‘Big Short’ Investor Michael Burry Calls Evergrande Freefall

As Newmax Finance reported well ahead of the market open today, Michael Burry (a renown hedge fund manager portrayed by Christian Bale in the movie “The Big Short”) returned to Twitter on Sunday, issuing cryptic warnings about the United States stock market, the overall economy – and, most critically, about China’s Evergrande real estate behemoth.Evergrande’s subsequent 19% decline on overseas markets earlier today sent the U.S. markets into a freefall, with the S&P 500 down 1.70%, Nasdaq down .2.19% and the Dow 30 down 1.78%.

BURRY’S TWEETS“If $5 incremental market value results from $1 added to stocks, and 90% of millennials (aka future wealth owners) are in passive market vehicles, that 5:1 ratio will get much, much sillier in time. COVID didn’t stop it. Inflation might (not). #epiphany,” Burry tweeted on Sunday.

The tweet links to a paper from the National Bureau of Economic Research. The paper, “In Search of the Origins of Financial Fluctuations: The Inelastic Markets Hypothesis,” suggests “investing $1 in the stock market increases the market’s aggregate value by about $5.”

According to Markets Insider, in April, Burry tweeted that he had deleted his Twitter due to a paid visit from SEC officials.

“Tweeting and getting in the news lately apparently has caused the SEC to pay us a visit,” the Scion Asset Management boss said in a now-deleted tweet from March.

But Burry’s return is marked by a continued effort warning against market irregularities. Juxtaposing Burry’s mention of an overvalued U.S. stock market was a retweeted thread from the Twitter account Girolamo Pandolfi da Casio ditto Carlo Dossi Erba. The Twitterer, Burry mentions, warns that “both denialists and alarmists are getting it wrong” when it comes to deciphering “the economic disaster in the making.”

EVERGRANDE RETWEETThe twitterer, Girolamo Pandolfi, cites China-based Evergrande, whose primary business is real estate development, saying that credit is collapsing. As a result, it will affect industries across different sectors, from steel manufactures to those that mine the iron ore.

According to CNBC, Evergrande “is now snowed under a crushing debt of $300 billion.” The company, described as the “world’s most indebted property developer,” has struggled to pay its suppliers and has warned investors it may default on its debts.

Mark Williams, the chief Asia economist at Capital Economics, says, “Evergrande’s collapse would be the biggest test that China’s financial system has faced in years.”

Dan Wang, an economist at Hang Seng Bank, said, “Evergrande is such an important real estate developer, and it would be a strong signal if anything happened to it … believe there will be some supporting measures from the central government, or even the central bank, trying to bail out Evergrande.”

Burry capped off his Twitter posting on Sunday evening with a link to a Wall Street Journal article that states there is “no support to the [Federal Reserve’s] idea that inflation is already coming back down.” Burry tweeted at the Federal Reserve, “So…are you lying to us, or are you lying to us?

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