Hedge fund manager Michael Burry, famous for his predictions on the 2008 financial crisis, has warned of a looming consumer recession and further earnings woes. He cited falling personal savings in the US and record-breaking revolving credit card debt despite trillions of dollars in stimulus money.
Michael Burry’s recession warning
Well-known investor and founder of investment firm Scion Asset Management, Michael Burry, warned on Friday of a looming consumer recession and further earnings woes.
He is best known for being the first investor to anticipate and capitalize on the US subprime mortgage crisis that occurred between 2007 and 2010. He is portrayed in The Big Short, a book by Michael Lewis about the mortgage crisis, a film starring Christian Bale.
Burry explained on Twitter on Friday:
US personal savings fell to 2013 levels, the savings rate to 2008 levels – while revolving credit card debt rose at a record-breaking pace back to pre-Covid peaks, even as all those trillions of cash fell into their laps. Threatened: a consumption recession and further earnings problems.
His tweet contains two images. The first shows a sharp decline in personal savings in the US. The other shows a sharp rise in consumer credit outstanding.
At the time of writing, there were 476 comments on Burry’s tweet, which received 11,000 likes and almost 2.5,000 retweets. Many people on Twitter agreed with Burry, thanking him for raising the issue and telling others to heed his warning.
One commented: “This is wild. We dropped helicopter money on people and yet personal savings went down and credit card debt went right up to where it was.”
Another wrote: “Exactly what I said – inflation is not a problem. Consumer debt is a problem. Demand-side monetary policy is flawed. Price manipulation cannot correct the market. Americans flushed with cash. Redirect to long-term savings instead of focusing on spending. Kill imports.”
Another user said:
While the media wants the narrative that the consumer is strong, the numbers say otherwise. Less savings, higher debt and inflation metrics still rising month-on-month, with energy prices near highs not seen since 2008.
Several people agreed that “numbers don’t lie,” and the US economy is looking as bleak as Burry suggested, or worse.
A growing number of people have recently warned that a recession is either here or imminent, including Tesla CEO Elon Musk, Robert Kiyosaki, author of Rich Dad Poor Dad, and Lloyd Blankfein, senior chairman and former CEO of Goldman Sachs .
What do you think of Michael Burry’s warning? Let us know in the comment section below.
photo credit: Shutterstock, Pixabay, WikiCommons
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