'Big Short' investor Michael Burry says the dollar isn't strong at all — and inflation is eroding the US currency's buying power
- Michael Burry of "The Big Short" dismissed the US dollar's current strength in a recent tweet.
- The currency has only gained versus rivals, and inflation is eroding its buying power, Burry said.
Michael Burry, the investor of "The Big Short" fame, took aim at the US dollar in a Tuesday tweet. He argued the currency is only strong on a relative basis, and rampant inflation is eroding its purchasing power.
"When you see mention of the strong dollar, the almighty dollar, please remember this is only in relation to other fiat currencies," he said. "The dollar is not at all strong, and it is not getting stronger. We all see it every single day in prices of everything."
The US dollar index, which measures the dollar's value against a basket of foreign currencies, hit a 20-year high in May. Its surge reflects the greenback's appeal as a haven in volatile markets, and investors betting the Federal Reserve will continue hiking interest rates in an effort to curb inflation at 40-year highs.
Burry's point is that a dollar may be worth more in euros or yen than before, but it buys a lot less due to the soaring prices of food, gas, housing, and many other goods and services.
Other top-flight investors have made similar arguments. Warren Buffett, who Burry studied closely as a budding investor, recently said inflation "swindles the person who keeps their cash under their mattress." Similarly, Ray Dalio has urged investors to gauge their wealth not in dollars but in buying power, or they'll misjudge the riskiness of holding cash.
Burry warned the pandemic could fuel inflation as early as April 2020, and suggested in April this year that rising costs will lower companies' profit margins and reduce their valuations.
Moreover, he recently noted that Americans are saving less, borrowing more, and could virtually exhaust their savings before the end of this year. That trend threatens to slash consumer spending and pile more pressure on corporate earnings, he said.
The Scion Asset Management boss is best known for his billion-dollar wager against the mid-2000s housing bubble, which was chronicled in the book and the movie "The Big Short." He also bet against Elon Musk's Tesla and Cathie Wood's Ark Innovation fund last year, and his past investments in GameStop and push for changes at the video-game retailer helped lay the groundwork for the meme-stock boom.
Burry has frequently called out the breathless hype and reckless gambling in financial markets during the pandemic. He bemoaned the "greatest speculative bubble of all time in all things" last summer, and warned owners of meme stocks and cryptocurrencies that they were headed towards the "mother of all crashes."
