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Michael Burry: EVERYONE'S Lying!! A BIGGER Crash Is Coming - YouTube
Channel: Casgains Academy
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michael bury made billions not once not
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twice but three times that's right after
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predicting the dot-com bubble in the
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2008 recession he also predicted the
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most recent market correction the market
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has already dropped significantly but
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burry believes that this is just the
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start of much more to come
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he actually still sees the market
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crashing over fifty percent more from
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the current levels this video will cover
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how brewery has already made millions
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and how you can hedge your portfolio
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just like brewery
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a lot of investors call michael burry a
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broken clock because he makes the
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majority of his money from market
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crashes timing the market is notoriously
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difficult and brewery is not immune to
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that he has been early to every
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prediction he's made but he's also been
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right at the end bury recently tweeted
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habitually be one to two years early on
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literally everything and you too can
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attain broken clock bury first made his
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market crash prediction in late 2021
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while it's been a while since then the
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situation has played out exactly as he
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predicted he foresaw accelerating
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inflation a crash in growth stocks and
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overall market correction and a crash in
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bond prices brewery is always early but
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he always seems to end up right no
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matter what one of the key reasons why
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berry has been able to predict market
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crashes is because of the predictability
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of human nature while technology has
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evolved human behavior never changes and
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history shows that burri said that third
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time's a charm 10 years leading to a
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financial crisis yellow s p 500 2000 why
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s p 500 today green dial 1929 gotta love
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human nature nothing if not consistent
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the yellow line represents the
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speculation during the dot-com bubble
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the green land resembles the roaring
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twenties before the great depression
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both of these periods include
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unprecedented levels of financial risk
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that ultimately led to a sharp downfall
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in the dot-com bubble we saw
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unprofitable internet stocks rally one
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thousand or even two thousand percent
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before crashing the zero the roaring
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twenties also had ridiculous levels of
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speculation stock prices quadrupled
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within the span of nine years and most
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investors were convinced that prices
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would continue rising brewery tweeted a
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newspaper showing how ridiculous the
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speculation was the headline explained
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how even though the market went down for
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the day a rally at the market closed
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tiered brokers both of these bull runs
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point towards one behavior which is
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greed this greedy behavior also occurred
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in 2020 and 2021 while the market might
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rebound in the short term brewery sees
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the market crashing over a one or two
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year span after 2000 the nasdaq had 16
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bear market rallies above 10
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averaging 22.7
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before bottoming down 78
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after 1929 the dow had 10 bear market
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rallies over 10
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averaging 22.8 percent before bottoming
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down 89 percent burry is essentially
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saying that the market will undergo
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short-term rallies but you shouldn't
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take that as a signal of long-term
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recovery he further explained his
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prediction by saying that dead cat
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bounces are the most epic 12 of the top
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20 nasdaq one day rallies happened
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during the 78 percent drop from 2000's
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top nine of the top 20 s p 500 one day
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rallies happened during the 86 drop from
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the 1929 top this tweet brings out an
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intriguing and deceiving correlation the
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market always rallies the most during
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long-term market crashes which is
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extremely misleading brewery has pointed
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out a lot of correlations but we all
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know that correlation does not equal
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causation michael burris spotted some
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frightening fundamentals that are
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backing up his prediction everyone knows
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that the macroeconomic situation is
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horrifying some economists will tell you
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that the ukraine russia situation is on
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the brink of collapse others will tell
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you that china's economy is weak or u.s
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interest rates are going to continue
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increasing all of these macro situations
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may be true but there's only one factor
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that will ultimately crash the economy
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the consumer the economy is practically
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purely driven by the consumer almost 70
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percent of the us gdp is just on
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personal consumption expenditures if the
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consumer feels weak at any point the
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entire economy will fall apart the
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current macro issue centers around the
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lowering purchasing power of the
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consumer if we all stop consuming as
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much and start saving the economy is
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going to crash brewery said that this is
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the problem last 18 months minus 850
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billion dollars in direct stem checks
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400 billion dollars in cash out refines
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1 trillion plus in forgivable loans with
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250 to 500 billion of it fraudulent
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another 4 trillion dollars indirect etc
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what recapitalizes the consumer now
