‘Big Short’ investor Michael Burry predicts ‘long-term inflation’
Michael Burry, the hedge fund chief made famous in the 2015 film “The Big Short,” warned of higher-than-usual inflation in the months ahead as geopolitical tensions and supply chain upheavals rattle the global economy.
Burry, the head of Scion Capital Management, said continued supply-chain snarls and escalating tensions related to China’s aggression toward Taiwan and the ongoing Russia-Ukraine war would conspire to keep prices elevated for the foreseeable future.
“Seems China moves on Taiwan in 2023, as the war in Ukraine spreads into the EU, maybe via Lithuania,” Burry said in the now-deleted tweet. “Onshoring/blue collar shortages plus global supply chain restructuring raise long-term inflation’s floor even as the bullwhip cycles lower to that end.”
Burry shared his view alongside a Bloomberg article detailing an “onshoring” trend in which US companies have increasingly shifted production stateside as they seek to avoid the disruptions that occurred during COVID-19 lockdown.
The report noted that construction of manufacturing plants within the US has surged 116% over the last year, according to Dodge Construction Network.
Burry’s mention of a “bullwhip” is a reference to a supply chain phenomenon in which differences between perceived demand and actual sales cause wild volatility in inventory levels.
Meanwhile, companies across various sectors, including retail, food service and air travel, have faced a labor crunch for months as the national unemployment rate hovers near historic lows.
Burry said last month that he expected blue-collar workers to remain in short supply even as office workers face mounting layoffs due to a looming recession.
Burry did not elaborate on his remarks regarding the geopolitical landscape. The US and its allies have repeatedly warned China against threatening Taiwan’s sovereignty.
Additionally, President Biden has vowed to defend every inch of NATO territory from the Kremlin’s aggression – including Lithuania and other NATO nations neighboring Russia.
Burry typically deletes his tweets shortly after posting them.
The Federal Reserve is enacting sharp rate hikes as it scrambles to bring down inflation that has surged to four-decade highs. The Labor Department will release an updated report on consumer prices next week.
Fed Chair Jerome Powell is adamant that the central bank’s ultimate goal is to bring inflation down to the 2% target it deems acceptable – despite mounting speculation that economic disruption will force officials to reconsider their target range.
Burry, who made a fortune betting against the subprime mortgage market during the Great Recession and was later featured in the 2015 film “The Big Short,” has been a sharp critic of the Fed’s response.
Earlier this week, Burry likened the Fed’s massive balance sheet to a drug addiction while noting the bank was falling short of its own goals for so-called “quantitative tightening.”
