In a since-deleted tweet, legendary American investor Michael Burry offered an ominous warning about a 2008-style crash that he believes could soon arrive to unleash more pain on US markets.
Burry, the founder of Scion Asset Management, rose to fame after anticipating the collapse of the US housing market as chronicled in the Michael Lewis book “The Big Short” which was later adapted into a Hollywood movie.
Here’s what Burry said in the now-deleted tweet: “As I said about 2008, it is like watching a plane crash. It hurts, it is not fun, and I’m not smiling.”
Years ago, Burry described a recurring dream he had as the housing market melted down in 2007. In his dreams he would repeatedly see planes crashing.
To be sure, the context-free tweet was largely open to interpretation as Burry neglected to answer questions from Twitter users inquiring about the tweet. Burry also has a habit of deleting his tweets shortly after publishing them.
US stock indexes climbed into the green after the open on Wednesday, but after the worst start to the year in history for technology stocks, investors remained cautious amid fears that stocks could swiftly reverse their gains at any time.
It’s worth noting that Burry’s vague tweet followed the release of U.S. new home sales data for April which showed a decline of nearly 30% compared with April 2021, according to data from the Census Bureau and the Department of Housing and Urban Development.
And in other economic news, the S&P Global flash US purchasing managers index for the services sector dropped to a three-month low of 53.5 in May from 55.6 in the prior month, a sign that the all-important US services sector is entering a period of contraction.
But the data aren’t all bad: while inflationary pressures have been widely blamed for driving the rapid re-rating in global equities, especially in the US, a quick look at the US five-year break-even rate – a measure of the difference between the nominal five-year yield and the yield on the five-year inflation protected securities which is seen as a gauge of inflation expectations five years in the future – shows it has retreated to below 2.9%, a decline of roughly 30 basis points in under a week. This would suggest that long-term inflation expectations are starting to cool, despite Bill Ackman’s complaints that the Fed still isn’t doing enough to suppress intransigent price pressures.
Roughly a year ago, Burry warned that markets were headed for “the mother of all crashes”. Months later, US stocks and bonds plunged as the Federal Reserve discussed its plans for a series of rapid interest rate hikes. More clues about the Fed’s thinking are expected later on Wednesday when the central bank releases the minutes from its two-day policy meeting earlier this month, during which it voted to raise its benchmark policy rate by 50 basis points.