We are Getting Closer to an Economic Implosion
Contin Jobless Claims in the US rose to 1,716mil in the week ending August 5, 2023, up from 1,684mil in the previous week. pic.twitter.com/hHx7po1nYG
— Don Johnson (@DonMiami3) August 17, 2023
” Michael Burry’s firm, Scion Asset Management, has put $1.6 billion (A$2.5 billion) on a Wall Street crash by the end of this year.
Scion has purchased a whopping $866 million in put options against a fund tracking the S&P 500 and $739 million in put options against a Nasdaq 100 fund.”
New York Fed Yield Curve as a Leading Indicator U.S. recession probability showing highest level since 1980’s for May ’24. “The yield curve has predicted essentially every U.S. recession since 1950 with only one “false” signal, which preceded the credit crunch and slowdown in production in 1967.”
| Month | Probability of Recession |
|---|---|
| August 2023 | 26.15% |
| September 2023 | 23.07% |
| October 2023 | 26.03% |
| November 2023 | 38.06% |
| December 2023 | 47.31% |
| January 2024 | 57.14% |
| February 2024 | 54.49% |
| March 2024 | 57.7% |
| April 2024 | 68.22% |
| May 2024 | 70.85% |
| June 2024 | 67.31% |
| July 2024 | 66.01% |
TLDRS:
- New York Fed Yield Curve as a Leading Indicator U.S. recession probability showing highest level since 1980’s for May ’24.
- This model uses the slope of the yield curve, or “term spread,” to calculate the probability of a recession in the United States twelve months ahead.
- “The yield curve has predicted essentially every U.S. recession since 1950 with only one “false” signal, which preceded the credit crunch and slowdown in production in 1967.”
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BTIG warns S&P 500 may drop to 4200 over coming weeks
BTIG technical analysts have reiterated their cautious stance on the U.S. stock market as they believe the decline risks outweigh the potential for gains.
“Essentially the ‘buy the dip’ trade appears to be losing its luster,” they wrote in a note.
The analysts argue that the momentum in technology and other high-beta sectors is rolling over shortly after breaching significant support levels.
“While there are likely to be bounces along the way, we see little reason to jump in here.”
From the macro perspective, they highlight the rates and the U.S. dollar as key risks for stocks. On Thursday, the benchmark 10-year yields reached 4.312%.
“As is often the case, it’s usually the velocity rather than the absolute level. 10yr yields remain stubbornly over 4.20%, and very close to their October ’22 intraday high of 4.33%. A quick run through those highs would likely be a risk-off signal.”
When it comes to the S&P 500, the technical analysts highlight 4325 as the next destination. In case this is breached, then the re-test of the 4200 breakout level may come into consideration over the next couple of weeks.
S&P 500 futures are up 10 points in the premarket Thursday trading after the index fell 0.8% yesterday.
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Investor who accurately predicted ‘08 housing crash bets $2.5 billion on 2023 Wall Street catastrophe
Michael Burry, an investor who correctly predicted the 2008 financial crisis, is banking on a 2023 economic catastrophe.
An investor who successfully predicted the 2008 financial crisis, has gained attention again after betting billions on a 2023 economic catastrophe.
Michael Burry’s firm, Scion Asset Management, has put $1.6 billion (A$2.5 billion) on a Wall Street crash by the end of this year.
Scion has purchased a whopping $866 million in put options against a fund tracking the S&P 500 and $739 million in put options against a Nasdaq 100 fund.
A put option is the right to sell an asset at a fixed price in the future.
To show he’s dead serious on another US meltdown, Burry is using over 90 per cent of his fund’s portfolio to bet against what many still believe to be a safe economy.
Burry first gained attention as a medical student engaged in value investing during the dotcom bubble before he established his own hedge fund focusing on subprime mortgage bonds.
He gained global acclaim as one of the first investors to predict and profit from the subprime mortgage crisis that occurred between 2007 and 2010.
Christian Bale played Burry in The Big Short, a film about how he bet in the financial crash.
During that period, Burry faced intense backlash from establishment economists and his own investors, who refused to believe his theory. Despite presenting clear evidence that the system was based on a gargantuan lie, demonstrating the refusal of ratings agencies to give poor grades to bonds full of subprime mortgages, Burry was a pariah.
But the house of cards came crumbling down on October 24, 2008, with then-named Scion Capital finishing up with a 489.34 per cent rise in value.
The S&P 500, widely regarded as the benchmark for the US market, returned just under 3 per cent, including dividends over the same period.
In recent years, Burry has warned of a passive investing bubble and predicted a significant market crash.
Michael Burry, the man who successfully predicted the 2008 financial crash, has bet more than 90 per cent of his company’s portfolio on a similar 2023 collapse.
In February 2021, the hedge fund manager sparked panic after comparing the US financial situation with that of Germany in the 1920s, when consumers bought groceries with wheelbarrows full of virtually worthless cash.
He warned that the “mother of all crashes” was coming and has since focused his attention on investing in water, gold, and farm land.
“Fresh, clean water cannot be taken for granted. And it is not—water is political, and litigious,” he said in 2020.
His pessimism stems from concerns about tech companies driving market gains, regional bank collapses, falling inflation, and economic issues in China.
In 2021, he even took shots at Elon Musk’s Tesla, with his fund revealing a more than half-a-billion-dollar bet against the tech giant.
Christian Bale playing the eccentric Burry in the 2015 film The Big Short.
A regulatory filing showed that it owned 800,100 Tesla shares as of March 31, 2021 with a total value of $US534 million ($A688 million) and bet against them by taking out a put option.
Mr Burry was also vocal about his bet on video game-retailer GameStop, helping to spark the Reddit-fuelled short squeeze that sent shares of the company skyrocketing earlier this year.
However, Burry’s firm cashed out of its position in the company in 2020, missing out on the most wild gains, which were seen in January.
Michael Burry places a huge leveraged short position on the stock market with put options.
The Big Short Version 2.0 😳 pic.twitter.com/8SHtZ0r4V9
— Wall Street Silver (@WallStreetSilv) August 14, 2023
His predictions on the state of the US economy are at striking odds with several other economists around the globe, with many, including Business Insider, believing the US has had its “doomsday clock reset”.
Douglas A. Boneparth, a US financial adviser, ridiculed Mr Burry, describing him as “that kid who got a perfect score on his class project that one time and won‘t shut up about it”.
“Wall Street analysts and economists have always had a tendency to fall in love with their forecasts,” Head of Economics at Renaissance Macro Neil Dutta wrote in a recent column.
Mr Dutta says economists and forecasters will take a reputation hit should the economy climb, but it will be “nothing compared to the financial confusion they’ve caused for average investors”.
“They don‘t like to admit when they’re wrong, and even as the evidence against them piles up, many stick to their guns,” he continued.
“Given the increasing number of reasons to be upbeat on the US economy, it‘s time for the recessionistas to admit defeat. The economic doomsday clock has been reset.”
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Resources:
https://citizenwatchreport.com/we-are-getting-closer-to-an-economic-implosion/
https://www.investing.com/news/stock-market-news/btig-warns-sp-500-may-drop-to-4200-over-coming-weeks-432SI-3156274
https://www.news.com.au/finance/economy/world-economy/investor-who-accurately-predicted-08-housing-crash-bets-25-billion-on-2023-wall-street-catastrophe/news-story/f3b5af9d1745323eb1860ddbd10487dd
