Michael Burry, one of the few investors who saw the financial crisis coming, fears that the current market chaos could be a prelude to an even bigger disaster.
“I was wondering out loud today if it could be worse than 2008,” Burry said now deleted tweet on Thursday. “What interest rates are doing, exchange rates globally, central banks seem reactionary and in CYA mode,” he added, using an acronym for “cover your a–.”
Burry was probably referring to the Federal Reserve and other central banks frantically raising rates to curb stubborn inflation. The Fed’s aggressive rate hikes, combined with overseas headwinds such as the Russia-Ukraine war and ongoing blockades in China, have driven the US dollar to record highs against other global currencies such as the British pound.
In addition, the Bank of England this week began buying £65 billion ($72 billion) in bonds as soaring gilt yields threatened the UK’s financial stability. As for the People’s Bank of China, it is reportedly preparing state-owned banks to sell dollars and buy offshore yuan in an effort to strengthen China’s currency.
Rising rates, flogging currencies and authorities scrambling to calm markets and prevent economic disaster are clear red flags for Burry, reminding him of the frenetic period before the Great Recession.
Other experts have expressed similar concerns, warning that an overzealous Fed could plunge the U.S. economy into a deep recession or trigger “stagflation,” where inflation remains high but growth stagnates and unemployment jumps. They also warned that volatile markets and a loss of confidence in policymakers could threaten consumer and investor sentiment and undermine growth.
Burry rose to fame after predicting and profiting from the collapse of the housing bubble in the mid-2000s, and his bet was immortalized in the book and movie “The Big Short.”
The Scion Asset Management boss is also known for betting against Elon Musk’s Tesla and Cathie Wood’s Ark Innovation fund last year, buying a stake in GameStop before it became a stock meme. Moreover, in June of last year he diagnosed “the greatest speculative bubble of all time in all things” and predicted that it would end up being the “mother of all crashes”.
Burry ended his Thursday tweet ominously. He wrote that one of his analysts said it was “spooky” to hear the current chaos compared to the 2008 crash, on the 14th anniversary of Congress failing to pass a $700 billion plan to bail out banks ravaged by the housing bust. The news sparked one of the steepest one-day declines in U.S. stocks in history.
Here’s a screenshot of Burry’s deleted tweet: