'Big Short' Investor Michael Burry On How Current Market Differs From Dot-Com Bubble Burst: 'Only Way Out Is By Trampling Each Other'

Legendary investor Michael Burry, who famously bet against the housing market in the run-up to the 2008 financial crisis, is known to be skeptical about passive investing. In early October, “The Big Short” investor said passive investing has steadily inflated over the last decade and the only way to get out of the "overcrowded theatre" is "by trampling each other."

"Difference between now and 2000 is the passive investing bubble that inflated steadily over the last decade. All theaters are overcrowded and the only way anyone can get out is by trampling each other. And still the door is only so big," Burry said in his tweet.

Screenshots from Michael Burry's handle on Twitter

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In 2019, Burry told Bloomberg that the bubble in passive investing through exchange-traded funds and index funds as well as the trend to very large size among asset managers has orphaned smaller value-type securities globally.

Famous investors like Peter Lynch have also criticized passive investing, calling this shift “a mistake”, according to a Bloomberg report.

Price Action: As 2022 witnessed a stock market rout following aggressive rate hikes by the U.S. Federal Reserve, ETFs have underperformed this year. The Vanguard Total Stock Market ETF VTI has lost over 26% since the beginning of the year, while the SPDR S&P 500 ETF Trust SPY has lost over 25% in the same period.

Burry earlier tweeted about how current market conditions remind him of the mid-late 2000.

“Another feeling I'm getting is mid-late 2000. Free cash flow totally on sale and ignored while former momentum stocks are coming down but not far enough, and darling 'better businesses' still had a way to fall. Value was about to take off for years despite more crash on the way,” Burry said in his tweet.

This story was originally published on Oct. 3, 2022.

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