The Big Short, shorting has begun! And it's a big bet on shorting! According to public information, Michael Burry, the prototype character in the movie "The Big Short" who shorted the subprime mortgage crisis, recently held put options on the US stock index at full capacity. This means he's "all in" on shorting the US stock market once again. Will Michael Burry recreate his past glory this time? "The Big Short" Fully Shorted According to the U.S. Securities and Exchange Commission website, at the end of the second quarter of 2023, Scion Asset Management, led by Burry, held two put options that accounted for almost the entire portfolio (see the figure below). One is SPY (PUT), which is a put option on the S&P 500 Index ETF, with corresponding market values of $887 million. The other is QQQ (PUT), which is a put option on the Nasdaq Index ETF, with a corresponding market value of $739 million. Together, they account for over 98% of the fund manager's holdings. Comprehensive Bearishness on "US Stocks" From his portfolio, it seems that Scion Asset Management, led by Burry, is bearish on both the overall U.S. stock market and U.S. technology stocks. This is because the S&P 500 Index is the most important broad-based index in the U.S., serving as a barometer for the performance of leading U.S. large-cap stocks. The Nasdaq Index reflects the market performance of U.S. technology stocks and is the stronghold of U.S. technology stocks. Burry's decision to short both of these indices clearly indicates his comprehensive and thorough pessimism towards the U.S. stock market. From Doctor to Professional Investor It is worth noting that Burry's life experiences are quite colorful. He was born in California, USA in 1971 and is rumored to be of Rusyn descent, with deep roots in the Slavic ethnic group. At the age of two, Burry lost his left eye due to retinoblastoma and has since had a prosthetic eye. During his university years, he studied economics and medicine at the University of California, Los Angeles, and later worked as a resident physician at a hospital. While working as a resident physician, Burry discovered a "new world": financial investment. It quickly captured almost all of his passion and interest. After investing for a while, Burry made the bold decision to give up his medical career and become a professional investor. Becoming a Hedge Fund Guru With his wholehearted dedication, Burry soon found his "home" in value investing. But his understanding of value investing is quite "extreme," not only buying undervalued stocks but also shorting "overvalued" assets. Since 1996, he has become a "big V" (opinion leader) in a stock trading community called "Silicon Investor." Berley established at least 25 message boards in the aforementioned online community, covering topics such as value investing and Buffett research. In four years, he contributed over 3,000 opinions, equivalent to writing two posts every day. It is said that many netizens at that time doubted this doctor's investment knowledge and did not believe that he truly understood investing. In 2000, Berley bid farewell to his "big V" status and founded the hedge fund Scion Capital LLC, with initial capital coming from his family funds and loans. Coincidentally, this fund was established at the time of the bursting of the dot-com bubble in the US stock market. The rest of the story is well-known: In 2001, when the dot-com bubble burst, Berley's fund rose by 55%. In 2002, as the US stock market fell further, Berley achieved a 16% annual return. In 2003, he continued his success with a 50% net return. It is worth mentioning that the reason Berley used the word "Scion" (which means young shoot, tender bud, and heir in Chinese) is because he was fond of a fairy tale book with that word in its title. In 2005, Berley turned his investment focus to the US subprime market, which ultimately established his position on Wall Street. He had been paying attention to the subprime market for several years and discovered a massive bubble through his research. He predicted that the bubble would burst as early as 2007. Therefore, he started shorting related securities, but the fund's investors resisted, considering his judgment too exaggerated and demanding a withdrawal of funds. Fast forward to 2008, the US subprime crisis finally erupted, sweeping global markets. Berley made a fortune from this crisis, and he and his clients collectively increased their assets by $700 million. While the US stock market enjoyed a long bull run, he did not forget to sing the bearish tune Excessive good luck always follows with painful "failures." Berley, who made a name for himself during the subprime crisis, couldn't completely carry his good luck into the following years. After Scion Capital LLC achieved a staggering 490% return from November 2000 to June 2008, Berley decided to "take the money and run," liquidating the fund's assets and closing the hedge fund, focusing on managing his own capital. This was an undoubtedly wise decision. In 2013, Berley decided to make a comeback and established the hedge fund Scion Asset Management, mainly investing in water resources, gold, agriculture, and other assets. Berley still diligently warns of the high risks in the US stock market, but the US stock market has benefited from the Federal Reserve's massive liquidity injection, continuously extending the bull market record. In 2019, Berli began to explicitly warn of the high risks in the US stock market, and since then, he has intermittently made bearish remarks. He even posted in 2022, saying, "The familiar stupidity of the epidemic era has not disappeared." However, during the same period, the S&P 500 Index showed no concerns. From March 2020 to August 15, 2023 - excluding the several circuit breakers in the early stage of the COVID-19 pandemic - the cumulative increase of the S&P 500 Index remained as high as 80%. In recent years, relying on long positions to support the market Analyzing Berli's position returns in recent years, it is evident that his long positions have yielded significantly higher returns than his short positions. According to the position report submitted to the U.S. Securities and Exchange Commission by Scion Asset Management, the firm had previously shorted Tesla, Apple, and Ark Investment's technology ETF. [Shorting Tesla] In the second quarter of 2021, Berli's put options on Tesla reached a market value of $731 million, accounting for 35% of the entire position. During that quarter, Tesla's stock price increased by 9 percentage points, and by the third quarter, it increased by 14 percentage points. This indicates that Berli's bearish position was met with a "hammer blow" from the bulls. [Shorting "Wood Sister" Fund] In the first quarter of 2021, Berli also shorted Ark Investment's flagship product, the "Innovation ETF," which accounted for less than 2% of the entire position. He closed this position in the second quarter. Ark Investment, founded by "Wood Sister" Cathie Wood, is a thematic actively managed ETF "boutique" focused on technology. It performed exceptionally well during the Federal Reserve's liquidity injection in 2020 and attracted a large number of buyers. In this operation, Berli initially made an accurate judgment. The ETF's net asset value reached its peak in mid-February 2021, and by the end of March, it had fallen by 20 percentage points. However, Berli closed his short position in the second quarter of 2021, missing out on the subsequent "big market." In fact, during the second to fourth quarters of 2021, the net asset value of Ark Investment's ETF fell by as much as 93%, and Berli missed out on this opportunity. [Shorting Apple] In the first quarter of 2022, Berli took a short position of 206,000 shares in Apple, which was the largest position at the time, with a market value of 35.97 million yuan, accounting for 18% of the entire position. During that quarter, Apple's stock price only fell by 1.91%. By the second quarter of 2022, Berli's short position in Apple completely disappeared. It is worth noting that Berli has shown excellent timing in his long positions, accurately capturing the lows and highs. "Going all-in" After facing continuous tests, Berli's courage once again burst forth. According to the information from his hedge fund in the second quarter of 2022, he went "all-in" on the bullish outlook for U.S. prison stocks. At that time, he held shares of the U.S. private prison operator GEO, with a market value of $3.3 million. By the end of the third quarter of 2022, he continued to increase his position, and the market value rose to $15.547 million, making it his top holding. He further increased his position in the fourth quarter of 2022 and then reduced his profits in the first quarter of 2023. During the period when Boli heavily held GEO, the stock price of this listed company rose by more than 100%, but it started to decline significantly in the first quarter of this year. Boli's pace of increasing and reducing positions in this stock has accurately followed the market rhythm. A new quarter has arrived, and this time Boli is taking a high position to short the US stock index. Can he replicate his past glory? Let's wait and see.