Image: MMG
Dr. Michael J. Burry, the hedge fund manager who made hundreds of millions of dollars betting that the U.S. housing market would crash and helped inspire the best-selling book, “The Big Short,” this week described what’s going on in the markets as the “greatest speculative bubble of all time in all things by two orders of magnitude.”
Some of Burry’s 497,000 followers tweeted back, asking him what he did about the last speculative bubble, while other followers answered for Burry.
“Can I ask you a serious question dude? When you figured out everything was going to shit in 2007-08, did you go to the authorities? Did you go to the media, say hey, im a super smart billionaire, please listen to me so I can help people?” Joe @NucleotideSoup asked. “Or were you just like, nah, make money”.
“No one believed him,” Flag of Netherlands @Bartcavu replied. “The banks laughed at him when he wanted to go short.”
Burry predicted in February, also on Twitter, that the U.S. was headed for Weimar-like hyperinflation, referring to a period after World War I when Germany printed massive amounts of banknotes to buy foreign currency which was used to pay reparations. This strategy exacerbated the inflation of the paper mark. By 1922, the German mark was practically worthless, resulting in misery for the general population, internal political instability and the occupation of the Ruhr by France and Belgium. The resulting dissatisfaction in the German population helped Hitler in his rise to power.
In a since-deleted tweet, Burry quoted from “Dying Of Money,” a 2011 book by Jens O. Parsson on the lessons of the Great German and U.S. inflations. The cover of the book depicts old German money — a Reichsbanknote issued on Aug. 22, 1923 for 100 million marks, worth about $20 on the day it was issued. Three months later, it was worth just a few thousandths of a U.S. cent.
Burry has a habit of predicting when bubbles are going to burst. He called the bubble during the subprime mortgage crisis and says this one is bigger. His billion-dollar bet on a U.S. housing-market collapse was so epic, it was chronicled in Michael Lewis’ book and the subsequent blockbuster movie, “The Big Short.”
Burry also predicted that the GameStop shares would skyrocket. “We are in a blow-off top in all things,” he tweeted, referring to a chart pattern that shows a steep increase in an asset’s price and trading volume, followed by a rapid price decline, Business Insider reported.
“Markets have now bubbled over in a dangerous way,” Burry tweeted.
Bank Of America’s Chief Information Officer Michael Hartnett described post-World War I Germany as the “most epic, extreme analog of surging velocity and inflation following end of war psychology, pent-up savings, lost confidence in currency & authorities.” Hartnett specifically referred to the German central bank’s monetization of debt, and extrapolated that this is similar to what is going on now.
“D.C.’s policy bubble is fueling Wall St’s asset price bubble,” strategists led by Michael Hartnett wrote in a note in January 2021. “When those who want to stay rich start acting like those who want to get rich, it suggests a late-stage speculative blow-off.”
The Bank of America strategists predicted a market correction and for positioning to peak in the first quarter of 2021, with the BofA Bull & Bear Indicator closing in on a “sell signal,” Bloomberg reported. They highlighted past bubbles including the dot-com of 2000 and the housing market bubble 2007-2008. With two weeks to the beginning of the third quarter, the speculative bubble hasn’t burst yet.
Listen to GHOGH with Jamarlin Martin | Episode 74: Jamarlin Martin Jamarlin returns for a new season of the GHOGH podcast to discuss Bitcoin, bubbles, and Biden. He talks about the risk factors for Bitcoin as an investment asset including origin risk, speculative market structure, regulatory, and environment. Are broader financial markets in a massive speculative bubble?
