According to CNN and Investing.com, Michael Burry, the “Big Short” investor who became famous for correctly predicting the epic collapse of the housing market in 2008, has bet more than $1.6 billion on a Wall Street crash. Burry is making his bearish bets against the S&P 500 and Nasdaq 100, according to the recently released Security Exchange Commission filings.

Burry’s fund, Scion Asset Management, bought $866 million in put options (that’s the right to sell an asset at a particular price) against a fund that tracks the S&P 500 and $739 million in put options against a fund that tracks the Nasdaq 100. In its turn, Buffett's Berkshire Hathaway Corporation (NYSE:BRKa, BRKb) sold $8 billion worth of stock and slowed buybacks last quarter, pushing total cash and Treasuries up 13% to $147 billion.

Burry's hedge fund Scion Asset Management held bearish put options at the end of June in the SPDR S&P 500 (SPY) ETF Trust and the Invesco QQQ Trust, which track the benchmark S&P 500 and Nasdaq-100 indices. The options mean that Burry will profit if the indexes fall. Burry had already warned of a historic bubble and predicted the “mother of all crashes.” It is quite possible that this time Scion has hedged its portfolio in case of a market crash.

Buffett also sold $33 billion worth of stock on a net basis and increased Berkshire's cash position by $38 billion over the last 3 quarters. This gives him a great opportunity to buy shares at a discounted price and make profitable acquisitions if the market does fall, as he did during the global financial crisis when he made deals with Goldman Sachs (GS), General Electric (GE) and many other companies.

The rising market sustainability doubt lies in the fact that the Federal Reserve has been long fighting against what it’s now apparently viewed as systemic, rather than ordinary cyclical, inflation – by conventional policy normally employed to manage the latter type of inflation. For systemic inflation, there’s only one known remedy – to cut cash liquidity in circulation.