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little did people know about michael bury the mastermind investor who predicted the housing crash of 2008 before the great recession not until the day when the film the big short was released showing how this genius investor earned millions of dollars by betting against the housing market he predicted a market crash which was manifested when hundreds of thousands of investors around the world lost their money and now after 14 years michael bury is once again hinting towards something not less than a recession he has been seen warning people on various platforms which alarms investors what is he saying about the market and can there be a recession around the corner what should the investors do to mitigate losses and ensure returns let's know everything michael bury says they can terrify everyone in this video pay close attention to his warnings because something really harsh is coming but before we continue here's the reminder to like the video and subscribe to our channel to watch more videos from us let's get started michael bury has been tweeting and talking about possible market crashes in recessions since 2008 investors would follow his crash-conscious mindset but with time they forget that a market crash is still possible recently murray came again and warned investors and corporates but for average citizens he had some good news in his warning bury hinted at a two-part cycle that would be all connected the first part will be multiple compression while earning compression will be the second what these cycles mean will be explained in the video but let's first know what he talked about in his recent tweet that very tweet was deleted later on in this tweet burrie said that adjusted for inflation corporates and markets have already pocketed a significant loss he said that in the first six months of 2022 s p 500 lost its value by 25 to 26 percent nasdaq went down by to 34-35 while bitcoin is down by 64 to 65 in just six months indexes have broken price drop records while the crypto market faced dramatic losses the same way it had gained returns comparing it with the worst performance history the first half of 2022 proved to be the worst for s p 500 since 1970 as for nasdaq the first half of 2022 is the worst since 2008 even nasdaq never declined so much in the first half of any year on record as it did in 2022 now let's look closely at what he means by the two-part cycle the multiple compression and earning recession the first part was multiple compression but what is this in the first place multiple compression is the phenomenon where the prices of stocks continue to decrease because investors are hesitant to buy those stocks even if the corporate earn more and show a growth in their revenue there's no positive effect on the stock prices it's because with time the investors are wary of that particular stock and since there's lesser demand for that stock the prices go down instead of going up there are only two motives that increases stock price first when investors are bullish about stocks and buy them and second when the stocks bring higher dividends or returns however when the investors are themselves hesitant to block their money in stocks since there's high inflation multiple compression occurs investors find it hard to pay premiums on stocks due to the ever-increasing inflation premium is the difference between the original price of a stock and the price it's sold at the difference has to be paid by investors but when they no longer have the incentive to pay the withstanding stock price starts to plunge too according to experts the stock price cannot increase unless bonds fall to pay the dividends and stock are risk-free the second stage is earning compression inevitably faced by already suffering corporates but what is it the earning compression is the phenomenon where corporations revenue generation decline due to an increase in the cost of production and fewer demands in multiple compression corporates face the problem of decreasing stock price but their earnings increased anyway however in earning compression the very revenue is contracted and thus corporate suffered dramatically according to bury two reasons behind a corporate's loss lead to a shutdown and ultimately to recession first the demands will be less so sales would not be sufficient to sustain the increasing production costs and second when the stock prices plunge due to the pandemic demand increased dramatically however now supply has risen to a remarkable level new supply chains and production plans were set worldwide to fulfill sensational demands once the pandemic was over however this made corporate stockpile every raw material to have a backup plan if demand ever increased to that level again here's where the bull whip effect comes in the bullwhip effect the whole chain of corporates involved from production to supply of a specific product start to have higher products in their warehouse than the original need let's try to understand that with an example let's say that at a supermarket the entire stock of 1 000 boxes of masks was sold when the superstore owner observes this he orders 1500 boxes of masks from his supplier his supplier owns a giant high quality surgical mass-producing factory he thinks the demand will increase further when he gets an order of 1500 boxes instead of the previous order of 1000 therefore instead of ordering fabric for 1500 boxes he orders material for 2 000 boxes the fabric producer then imports fabric for 2 500 boxes of masks instead of 2 000 boxes since he thinks that the demand will increase this cycle continues to the final supplier and so on here it can be seen that the original demand was 1000 boxes of masks but it ended up in 2 500 boxes which will continue to increase at every point however what happens next brings earning compression in the next month instead of sales of 1 000 boxes of masks it only reaches 400 boxes now if we see surplus products and raw materials present at every point of supply this is extra stuff that's not needed and incurs the cost of storage every day hence corporates bear losses inevitably they have to sell products at low prices to mitigate heavy losses the cost of production of more products was high but they're not getting paid equal to that since fewer products are being sold these fewer products do not bring the same profits as more product sales would bring but this phase brings good news for average citizens who get to buy products at a decreased price it provides a cooling effect during high inflation and people can purchase products at the lowest prices let's summarize what michael bury said about a possible recession that can bring devastating impacts on corporations and their investors but at the same time there is some good news as well here's the summary of what bury said multiple compression has already occurred where companies worldwide have battled decreasing stock prices in the first half of 2022 s p 500 lost 25 to 26 of its price nasdaq lost 34 to 35 while bitcoin's price went down by 64 to 65 percent it suggests that a recession is underway next there will be earning compression which will hurt the most where corporates will suffer losses it will be due to low demands and high cost of production resulting in less revenue generation when there are more products than the demand companies have to decrease prices which will lessen the burden of inflation the interest rate could also be reduced to help these corporations eliminate the bull whip effect hence the investors must know that the companies they invest in won't earn too much in the next six months the stock price can plunge harshly while revenue generation will come to the lowest level in decades calling for a recession what do you think will michael bury's prediction manifest itself after listening to what he said about the marketing going down in the history of making the correction prediction investors need to listen to him comment right below in the comment section do you think a recession might be approaching the market leading to a market crash also please like share and subscribe to our channel to watch more videos from us until the next video stay tuned
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