‘Big Short’ Burry Called Inflation, Still Waiting for Crash, Recession

  • When inflation was at its peak last summer, Michael Burry predicted it would fall within months.
  • The “Big Short” investor was right, as price growth has slowed from 9.1% last June to 4% in May.
  • In contrast, Burry’s warnings of a historic stock-market crash and a recession are yet to pan out.

When inflation was at its peak last year, Michael Burry predicted it would tumble within months. The bold call from the investor of “The Big Short” fame is looking mightily prescient, but a few of his other forecasts are yet to come true.

The Consumer Price Index (CPI) surged to a 40-year high of 9.1% last June. A couple of weeks before that reading was published, Burry wrote in a since-deleted tweet that he expected “disinflation in CPI later this year.”

Indeed, annualized price growth slowed to 6.5% by December. Burry returned to Twitter at the start of this year to forecast that inflation would continue falling. He’s been so right so far, as it slowed to 4% in May.

A chart showing US inflation in recent years

A chart showing US inflation.

US Bureau of Labor Statistics

Burry has a penchant for making accurate, often dire predictions. For example, he called the collapse of the mid-2000s housing bubble, and his bet on a crash was chronicled in the book and movie “The Big Short.” He also flagged the risk of post-pandemic inflation as early as April 2020, when the CPI reading was below the Fed’s target rate of 2%.

However, some of the Scion Asset Management chief’s forecasts are yet to pan out. After diagnosing a historic market bubble and warning it would end with the “mother of all crashes,” he tweeted in May last year that the S&P 500 could bottom below 1,900 points, based on how the benchmark has fared during past crashes. While the stock index plunged nearly 20% in 2022, it has rallied 16% this year to around 4,400 points.

Burry also predicted last summer that American households, under pressure from rising prices and soaring borrowing costs, would exhaust their savings by the end of the year. He cautioned that could spark a decline in consumer spending and erode corporate profits.

Moreover, he tweeted in January that the US would likely fall into recession, spurring the Fed to cut interest rates and the government to stimulate the economy, causing inflation to spike once again.

For now, consumer spending and employment are proving resilient, fueling hopes that the US economy might keep growing and escape a downturn. The Fed, which has hiked rates from nearly zero to north of 5% since last spring, has also signaled it plans to raise them further.

Regardless, it’s worth paying attention to Burry, given his track record of predicting market events. The investor highlighted some of his greatest hits in a now-deleted tweet last summer:

“Just getting one thing right is hard. 1999 tech bubble, 01-05 value revival, 2005 housing bubble, 2009 almond farms, 2020 COVID bottom, 2020 lockdown horrors, 2021 meme stocks, 2021 crypto leverage, 2021 inflation, 2022 not done yet, late 2022 ????”

Source link

We will be happy to hear your thoughts

Leave a reply

Enable registration in settings - general
Shopping cart