Michael Burry has had enough. In a short letter yesterday, he announced he’s liquidating his funds and returning capital because his “estimation of value in securities is not now, and has not been for some time, in sync with the markets.” In other words, he’s been thinking the market is overvalued for a while, and he’s finally stepping aside.
Burry has been shorting high-flying tech names like Nvidia and Palantir, and he’s got his reasons. But, as Swissquote senior analyst Ipek Ozkardeskaya notes, he’s “growing increasingly desperate about the time it will take for the market to go back to its senses. Senses meaning valuations that point to PE, PS, P—whatever ratios—that make more sense to him and to many.”
The S&P 500, for example, trades at an average PE ratio of about 23, well above its historical average near 18.
“A big bear has just fallen — just given in to the aggressive AI bulls and their insatiable appetite for tech stocks, or just anything that would rally fast and high enough to keep the show going,” Ozkardeskaya added.
But the market didn’t exactly cheer his exit. The Nasdaq fell 2% yesterday, with Nvidia down more than 3.5%.
Looking deeper, short positions against the S&P 500 have risen alongside its price. Institutional traders have “been breathing down the necks of retail bulls — and have been for some time,” Ozkardeskaya said.
“If retail traders can hold on to their positions long enough to push the bears away, the bears will get washed out and the market rally could continue. That’s probably what Burry thought when he made his decision to just get the hell out of here.”
Burry’s exit is a stark reminder that even seasoned investors see the market as stretched. As Ozkardeskaya puts it, he may have simply decided he’s had enough of waiting for valuations to come back down to earth.