"The Big Short": U.S. stocks may crash, tech stock surge reminiscent of the 2000 bubble

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Michael Burry, the inspiration for the main character in "The Big Short," has issued a warning of a market crash, saying the "parabolic" surge in tech stocks is pushing their valuations to unsustainable highs, and the Nasdaq 100 Index faces significant downside risk.

In his Substack column, Burry wrote that the current market pattern is highly similar to the peak pattern before the bursting of the internet bubble, with particular focus on chip stocks—the Philadelphia Semiconductor Index has climbed nearly 70% since the end of March.

He pointed out that the actual P/E ratio of the Nasdaq 100 Index is as high as 43 times, far exceeding the implied level of around 30 times given by Wall Street. The reason, he says, is that "Wall Street may have overestimated the earnings of the fastest-growing, highest-valued companies by more than 50%."

Burry wrote, "We are witnessing history. In the stock market, this is not a good thing. Right now it's like a bloody car crash scene, just minutes before the accident happens."

According to data from Bespoke Investment Group, the extent to which the Philadelphia Semiconductor Index deviates from its 200-day moving average has only occurred twice in history—July 1995 and March 2000, the latter coinciding with the collapse of the internet bubble.

Burry: Not recommending shorting, but taking profits and reducing exposure

Burry did not advise investors to actively short the market. He noted that, given the high cost of put options and the risk of timing error losses, actively shorting is not wise.

Burry said he holds a portfolio of stocks that are "heavily shorted with leverage by the market," which he considers "undervalued and cheap," but did not provide details. He also plans to "reduce holdings" in companies that do not meet his "rigorous valuation requirements."

For ordinary investors, Burry's advice is: take profits from the recent rally and overall reduce equity positions, especially exposure to the tech sector.

In the article, Burry bluntly stated, even if the market seems to have room to rise, those investors riding this round's parabolic trend who don't choose to exit are essentially betting they can time their move perfectly at or near the top.

"History tells us, even if the party lasts another week, month, three months, or a year, the final result will be significantly lower prices," he wrote. "We are entering one of those rare extreme states, the consequences of which will be inevitable, and there will be no escape no matter where you hide."

Risk warnings and disclaimerThe market carries risks, and investment must be done cautiously. This article does not constitute personal investment advice and does not take into account individual users’ specific investment goals, financial status, or needs. Users should consider whether any opinions, views, or conclusions in this article are suitable for their own circumstances. Investment made based on this article is at your own risk. ```