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higher wages can't do that the economy
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is experiencing immense price increases
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and consumers like yourself are feeling
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that your money is worth substantially
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less this lowering purchasing power is
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not just anecdotal there is a vast array
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of data showing that the consumers are
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the weakest they've ever been the most
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famous tracker of consumer behavior is
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the university of michigan consumer
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sentiment index the u michigan consumer
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sentiment index is currently reaching
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record lows which is clearly showing us
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that consumers feel weak another signal
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of the weakening consumer is the
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slowdown in amazon's revenue amazon's
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first quarter results were horrendous
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with revenue only growing seven percent
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year over year and earnings missing by a
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substantial amount the technological age
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has seen amazon become the primary
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marketplace where most consumers
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purchase their goods amazon's poor
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quarterly result shows that the
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consumers are in an incredibly weak
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situation burley tweeted and so amazon
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says to gdp there is your weakening
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consumer so given all of this
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information how has billy made millions
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and how can investors do the same brodie
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believes that the first economic impact
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of weakening consumers will be lower
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profit margins this will be spearheaded
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by the struggle for businesses to
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maintain twice as high consumers are
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feeling weaker than ever and this will
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force businesses to lower prices the
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issue with this is that wages do not
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fluctuate frequently so wages will
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remain elevated relative to prices
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because businesses will have to lower
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prices while still paying higher wages
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their profit margins will fall
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substantially this will ultimately cause
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stocks to trade at lower price to sales
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ratios after a significant decrease in
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sales bury is preparing his portfolio to
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make millions if not billions of dollars
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in the next year by shorting bonds he
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revealed in late 2021 that he was
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shorting 30-year treasury bonds in
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particular he tweeted for what it's
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worth i've never shorted any
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cryptocurrency this is my third bubble
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and the biggest i've learned a thing or
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two 30-year treasuries on the other hand
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the reason for bury to short bonds is
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quite obvious inflation was accelerating
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to almost 7 percent while 30-year bond
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yields were still roughly at two percent
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this meant that bond investors were
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basically guaranteed to lose five
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percent per year in the short term bond
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yields and bond prices are inversely
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correlated so as bond yields increased
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bond prices crashed one etf that berry
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has purchased before is tbt which is the
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pro shares ultra short 20 plus year
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treasury etf tbt is an etf that short
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sells a bundle of bonds bond yields have
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increased drastically over the past few
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months due to increasing interest rates
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inflation and the ukraine situation this
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has caused bond prices to crash and for
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tbt to rally the tbt etf has increased
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by over 43 percent since bury first
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revealed a short position that is
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already a substantial amount but burry
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sees himself making even more in the
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future burry recently tweeted 1977 says
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hello with a picture of himself in 1977
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this was in reference to the economic
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situation in the 1970s the period of the
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1970s is known as the great inflation
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with inflation reaching unprecedented
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levels the inflation rate in 1977 was at
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6.5 percent before accelerating to over
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14 by 1980. this is very similar to our
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situation inflation is currently at
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roughly eight percent but burry sees it
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passing 10 and maybe even 15 percent the
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truth may actually be that inflation is
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already past 10 percent
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bury is skeptical of the consumer price
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index or cpi that is used to calculate
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inflation he explained how the cpi says
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housing costs rose 5 last 12 months
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wrong cpi would be 12 using real-world
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nar housing data bls has smoothed out
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housing numbers forever because home
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prices have been a problem forever
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so next month they will start smoothing
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out vehicle prices hashtag problem
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solved brewery is essentially saying
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that the housing prices that the cpi
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uses are off by a large sum the number
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that the cpi uses claims that housing
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prices only rose by five percent in the
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past year this is definitely not true if
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the calculation for home prices included
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real-world housing data then cpi
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inflation would be at 12
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that means that the current inflation
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rate of eight percent is off by four
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percent
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this miscalculation and other macro
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factors will cause the market to crash
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by an estimated amount of roughly 55
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from the current price levels bury
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explained how they were paradigm shifts
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speculative peaks the s p 500 bottom 13
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lower than 2002's bottom in 2009 17
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lower than 1998's long-term capital
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management crisis low in 2002 and 10
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lower than 1970s low in 1975. 15 lower
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than the coveted low is sbx 1862.
