‘Big Short’ investor Michael Burry predicted the inflation spike a year ago – and sounded the alarm multiple times in February

Michael Burry big short

  • Michael Burry predicted post-reopening inflation back in April 2020.
  • “The Big Short” investor warned prices could surge earlier this year too.
  • Burry trumpeted the value of profitable companies during inflationary periods.
  • See more stories on Insider’s business page.

Michael Burry warned the post-pandemic reopening could cause inflation to spike as early as April last year – mere weeks after the first lockdowns in the US. His prediction was proven right this week by data showing consumer prices jumped 4.2% year-on-year last month, the sharpest increase in 11 years.

“When we start working and playing again, inflation may be in store,” the investor told Bloomberg for a story published on April 7 last year.

Burry is best known for anticipating the collapse of the US housing market in the mid-2000s, and making a billion-dollar bet on that outcome. That episode of his career was immortalized in the book and movie “The Big Short.” He also helped lay the groundwork for the meme-stock frenzy earlier this year by investing in GameStop and pushing for changes at the retailer back in 2019.

The Scion Asset Management chief ramped up his inflation warnings in February of this year. He cautioned that stimulus checks, the Federal Reserve’s continued pumping of liquidity into markets, and the reopening of large parts of the economy were likely to drive prices higher.

“Prepare for #inflation,” Burry tweeted on February 19. “#Inflation pressure building. The Fed is monetizing $80 billion of Treasury debt per month, and now comes $Trillions in stimulus/debt + reopening,” he tweeted four days later.

Burry highlighted America’s inflation woes in the 1970s, as well as Weimar Germany’s hyperinflation in the 1920s, as cautionary tales about the risks of soaring prices. He also flagged Warren Buffett’s description of inflation as a “tax on capital,” as it discourages companies from investing by reducing their real returns, and acts as an implicit tax on investors by eating into their purchasing power.

Read more: The founders of a crypto-asset hedge fund break down how ether could overtake bitcoin in market cap – and why the second-largest cryptocurrency will go over at least $25,000 in the short- to medium-term

The Scion chief’s takeaway was that profitable companies shine during inflationary periods.

“Each $ of earnings today becomes important,” he tweeted on February 23. “Earnings 10 and 20 years from now, the corollary goes, may be worth substantially less tomorrow’s today.”

Burry didn’t only raise the alarm on inflation. He also warned the stock market was “dancing on a knife’s edge” in February, and called out Tesla, GameStop, bitcoin, and Robinhood as examples of dangerous speculation in markets.

The investor pledged to stop tweeting in mid-March, citing a visit from federal regulators. He deleted his Twitter profile in April.

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Billionaire ‘bond king’ Jeffrey Gundlach blasted stimulus checks for distorting markets – and warned inflation could threaten stock prices

Jeffrey Gundlach
Jeffrey Gundlach

  • Billionaire investor Jeffrey Gundlach warned stimulus checks are distorting markets.
  • The DoubleLine Capital CEO said sustained inflation could hit stock prices.
  • Gundlach called crypto the “poster child” of the speculative mania in markets.
  • See more stories on Insider’s business page.

Jeffrey Gundlach underlined the risks of excessive federal stimulus in a Yahoo Finance interview this week. He also warned sustained inflation could hammer stock prices, and suggested bitcoin’s recent slump might indicate that market speculation is on the decline.

The billionaire founder and CEO of DoubleLine Capital, whose nickname is the “bond king,” said multiple rounds of stimulus checks have distorted several parts of the economy. They have fueled the sharp rise in US house prices over the past year, he said, and discouraged some recipients from working because they’re “making more money sitting at home watching Netflix.”

“One of the dangers that we’ve opened the door to is these stimulus checks are starting to feel like they might not go away,” Gundlach added.

The DoubleLine boss was caught off-guard by inflation data this week that showed consumer prices jumped the most in 11 years last month. His firm’s models were predicting higher inflation in another month or two, and he still expects the peak to be in July, he said.

