Michael Burry of "The Big Short" Predicts Spike In Inflation Correctly

"The Big Short" Michael Burry, during the early phase of the lockdown in the United States, predicted that the post-pandemic reopening of the economy could lead to a spike in inflation.

This prediction which he made as far back as April 2020 is being confirmed now as data reveals that consumer prices last month went up the highest in 11 years, at 4.2% year-on-year.

In an interview with Bloomberg last year, the investor said,

 "When we start working and playing again, inflation may be in store." 

On the 19th of February, Michael Burry tweeted the hashtag #inflation on his then-active Twitter. Four days later, he tweeted "#Inflation pressure building. The Fed is monetizing $80 billion of Treasury debt per month, and now comes $Trillions in stimulus/debt plus reopening."

Michael Burry went as far as exposing America's inflation problems which took place in the 1970s and Weimar Germany's hyperinflation in the 1920s in a bid to earn about the dangers of soaring prices. The investor disagreed with the definition of Inflation as "tax on capital", which was proposed by billionaire investor Warren Buffett. According to Burry, this narrative dissuades companies from investing by taking away their real returns and also acts as an implicit tax on investors by tampering with their purchasing power.

It might be of great use to pay attention to Burry at this point, the investor, who has had parts of his career turned into both a book and movie, "The Big Short", has a track record of predicting economic situations correctly. He is best known for the prediction of the US housing market collapse which took place in the mid-2000s and making a billion-dollar bet on the outcome.

The investor, who currently is chief at Scion Asset Management, heavily emphasized inflation warnings in February. He cautioned that stimulus checks, the Federal Reserve's ongoing pumping of liquidity into the markets, and the reopening of the economy, would all combine to drive the priest of products and services up.

In a tweet on the 23rd of February, Burry said, "Each $ of earnings today becomes important," followed by another tweet that read

"Earnings 10 and 20 years from now, the corollary goes, may be worth substantially less tomorrow's today."

Not only did Michael Burry caution about inflation, he had words for the US stock market as well, claiming that companies like GameStop, Robinhood, and Tesla were bad precedents of speculation in the market. He likened the stock market to "dancing on a knife's edge." Burry was part of those who laid the foundation for the GameStop stock saga early this year, as the investor invested in the game retailer in 2019 and rallied for changes to take place at the company by writing several letters to the board. After the short squeeze in January, Burry came on Twitter to express his displeasure by calling it "insane, and dangerous." He blasted Robinhood, and called the company a "dangerous casino."

He, however, deleted his Twitter profile in April, as he vowed to stop tweeting after federal regulators paid him a visit. Before he did, he revealed that he was shorting Tesla stocks by 800,100 shares.