10 ms·

'Big Short' investor Michael Burry says 'prepare for inflation'

39 points by undefined1 6y ago

PragmaticPulp 6y ago
News articles about cryptic, now-deleted tweets are not a great way to discuss these issues. It seems the media wants inflation and stocks and Bitcoin to be the new attention-grabbing topic now that the election is over and COVID is trending downward due to vaccine availability. Inflation has entered the public zeitgeist in a weird way: Too many people are convinced that inflation is a binary on/off switch, rather than a range of values. Too many people have also been led to believe that Bitcoin is the only way to escape inflation, when really any asset will rise with inflation (by definition).
- mox1 6y ago
  He posts then deletes every one of his tweets, just what he does.
- Traster 6y ago
  In some ways though inflation is on/off. There have been a number of events in US history where inflation went from “ off” (sub 5%) to “on” (>10%). No one is worried inflation will rise to 2% they’re worried it’ll rise to 20% (or as BTC holders think - 2,000,000%)
- deleted 6y ago
  [deleted]
- terse_malvolio 6y ago
  > Too many people are convinced Oh? How do you know? I think you are convinced that other people are convinced which is different. It may sound like I'm being obnoxious but I only attempt to hint that it's hard to believe in a 100% natural 'public zeitgeist' anymore.
chrisgd 6y ago
Can’t be right every time
- AzzieElbab 6y ago
  Would you bet against him?
  - cko 6y ago
    I wouldn't, but I wouldn't bet with him either. I think some people (like myself) have the personality where they won't make a bet if there's too much uncertainty.
  - chrisgd 6y ago
    On inflation, absolutely. Nothing has changed since 2008 when people first brought up inflation
    - AzzieElbab 6y ago
      I was reading his tweets and the point that it takes 3 debt dollars to create 1 dollar of value really did resonate with me. Wish I had access to analysis behind it though. And seriously, nothing has changed since 2008? We didn’t print a load of new money for one reason or another?
      - chrisgd 6y ago
        Yes, a lot of money printed since 2008 and yields at record lows, inflation not in sight.
    - jopsen 6y ago
      How do you bet on inflation? Hold stocks/stonks? Gold?
      - fshbbdssbbgdd 6y ago
        TIPS (inflation-protected treasuries) are the purest bet on inflation.
solaxun 6y ago
People continually reference the lack of inflation (as traditionally measured by the CPI price basket) as a reason to not be concerned with the huge increase in the money supply we've experienced. I think we are experiencing extreme inflation, just not in CPI goods, but rather capital assets. Stocks, bonds, real-estate, all are completely disconnected from any reality right now... traditional valuation is irrelevant and we are now trading purely on sentiment, ala meme-stonks. Just look at the IPO landscape, and the ridiculous market caps of companies who not only have never had positive net income, but in fact have an increasing loss every year! They can continue doing this because the capital markets basically throw free money at them, it's easy to raise debt at low rates and issue additional shares if needed. As they say "don't fight the fed", and timing the market is impossible, but I can't even begin to fathom the blood-bath that will ensue if rates were increased to a reasonable level.
- boublepop 6y ago
  True. Feels like the concept of looking for inflation by watching the price of milk and bread makes no sense when the supply/demand curve is hiding the fact that we have an extreme overproduction of both ready to go, but kept from the market in order to avoid harming the market. On the other hand everyone is putting every last excess dollar they have into the stock market because banks can’t offer interest, so prices are exploding without any grip on reality.
- jopsen 6y ago
  > blood-bath that will ensue if rates were increased to a reasonable level. Any reason to think that'll happen? Won't assets inflation just stay and maybe level off.. my point is: nobody is going to pull money out of stocks to buy bread and milk. Isn't stonks the best thing to hold, if we have inflation.
  - solaxun 6y ago
    It's a complicated relationship, but yes stocks generally perform well in inflationary environments, certainly better than bonds which unequivocally get crushed. However, often what happens along with rate increases is tighter lending standards, increased borrowing costs, less ability to refinance at attractive rates, etc. It's also more difficult to raise equity when investors have reasonable alternatives in other asset classes. Suddenly investors start caring about tired and old things like "valuation" again, and "price to eyeballs" or "tweets per minute" matter less. For companies that have been riding the wave of free money in perpetuity, that's a bitter pill to swallow - when it's time to refinance they aren't prepared to pay the new bill. More dangerously, they simply may not be able to refinance at all if credit markets dry up (2008), and that is when it gets really ugly. Stock prices are as high as they are right now because there are no reasonable alternatives. It's the "least bad" option.
wtf_is_up 6y ago
The Fed wants inflation. They've been trying to create it for awhile. Just this year they announced broadening the window over which they calc the 2% target. They will let inflation run for some time, if it comes.
imrankhan17 6y ago
What if we stopped measuring inflation? Can't help but think inflation causes more inflation and it's just used as a lazy excuse to raise the price of goods. Why have train ticket prices gone up? Inflation. Why have the debt repayments gone up? Inflation.
- yladiz 6y ago
  Even if we stopped measuring it, it would still exist and so there’s no benefit to not measuring and in fact it would be worse as you would have less data to make reasoned and informed solutions to economic problems.

