Bloomberg Risk Takers
- Michael Burry said the Federal Reserve has lost all credibility following its trading scandal.
- "The Big Short" investor warned of stubborn inflation, citing Costco's complaints of rising costs.
- Burry deleted his Twitter profile once again without explanation.
- See more stories on Insider's business page.
"The Big Short" investor Michael Burry blasted the Federal Reserve for its trading scandal, underlined the inflation threat using Costco, and deleted his Twitter account yet again this week.
"Bond & stock markets depend on a Fed stripped of all credibility," Burry said in a now-deleted tweet. He cited the central bank's mismanagement of the global financial crisis, its decision to cut interest rates three times in 2019, and the revelation this month that two of its regional presidents, Robert Kaplan and Eric Rosengren, traded stocks and other securities last year.
The Scion Asset Management chief attached a screenshot of Kaplan's latest financial-disclosure form, which showed the official traded millions of dollars' worth of Tesla, Chevron, Johnson & Johnson, and other stocks in 2020. Both Kaplan and Rosengren announced their resignations this week, the latter citing health issues.
Burry – who has warned of a huge market bubble and predicted the "mother of all crashes" is coming in recent months – also rang the inflation alarm. "Inflationary mindset is not something you'd want to short," he tweeted. "Ask Costco."
Costco's finance chief, Richard Galanti, noted the rising cost of goods such as oil, coffee, and nuts during the big-box retailer's earnings call last week. He listed a raft of inflationary pressures including higher labor, freight, and commodity prices. He also noted shortages of containers and products such as computer chips, greater transportation demand, and delays at shipping ports. "It's a lot of fun right now," he quipped.
Galanti also warned the increased costs of freight and other items would be permanent, and said Costco has passed on those higher expenses to customers via price hikes. His comments challenge the Fed's narrative that the recent spike in inflation is "transitory" and will fade as the economy grinds back into gear, and align with Burry's expectations.
Burry has deleted his Twitter profile a few times this year, and offered no explanation for his latest departure. The investor is best known for his lucrative bet against the mid-2000s housing bubble, which was featured in the book and the movie "The Big Short." He also paved the way for the meme-stock boom this year by investing in GameStop in 2019.