'Big Short' investor Michael Burry warns household wealth is under pressure — and higher wages can't replace the huge wave of pandemic stimulus
- Michael Burry rang the alarm on consumer wealth in a since-deleted tweet on Tuesday.
- "The Big Short" investor noted households received huge amounts of stimulus during the pandemic.
Michael Burry fears consumer wealth, boosted by vast amounts of cheap money during the pandemic, could falter in the face of raging inflation and falling asset prices, choking economic growth.
"This is the problem," Burry said in a now-deleted tweet on Tuesday. "Last 18 months - $850B in direct stim checks, $400B in cash out refis, $1+T in forgivable loans ($250-500B of it fraudulent), another $4 trillion indirect, etc."
"What recapitalizes the consumer now?" the investor of "The Big Short" fame continued. "Higher wages can't do THAT."
Burry's view is that US households took advantage of stimulus checks, cash-out refinancing offers, forgivable loans, and indirect economic support to grow their wealth over the past year and a half.
He's now worried that salary increases won't be enough to protect those savings and spare people from onerous debt. Consumers face a backdrop of surging inflation, rising interest rates, falling liquidity, and a potential drop in house prices or stocks. They may spend less if their fortunes shrink, causing the economy to slow down.
Moreover, the Federal Reserve and Treasury might balk at stepping in to shore up asset prices and economic growth as they did during the pandemic, given the risk of exacerbating inflation, Burry tweeted recently.
The Scion Asset Management boss has also argued the US central bank isn't even trying to curb inflation; it's raising rates and shrinking its balance sheet to give itself scope to intervene again. "The Fed's all about reloading the monetary bazooka," he tweeted.
Burry is best known for shorting the mid-2000s housing bubble, backing GameStop before it became a meme stock, betting against Elon Musk's Tesla and Cathie Wood's Ark Innovation fund last year, and repeatedly warning a historic market crash is on the horizon.
Here's a screenshot of Burry's latest tweet:
