“Big Short” Michael Burry warns that inflation is eroding the value of the US dollar
- Michael Burry of “The Big Short” dismissed the current strength of the US dollar in a recent tweet.
- The currency has only gained relative to its rivals, and inflation is eroding its purchasing power, Burry said.
- The investor expects rising prices to threaten consumer spending and corporate earnings.
Investor of ‘The Big Short’ fame Michael Burry took aim at the US Dollar on a Tuesday Tweeter. He argued that the currency is only strong on a relative basis and runaway inflation is eroding its purchasing power.
“When you hear about the strong dollar, the almighty dollar, remember that’s only in relation to other fiat currencies,” he said. “The dollar isn’t strong at all, and it’s not getting any stronger. We all see it every day in the prices of everything.”
The US dollar index, which measures the value of the dollar against a basket of foreign currencies, hit a 20-year high in May. Its surge reflects the greenback’s appeal as a safe haven in volatile markets, and investors are betting that
will continue to raise interest rates in an effort to contain inflation at its highest level in 40 years.
Burry’s point is that a dollar may be worth more in euros or yen than before, but it is buying much less due to soaring prices for food, gas, housing and many other goods and services.
Other prominent investors have made similar arguments. Warren Buffett, whom Burry studied closely as a budding investor, recently said that inflation “cheats the person who keeps his money under his mattress.” Similarly, Ray Dalio urged investors to assess their wealth not in dollars but in purchasing power, otherwise they will misjudge the risk of holding cash.
Burry warned that the pandemic could fuel inflation as early as April 2020 and suggested in April this year that rising costs would squeeze corporate profit margins and squeeze valuations.
Moreover, he recently noted that Americans are saving less, borrowing more, and could all but run out of savings before the end of this year. This trend threatens to reduce consumer spending and increase pressure on corporate profits, he said.
The Scion Asset Management boss is best known for his billion-dollar bet against the mid-2000s housing bubble, which was chronicled in the book and film ‘The Big Short’. He also bet against Elon Musk’s Tesla and Cathie Wood’s Ark Innovation fund last year, and his past investments in GameStop and his push for changes at the video game retailer helped lay the groundwork for the gaming boom. meme stocks.
Burry has frequently called out the breathless hype and reckless play in financial markets during the pandemic. He lamented the “greatest speculative bubble of all time in all things” last summer, and warned owners of meme and cryptocurrency stocks that they were headed for the “mother of all crashes.” “.
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