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- If Micheal Burry is correct, the Federal Reserve or FED needs to reverse its policy of quantitative restrictions and increased interest rate hikes.
- According to Burry, most retail retailers have so much inventory in them that the cost of storing them is draining their resources.
- There were even instances when the customers went to return their shopped items; the companies asked them to retain the things with them along with the compensated amount.
Micheal Burry Sensing A Crash…Again
We all know Micheal Burry as the awkward, introverted genius from the film- “The Big Short” played by Christian Bale. Well, people wished for part 2 of that film. Now, it seems that it may happen.
Micheal Burry, a famous and legendary investor and the Head of Scion Capital Management, recently predicted another big market crash, this time in the industry of retail and storage.
If Micheal Burry is correct, the Federal Reserve or FED needs to reverse its policy of quantitative restrictions and increased interest rate hikes.
The Federal Reserve is presently trying to manage inflation at 8.6 percent, the highest level in 40 years, by aggressively raising interest rates. The Federal Reserve agreed in May to raise interest rates by 0.5 percent, the most since 2000. In June, a further 0.75% rate hike brought rates to a range of between 1.5% to 1.75%.
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The Bullwhip Effect
Micheal Burry’s words carry a lot of weight because of his predictions in the market in 2008: He recently came on Twitter with the following terms: “Just keep your returns: Stores weigh paying you not to bring back unwanted items.”
According to Burry, most retail retailers have so much inventory in them that the cost of storing them is draining their resources. These retailers include:
- Target
- Walmart
- Gap
- American Eagle Outfitters
There were even instances when the customers went to return their shopped items; the companies asked them to retain the things with them along with the compensated amount.
Burry has said that this is an ideal scenario of the ‘bullwhip effect,’ which is a supply-chain phenomenon described by Micheal himself:
“This supply glut at retail is the Bullwhip Effect. Google it. Worth understanding for your investing endeavors. Deflationary pulses from this- -> disinflation in CPI later this year –> Fed reverses itself on rates and QT –> Cycles.”
Now, because the inflation rates are increasing, the dollar value is going, along with the purchasing power of the public.
This is the reason that the retail stores are not able to sell a lot of units.
This adds to the inventory, thus making it even more of a loss-making profession for them.
The retailers have no option but to sell their reserves for far less than what they should be sold for.
Steve Anderson is an Australian crypto enthusiast. He is a specialist in management and trading for over 5 years. Steve has worked as a crypto trader, he loves learning about decentralisation, understanding the true potential of the blockchain.
