Burry warns of crash and my views on this

'Big Short' investor Michael Burry warns stocks will crash and rallies won't last. Here's a roundup of his recent tweets and what they mean.

 

Michael J. Burry photo - extracted from insider article

Burry's book shelf - what he reads

Source: https://markets.businessinsider.com/news/stocks/big-short-michael-burry-tweets-stock-market-bubble-crash-rallies-2022-5

 

Key quotes from the article:

When the S&P 500 has crashed in the past, it has traded lower several years later, Burry noted. He pointed to the index bottoming 13% lower in 2009 than it did in 2002, 17% lower in 2002 than it did during the Long-Term Capital Management fiasco in 1998, and 10% lower in 1975 than in 1970.

 

Burry noted that 12 of the 20 largest one-day rallies in the Nasdaq index took place as the dot-com bubble burst, while nine of the S&P 500's 20 biggest one-day rallies occurred in the aftermath of the Great Crash in 1929.

 

He noted that after the dot-com bubble burst, the Nasdaq rallied 16 times by more than 10% — gaining on average 23% each time — on its way to a 78% decline at its nadir.

 

The Scion chief pointed to the S&P 500's trajectory over the past 10 years, noting it was strikingly similar to the index's chart for the decade leading up to the dot-com crash, and the Dow's chart for the 10 years before the Great Crash of 1929. Burry suggested that human nature was behind the consistently decade-long buildups, and implied that history is repeating itself. 

 

Investors can expect stocks to fall a lot further, Burry warned in a May 11 tweet.

My thoughts

 

Personally, I hold Michael J Burry with highest regards. While we may view the market differently, let us consider all narratives before concluding our own. In lieu of the dragging war, we see challenges in energy, food, supply chain and a US economy that could not lift itself further following recent earnings. With a stubborn virus, inflation and increasing unemployment, the hands of the Federal Reserves are full. The Fed faced a tough job of balancing managing both inflation and recession. I do think that their approach to "soft land" is leading the market to a hard crash instead.

 

There is no such thing as free (money), now, the economy is paying a high price for something's "free". The market was sustained by the Fed and the pandemic was the "excuse". In essence, we still had an overvalued economy before the pandemic.

Some have expressed views that the market has bottomed. Personally, I am waiting to see which asset class could give way first. Thus far, Crypto seems to be leading the way.

I hope that I am wrong. This is my view after considering various hopeful and fearful opinions. It is most important to be realistic so that we can plan and strategize accordingly. I am observing more and will be listing down the various great companies that I hope to get at a discount. Time to pile up my "cash for crash".