Michael Burry of "The Big Short" fame warned inflation would make a comeback — and it's on the rise again.
Headline price growth accelerated to 3.5% in March, up from 3.2% in February and 3.1% in January. While it's slowed significantly from its peak two years ago, it remains well above the Federal Reserve's 2% target.
Burry first flagged the risk of inflation in April 2020, when prices were almost flatlining. Inflation soared to a 40-year high of over 9% by June 2022.
That month, the Scion Asset Management chief correctly predicted the inflation rate would slow over the next six months:
In January 2023, when inflation was over 6%, Burry again accurately forecasted that it would decline by the year's end — but cautioned it would surge again.
"Inflation peaked. But it is not the last peak of this cycle," Burry said in a X post at the time. "We are likely to see CPI lower, possibly negative in 2H 2023, and the US in recession by any definition."
"Fed will cut and government will stimulate," he continued. "And we will have another inflation spike. It's not hard."
Burry's recession call was off the mark as the US economy grew about 2.5% last year. Nor has the Fed started cutting interest rates yet, as it's navigating stubborn inflation, a tight labor market, and solid growth. And there haven't been any emergency stimulus packages so far.
Yet inflation has ticked up. Potential reasons include resilient consumer spending, robust employment growth, multiple overseas conflicts, and government programs funding infrastructure construction, microchip subsidies, and student-debt relief.
Burry may have been wrong that a recession, rate cuts, and a pandemic-style fiscal response would reignite price growth. But he might still be right about resurgent inflation — it could just be a product of other factors.
It's too early to say if inflation will continue to climb, or if the upticks in February and March were just anomalies. But it's worth noting this might just be the start of the inflation jump that Burry predicted — and prices might really take off if a recession hits, the Fed cuts rates, and the government wades in to shore up growth as he suggested.
Burry shot to fame for his monster bet against the mid-2000s US housing bubble, which was immortalized in the book and movie "The Big Short."
He's also known for betting against Elon Musk's Tesla and Cathie Wood's Ark Innovation ETF, investing in GameStop before it became a meme stock, and warning of stock-market crashes and economic disasters.
