- Michael Burry expects long-term US inflation to trend higher than previously expected.
- "The Big Short" investor cited labor shortages, an onshoring boom, and changes to supply chains.
- Burry expects weaker consumer demand and bloated retail inventories to reduce short-term inflation.
Michael Burry predicted higher long-term inflation in the US, fueled by a shift towards more domestic production, a post-pandemic shake up of global supply chains, and a chronic shortage of manual workers.
"Onshoring/blue collar shortages plus global supply chain restructuring raise long-term inflation's floor even as the bullwhip cycles lower to that end," he wrote in a since-deleted tweet on Tuesday.
The investor of "The Big Short" fame attached a link to a Bloomberg article highlighting an onshoring boom in the US, after the pandemic sparked shortages, bottlenecks, and a surge in shipping costs.
The second part of Burry's tweet refers to the "Bullwhip Effect" — the idea that an upturn in demand from consumers or retailers reverberates up the supply chain, causing wholesalers to overstock and manufacturers to overproduce in preparation for a flurry of orders. The excessive supply results in lots of surplus inventory, spurring retailers to cut their prices to avoid being left with loads of unsold goods.
Burry's view seems to be that US companies, faced with the higher costs of domestic production versus outsourcing, will work through their bloated inventories and pursue more aggressive price hikes over time, resulting in higher inflation in the long run.
Burry recently forecasted slower inflation later this year. He suggested retailers would slash prices to get rid of excess inventory, and consumers would cut back on spending as their savings dwindle and they continue to weather higher food, fuel, and housing costs.
The Scion Asset Management boss also predicted a split in the US labor market, with a glut of office workers weighing on white-collar wages, while unmet demand for unskilled and semi-skilled laborers pushes up blue-collar salaries.
Burry is best known for calling the collapse of the mid-2000s housing bubble, inadvertently inspiring the meme-stock movement by investing in GameStop, betting against Elon Musk's Tesla and Cathie Wood's flagship Ark fund last year, and issuing grim warnings about asset bubbles and market crashes.