39 points by undefined1 6y ago

News articles about cryptic, now-deleted tweets are not a great way to discuss these issues. It seems the media wants inflation and stocks and Bitcoin to be the new attention-grabbing topic now that the election is over and COVID is trending downward due to vaccine availability. Inflation has entered the public zeitgeist in a weird way: Too many people are convinced that inflation is a binary on/off switch, rather than a range of values. Too many people have also been led to believe that Bitcoin is the only way to escape inflation, when really any asset will rise with inflation (by definition).

mox1 6y ago
He posts then deletes every one of his tweets, just what he does.
Traster 6y ago
In some ways though inflation is on/off. There have been a number of events in US history where inflation went from “ off” (sub 5%) to “on” (>10%). No one is worried inflation will rise to 2% they’re worried it’ll rise to 20% (or as BTC holders think - 2,000,000%)
deleted 6y ago
[deleted]
terse_malvolio 6y ago
> Too many people are convinced Oh? How do you know? I think you are convinced that other people are convinced which is different. It may sound like I'm being obnoxious but I only attempt to hint that it's hard to believe in a 100% natural 'public zeitgeist' anymore.

chrisgd 6y ago

Can’t be right every time

AzzieElbab 6y ago
Would you bet against him?
- cko 6y ago
  I wouldn't, but I wouldn't bet with him either. I think some people (like myself) have the personality where they won't make a bet if there's too much uncertainty.
- chrisgd 6y ago
  On inflation, absolutely. Nothing has changed since 2008 when people first brought up inflation
  - AzzieElbab 6y ago
    I was reading his tweets and the point that it takes 3 debt dollars to create 1 dollar of value really did resonate with me. Wish I had access to analysis behind it though. And seriously, nothing has changed since 2008? We didn’t print a load of new money for one reason or another?
    - chrisgd 6y ago
      Yes, a lot of money printed since 2008 and yields at record lows, inflation not in sight.
  - jopsen 6y ago
    How do you bet on inflation? Hold stocks/stonks? Gold?
    - fshbbdssbbgdd 6y ago
      TIPS (inflation-protected treasuries) are the purest bet on inflation.

solaxun 6y ago

People continually reference the lack of inflation (as traditionally measured by the CPI price basket) as a reason to not be concerned with the huge increase in the money supply we've experienced. I think we are experiencing extreme inflation, just not in CPI goods, but rather capital assets. Stocks, bonds, real-estate, all are completely disconnected from any reality right now... traditional valuation is irrelevant and we are now trading purely on sentiment, ala meme-stonks. Just look at the IPO landscape, and the ridiculous market caps of companies who not only have never had positive net income, but in fact have an increasing loss every year! They can continue doing this because the capital markets basically throw free money at them, it's easy to raise debt at low rates and issue additional shares if needed. As they say "don't fight the fed", and timing the market is impossible, but I can't even begin to fathom the blood-bath that will ensue if rates were increased to a reasonable level.

boublepop 6y ago
True. Feels like the concept of looking for inflation by watching the price of milk and bread makes no sense when the supply/demand curve is hiding the fact that we have an extreme overproduction of both ready to go, but kept from the market in order to avoid harming the market. On the other hand everyone is putting every last excess dollar they have into the stock market because banks can’t offer interest, so prices are exploding without any grip on reality.
jopsen 6y ago
> blood-bath that will ensue if rates were increased to a reasonable level. Any reason to think that'll happen? Won't assets inflation just stay and maybe level off.. my point is: nobody is going to pull money out of stocks to buy bread and milk. Isn't stonks the best thing to hold, if we have inflation.
- solaxun 6y ago
  It's a complicated relationship, but yes stocks generally perform well in inflationary environments, certainly better than bonds which unequivocally get crushed. However, often what happens along with rate increases is tighter lending standards, increased borrowing costs, less ability to refinance at attractive rates, etc. It's also more difficult to raise equity when investors have reasonable alternatives in other asset classes. Suddenly investors start caring about tired and old things like "valuation" again, and "price to eyeballs" or "tweets per minute" matter less. For companies that have been riding the wave of free money in perpetuity, that's a bitter pill to swallow - when it's time to refinance they aren't prepared to pay the new bill. More dangerously, they simply may not be able to refinance at all if credit markets dry up (2008), and that is when it gets really ugly. Stock prices are as high as they are right now because there are no reasonable alternatives. It's the "least bad" option.

wtf_is_up 6y ago

The Fed wants inflation. They've been trying to create it for awhile. Just this year they announced broadening the window over which they calc the 2% target. They will let inflation run for some time, if it comes.

imrankhan17 6y ago

What if we stopped measuring inflation? Can't help but think inflation causes more inflation and it's just used as a lazy excuse to raise the price of goods. Why have train ticket prices gone up? Inflation. Why have the debt repayments gone up? Inflation.

yladiz 6y ago
Even if we stopped measuring it, it would still exist and so there’s no benefit to not measuring and in fact it would be worse as you would have less data to make reasoned and informed solutions to economic problems.