“If we keep going higher from there, then I think people are going to be seriously worried,” he continued, explaining that it would rule out a temporary increase in prices due to the economy reopening.

Moreover, sustained inflation could pressure the Federal Reserve into raising interest rates and pumping less liquidity into markets. “That’s gonna be problematic for the valuation of the stock market,” he said.

Gundlach linked the cryptocurrency boom and meme-stock frenzy to stimulus checks later in the interview.

“Gamestop, all these things, a lot of people are just playing with this funny money,” he said. “They feel like they’re playing with the house’s money, so it actually does resemble a casino to them, psychologically.”

Gundlach, who was bullish on bitcoin last year, compared it to the pre-revenue tech startups that went public in the months before the dot-com crash. “Every era of really highly valued markets, after they’ve run a lot, has some sort of a poster child,” he said. “Here I think it’s really these cryptos.”

The investor suggested bitcoin’s recent correction might indicate the rampant speculation in markets has peaked and may now be easing. “Maybe it’s only temporary, but when you’re looking at a speculative fervor, I look for the poster child to roll over last,” he said.

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Jen Psaki says the IRS letter sent to Americans about stimulus checks was ‘not intended to make it about’ Biden

white house press secretary jen psaki
Jen Psaki, the White House press secretary.

  • Jen Psaki defended a letter President Joe Biden sent to Americans about stimulus checks.
  • The letter was “not intended to make it about” Biden, the White House press secretary said.
  • Trump sent a similar letter to Americans when stimulus checks went out during his administration.
  • See more stories on Insider’s business page.

The White House press secretary, Jen Psaki, on Friday defended a letter that President Joe Biden sent to tens of millions of Americans who received a third round of COVID-19 stimulus checks this spring.

The letter, mailed by the Internal Revenue Service and signed by the president, touts his $1.9 trillion American Rescue Plan, which was passed in March, and highlights key provisions of the bill, including $1,400 direct payments, funding for small businesses, and an expanded child tax credit.

“A key part of the American Rescue Plan is direct payments of $1,400 per person for most American households,” Biden wrote in the letter obtained by Insider. “This fulfills a promise I made to you, and will help get Americans through the crisis.”

The letter is “pretty standard” and was “not intended to make it about him,” Psaki told reporters during a press conference on Friday. “It’s about the American people.”

Psaki said the letter “goes out with physical checks.” But people who got the federal aid through direct deposit have also received the letter. The IRS said all recipients of the third payment will get the letter, which “should be kept with tax year 2021 records.”

Psaki’s comments come after some have criticized the letter as an act of self-promotion and compared Biden’s move to that of his predecessor, President Donald Trump, who sent a similar IRS letter to Americans about coronavirus stimulus checks enacted during his administration.

Biden’s letter appears identical in format to the one Trump sent last spring. Both letters were mailed by the IRS, displayed the White House letterhead, are signed by the president, and addressed to “My fellow American.”

But Biden did not include his signature directly on the stimulus checks, which Trump did – a decision that may have delayed their delivery to the public. “We didn’t have [Biden] sign the checks because we were concerned about any impact that would have on delaying them going out to the public,” Psaki reiterated on Friday.

At the time, Trump’s letter prompted criticism that he was politicizing the IRS for his benefit. Citizens for Responsibility and Ethics in Washington, a government watchdog group, called Trump’s letter “self-aggrandizing.”

The organization reacted negatively to Biden’s letter as well.

“This trend toward presidents sending self-serving signed letters at taxpayer expense is unfortunate regardless of who does it,” said Noah Bookbinder, CREW’s president. “I hope that President Biden will not learn the wrong lessons from his predecessor and continue this kind of tactic.”

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Mitch McConnell claims Biden’s stimulus benefits are setting back the economic recovery

Mitch McConnell
Senate Minority Leader Mitch McConnell.

