Michael Burry Warns Of The Next Great Depression (And Criticizes Cathie Wood)

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In this video, I cover Michael Burry's latest warnings regarding the stock market and how this directly contradicts Cathie Wood's opinion in several ways.

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Over the past couple of months, the overall stock market has had little to no volatility. Even on the most volatile days, the S&P 500 moves just a little over 1% in either direction, which is definitely not much. The reason behind this low volatility is that the stock market is preparing for a breakout in either direction. Opinions have become more and more polarized regarding the stock market, with some claiming that hyperinflation is on the brink of occurring and others stating that inflation is just transitory. Most recently, Michael Burry tweeted some warnings about the stock market on his Twitter account, which directly contradicts Cathie Wood’s opinions. This entire polarization behind these two investors is transcending to become not just a clash between two types of investors, but possibly one of the greatest clashes in our modern financial era. In this video, I’ll cover Michael Burry’s latest warnings and how this is exacerbating a major division within the stock market right now. Welcome to Casgains Academy. If you’re new to the channel, please consider subscribing for more content like this, and let’s get right into it.
As I’ve covered in a previous video, Michael Burry is predicting and betting big on the inflation rate for the US dollar increasing dramatically. According to Burry’s latest 13-F filing, he has purchased put options on Tesla and the bond market and has purchased call options in inflation hedged stocks like Google, Facebook, CVS, and KraftHeinz. However, these bets were filed on March 31st, so we didn’t gain any insight as to what happened to Burry’s positions. On June 15th, Michael Burry tweeted, “People always ask me what is going on in the markets. It is simple. Greatest Speculative Bubble of All Time in All Things. By two orders of magnitude. #FlyingPigs360.” This is a very bold prediction from Michael Burry, especially considering that he didn’t just call our current situation a bubble, but also called it the greatest one. Those words imply that he thinks that the stock market is in a situation worse than the peak of the dot-com bubble. But it’s not just that, as he thinks that this bubble is two orders of magnitude larger. This can be directly contrasted with what Ray Dalio said in March of 2021, as Dalio stated that the stock market bubble was halfway to the magnitude of 1929 or 2000. However, since Dalio’s statement, the stock market has risen even more, but it definitely hasn’t doubled in magnitude by Dalio’s projections. One famous metric used to analyze whether the stock market is overvalued is the Buffett Indicator. The Buffett Indicator is essentially the entire stock market capitalization divided by the gross domestic product. In short form, it is the market cap divided by the GDP. As you can see in this graph, the Buffett indicator is actually 2 standard deviations above the normal levels. In fact, it’s actually over 2.5 standard deviations above the mean right now. In statistics, a 2.5 standard deviation above the mean is equal to a positive z score of 2.5. By my calculation, this puts the Buffett Indicator in the 99.38 percentile of previous levels. In other words, based on previous data, we’re only at these levels 0.062% of the time, which is a 0.00062 probability ratio for the data set. However, keep in mind that the US GDP hasn’t fully recovered yet, but this graph is still using Q1 2021 numbers for the US GDP, which is actually already higher than pre-pandemic levels. The last statement that Burry put out was #FlyingPigs360, which could mean two different ideas. The first one is the idea that people are speculating so much that pigs might as well fly before those speculations actually happen in real life. The phrase "when pigs fly" is an adynaton, which means that it is a hyperbole that is so exaggerated that it is practically impossible. The other idea that Burry may be referring to is a famous phrase about the stock market: “bulls make money, bears make money, pigs get slaughtered.” That phrase definitely has a lot of truth behind it. Long-term bulls have made substantial amounts of money in the stock market. At the same time, bears like Michael Burry have successfully made money by predicting short-term crashes before.

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