- 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.
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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.