  • McConnell claimed on Thursday that Biden’s stimulus benefits are causing worker shortages.
  • “We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” he said.
  • Some economists say a labor shortage would cause wages to rise, but that hasn’t happened yet.
  • See more stories on Insider’s business page.

Senate Minority Leader Mitch McConnell on Thursday faulted the Biden administration for approving stimulus benefits, and claimed they are hurting the nation’s economic recovery.

“We have flooded the zone with checks that I’m sure everybody loves to get, and also enhanced unemployment,” McConnell said from Kentucky. “And what I hear from businesspeople, hospitals, educators, everybody across the state all week is, regretfully, it’s actually more lucrative for many Kentuckians and Americans to not work than work.”

He went on: “So we have a workforce shortage and we have raising inflation, both directly related to this recent bill that just passed.”

McConnell’s comments reflect longstanding GOP concerns about disincentivizing people from returning work as a result of issuing direct payments and federal unemployment benefits. Democrats approved a massive $1.9 trillion stimulus package in March, arguing many households needed immediate financial aid from the government.

No Republicans voted for the relief package. The unemployment rate has steadily fallen to 6%, and new claims have dropped for four weeks in a row.

But employers are growing alarmed over worker shortages, particularly those in the restaurant sector, while shortages of commodity goods are causing massive price increases in certain pockets of the economy. The trends caused the White House to defend its policies on Thursday. White House Deputy Press Secretary Karine Jean-Pierre said there was “little evidence” that enhanced unemployment insurance was enticing people away from work.

Some economists note that a key feature of a labor shortage – rising wages – is not in evidence, as businesses typically take that step to lure job-seekers from a scarce pool.

“When you don’t see wages growing to reflect that dynamic, you can be fairly certain that labor shortages, though possibly happening in some places, are not a driving feature of the labor market,” Heidi Shierholz, economist and director of policy at the left-leaning Economic Policy Institute, wrote on Twitter. “And right now, wages are not growing at a rapid pace.”

Federal Reserve Chairman Jerome Powell weighed in on the issue last week at a press conference. He said potential factors that could explain the shortage include a lack of childcare, lingering COVID-19 fears, and school closures.

“We don’t see wages moving up yet. And presumably we would see that in a really tight labor market,” Powell said. “And we may well start to see that.”

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30 million people may now get their $1,400 stimulus checks after the Social Security Administration released new information

Richard Neal
Rep. Richard Neal (D-MA).

  • 30 million people on Social Security and Supplemental Security incomes haven’t gotten stimulus checks yet.
  • That’s because the SSA wasn’t sending necessary payment information to the IRS.
  • Top House Democrats gave the SSA 24 hours to provide it, and the IRS got it Thursday morning.
  • See more stories on Insider’s business page.

Following a 24-hour ultimatum from Democratic lawmakers, the Social Security Administration provided information to the Internal Revenue Service on Thursday that will help more Americans get stimulus payments.

Nearly 30 million Social Security and Supplemental Security income beneficiaries were kept waiting on stimulus payments because, House Democrats said, the SSA hadn’t provided the Internal Revenue Service with necessary payment files for them.

On Wednesday, the chair of the House Ways and Means Committee, Richard Neal, and the chair of the House Oversight Subcommittee, Bill Pascrell, Jr., sent a letter to the SSA requesting that information be sent over right away. “We are giving the trump-appointed heads of the Social Security Admin **24 Hours** to get off their backsides and stop delaying sending stimulus checks to 30,000,000 Americans,” Pascrell said on Twitter on Wednesday.

On Thursday, the SSA transferred the necessary files to the IRS, making it possible for the affected Americans to get the $1,400 stimulus checks that many others have already received.

“The delays imposed by Commissioner Saul defied congressional intent and imposed needless anxiety and pain on taxpayers,” the Democrats said in a statement on Thursday. “Now the IRS needs to do its job and get these overdue payments out to suffering Americans. Further delays will not be tolerated by this committee.”

Rep. John Larson of Connecticut and Rep. Danny Davis of Illinois had joined Neal and Pascrell in calling for action from the SSA and IRS.

