Investor Michael Burry, famous for accurately predicting and profiting from the 2008 housing market collapse, is warning of the possibility of a massive stock market correction.
In an interview on the Against the Rules with Michael Lewis podcast, Burry says the stock market could enter a years-long bearish phase.
“I think that we’re in a bad situation in the stock market. I think the stock market could be in for a number of bad years. And I think it could be a longer bear market more akin to 2000.”
Burry says the possibility of a wide-ranging correction has gone up due to the growth of passive investing.
“Today it’s all passive money. And it’s a lot. It’s over 50% passive money. There are index funds… Less than 10% of money, some say, is actively managed by managers who are actually thinking about the stocks and in any kind of way that’s long-term.
And so the problem is in the United States, I think, when the market goes down, it’s not like in 2000, where there was this other bunch of stocks that were being ignored, and they will come up even if the Nasdaq crashes. Now I think the whole thing is just going to come down. And it would be very hard to be long stocks in the United States and protect yourself.”
On what to sell or buy over the near term, Burry says,
“I think if you’re going to buy something now, buy healthcare stocks. They’re really out of favor.
If you own something that has gone up a lot, you’ve done really, really well in it, it’s shooting straight up, and you think it’s kind of overvalued, I think that’s something you should sell.”
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