Investors panic as stock market expert, Michael Burry, predicts a downward plunge in stocks in the coming months.

Investors are ever anxious about the potential of a dip in the stock market. And many times, that panic is in vain when predictions have proven false.  Other times, however, the predictions hold true and the present state of the market may be one of those unfortunate times. With The Mother of All Crashes” underway, according to the enigmatic Burry, it is unknown where the state of investing will go from here.

Michael Burry, the hedge fund investor who rose to fame in the 2015 movie “The Big Short”, claimed on Wednesday that the dreaded stock market crash is already underway.

More than a year ago, Burry already theorized that the stock market was headed for the “mother of all crashes”, a crash that will be the beginning of a dozen others. He then follows his former prediction with another warning. Using a graph with which he showed the S&P 500’s current sharp nosedive, he illustrated a stark contrast from the all-time high it once reached earlier in the year.

The S&P is the broadest measure of the US stocks. It is frighteningly down by 18% since January this year. This decline appears to reinforce mounting investor fears that an economic recession is around the corner. This is due to the Federal Reserve’s tightening policy to address inflation, a situation that has been going on for decades.

Burry has been the stock market’s prophet of doom and gloom. In 2021, he warned of the deadly consequences of what he termed the “irrational fear of missing out” in cryptocurrency and meme stocks. The ‘Sage Michael Burry’ feels that it could have disastrous consequences for overextended retail traders.

“All hype/speculation is doing is drawing in retail before the mother of all crashes,” the investor tweeted. “When crypto falls from trillions, or meme stocks fall from tens of billions, #MainStreet losses will approach the size of countries.”

Some big words there. However, this is coming from someone who has a reputation for not making mistakes.

Due to investor optimism about the federal policy stance, stocks have climbed to tremendous heights. Shortly after that, Fed Chair, Jerome Powell indicated that rate hikes could continue even though it would cause “some pain” for US households.

Michael Burry’s company, Scion Capital Management dumped all its stock portfolio in preparation for a collapse. This occurred in the second quarter of the year 2022. That was not all; the firm sold off all its long positions in 11 stocks. This included Google parent Alphabet, Facebook parent Meta, Bristol-Meyers Squibb, and Nexstar Media Group. After the sale of these stocks, Scion Capital Management took a stake in a Florida-based private prison operator, Geo Group.

Another pointer to his predictive accuracy was in 2008 when he bet against the housing market. People scorned him, confronted him with ‘facts’, and called it a hoax. However, Burry was proven right. The housing market indeed collapsed. Based on his tweets on the stock market, the investor was  able to amass a Twitter follower base of over one million users. Oddly enough, Cassandra M.B. as he is known on Twitter, typically removes his messages only a short while after they are posted.

In response to those asking for proof of his predictions, Michael Burry pointed out that rapidly rising consumer debt might be an indicator of the tribulation to come.

“Net consumer credit balances are rising at record rates as consumers choose violence rather than cut back on spending in the face of inflation,” Burry tweeted.“Remember the savings glut problem? No more. COVID helicopter cash taught people to spend again, and it is addictive. Winter is coming.”

This tweet was targeted at the high consumer spending in the face of inflation. Typically, in times of inflation, any reasonable consumer should cut back on unnecessary expenditures. However, American consumers, or the whatever audience Michael Burry was focusing in on, have been far from being reasonable. He seems to insinuate that having forgotten about the savings glut problems, American consumers seemed to have learned nothing. The social welfare package during COVID led consumers to start spending heavily and without restraint. The effect of this is a ‘winter’ where the United States economy will pay the price for its citizen’s arbitrary spending.

Michael Burry’s prediction has begun to gain intense credibility as the S&P, the American measure of stocks, fell to its lowest price since 1970. Considering this, Burry opined that the selloff was “maybe halfway over”.