Since President Joe Biden’s stimulus bill was signed into law, Americans across the country have encountered delays in receiving stimulus aid. Due to December and March stimulus changes, the IRS was behind in processing nearly 7 million tax returns, and customers of major online tax preparers, such as TurboTax and H&R Block, faced delays on the $10,200 tax break on unemployment benefits received during the pandemic.

As a result of the delays, along with calls from lawmakers, the IRS extended tax filing season to May 17, which Neal and Pascrell said would lift the “titanic strain” on taxpayers.

The Treasury Department, IRS, and Bureau of Fiscal Service announced on Wednesday that 127 million of the $1,400 stimulus checks have been sent out to date.

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People who don’t get a $1,400 direct payment by March 24 can expect mailed checks, Treasury says

coronavirus relief bill cares act stimulus check
  • Treasury said people waiting for $1,400 stimulus payments on March 24 can expect theirs by mail or prepaid debit card.
  • The IRS and Treasury are moving swiftly to issue tens of millions of direct payments.
  • Singles earning up to $75,000 in adjusted gross income qualify for the full amount.

Americans who don’t receive a $1,400 direct deposit by March 24 can expect either a mailed check or a prepaid debit card, according to the Treasury Department.

The cabinet agency said in a statement that a second round of stimulus checks were sent out on Friday with a pay date of Wednesday, March 24. People waiting for checks after that date will likely receive theirs by mail.

“Taxpayers who do not receive a direct deposit by March 24 should watch the mail carefully in the coming weeks for a paper check or a prepaid debit card, known as an Economic Impact Payment Card, or EIP Card,” Treasury said on Monday.

The Biden administration along with Congress approved $1,400 stimulus checks earlier this month, the third wave of federal payouts over the last year. The IRS started issuing the payments only a day after the rescue package was signed into law.

The Treasury Department said on Wednesday it had already deposited 90 million checks, amounting to $242 billion. It also said 150,000 paper checks were mailed.

Singles earning up to $75,000 in adjusted gross income qualify for the full amount, along with couples making up to $150,000. Each adult dependent is eligible for a check as well.

But the stimulus check amounts shrink much more quickly above those thresholds. Individuals earning more than $80,000 and couples making above $160,000 will receive zero.

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Billionaire investor Jeffrey Gundlach warns stocks are hugely overvalued – and amateur traders will worsen the coming crash

Jeffrey Gundlach
Jeffrey Gundlach.

  • Jeffrey Gundlach warned stocks are overvalued and face a brutal downturn.
  • The billionaire investor predicted the stock market will tumble by far more than 15%.
  • The DoubleLine Capital boss also slammed the latest round of US stimulus.
  • See more stories on Insider’s business page.

Billionaire investor Jeffrey Gundlach sounded the alarm on stocks and predicted a painful crash on DoubleLine’s Total Return Webcast last week.

Suggesting the stock market is “anything other than very overvalued versus history is just to be ignorant of all the metrics of valuation,” the DoubleLine Capital boss said.

Gundlach gave that reply when asked whether he agrees with Michael Burry of “The Big Short” fame that markets are in a “speculative bubble” and will suffer a “dramatic and painful” decline. He voiced a similar view, saying stocks would fall much more than 15% when the downturn comes.

The so-called “bond king” predicted that many retail investors will cash out when equities turn south, exacerbating the inevitable correction. “We’ll have a tremendous unwind of a lot of the money that thinks that the stock market is a one-way thing,” he said.

Gundlach also issued a stark warning about federal spending during the pandemic. “We’re pretty clearly in a speculative bubble regarding debt and government activity,” he said.

The DoubleLine boss deployed a wealth of economic data to make his arguments. For example, he pointed to rising trade and budget deficits, depressed consumer confidence, record readings on the “Buffett indicator” and other market gauges, heady price-earnings ratios, and the disconnect between growth, employment, and the stock market.

