short positions):

• Nvidia (NVDA)
• Alibaba (BABA)
• PDD Holdings (PDD)
• JD.com (JD)
• Trip.com (TCOM)

The message is clear: Burry remains bearish on technology, particularly the artificial intelligence hype, while also showing interest in more defensive or "value" sectors, such as healthcare and premium consumer discretionary. In other words, he appears to be betting on a market rebalancing, where the most overvalued stocks could undergo a correction due to profit-taking and the neglected ones could return to prominence.

A lesson in prudence (more than of fear)

History teaches us that bubbles don’t burst when everyone sees them, but when they no longer appear to be bubbles. His message could also be interpreted in a less apocalyptic way: not an invitation to "run away from the markets," but a warning to recognize the limits of market rationality. "Sometimes the only winning move is not to play" wouldn’t mean selling everything, but perhaps reducing exposure, increasing selectivity, and maintaining a margin of safety in the portfolio.

In a context of AI euphoria, falling rates, and compressed volatility, the real bubble might not be in prices, but in confidence. And perhaps this is precisely what Burry, once again, is trying to remind everyone.

So yes, the public is divided. On the one hand, there are those who see him as a visionary who anticipates events; on the other, there are those who consider him an anachronism, a voice out of time.

But as always, the truth isn’t in tweets or the labels "bull" and "bear." It lies in the ability to look at the numbers with detachment, and the story of the market with humility.

Original article published on Money.it Italy 2025-11-03 18:19:48. Original title: La bolla è qui? È appena arrivato un messaggio enigmatico che divide il mercato