Hedge funder Michael Burry, most notable for foreseeing the 2008 housing crash, is warning that the U.S. is headed toward a multi-year recession—and says why.
Key Details
- Michael Burry who is well-known for predicting the 2008 financial crisis is warning others that the U.S. is heading for an extended multi-year recession.
- Burry has long argued that U.S. consumers are spending down their savings—and so spending will soon slow—inflation is here to stay, and corporate profits are set to take a hit. All this means a recession is all but guaranteed, according to Fortune writer Will Daniel.
- Most investment banks have been anticipating a short and mild recession, but Burry says those predictions are overly optimistic and he expects this recession to last much longer.
Why it’s news
Many banks and investors have been getting slightly more optimistic that the future recession will be mild, but Burry suggests that it will be much longer than anticipated and is attempting to warn others.
Some believe that if a recession were to happen it will be relatively mild including Goldman Sachs Research economists. The economists believe any post-COVID U.S. recession will likely be mild because now that the pandemic is over most COVID affected areas will have room to normalize.
Burry disagrees as he believes that an oncoming recession will be severe and long lasting. His reasoning for the recession to be long is due to the fact that there are limited options to spur economic growth due to continuous rising inflation.
Burry is well known for predicting the 2008 house market crash that sent the U.S. into a deep recession where he managed to emerge with hundreds of millions in profits. He also warned of the crypto fall out in June 2021.
He warned crypto investors that “the mother of all crashes” was making its way to the crypto sector—and he was correct. Since that fallout crypto has fallen from around $3 trillion to roughly $850 billion, according to CoinMarketCap.
Although he has been correct in his predictions multiple times he has also been proven wrong multiple times leaving some speculative of his current recession prediction.
Burry took to Twitter to call out others who are predicting a mild recession and not warning others that a severe recession could potentially be on the horizon leaving CEO of Roubini Macro Associates Nouriel Roubini to respond to his tweet.
Notable quote
CEO of Roubini Macro Associates Nouriel Roubini has also been warning others that the U.S. could soon face a recession similar to that of the Great Depression and responded to Burry’s tweet saying, “Some of us have been predicting a long and severe recession and made a detailed case for why we are headed towards a Great Stagflationary Debt Crisis.”