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roughly shiller pde of 16 nominal pde of
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9 in historic range michael berry is
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pointing out a pattern of market crashes
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becoming worse and worse as time goes on
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if we assume that this pattern continues
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then the s p will crash to a level that
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is marginally lower than the covid crash
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bury uses 15 as an example here to see
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if this would be reasonable in theory if
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the s p were to crash to a level that is
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15 percent lower than the previous load
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during kovid then the index would be at
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roughly 1800 points that is roughly 55
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percent lower than the current levels
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and would bring the index back to
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historical price levels one of the
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graphs that very attached to his tweet
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shows the chiller pde ratio over time
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the schiller pde ratio is a cyclically
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adjusted pde ratio which means that it
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adjusts the pde ratio for inflation we
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are currently at a schiller pde ratio of
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36 a 55 crash would bring this ratio
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down to roughly 16 which is in line with
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the historical average brewery also
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attached a graph showing the historical
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average for the nominal pde ratio which
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is just the price to earnings ratio for
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the past 12 months we are currently at a
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pde ratio of 21. a 55 crash would bring
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this down to about 9. a pde of 9 would
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be slightly lower than the average which
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bury believes is reasonable all of this
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points to his prediction that the pain
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has not ended yet some of you think that
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short-term crashes aren't relevant if
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you're holding stocks for the long term
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this is completely true if you're able
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to handle the psychological pain of your
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portfolio dropping substantially great
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companies always experience short-term
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crashes and long-term gains one example
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of this is amazon during the dot-com
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bubble burrie questioned how far can the
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stock of a good growing company fall one
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destined to be one of the greatest
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companies in the world remember when
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amazon fell 95 but the fed but the fed
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didn't have inflation like this hanging
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over its head then either if you aren't
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prepared to maintain conviction in the
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stock that drops something over 95
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percent then perhaps the stock market is
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not for you short-term volatility
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affects all investors emotionally and
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controlling this emotion is extremely
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difficult speaking of volatility there's
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another signal pointing towards a
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further crash which is trading volume
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trading volume tends to be higher during
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market crashes because there is more
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activities from buyers on both the buy
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and sell side the current trading volume
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to shares outstanding is at
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unprecedented lows bury detailed how top
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to bottom microsoft traded 5.2 times its
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shares outstanding by 2002 3.3 times
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that 2009 and 0.5 times so far amazon
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traded 5.7 times by 2002 6.6 by 2009 and
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0.9 times so far jp morgan traded three
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times by 2002 5.9 times by 2009 and
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about 0.7 times so far etc enough takes
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time trading volume still has to
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increase by 5 to 10 times from its
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current levels in order for the market
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to be similar to previous crashes this
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is because the market tends to have a
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higher trading volume when prices are
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lower in order to be in line with
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previous market crashes the trading
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volume would still need to increase
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significantly keep in mind that michael
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bury is not a financial advisor he is
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simply a hedge fund manager who would
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profit significantly if the market
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crashed you should always do your own
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due diligence and invest at your own
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risk that being said i would not push
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aside berry's predictions especially
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given his track record the traditional
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financial system never listens to him
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which is why he recently tweeted at
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least i tried let me know if you think
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the big short 2 is coming soon after
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bury makes billions once again
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if you enjoyed this video please hit the
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like button and subscribe and i'll see
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you in the next one
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