Hedge fund manager Michael Burry became a household name when he was portrayed by Christian Bale in the 2015 film The Big Short. That film, and the book from which it was adapted, tells the story of how Burry and a group of other investors predicted the collapse of the subprime mortgage market in 2008. They made a fortune on betting that mortgage-backed securities would lose value—a strategy known as short selling. This was not the first time Burry found success by short selling an overvalued market; for instance, in the early 2000s, he achieved unprecedented returns by shorting tech stocks before they famously collapsed. Indeed, Burry’s predictions about the direction of the stock market have proven to be accurate in the past, and now he is issuing a dire warning about the current state of our economy.
In a series of tweets beginning in November of 2020, Burry publicly attacked electric carmaker Tesla, claiming the company was overvalued and that he would be shorting Tesla stock. In March 2021, Burry also warned investors against taking a long position on Bitcoin and so-called meme stocks like Blackberry and AMC Theaters. Speculation, claimed Burry, is rampant in 2021 and he insinuated that investors who remain on the market in these types of investments would regret their decisions when the bubble bursts. In a now-deleted tweet, Burry suggested that Tesla CEO Elon Musk was intentionally overinflating the value of his company in preparation for a sale.
Time will tell whether Burry’s predictions about the stock market will ultimately prove to be true, but his track record is making investors around the world take notice. If he is right, a significant stock market crash could be right around the corner, and it is essential that investors are prepared. At Crash Proof Retirement®, we know that money invested in the high-risk securities industry (which includes stocks, bonds, mutual funds, and more) is at risk of being lost in a crash. Our team is always analyzing current events and stock market trends to determine what could be coming next. Michael Burry’s predictions may have some basis, as economic issues continue to grow in the United States, creating an environment ripe for a market crash in the future.
Is the Stock Market Overinflated?
In the wake of the COVID-19 stock market crash, the Federal Reserve began pumping $120 billion per month into the treasury bond and mortgage-backed securities markets—a policy known as Quantitative Easing (QE). The Fed also slashed their benchmark lending interest rate to near zero to encourage banks to boost lending for homes, cars, and stimulate consumer spending. While these policies have led the stock market to a full recovery and consistent record highs during the past year, the retirement phase experts at Crash Proof Retirement® believe this level of success could prove to be short-lived given the state of the economy. Now that the Fed has announced a tapering of QE spending and a series of interest rate hikes over the next several years, bearish investors could begin selling off their stock market holdings which could send ripples throughout the equity markets.
In addition, QE spending has coincided with massive spending bills that added trillions to the country’s national debt after losing revenue from the Trump administration’s tax cuts. This combination of increased spending and decreased revenue requires Congress to raise the debt ceiling—but this has proven to be an extremely difficult and exhausting task in an evenly divided Congress. It seems every piece of spending legislation that comes before Congress is coupled with a debt ceiling battle; if lawmakers are unable to reach a consensus, it could result in a government shutdown (or worse, a debt default) that will certainly have investors running for the hills. Inflation is another huge concern; the price of goods and services have risen sharply since the beginning of the pandemic, severely threatening the buying power of American consumers. If the Federal Reserve and other officials fail to get inflation and government spending under control, it could lead to a stock market crash and a prolonged recession unlike anything that we have seen in the past. A crash of the magnitude predicted by Michael Burry, and others, could take years for the economy to recover from.
If you are concerned that a stock market crash will devastate your retirement savings, there is still time for you to protect your nest egg. With the exclusive Crash Proof Retirement® System, investors enjoy the benefits of principal protection and guaranteed growth that keeps up with inflation and is unabated by government shutdowns and debt defaults. The proprietary financial vehicles used in the Crash Proof Retirement® System are immune to stock market volatility and the costly fees that weigh down on investors in high-risk securities. These vehicles also credit interest at levels comparable to many high-risk securities-based investments. Over 5,000 Americans in or near retirement have utilized these vehicles to protect their retirement and so can you. To learn more about the exclusive Crash Proof Retirement® System call 800-722-9728 or visit crashproofretirement.com and begin your journey to a worry-free retirement.