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what if I told you an iconic investor who predicted the 2008 financial crisis the most recent collapse inspects the most recent collapsed in cryptocurrencies and was early in calling for record high inflation is now calling for a stock market crash one that could be worse than 2008 and potentially even a depression I know that sounds extremely scary but that's exactly what's happening Michael burry famous for his massive short position against the housing market in the 2008 financial crisis in which he was able to provide his investors huge returns saved a ton of money much more than I ever imagined you know I'd ever have we made 725 million I think on the funds in 2007 and in the first six months of 2008 there was about 730 million withdrawals this iconic trade shorting the housing market was portrayed by Christian Bale in the movie The Big Short and Michael burry the man who did all this has recently tweeted you have no idea how short I am and no he is not talking about his height which by the way is five feet seven inches tall he's talking about how bearish he is on the market now he is positioning himself for a massive downturn on top of that to make this even more interesting he tweeted that the Federal Reserve is so scared of being the FED of the 1970s that they're turning into the FED of the 1930s now why is that important and why is that shocking that's because the Federal Reserve of the 1930s is probably the main culprit behind the Great Depression so if things continue to progress the way they are we could very well head into a economic depression that's how uncertain things are in this video we will go over what we know about Michael burry's portfolio and we'll go over reasons why he is short so without further Ado hit that subscribe button ring that Bell and let's get started part one portfolio positioning it is impossible to know in its entirety how Michael burry is positioned right now with his portfolio that detailed level of information is simply not available to the public however there is information that we can look at that is available to the public and has just recently been published that can help give us a better understanding of how Michael burry is positioning his portfolio bury runs a hedge fund with over a hundred million dollars in assets under management the fun is called Scion Asset Management therefore he is required by law to file with the SEC what is called a form 13f this lets us know what stocks call options and put options he owned in the prior quarter based on the latest 13f which was recently released you can see that Michael Berry owns Six stocks and that's worth approximately 41 million dollars in the prior quarter he only owned One stock worth approximately three million dollars but in June of 2021 he owned more than two billion dollars worth of stocks and Options under this portfolio so as you can see he has drastically reduced his exposure to the market now there are some downfalls with 13f filings because of filing deadlines some of these purchases could be 45 days old it doesn't give us a snapshot picture of what's in his portfolio right now and by law in 13f filings the hedge funds do not have to disclose their short positions so we cannot use the 13f to see what Michael burry is shorting and by what magnitude but based on the significant reduction in exposure to the overall Market on the long side by drastically unloading shares we can at least say with confidence that Michael burry is not positioned for any upside potential unlike he has been in the past based on this and his recent tweets I think we can assume that Michael burry is extremely short the market part two why is he short the market there are a few reasons in my personal opinion that Michael burry is short they include inflation the bull whip effect current market valuations and monetary policy bury believes we will see an inflation environment that is similar to the 1970s meaning that we will see two peaks of inflation this is because of what is known as the velocity of money there are two components to Velocity one is GDP and the other is money supply in this case it's M2 now we know for a fact that money supply will decrease this is because of rising interest rates and quantitative tightening from the Federal Reserve during the pandemic as a response to lockdowns the Federal Reserve printed so much money that it doubled the size of their balance sheet and doubled the amount of money circulating in the economy and this happened in just one year's time the size of Federal reserve's balance sheet went from four trillion dollars to over eight trillion dollars during that time this will need to roll over and return to somewhat of a normal level because I can guarantee the Federal Reserve is not comfortable maintaining a balance sheet of that size there are extreme risk with doing so this is why we have a rising rate environment and quantitative tightening to undo some of what was done during the pandemic bringing money supply down which is the denumerator of the equation in velocity of money will mathematically increase velocity unless GDP Falls more so which is unlikely because of inflation inflation will keep GDP elevated hence why Michael burry is calling for a double Peak inflation environment similar to the 1970s another reason why he is short is because of what is known as the bull whip effect which will ultimately lead to massive layoffs as you can see by his tweet he believes there is a bubble in White Collar employment and he