Michael Burry, a hedge fund manager, is known for his prediction of the 2008 financial crisis. He also warned about a consumer recession and increased earnings problems. He pointed out declining U.S. personal savings, record-setting revolving debt on credit cards and trillions of dollars in stimulus money.
Michael Burry, a famous investor and founder of Scion Asset Management, warned Friday about a coming recession and increased earnings problems.
He is most well-known for being the first investor who was able to profit from the subprime mortgage crisis in the United States that took place between 2007 and 2010. His story is featured in Michael Lewis’ book “The Big Short” about the mortgage crisis. It was made into a movie with Christian Bale.
Burry explained Friday’s Twitter explanation:
The US personal savings fell to 2013 levels and the savings rate to 2008 levels. Meanwhile, revolving credit card balances grew at an unprecedented pace back to their pre-Covid peak despite the trillions of dollars they had in their pockets. The future is a consumer recession that could lead to more earnings problems.
Two images were included in his tweet. The first image shows a dramatic decline in U.S. personal saving. The second shows a sharp rise in outstanding consumer credit.
Burry’s tweet had 476 comments at the time of writing. It has been liked almost 11K times, retweeted nearly 2.5K times, and shared more than 2K times. On Twitter, many people agreed with Burry. They thanked him for raising this issue and warned others to listen.
One commentator said: “This is wild. We dropped helicopter money on people, but personal savings fell and credit card debt returned to its original level.
Another said: “Exactly what you said, inflation is not a problem. Consumer debt IS a problem. The demand-side monetary policies are flawed. Market correction is impossible with rate manipulation. Americans are flush with cash. Instead of spending your money, invest in long-term savings. Stop importing.”
Another user had a different opinion:
The media likes to portray a strong consumer, but the facts are clear. Inflation metrics that are still rising MoM and decreased savings have been accompanied by increased debt and inflation metrics that are still increasing MoM. Energy prices have reached new highs not seen since 2008.
Many people agreed that “numbers do not lie” and the U.S. economic outlook is as dire as Burry suggested, or worse.
A growing number have warned that a recession could be imminent or has been, including Tesla CEO Elon Tesla, Rich Dad, Poor Dad Author Robert Kiyosaki and Goldman Sachs’ former CEO and senior chairman Lloyd Blankfein.