Dr. Michael Burry JUST WARNED Of A Frightening Market Crash - INFLATION 2021
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The American investor Michael Burry, famous from the movie The Big Short, being the man who a decade and a half ago predicted the global financial crisis and made a fortune shorting the housing market, HAS NOW just issued a dire warning about what he thinks will be the MOTHER of all crashes. After taking a 10 week break from twitter he has returned and his thoughts on stocks and cryptocurrencies are concerning to say the least. Before he took this break he was already putting out warnings, February 21st writing that speculative stock bubbles ultimately see the gamblers take on too much debt causing margin debt popularity to accelerate at peaks. He thinks that at this point the market is dancing on a knife’s edge. Apparently he sold off a large part of his stock portfolio as well as buying hundreds of millions of dollars worth of Tesla put options that have made him alot of money at this point since Tesla has in fact been struggling the past few months.
But now his very first tweet after coming back to twitter was very bold and worrying. Writing “People ask me what is going on in the markets. It is simple. Greatest speculative bubble of all time in ALL THINGS. By two orders of magnitude. It is clear as day that Michael Burry is critical of all the recent stimulus and of the Federal Reserve and their recent market operations. Although many people really needed their stimulus checks it is no secret that many checks went right into the stock market and pushed up asset prices to the crazy all time highs we are seeing today.
Aside from this Michael Burry has expressed his worry about the so called hype groups and uneducated money going into these momentum stocks like GME, AMC and many other short squeeze stocks. Due to all this stimulus and do to various hype groups on reddit and other social media, he thinks that fundamental analysis has become less and less of a factor in investing decisions. This is apparent when you look at recent Price to earnings ratios in the SP500. In a market environment where there is a high focus on fundamental analysis and cash flows, investors are only willing to value a company SO HIGH if it doesn’t have that much earnings. For example, historically investors have not bought a stock that is worth more than 25 TIMES its earnings and every time this ratio SKYROCKETS, we also see a market crash. This happened in the IT-crash in the early 2000s and during the financial crisis of 2008 and now in 2021 we are again seeing prices to earnings ratios reach new heights, being at around 44 at the moment.