'Big Short' Investor Michael Burry Bets $1.6 Billion On A Market Crash — Here Are 3 Investment Opportunities If You Want To Stay Away From Stocks

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Fri, Aug 25, 2023, 2:30 PM 5 min read

Michael Burry has always been one to challenge mainstream thinking.

The renowned hedge fund manager successfully wagered against the U.S. housing bubble in 2008, a gutsy call that became the focal point of the film “The Big Short.”

Now, he’s betting against the U.S. stock market.

In its latest 13F filing with the Securities and Exchange Commission, Burry’s firm Scion Asset Management disclosed a substantial amount of put options against exchange-traded funds (ETFs) that track major U.S. stock market indices.

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In particular, Scion held $886.56 million worth of put options against the SPDR S&P 500 ETF Trust (NYSEARCA: SPY) at the end of the second quarter. SPY tracks the S&P 500 Index and is the largest ETF in the U.S. measured by assets under management. Burry’s firm also had $738.84 million in put options against the Invesco QQQ Trust Series 1 (NASDAQ: QQQ), an ETF that follows the Nasdaq-100.

Put options provide the holder the right to sell an asset at a predetermined price. The value of put options typically increases when the price of the underlying asset drops.

With a combined value of $1.6 billion, these put options accounted for 93.59% of Burry’s portfolio at the end of June.

If you are wary about the market’s future like Burry, there are investment opportunities outside the realm of stocks. Here’s a look at three of them.

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High-Yield Savings Accounts

When the Federal Reserve kept its benchmark interest rates near zero, most savings accounts paid next to nothing.

Then inflation got out of control, and the Federal Reserve had to start tightening. In 2022, the U.S. central bank announced seven rate hikes.

Interest rate increases have continued in 2023, and the benchmark rate is the highest it’s been since 2001.

While higher interest rates have sent shockwaves across the economy — they are a key reason behind many experts’ warnings about stocks — they also mean that people can finally earn some return on their savings.

These days, there are plenty of high-yield savings accounts to choose from. And you don’t even need to visit a brick-and-mortar bank to find the ones that pay higher interest rates and charge no account fees.

Single-Family Rentals

This one might sound counterintuitive. A high-interest rate environment also leads to high mortgage rates, so shouldn’t that impact the housing market negatively?

It’s true that real estate has taken a hit.

Billionaire investor Stanley Druckenmiller recently said that housing “has obviously gone down dramatically given the 500 basis-point increase in interest rates.”

But this is not doom and gloom, as he noted that there’s now a “structural shortage in single-family homes.”

“So if things got bad enough, I could actually see housing — which is about the last thing you would think of intuitively — could be a big beneficiary on the way out,” Druckenmiller said.

The reality is that regardless of the state of the stock market, people will always need a place to live. Meanwhile, elevated home prices and high mortgage rates mean owning a home is less feasible. And when people can’t afford to buy a home, renting becomes the only option. This creates a stable rental income stream for landlords.

The best part? It’s easy for retail investors to invest in housing — and you don’t need to buy a house to do it. These days, there are options to invest directly in single-family rentals with as little as $100 while staying completely hands-off.

Fine art

Art might not be the first thing that comes to mind when people think of investments. But the ultra-rich have long been holding artworks in their portfolios — and reaping rewards from this unique asset class.

From 1995 to 2022, contemporary art has appreciated at a compound annual growth rate of 12.6%, outperforming the S&P 500’s annual return of 9% over the same time frame.

Art also offers diversification as its value is not directly tethered to the stock market, bonds or real estate.

To be sure, it usually takes a lot to get in the game.

For instance, in 2020, Amazon.com Inc. Founder Jeff Bezos reportedly spent $52.5 million on Ed Ruscha’s “Hurting the Word Radio #2” and another $18.5 million on Kerry James Marshall’s “Vignette 19.”

Nowadays you don’t need to be the founder of an e-commerce empire to delve into the art market. New companies have innovated ways for retail investors to invest in masterpieces by the likes of Banksy and Picasso for as little as $20 per share.

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