Hedge Fund Manager Michael Burry Says Stock Market Clearly in the First Stage of Grief: Denial
Hedge fund manager Michael Burry stated that the stock market is clearly in the first stage of grief, which is denial. According to the paths of 2000 and 2008, this stage could last 6 to 9 months. At the time of his statement, the S&P 500 and Nasdaq were still hitting new highs.
He did not provide specific levels or dates in this post. The only references are two historical periods: before the dot-com bubble burst and before the 2008 financial crisis. In both cases, the indices were still high, but the breadth had already deteriorated. He correlates the current stage to the beginning of those two periods, rather than to after the declines had occurred.
Indices and individual stocks have diverged. On October 5, the Nasdaq Composite Index rose 1.05% to 27,477 points, having just set a record in intraday trading the previous day. The S&P 500 slightly increased in September, but 75% of its components fell. Peter Schiff previously noted that the index was only 0.7% away from its record, while 430 components were on average 21.7% below their respective peaks, and compared this to January 1973 and 1999-2000. Burry replied that he wanted to disagree with this conclusion but could not.
In terms of positioning, he has moved his timeline forward. Around September 28, he stated that new research led him to believe that the AI bubble might burst sooner, prompting him to close short positions in Nvidia, Palantir, Micron, and switch to put options. He placed Micron in contracts expiring in June with a strike price close to $500. Nvidia and Palantir were placed in contracts expiring in September 2027. He also mentioned that the Nasdaq 100 is historically overvalued, with excessive concentration, and suggested that AI stocks might experience a crash similar to that of 1987.
On September 29, he mentioned the issuance of stocks. Burry wrote that for the benefit of humanity, the market should decline significantly to prevent OpenAI and Anthropic from going public. He claimed that these two companies would siphon and destroy trillions of dollars in capital, which is still the less damaging part. Anthropic's prospectus discussed catastrophic risks such as model resistance to shutdown and information manipulation. His fund Scion has deregistered as an investment advisor and will no longer file 13F reports.
This is a put option against the newly set high indices, not a spot sell-off. The buyers are passive funds and leveraged longs still adding to weighted stocks, while the seller is Burry expressing his timeline with long-dated put options. The beneficiaries are the holders of weighted stocks in the new high trades, while the pressured party is the one who has switched from short stocks to options and must pay premiums for time. If the denial period follows his suggested 6 to 9 months, the option expiration dates will be more specific than verbal judgments.
Source: Public Information
ABAB AI Insight
Burry shorted subprime mortgages using credit default swaps through Scion in 2005, profiting from that position in 2007-2008. He has repeatedly warned of a crash in 2015, 2021, and 2023, yet the indices continued to reach new highs. He wrote in May 2026 that he had become a meme for "calling crashes". By paralleling 2000 and 2008 as examples of the denial phase, he acknowledges that he relies on cyclical comparisons rather than on declines that have already occurred.
The money is positioned in options rather than short selling. He closed his short positions in Nvidia, Palantir, and Micron, switching to put options expiring in September 2027 and June 2026, moving his timeline forward. The verbal judgment suggests a denial period lasting another 6 to 9 months, while the contracts have later expiration dates. After deregistering as an advisor, Scion will no longer file 13F reports, and the external visibility is limited to his disclosures in subscriptions and posts, not the entire holdings filed with exchanges.
In contrast, in 1999, Druckenmiller continued to add to tech stocks until the last phase, exiting Quantum Fund in 2000, and John Paulson used credit default swaps to profit from the housing downturn in 2007. Burry is in a phase of repeated warnings, having shifted his position to options. The new highs in indices are contributed by a few weighted stocks, and in September, 75% of S&P components fell, resembling the structure of deteriorating breadth seen in 2000, with results yet to emerge.
Structurally, there is a transfer of pricing power. Passive funds and leveraged ETFs continue to buy high-weight stocks at new highs, while individual stock peaks have lagged behind the indices. Burry is buying downside rights while the index is still in denial, not at the current transaction price. Premiums will erode over time. If breadth repairs after 6 to 9 months, the options will expire worthless. If weighted stocks fall back to where most individual stocks already are, pricing power will shift from index funds back to the buyers of put options.
ABAB News · Law of Cognition
- New highs in indices do not mean individual stocks are still at high points.
- Verbal cycles will incur costs before expiration dates.
- Denial periods can be long, and premiums will not wait.