George Gammon: Michael Burry Is Now Predicting Another Huge Crash
Stocks go up and stocks go down. Those who go long stocks have to sit through periodic bear markets. Those who look for obvious signs of overvaluation can make strategic short trades. That allows them to cash in when an asset falls in value.
Michael Burry was one of a handful of traders to bet against the housing market in the mid-2000s. The “Big Short” investor has continued to warn of other pockets of overvaluation, including crypto and SPACs.
And in recent years, Burry has raised concern that passive investing has led investors into mostly large-cap names and created a bubble there.
Now, his latest warning is based on a “bullwhip effect.”
Simply put, stimulus measures were artificial and short-term in nature. As they unwind, companies may end up being worse off than before. That’s because many firms may have planned for a permanent increase in business that was based on a temporary stimulus boost.
Bellwether company Amazon (AMZN) has become the first company to lose $1 trillion in value. That’s thanks to the market decline just this year. Yet over the past few years, the company has doubled its workforce, which now tops 1.6 million.
Amazon has announced layoffs of 11,000 employees in total. That’s not nearly enough to offset the employment gains of recent years. Further big drops ahead could show the full power of this bullwhip effect to crush the economy ahead.