Are we about to relive the financial crash of 2008?
The question is starting to cross people’s minds since a cryptic tweet on May 24 from iconic investor Michael Burry, known for being one of the first to bet against subprime mortgages in the mid-2000s. Burry accurately predicted the collapse of the real estate bubble. The hit film “Big Short”, where his role is played by actor Christian Bale, depicts his incredible bet against the tide of a euphoric market.
“Like I said about 2008, it’s like watching a plane go down,” Burry posted on Twitter on May 24. “It hurts, it’s not fun and I’m not smiling.”
He added no further messages, leaving Twitter users and investors to speculate. The confusion added to the nervousness.
The Nasdaq Composite fell 2.4%, while the S&P 500 slipped 0.8%. The Dow rose 0.2% in a late-day reversal, despite falling 1.6% earlier in the session.
Investors worry about an overheating economy and fear that a recession is looming. They are currently panicking at every sign suggesting an economic slowdown. This was the case on Tuesday May 23 when the social network Snap Inc (INSTANTANEOUS) – Get the Class A report from Snap, Inc. issued an earnings warning about supply chain disruptions, soaring prices and Russia’s war in Ukraine, urging companies to be cautious about spending on digital advertising.
“2008 responsible housing market but 2022 what reasons ???” a Twitter user asked Burry.
“The massive amounts of monroe impressions created a bubble on every asset. 2008 was nothing compared to what’s to come. A house that should be valued at 500,000 is now worth 2.2 million, it’s crazy The US dollar as a currency has been destroyed,” another user replied.
“Is everything a bubble? or are Western currencies overvalued?” another user asked.
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“Stop comparing this to 2008,” tried to reassure another user. “It’s nothing like 2008. I dare say we’re in better shape than 08. Better connected and better prepared. Technology is also on our side, news travels faster. Feelings can change in the blink of an eye in today’s world. (No pun intended).”
Nervousness and bad news
All of these messages show the panic and nervousness currently affecting investors. They are desperately looking for a glimmer of hope in a landscape completely weighed down by bad news. Almost all asset classes are affected, even cryptocurrencies including bitcoin, which was supposed to be a hedge against inflation.
The S&P 500 is on its seventh consecutive week of declines, its worst streak since 2001. Big Tech stocks like Apple (AAPL) – Get the Apple Inc. report.Microsoft (MSFT) – Get the Microsoft Corporation reportAlphabet (GOOGL) – Get the Class A report from Alphabet Inc.Amazon (AMZN) – Get the report from Amazon.com, Inc.You’re here (TSLA) – Get the Tesla Inc reportFacebook (metaplatforms) (Facebook) – Get the Class A report from Meta Platforms Inc. or Nvidia (NVDA) – Get the NVIDIA Corporation report are down despite strong fundamentals. Investors seem confident that companies will soon start delivering bad news.
At the macroeconomic level, the housing market is cooling: sales of new homes have fallen, with high prices and a sharp rise in mortgage rates.
Market participants are also eagerly awaiting the latest reports on weekly mortgage applications and durable goods orders before markets open on May 25. Investors await the final minutes of the Federal Open Market Committee meeting.
Hours after his tweet, Burry deleted it and other posts. He is known to often delete his tweets after the fact.
On May 16, Burry, who heads Scion Asset Management, revealed that he had bypassed Apple. Basically, he is betting on the sharp drop in Apple stock. Hedge fund Scion Asset Management revealed in a filing with the Securities and Exchange Commission that it held 206,000 put options on Apple shares at the end of the first quarter.
Apple stock is down 21% since January. The iPhone maker also lost the honorary title of world’s most valuable company to oil giant Saudi Aramco.
Burry will be remembered as the man who predicted the collapse of the housing bubble, and also as the person who declared the mortgage market to be one huge and unsustainable house of cards.