December 19, 2022
According to one prominent prognosticator, your savings are at risk of succumbing to another huge crash. Yeah, sure. Who is saying this?
It’s someone to take seriously. It’s someone who predicted the collapse of the housing industry and resulting financial crisis. And he’s at it again.
I’m talking about Michael Burry, the famed investor who influenced the film “The Big Short.” He made $100 million for himself and $700 million for his investors by short selling the housing bubble. He also made huge profits during other times of chaos, hitting an 80% return from 2001-02 as the S&P 500 dropped 32%.
Recently he said we’re in the midst of another huge crash. He believes we’re now in the eye of the storm.
We all know how the government showered people with cash in 2020-21 and dropped interest rates to nearly 0%. Burry thinks this created “the mother of all bubbles” and now it’s starting to pop.
If he’s right, total losses could hit 55%, like in 2008. That would place the S&P 500 at roughly 2,150, or about 43% below its current level.
That’s scary. What’s perhaps scarier is that another smart, credible investor agrees with him.
Stanley Druckenmiller, who’s widely regarded as among the best investors ever, says owning stocks today doesn’t make a lot of sense. From 1980-2010, his firm averaged annual returns of 30%, never posting a losing year.
Now he thinks we’re in deep trouble for the same reasons as Burry.
Druckenmiller said ultra-low interest rates and loose monetary policy propped up the 2011-21 bull market. That run is over now as the phenomena driving it have not just ended but reversed.
As a result, he thinks the stock market will be flat for a decade.
On a more joyous note, we’d like to extend warm holiday wishes to you and yours this season. From everyone at Dan White and Associates – Merry Christmas!