Michael Burry Says the Stock Market Is in Denial, Its First Stage of Grief
Denial comes first, and it can last a while
Michael Burry says the stock market is in denial. "The stock market is quite obviously in its first stage of grief, denial," the "Big Short" investor posted on X, adding that in 2000 and 2008, the denial stage lasted 6 to 9 months.
The framing borrows from the five stages of grief, and in market terms it describes investors treating early weakness as a buying opportunity rather than a turning point. Both of Burry's reference crashes started the same way: after the dot-com peak in March 2000 the S&P 500 eventually lost nearly 50%, and in 2008 stocks rallied into May before the Lehman Brothers collapse that September triggered the worst of the sell-off. Burry made his name, and a fortune reported at nearly $800 million, betting against US housing before that second crash.
He has spent October building the case
The denial post was one piece of a running argument. Burry has since warned of a "Red October," calling the Magnificent Seven the market's "Last Man Standing" and calculating that 55% of S&P 500 members trade at least 20% below their highs. On October 15, the 10-year Treasury yield fell more than 10 basis points while the Nasdaq opened lower anyway, a session he pointed to as evidence that the usual playbook is broken: "the pain trade continues to be rates down, Nasdaq down," he said, warning that pain trades become widowmaker trades because they tend to last a very long time.
He has also moved beyond equities, writing in his Substack on October 8 that he hears "creaks and groans" and "loud snapping and crackling" in private-market credit, and arguing that some insurers financing AI infrastructure hold "too many bad assets." His positioning matches the rhetoric: in late September he swapped earlier shorts for put options, and nearly all of his short exposure now sits in puts on the Nasdaq-100 and the VanEck Semiconductor ETF, with additional bearish bets against individual AI names and long-dated put options on MetLife struck in the $70s.
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Options market and stocks to watch
Burry's trade is concentrated exactly where denial would break first: QQQ and SMH puts are the hedge of choice if the chip-led leg of the AI rally rolls over, and the individual names he has targeted, including NVDA, PLTR and MU, are where put volume shows up earliest. His private credit warning puts insurers like MET on the same watchlist.
The test he has set is observable: if falling yields keep failing to lift tech, and if selling spreads from semiconductors into the Magnificent Seven, the denial thesis gains conviction into year-end. Track index put flow and breadth on the Unusual Whales news feed.
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