Michael Burry – “Sell” Why does the person who predicted the 2008 crisis bet again?

Michael Burry again predicts the fall of the stock market, against the backdrop of an unstable situation in the economy.

He was one of the first to predict the 2008 crisis and made over $800 million from it. I advise you to read an article about him and about this event in particular, his story is told there.

Burry’s recent forecasts of a significant decline in the stock market in 2022 and significant inflation in the United States have already come true.

Investors are wondering if the stock market’s downtrend, i.e. recession, will continue this year, and whether the Fed will be able to cope with inflation through effective economic policy. In recent weeks, a certain optimism has been noticeable among investors: they are convinced that inflation is finally receding. This optimism was reflected in the growth of the S&P 500 at the beginning of the year.

Burry in this case is not prone to optimism: he suggests that the growth in the market is more of a mirage, and there are very difficult times ahead.

Burry recently tweeted:

“Inflation has peaked. But this is not the last peak of this cycle. We will likely see a decline in the CPI in H2 2023 and the US will be in recession by any definition. The Fed will cut, and the government will stimulate. And we will have another burst of inflation. It is not difficult.”

The history of the United States has already seen the ineffective policy of the Fed to cope with inflation, then the crisis of the 1970s dragged on for a decade.

Burry believes that we may face a more difficult situation, as the Fed will be influenced by the current political environment and public pressure to demand a rate cut.

There will be a vicious circle:

Rates will be high > Inflation will fall due to high rates > The economy will plunge into recession > Under public pressure, the Fed will cut rates prematurely > Premature rate cuts and stimulus to the economy will give rise to inflation.

The legendary investor and Warren Buffett’s closest partner, Charlie Munger, is of the same opinion.

“When Volker raised the Fed to 20% in the early 80s and the government paid 15% on its bonds, a terrible recession set in. It lasted a long time and brought a lot of suffering. I sincerely hope that we don’t have to experience this again. I think the circumstances that allowed Walker to do this without any intervention from politicians were very unusual.In 2020, we understand in hindsight, it’s good that he did so.I’m not sure that our modern politicians will allow the “new Walker” to deliver the economy under the same tough conditions and provoke another recession to fight inflation.I think now we are in for very different difficulties.You should want to have a Volcker-style recession, instead of what awaits us.The future problems may be more serious than those with which time encountered Walker”

On the final day of the Fed meeting, Michael Burry wrote only one word: “Sell.”

Now he also manages his fund and now writes his analytics and forecasts not in a blog, but in twitter, but at the same time he deletes all tweets after a few days. To keep track of what Michael writes about, you can subscribe to the telegram channel – Michael Burry Archive. This is a channel created by the author. I save Michael’s analytics and translate them. If you are interested, I will be glad to see you in the channel. Thank you for reading the article to the end!

Materials are collected from open sources.
For the translation of Charlie Munger’s interview, thanks to the Compound Interest channel