‘Big Short’ Investor Michael Burry Warned Inflation Would Spike Again

• Michael Burry predicted a second surge in inflation and a further acceleration in price growth in March.
• The “Big Short” investor first warned about inflation in April 2020, more than two years before its peak.
• Burry expected a recession, rate cuts and stimulus spending to revive inflation.

Michael Burry of “The Big Short” warned that inflation would make a comeback – and it’s rising again.

Overall price growth accelerated to 3.5% in March, compared to 3.2% in February and 3.1% in January. Although it has slowed significantly from its peak two years ago, it remains well above the Federal Reserve’s 2% target.

Burry first flagged the risk of inflation in April 2020, when prices were almost stable. Inflation reached its highest level in 40 years, at more than 9% in June 2022.

That month, the head of Scion Asset Management correctly predicted that the inflation rate would slow over the next six months:

In January 2023, when inflation rose above 6%, Burry again accurately predicted it would fall by the end of the year – but warned it would rise again.

“Inflation has peaked. But it’s not the last peak of this cycle,” Burry said in an X post at the time. “We will likely see the CPI decline or even negative in the second half of 2023, and the U.S. enters a recession, however defined.”

“The Fed will cut and the government will stimulate,” he continued. “And we will have another spike in inflation. It’s not difficult.”

Burry’s recession announcement was misplaced since the U.S. economy grew about 2.5 percent last year. The Fed also hasn’t yet started cutting interest rates as it faces stubborn inflation, a tight labor market and solid growth. And no emergency recovery plan has been put in place so far.

However, inflation has increased. Potential reasons include resilient consumer spending, robust job growth, multiple conflicts abroad and government programs funding infrastructure construction, microchip subsidies and student debt relief.

Burry may have been wrong to think that a recession, rate cuts and a pandemic-style fiscal response would revive price growth. But he may still be right about the resurgence of inflation: it could simply be the product of other factors.

It is too early to say whether inflation will continue to rise or whether the increases in February and March were just anomalies. But it’s worth noting that this could well be the start of the rise in inflation that Burry predicted – and prices could really take off if a recession hits, the Fed cuts rates and the government steps in to support growth , as he suggested.

Burry became famous for his monster bet against the US housing bubble of the mid-2000s, immortalized in the book and film “The Big Short”.

He is also known for betting against Elon Musk’s Tesla ETF and Cathie Wood’s Ark Innovation, investing in GameStop before it became a meme stock, and warning of stock market crashes and economic disasters.