The investor who gained legendary status after nailing the 2008 housing market collapse urges investors to cut exposure to one specific area of the market and accumulate buying power.
In a new Substack post, Michael Burry says investors should start thinking about cashing in gains, particularly in stocks that have risen almost in a straight line, CNBC reports.
“An easier way for most is to simply reduce exposure to stocks, to tech stocks in particular. For any stocks going parabolic, reduce positions almost entirely.”
While Burry did not mention specific names, a number of AI chips and memory stocks have gone parabolic following the market’s rapid recovery from its March lows. Micron Technology (MU) is up over 150%, and AMD (AMD) has soared about 140% over the same time frame.
But the famed contrarian investor is warning about shorting the market, noting that it is not the right time to bet against US equities.
“Shorting is not the answer. It is not something most people should ever do. Right now, it is expensive, in general, to buy put options and directly shorting stocks can still cause significant pain.”
Burry says the right move is to build cash positions with the expectation that the market will eventually take a nosedive.
“The idea is to raise cash, and prepare to put it to work when it makes more sense to do so. History tells us that even if the party goes on for another week, month, three months or a year, the resolution will be to much lower prices.”
The S&P 500 is trading at a new all-time high of 7,412.
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