“Big Short” investor Michael Burry warns of another spike in inflation and expects the U.S. to be “in a recession, however you define it.”

Hedge fund manager Michael Burry, famous for predicting the 2008 financial crisis, says inflation has peaked in the U.S., but there will be another inflation spike. He expects the U.S. economy to be in recession “by any definition“.

Michael Burry’s economic predictions for 2023

Famed investor and founder of the investment firm Scion Asset Management, Michael Burry, has shared his economic predictions for 2023. Michael Burry is best known for being the first investor to predict and profit from the subprime mortgage crisis in the United States, which occurred between 2007 and 2010. He is featured in “The Big Short,” a book by Michael Lewis about the mortgage crisis, which was made into a movie starring Christian Bale.

Michael Burry tweeted Sunday, “Inflation has peaked. But this is not the last peak of this cycle“. He continued:

We are likely to see lower CPI, possibly negative by 2H 2023, and the U.S. in recession by any definition. The Fed will cut spending and the government will stimulate the economy. And we will have another inflation spike. It’s not difficult.

Many people on Twitter agree with Michael Burry. Attorney John E. Deaton tweeted, “I think that’s right.” Economist Peter St. Onge wrote: “The smart guys agree: the drop in inflation will be transitory, then the Fed restarts the money printers and starts over.

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Investment specialist Karel Mercx commented, “Michael Burry has a point … Inflation usually comes in waves, and rarely is there just one wave (see the CPI chart from the 1970s). The five most dangerous words in investing are always: ‘this time it’s different’“.

The Investor
The consumer price index (CPI) chart shared by Mercx. Source: Twitter.

Investor Kerry Balenthiran agreed with Burry, tweeting, “OK, but the next inflationary peak could be a decade or more away. This sounds a lot like the secular bull market of 1947-1965. In that case, there was postwar inflation that subsided, followed by an inflationary environment that finally peaked in 1980.

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Some people have offered alternative views. Former broker Rob Bezdjian, for example, thinks there will be deflation. “I’ll take the other side of his inflation prediction … We will be in deflation for a long time. Bubbles take a long time to re-inflate“, he said.

Michael Burry has shared numerous warnings about the U.S. economy. In November 2022, he warned of “a prolonged multi-year recession“. In May, the Big Short investor warned of an impending consumer recession and further earnings problems. In April, he stated that the Federal Reserve “has no intention of fighting inflation,” pointing out, “The Fed is only looking to reload the monetary bazooka so it can come to the rescue & fund the fiscal bet.

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