- Michael Burry warned this could be the last set of positive company earnings for a while.
- The "Big Short" investor expects inflation and overstocking to pummel corporate profits.
The current crop of upbeat company earnings might be the final ray of sunshine for investors before demand dries up and the US economy slumps into a recession, Michael Burry warned this week.
"These earnings reports and by Jove the whole season have a 'Last Hurrah' feel," he said in a since-deleted tweet on Tuesday.
The fund manager of "The Big Short" fame was likely referring to Microsoft and Alphabet, after the Big Tech duo's solid financial results sent their respective stock prices up as much as 4% in premarket trading on Wednesday. In contrast, investors have punished the likes of Netflix, Snapchat, and Walmart in recent weeks after their earnings disappointed.
Burry predicted earlier this year that inflation would squeeze shoppers and erode consumer spending, while overstocked retailers would be forced to slash prices to get rid of excess inventory, eating into corporate profits and choking economic growth in the coming months.
Walmart essentially confirmed the investor's thesis this week. The mega-retailer complained that high food and fuel prices are sapping demand for general merchandise in its stores, it has marked down unsold goods, and it expects a sharp decline in profits this year as a result.
Burry has previously suggested that Microsoft shares, down 25% this year, could tumble much further based on their much higher trading volumes following the dot-com crash and financial crisis.
He has also cautioned that a wave of weak earnings might double the already sharp declines for stocks and cryptocurrencies this year, and even the best growth stocks might plummet in value, given Amazon's 90%-plus decline after the dot-com bubble burst.
The Scion boss is best known for his iconic bet against the mid-2000s housing bubble, which was immortalized in the book and the movie "The Big Short."
Burry also inadvertently fueled the meme-stock frenzy by purchasing a stake in GameStop, placed high-profile wagers against Elon Musk's Tesla and Cathie Wood's Ark Innovation ETF last year, and has tweeted numerous times that the pandemic-era surge in asset prices would culminate in a historic crash.