‘Big Short’ investor has dire warning for economy, comparing stock market state to pre-1929 and dot-com crashes

Burry warns more speculation than 1920s, more overvaluation than 1990s, more economic strife than 1970s

Oliver O'Connell
New York
Friday 12 November 2021 18:18
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The investor made famous by The Big Short has issued a dire warning about the state of the stock market.

Michael Burry warns that stock market speculation has reached levels not seen since before the 1929 crash, and assets are more over-valued than before the dot-com bubble burst.

He also worries that geopolitical and economic strife exceeds that seen in the 1970s. His fear appears to be that we are fast moving towards an economic calamity, and government regulators such as the Securities and Exchange Commission and the Federal Reserve are taking no action to prevent it.

In a tweet, Mr Burry wrote: “More speculation than the 1920s. More overvaluation than the 1990s. More geopolitical and economic strife than the 1970s.”

He added: “Players grabbing the barrel of Kyle Rittenhouse’s rifle while @SECGov and @federalreserve nod approvingly.”

He attached an opinion piece from the editorial board of The Wall Street Journal headlined: “Rivian, the government unicorn,” and subheaded: “The EV truck maker is worth $120.5bn. It has sold 156 vehicles.”

Electric vehicle manufacturer Rivian, backed by Ford and Amazon, went public this week, fast becoming the second-highest valued automaker in the US after Tesla.

Valued at more than $100m by the end of its first day of trading, it has nevertheless only sold less than 200 trucks and makes almost no revenue. The company plans to manufacturer more than 1m vehicles a year by the end of the decade.

On the same theme, Mr Burry also alleged in a tweet this week that Tesla CEO Elon Musk might be selling stock in the company to cover personal debts and raised the possibility of the company losing up to 90 per cent of its value, as happened to many firms in the dot-com crash.

He noted that even Mr Musk said that the company was overpriced in May 2020 when it was approximately 16 per cent of its current value. The tweet has since been deleted.

Mr Burry is most widely known for calling the housing price bubble that developed in the 2000s. He “shorted” the housing market – selling market positions on the assumption that housing prices will drop – and when the market collapsed as he had predicted in 2007 and 2008, he made a fortune.

The subsequent fallout of the housing bubble bursting saw 3.8m Americans lose their homes and triggered the global financial crisis that rippled around the world leading to the great recession.

Mr Burry also focussed on inflation this week, noting that the current high rate of inflation is effectively depressing wages, which although growing, cannot keep pace. He adds that as a regressive tax, it hurts lower-income people the most.

He wrote: “American real wages – adjusted for inflation – are down 2.2% since Jan 1. Seems the ONLY truly meaningful thing that’s down this manic, manic year. Inflation is a massively regressive tax. Never forget it.”

Mr Burry is known as something of a doomsayer and while his Twitter account is @michaeljburry, his username is “Cassandra” – the Trojan priestess of Greek mythology who made accurate prophecies but was never believed.

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