Michael Burry dumped most of his stocks and warned that a major market crash is coming, citing surging consumer debt and rising interest rates. He's kept only a large stake in GEO Group, a private prison company. Burry predicted this kind of collapse before the 2008 financial crisis.
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Welcome back to the channel. Today, we're gonna talk about Michael Burry's major, major stock dump, his tweets, and his huge predictions for a major, major market collapse. Should be a pretty fun call. Now, if you don't know who Michael Burry is, he is famous because of The Big Short, going through the 2007-2008 market crash, how he came away with hundreds of millions of dollars for his investors and even a $100 million chunk for himself. After that huge position he took shorting the housing market in 2008. Now at the time, Scion Capital had over $600 million under management. After he cashed out on 2008, he turned Scion Capital pretty much into his own investment management firm with about $140 million under management of just his own personal money. Now this is all significant because in May of this year, Michael Burry, also known as Cassandra on Twitter, which Cassandra is known for giving bad news back in ancient mythology times, In their 13F filing, they showed they dumped all of their stock positions besides one. Now, the stocks they dumped included Facebook, Google, Nextar, Warner Brothers, Cigna, Global Payments, Booking Holdings, etc. Now, Scion added 501,000 shares of a single stock called GEO Group. They're a Florida-based company that operates private prisons. Now, the Prison Policy Initiative and CoreCivic, they estimate the private prison industry will be worth about $4 And GEO Group is one of the only 2 pure-play stocks that allow investors to speculate on growth in this space. They manage about 53 secure facilities across the United States. And I guess Michael Burry thinks a lot more people are going to jail here pretty soon. Now, this brings us to the last few weeks of Michael Burry's tweets. On August 12th, in a now-deleted tweet, Dr. Burry stated, net consumer credit balances are rising at a record rate as consumers choose violence Rather than cut back on spending in the face of inflation, he then included a graph that showed from Bloomberg that consumer borrowing increased $40.2 billion in June from the prior month. This was the second biggest increase ever, according to data from the Federal Reserve. Meaning consumers in the face of inflation, a lot of inflation going, they're not changing their spending habits though; they're just adding more credit card debt instead of trying to hunker down, save a few pennies. They're saying screw it, let's add $40.2 billion to our credit. Cards from one month to the next. Burry then adds this in his tweets. Remember the savings glut problem? No more. COVID helicopter cash taught people to spend again, and it's addictive. Winter coming. Now, winter coming, of course, quoting Game of Thrones. Winter is coming. And he's referencing back to the COVID times where savings rates were the highest they had been since World War II. What he's saying here is a lot of stimulus came in, people are not financially responsible and are spending at crazy rates that we haven't seen before. Burry then adds another tweet on August 31st, a few days ago, and he says this, and yet I keep getting asked when crash. And he puts a chart of the S&P 500 since 2017 on the major run-ups and major crashes. People have been putting this chart against 2005, '06, '07, and '08 and showing the very similar chart against this. Now what Burry's getting at here is the long-term and short-term debt cycles are coming to an end. That's something from Ray Dalio that he talks about in his books, is that these debt cycles that are growing need to be paid back. So we're having a— we're into a deep bear market right now. And he's saying it's just starting to hit consumers. It's just starting to hit businesses. You have the Fed right now planning to raise another 75 basis points next month, which makes all debt service across the entire economy go up. With all their tough talk to curb inflation, according to Burry, they might just kill the economy doing so. And he concluded all of his tweets with, winter is coming. Now, guys like Burry have predicted 20 of the last 4 crashes, meaning they predict a crash every single year. Coming up, and then they're only right the four times they're right. Everyone thinks they're a genius, but they don't recognize the other fifteen times where they were wrong when they predicted a crash as well. Now he concludes all of his tweets with winter is coming. So we will. I guess we will see if Michael Burry is correct. If this economic conditions are happening the way he sees them. Comment what you guys think below. I'm very actually curious what the comments will say on what people think if you're a bull or a bear, and what's going to happen here in the future. If you want to learn more about funds and my other prediction on the China debt crisis, what's happening there? Check the other videos out on our channel. We'll see you guys next one. Bye.