Gundlach made several calls during the webcast. He expects year-on-year inflation of over 3% in June or July, the dollar to weaken in the coming months, and gold prices to bounce back.

Moreover, the investor predicted the VIX – an index known as the market’s “fear gauge” because it measures investors’ volatility expectations – will surge past 100 for the first time when the crash comes. Lofty valuations and the “amateur aspect of the market with Robinhood” will fuel volatility, he said.

Gundlach also criticized President Biden’s $1.9 trillion stimulus bill, which was signed into law last week. He called it “shocking” that couples with a household income of $150,000 and three children are set to receive $6,000 in federal support.

Stimulus initiatives are “cooking all of us frogs in a pot,” he said, comparing them to “monetization” programs where governments fund themselves by printing money instead of collecting taxes or borrowing.

“The biggest problem is that we’ve become totally addicted to these stimulus programs,” Gundlach said. He argued that the government is training people to rely on federal support, and could struggle to turn off the tap as a result.

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Treasury says it has issued 90 million direct payments – and Americans can start accessing their stimulus checks

coronavirus relief bill cares act stimulus check
  • The Treasury Department said on Wednesday it’s already issued 90 million direct payments.
  • It means Americans can start accessing stimulus cash, including those with accounts at major banks.
  • Individuals earning up to $75,000 qualify for a full check from the federal government.
  • See more stories on Insider’s business page.

The Treasury Department announced Wednesday it has distributed 90 million direct payments to Americans, and people can start tapping into their federal relief funds.

“The first batch of payments were mostly sent by direct deposit, which some recipients started receiving this past weekend,” the Treasury Department said in a statement. “As of today, all recipients of this first batch of direct deposit payments will have access to their funds.”

The 90 million federal payouts amounted to $242 billion, the Treasury said. It added that the first round of direct payments went to taxpayers who provided deposit information on their 2019 or 2020 tax returns. The federal government has also mailed 150,000 paper checks, the agency said.

The IRS and Treasury started distributing the $1,400 federal payments on Friday evening, only a day after President Joe Biden signed the $1.9 trillion stimulus plan into law.

However, customers at major banks like Wells Fargo had to wait for the government cash to be released on March 17 before being able to tap into the money.

Singles earning up to $75,000 in adjusted gross income qualify for the full amount, along with couples making up to $150,000. Each adult dependent is eligible for a check as well. But the stimulus payments diminish in size much more quickly. Individuals earning above $80,000 and couples making above $160,000 will receive zero.

People can track the status of their relief checks using the “Get my Payment” portal. The Treasury said that 35 million Americans had accessed the service for more information.

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Retail investors could buy a record $3 billion of US stocks the day they get their stimulus money, one research firm says

Traders work on the floor of the New York Stock exchange
  • Retail investors could snap up a record $3 billion in stocks the day they start receiving their COVID-19 relief funds, says Vanda Research.
  • That could happen as soon as Wednesday or Thursday, when most Americans will start seeing $1,400 deposited into their bank accounts,.
  • Owning small-cap stocks could be a good way to position for this week’s event, says Vanda Research.
  • See more stories on Insider’s business page.

Retail investors could buy a record $3 billion of US equities in a single day when they receive their $1,400 stimulus checks from the US government, according to Viraj Patel, global macro strategist at Vanda Research

The firm says this could happen as soon as Wednesday or Thursday of this week. JPMorgan Chase and Wells Fargo have previously said their customers are slated to start getting the $1,400 checks on Wednesday.

Numerous Americans have already said on social media sites they’ve already received the cash approved by Congress and signed off on last week by President Joe Biden. The aim is to help reinvigorate the world’s largest economy after it was thrown into recession last year because of the coronavirus crisis.

A new round of cash coming into equities would take place at a time that the S&P 500 Index and the Dow Jones industrial average have hit all-time highs, spurred in part by investors rotating into cyclical stocks that should benefit from the recovery in the US economy. Many businesses have been reopening their doors as millions of Americans have received vaccinations to ward off COVID-19 infections.