believes that that bubble is bursting right before our eyes the bullwhip effect is definitely a reason why that bubble will burst because of the pandemic consumers had increased savings because of all the stimulus and the increase in money supply and because of this increased savings consumers were shopping like there was no tomorrow this led to an uptick in consumer demand which led to an even higher uptick in retail demand which led to an even higher uptick in wholesaler demand which led to an even higher uptick in manufacturer's demand which led to an even higher uptick in supplier output by the time the supplier was able to fill those orders and it worked its way down through the supply chain the consumer demand that was there before no longer exists it fell off a cliff this leaves retailers with extra inventory that they cannot sell so they have to slap massive sales and decrease profits and not submit new orders up the supply chain which leads to layoffs from retailers from wholesalers from manufacturers and from suppliers it cannot be contained into one part of the supply chain the bullwhip effect affects everyone now an example of how consumer demand has fallen off of a cliff is if you look at this chart from the Federal Reserve which shows the consumer's saving rate and as you can see it is extremely low consumers just don't have the money they had before is being eaten Away by inflation and it's only a matter of time before this impacts corporate earnings stock valuations and leads to layoffs which then compounds the effects and hurts corporate earnings and stock valuations even more and this brings me to my last point which is the Federal Reserve Michael burry is worried that this Federal Reserve is so concerned and so worried about making the same mistakes of the 19th 70s that they're actually going to repeat the same mistakes they did in the 1930s in the 1970s Paul volcker was the chairman of the Federal Reserve he is famous for his fight against inflation and ultimately bringing rates up to near 20 the mistake they made in the 70s was they stepped off of the brakes too soon in 1974 interest rates were around 12 percent they dropped to around 5 percent in 1977 but then in the early 80s they had to go to near 20 percent this is because inflation came roaring back because they stopped raising rates too soon and this Fed chair Jerome Powell has been very clear in his press conferences that he will not make the same mistake as Paul volcker did in the 70s he is not going to gas up this economy too soon on the flip side in the late 20s leading up to the Great Depression the Federal Reserve raised interest rates to crush speculation in the stock market this ultimately led to the stock market crash of 1929 which is one of the biggest crashes in stock market history and what's ironic is that this Federal Reserve is also raising rates to crush speculation in the stock market and crypto Market it's eerily similar now what's also similar is the money supply situation we have currently leading up to the Great Depression we saw an increase in money supply and then it Came Crashing Down in the 1930s the decline of money supply decreased spending and because of actual prices coming down and a decrease in money supply consumers and businessmen came to expect deflation and as a result people did not want to borrow money they feared that future wages and profits would be inadequate to cover their loan payments this ultimately led to a severe decrease in consumer spending and business investment now our money supply is also dropping we have a unique situation where we are at a super high level because of the amount of money they printed during the pandemic so there is a case here where money supply can fall off a cliff now we don't have deflation currently and Michael burry is expecting more inflation but if we see deflation which is a possibility which would happen if we have a severe recession because of those inventory issues we have seen where companies have to slash prices just to get them off of the Shelf we can find ourselves in a situation that is very similar to what happened during the Great Depression now the writing is on the wall Michael burry has been very clear and he is warning investors and Traders Now My Views while they might not be as bearish as Michael burries are also negative but let me know if you're bullish or bearish in the comment section down below and if you'd like to support this channel you can do so by joining the patreon it's five dollars a month it's cheaper than a Starbucks coffee and it gives you access to a private Discord server in which we share investment and trading ideas with each other have educational content and I notify all members of my trades as soon as they happen in a dedicated Channel within the private Discord server now here are some examples of Trades that I have posted on the private Discord server and let me tell you something we have a strategy that has been printing money it provides very high risk to award ratios and with the volatility we have seen in the market right now there are opportunities to make money trading but at the end of the day the main purpose of the Discord server is to have a community of investors and Traders where we can learn together grow together and make money together a link to join is in the video description if you're interested in becoming part of this community but with that I thank you so much for your time this is we are investing and together we are invincible see ya
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