Home Consumer debt ‘Big Short’ Investor Michael Burry Warns of Looming Consumer Slump and More Income Troubles

‘Big Short’ Investor Michael Burry Warns of Looming Consumer Slump and More Income Troubles

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Hedge fund manager Michael Burry, famous for predicting the 2008 financial crisis, warned of an impending consumer slump and more income problems. He cited plummeting personal savings in the United States and record revolving credit card debt despite trillions of dollars in stimulus money.

Recession warning from Michael Burry

Famed investor and founder of investment firm Scion Asset Management, Michael Burry, warned on Friday of a looming consumer slump and other earnings troubles ahead.

He is best known for being the first investor to foresee and profit from the subprime mortgage crisis in the United States which occurred between 2007 and 2010. He is featured in “The Big Short”, a book by Michael Lewis on the mortgage crisis, which was made into a film starring Christian Bale.

Burry explained on Twitter on Friday:

Personal savings in the US fell to 2013 levels, the savings rate to 2008 levels – while revolving credit card debt rose at a record pace to the pre-Covid peak despite all those trillions of cash that have dropped in their towers. Looming: a consumer slump and more income problems.

His tweet includes two images. The first shows a sharp drop in personal savings in the United States. The other shows a sharp rise in outstanding consumer credit.

At the time of writing, there were 476 comments on Burry’s tweet, which has been liked 11,000 times and retweeted nearly 2.5,000 times. Many people agreed with Burry on Twitter, thanking him for raising the issue and telling others to heed his warning.

One commented: “It’s wild. We’ve dropped helicopter money on people and yet personal savings have dwindled and credit card debt is back where it was.

Another wrote: “Exactly what I said, inflation is not a problem. Consumer debt is a problem. Monetary policy on the demand side is flawed. Rate manipulation fails to correct the market. The Americans were overflowing with money. Shift your focus to long-term saving instead of spending. Kill imports.

Another user gave his opinion:

While the media wants the narrative to be that the consumer is strong, the numbers say otherwise. Diminishing savings, rising debt, and inflation metrics that continue to rise every month, with energy prices near highs we haven’t seen since 2008.

Several people agreed that “the numbers don’t lie” and that the US economy looks as bleak as Burry suggested, if not worse.

A growing number of people have recently warned that a recession is either here or imminent, including Tesla CEO Elon Musk, Rich Dad Poor Dad author Robert Kiyosaki, and CEO and former CEO of Goldman Sachs, Lloyd Blankfein.

Keywords in this story

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What do you think of Michael Burry’s warning? Let us know in the comments section below.

Kevin Helms

An economics student from Austria, Kevin discovered Bitcoin in 2011 and has been an evangelist ever since. His interests include Bitcoin security, open source systems, network effects, and the intersection between economics and cryptography.

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