Michael Burry, the man behind The Big Short, warns of imminent danger for investors in 2023

The U.S. economy will enter a recession and experience another round of inflation in 2023, according to ‘The Big Short’ investor Michael Burry, in a tweet shared on Jan. 2, by the man known for his gloomy but often correct forecasts.

Michael Burry warns that the rate of inflation has peaked, but it won&t be the last peak in this cycle. The Consumer Price Index (CPI) will fall much further in the new year, and may even turn negative in the second half of 2023. A decline of this magnitude will result in the recession that everyone was predicting a year ago.

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Michael Burry Archive (@BurryArchive) January 24, 2023

US inflation figures

The U.S. inflation rate hit a 40-year high of 9.1% in June and remained above 7% in November, well above the Federal Reserve’s 2% target. After that, the central bank raised its base interest rate from near zero to over 4%, indicating that it would peak at over 5% in 2023.

By discouraging consumption, investment, and employment, higher interest rates help ease inflationary pressures. But they can also reduce corporate profits and dampen economic growth, which in turn can lead to falling asset prices and a recession.

According to Michael Burry, inflation will fall and the economy will weaken in 2023, leading the Federal Reserve to cut interest rates and the government to increase spending to stimulate growth, which will increase demand and lead to higher inflation.

Michael Burry’s billion dollar bet against the housing boom of the mid-2000s was made famous in the book and movie “The Big Short“. He invested in GameStop before its stock rose in early 2021, bet against Elon Musk’s Tesla and Cathie Wood’s flagship Ark Innovation fund last year.

Last summer, the Scion chief warned investors that the “largest speculative bubble of all time in all things” was forming, predicting that the price of meme stocks and crypto-currencies would collapse, ushering in the “mother of all crashes.“