BUSINESS

Big Short' Burry Warns of 1987-Style Crash as S&P 500 Hits Record High

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Michael Burry, the investor portrayed in the film "The Big Short," has renewed his warning that the current stock market rally could end in a sharp selloff similar to the 1987 crash. Burry made the comments in a Substack post on August 4, even as the S&P 500 index closed at a record high. The S&P 500 jumped 1.9% on Tuesday to close at 7,736.52, its first record close since June. The Dow Jones Industrial Average rose 907.47 points, or 1.71%, to 54,085.88. The Nasdaq Composite surged 671.1 points, or 2.59%, to 26,584.99. The rally was driven by stronger-than-expected corporate earnings from AI-related companies and a drop in oil prices amid hopes that the Strait of Hormuz could reopen. Burry wrote: "I continue to believe it is possible we are near a major top, and possible a 1987-type fall, but the S&P 500 making new highs likely will bring new money into the market." He warned that rising stock prices and falling volatility could fuel systematic automated buying, ultimately amplifying a sharp decline later. "Remember, the market going up on falling volatility forces vol-targeting funds to leverage up, and brings leverage from other momentum strategies into play," he said. Burry said he continues to hold short positions in the iShares Semiconductor ETF, as well as Micron Technology, Nvidia, Caterpillar, Palantir Technologies, Tesla, and Applied Materials. He stated that all positions except the Nvidia short remain profitable. He added: "Again, shorting is not for everyone. I must short. Most should not." Burry has been one of Wall Street's most outspoken skeptics of the artificial intelligence boom, arguing that demand for AI infrastructure is being fueled by financing arrangements that may prove unsustainable. His latest warning comes as the S&P 500 and Dow have risen for four consecutive trading sessions. The market advance was also supported by comments from U.S. Treasury Secretary Scott Bessent, who said the U.S. could reach an agreement with Iran to reopen the Strait of Hormuz within days. Oil prices fell more than 5%, with West Texas Intermediate crude settling at $75.77 a barrel.

Prepared by Christopher Adams and reviewed by editorial team.

Timeline of Events

· On October 19, 1987, Black Monday saw Dow plunge 508 points, 22.6%.
· On March 21, 2000, S&P 500 surged 5% over four days near dot-com peak.
· On April 23, 1999, S&P 500 four-day surge coincided with dot-com decline start.
· On November 9, 2020, S&P 500 four-day surge marked post-election vaccine rally.
· On June 30, 2026, Burry shorted iShares Semiconductor ETF at approximately $643.
· In Q1 2025, Burry shorted market before April flash crash.
· On July 22, 2026, SOXX ETF had still gained 73% in 2026.
· In July 2026, semiconductor and momentum trades suffered sharp setback.
· On August 3, 2026, Burry warned of 'bloody mess' scenario for stocks.
· On August 4, 2026, S&P 500 closed at record high 7,736.52.
· On August 4, 2026, Burry posted Substack warning of possible 1987-type fall.
· On August 4, 2026, S&P 500 jumped 1.9% to first record since June.
· On August 4, 2026, Dow rose 907 points to record 54,085.88.
· On August 4, 2026, Nasdaq Composite surged 2.59% to 26,584.99.
· On August 4, 2026, Burry holds shorts in SOXX, Micron, Nvidia, Caterpillar, Palantir, Tesla, Applied Materials.
· On August 4, 2026, Burry said all short positions except Nvidia remain profitable.
· On August 4, 2026, oil fell 5.7% to settle at $75.77 per barrel.
· On August 4, 2026, Palantir shares surged 29.5% on blowout earnings.
· On August 4, 2026, PHLX Semiconductor Index rose 6.6%.
· On August 5, 2026, Yonhap Infomax published Burry warning at 08:17 ET.
· Burry expects new highs to attract new money inflows.
· Volatility-targeting funds may leverage up amplifying any decline.
· A 2.5% S&P drop could force funds to reduce stock allocation from 77% to 50%.
· Momentum strategies could employ additional leverage in rising market.
· SOX and momentum trade leadership will determine market direction.
· Burry's fourth "Heretic's Guide" installment will examine hyperscaler filings.
· AI infrastructure demand sustainability remains a key uncertainty.
· Strait of Hormuz reopening hopes may continue to pressure oil.
· August volatility may be lower than July according to Citadel Securities.
· Market direction depends on whether semiconductor stocks regain leadership.

News Intelligence

Immediate US Impact (10 words): Burry's crash warning may spook investors despite record-high market closing.
Possible Long-term US Impact (10 words): A 1987-style crash would wipe trillions from retirement accounts.
Most Affected Groups (10 words): Tech investors, semiconductor holders, volatility-targeting funds, and retirement savers.
Reader Priority (10 words): Monitor VIX, semiconductor momentum, and volatility-targeting fund positioning.