Scion Asset Management founder and manager Michael Burry made waves yesterday in a now-deleted tweet, urging investors to be cautious about the general optimism in the market today. Though the benchmark SPDR S&P 500 ETF Trust (NYSEARCA:SPY) is down double digits for the year, it’s up around 8% in the trailing month. The investor whose bearish exploits were given the Hollywood treatment in The Big Short has attracted criticism, yet also interest.
Writing in his usual cryptic style, Michael Burry appears to be suggesting excessive euphoria is a sign of an impending reality check, mentioning several events and time periods in U.S. history that featured a general transition from bullishness to bearishness. He stated:
“The Silliness is back. After 1929, after 1968, after 2000, after 2008, the strain of Silliness that transformed bulls into bubbles completely and utterly disappeared. But that familiar COVID-era Silliness is not dead yet. Like 2001 before Enron, before 9/11, before WorldCom.”
Still, Bloomberg notes it’s not entirely clear what exactly Michael Burry is getting at. It notes the hedge fund manager is comparing “this period in markets to 2001 before the Sept. 11 terrorist attacks and the Enron and WorldCom scandals, when the dot-com bubble was unwinding.”
Earlier, on July 27, Burry declared in another deleted tweet, “These earnings reports and by Jove the whole season have a ‘Last Hurrah’ feel.” Still, economic indicators within the granularity suggest investors ought to pay attention, even if they don’t agree with the net bearish projection.
Jobs and Debt in Focus Amid the Michael Burry Tweet
Interestingly, Burry launched his latest obscure warning a day before the U.S. Bureau of Labor Statistics released its report on the employment situation for July 2022. In this case, the economy added a blistering 528,000 new jobs, blowing past the consensus estimate of 258,000 jobs and sending the unemployment level back down to pre-pandemic levels.
On the surface, such news should generate optimism in the equities sector, showing the pandemic-burdened economy is on the comeback trail. However, the Federal Reserve is likely to view this development as a negative because of the inflationary implications of rising wages. Thus, the Fed may need to be more aggressive with its monetary tightening policy.
Sandwiching the aforementioned Burry tweet is another shocking development, this time with pointedly bearish implications. On Aug. 2, The Hill reported more than 70% of millennials “have some form of non-mortgage debt, with the average millennial owing $117,000.” Further, the article states “the most common type of debt was credit card debt, with 67 percent of millennials having some amount of debt on a credit card.”
To be fair, 63% of affected survey respondents believe they can pay off their debt over the next one to five years. Still, if young people continue to borrow money in a rising interest rate environment – and should the unwinding of some jobs (particularly in the technology space) continue to accelerate – Burry might not appear to be a worrywart.
No Stranger to Controversy
Over the years, Michael Burry has demonstrated little restraint in stirring the social media pot with his contrarian opinions. The hedge fund manager has garnered a reputation for pessimism, earlier this year warning about the bullwhip effect in retail and multiple compression that may portend a broader market correction.
Nevertheless, it’s not fair to imply Burry exclusively promotes bearish arguments. Indeed, in 2019, he made an outlandishly bullish bet on a particular company that would epitomize the current meme-stock phenomenon. Therefore, whatever you think of him, it’s wise to at least pay attention.
On the date of publication, Josh Enomoto did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
