This Michael Burry Warning Could Be Bigger Than His Short Call on Palantir

Most investors are well aware I’m not necessarily bullish on Palantir (NASDAQ:PLTR | PLTR Price Prediction) and a few other high-flying growth stocks which have valuations that just appear to be untenable right now. It turns out I’m not the only one, with high-profile hedge fund manager Michael Burry of The Big Short fame signaling he thinks this company could be among the most easy-to-spot short opportunities he’s seen in a very long time. 

Coming from an investor who saw the subprime mortgage crisis before almost anyone else, that’s an incredible statement. And when he made that statement, the market immediately took notice. 

The thing is, while he may be on to something, I think his broader prognostication about a particular trend could be more concerning. Here’s the key warning Burry and others have issued I think investors would do well to consider right now. 

Household Wealth Concentration Matters

Home equity visual

Aside from Burry’s calls on artificial intelligence being a bubble (there’s so much talk of it being a bubble right now, perhaps it’s a bubble in waiting – who knows), there are other key warning signs he’s given I think are potentially more devastating to investors thinking about how the next decade or so will play out. 

One of his recent areas of focus has been the concentration of wealth among households, and specifically the percentage of household wealth held within home equity versus the stock market. When stocks make up a large percentage of household wealth than housing (as has happened only two times in history, once in the late-1960s and then again in the late-1990s, long duration recessions took place. 

We’ve seen this metric unfold in recent years, once during the pandemic and then again in 2025. While the pandemic did not lead to a prolonged recession due to the impact the Federal Reserve and the U.S. government under former president Joe Biden had on issuing a tremendous amount of monetary and fiscal stimulus, it’s his view that this time, we’re about to see a big one. 

The Boy Who Cried Wolf

Wolf eyes

Now, as many financial commentators and skeptics will point out, Michael Burry has correctly predicted 37 of the last five recessions. In other words, his adamant focus on how valuations have gotten out of whack have missed a key point – being early is just about the same as being wrong. Calls for a prolonged bear market have persisted from his camp and other notable investors who have pointed out the froth in the system of late.

Missing out on the last three years of gains in the market because one was bearish on how overvalued stocks looked in, say, 2022 hasn’t been a winning bet. That’s true. But like was the case in the movie The Big Short, Burry may be early but there are some out there who think he’s definitely not wrong on calling a bubble in Palantir and other high-flying AI-related stocks. 

We’ll have to see how long this bubble (I’m assuming it’s a bubble, given many metrics suggest valuations are at historically unprecedented levels) can inflate. But at some point, investors need to look at the data Burry is highlighting such as the chart above, the Buffett indicator, and other macro benchmarks which suggests stocks aren’t expensive, they’re trading at absolutely astronomical and outlandish levels. 

Why I’m Listening to Burry Here

Michael Burry

I do think the metric of concentration of household wealth (between real estate and equities) is an important and useful metric for investors to consider. Indeed, the run-up in stock valuations which has now exceeded an incredible amount of household equity built up over the last real estate bull market is telling.

Considering the fact that most household wealth continues to be held by baby boomers, the fact that they’ve not got more of their nest egg in stocks than real estate could be viewed as a net positive. However, when we take into account the historical meaning of such shifts, it’s entirely possible that now may be the time to consider taking profits at current levels, and investing in other assets which have been beaten down (say, fixed income) to wait out the storm.

I’m of the view that time in the market beats timing the market, so I’m going to stay fully invested (but diversified). Personally, I’ve shifted more of my own retirement account to fixed income and international equities in recent quarters, and will likely continue the transition if valuations among U.S. equities continue to soar.