Michael Burry Warns Of ‘Number Of Bad Years’ For US Stock Market: ‘I Think The Whole Thing’s Just Going To Come Down’

• Burry stated that more than half of investments are now in passive mode, pointing to a change in industry dynamics.
• He added that the market has entered a phase where stocks rise when companies announce capital expenditure on artificial intelligence technology.
• The investor also said that while Palantir and IBM do “basically the same thing,” the latter does not get the “credit for a Palantir valuation” on its business that caters to the federal government.

Michael Burry on Tuesday warned that the U.S. stock markets could be in for several “bad years,” explaining why he decided to deregister his hedge fund in November.

On the “Against The Rules” podcast, “The Big Short” legend noted that it could be a longer bear market this time around – longer than the one in 2000, which lasted nearly 31 months.

This time around, though, Burry noted that the industry's structure has changed. “Back then, it was hedge funds, mutual funds, separate accounts, businesses. But there were people running pools of money and thinking about stocks and investing in stocks,” he added.

Now, more than half of the investments are through the passive mode, he said.

“I think when the market goes down, it's not like in two thousand where there was this other bunch of stocks that were being ignored and they'll come up even if the Nasdaq crashes. Now I think the whole thing's just going to come down,” he warned.

He added that the market has entered a phase where stocks rise when companies announce capital expenditure on artificial intelligence technology.

“We’ve gotten into this part of the phase where if you announce a dollar of capex on AI, your market cap goes up $3 for every dollar you had,” he said.

Burry On Palantir

Burry also noted that while Palantir Technologies Inc. (PLTR) and International Business Machines Corp. (IBM) do “basically the same thing,” the latter does not get the “credit for a Palantir valuation” on its business that caters to the federal government.

“They keep saying they're the only ones. But IBM does basically the same thing. Their business is actually bigger than Palantir’s,” he added.

In November, Palantir co-founder and CEO Alex Karp called out Burry’s short bet against the company as well as against Nvidia Corp. (NVDA), stating that it was “super weird.”

Karp noted that by shorting Palantir and Nvidia, Burry is actually shorting AI. “I do think this behavior is egregious and I’m going to be dancing around when it’s proven wrong,” Karp added, in reference to the practice of short selling.

Meanwhile, U.S. equities were mixed in Tuesday morning’s trade. At the time of writing, the SPDR S&P 500 ETF (SPY), which tracks the S&P 500 index, was down by 0.1%, the Invesco QQQ Trust ETF (QQQ) gained 0.12%, while the SPDR Dow Jones Industrial Average ETF Trust (DIA) was up by 0.18%. Retail sentiment around the S&P 500 ETF on Stocktwits was in the ‘bullish’ territory.

Also See: Jeremy Siegel Says Kevin Hassett Is A 'Very Good' Economist, But His Top Picks For Fed Chair Would Be Chris Waller Or Kevin Warsh

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