“But besides just guessing past retail favourites (GME, TSLA, AMC, BB, NIO etc.) in the hope that retail traders will plow their stimulus checks into those stocks once again — we’d think owning small-cap indices (namely the Russell 2000) could be a good way to position for this week’s event,” Patel told Insider via email on Monday.

Vanda Research’s data analysis arm VandaTracks tracks retail investing activity in 9,000 individual stocks and ETFs in the US.

GameStop, AMC Entertainment and BlackBerry have become popular among retail investors who are active on Reddit’s WallStreetBets platform and who drove the January rally in those and other so-called meme stocks.

The small-cap Russell 2000 Index has gained about 19% during 2021, with movie theater operator AMC among its best performers. The company this week will begin showing films again in California, starting in the major market of Los Angeles.

Big buying of US equities on Wednesday would be on the same day the Federal Reserve will release its monetary policy statement. The Fed isn’t expected to make any changes on interest rates but investors will listen for indications from Fed Chairman Jerome Powell about when the central bank will begin to raise interest rates in the face of improvement in the economy.

Read more: Morgan Stanley says to buy these 12 stocks before their unique catalysts drive them to deliver market-beating returns

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4 measures in the Biden stimulus law that provide extra cash for Americans

Joe Biden
President Joe Biden.

  • The $1.9 trillion Biden stimulus law was enacted last week.
  • Some elements could strengthen the nation’s social safety net in the wake of the pandemic.
  • Provisions include larger tax credits and enhanced unemployment insurance.
  • See more stories on Insider’s business page.

President Joe Biden signed a $1.9 trillion stimulus law last week, among the largest government rescue measures in American history.

Many of its provisions are directed at keeping individuals and families afloat as vaccinations become more widely available. Still, some aspects of the law may end up dramatically remaking the social safety net.

“This package sets a new and powerful precedent, especially for helping children and their families when they have limited or no income,” Indivar Dutta-Gupta, co-executive director of the Georgetown Center on Poverty and Inequality, said in a recent interview with Insider.

(1) $1,400 stimulus checks

The relief law includes a $1,400 direct payment for most taxpayers. Those will be distributed over the next few weeks, and some are already going out the door.

Individuals earning up to $75,000 and couples making up to $150,000 qualify for full checks. A married couple, then, can get $2,800. People can also collect an extra $1,400 per adult dependent, a change from the first two federal payouts.

People earning above those thresholds still qualify for a smaller direct payment. But eligibility is capped at individuals earning more than $80,000 and joint filers bringing in more than $160,000, meaning people and households making above those amounts are paid nothing.

(2) $300 federal unemployment benefits through Labor Day

The law provides $300 in weekly federal unemployment benefits until September 6. The measure renewed the government supplement to state unemployment checks for an extra six months.

It extends the length of various programs, such as the Pandemic Unemployment Assistance program for gig workers and the Pandemic Emergency Unemployment Compensation for long-term unemployed people. Both will expire in September without additional action in Congress.

(3) Expanded tax credits

The law also beefs up the child tax credit for millions of families. For the next year, it provides $3,600 per child aged 5 and under, and $3,000 for each kid aged 6 to 17.

Payments were designated as “periodic” to clear Senate procedural hurdles, but Democrats want to implement advance monthly checks to families of up to $300, although it’s unclear if the IRS can accommodate that request. Advance checks could start going out on July 1, the legislation indicates.

Other tax credits are augmented as well, such as the Earned Income Tax Credit. The law nearly triples the maximum amount a childless worker can receive, from $540 to $1500. The income cap for adults is also lifted from $16,000 to $21,000, a step widening its reach.

(4) Bigger SNAP benefits

The measure also aims to address hunger and food insecurity through the Supplemental Nutritional Assistance Program. It renews a 15% boost to SNAP benefits through September.

Put another way, the increase is equal to $27 more in SNAP benefits per person each month, or just over $100 monthly for a family of four, according to the Center on Budget and Policy Priorities.

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