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The Big Short legend Michael Burry says hyperinflation coming, invest in real estate

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  • Feb 23rd, 2021 2:47 pm
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Deal Addict
Mar 20, 2017
1309 posts
1092 upvotes

The Big Short legend Michael Burry says hyperinflation coming, invest in real estate

Who of you expected to live the day when Michael Burry advices to invest in real estate as the best deal on the market?
Guess what, this day is today!
https://www.zerohedge.com/markets/micha ... ion-coming

Michael Burry Warns Weimar Hyperinflation Is Coming

Update (1815 ET): one day after the Weimar tweetstorm below, and shortly after our article came out, Burry tweeted the following:

People say I didn't warn last time. I did, but no one listened. So I warn this time. And still, no one listens. But I will have proof I warned.

Indeed he will.

One week ago, Bank of America hinted at the unthinkable: the tsunami of monetary and fiscal stimulus, coupled with the upcoming surge in monetary velocity as the world's economy emerges from lockdowns, would lead to unprecedented economic overheating... or rather precedented as BofA's CIO Michael Hartnett reflected back on the post-WW1 Germany which he said was the "most epic, extreme analog of surging velocity and inflation following end of war psychology, pent-up savings, lost confidence in currency & authorities" and specifically the Reichsbank’s monetization of debt, and extrapolated that this is similar to what is going on now.

There is, of course, another name for that period: Weimar Germany, and because we all know what happened then, it is understandable why BofA does not want to mention that particular name.

Of course, others have been less shy - in 1974, Jens Parsson wrote a fascinating, in-depth historical analysis of the hyperinflationary collapse of Weimar Germany under the original money printer, Rudy von Havenstein, "Dying of Money: Lessons of the Great German and American Inflations" one which we periodically remind readers is absolutely critical reading in preparation for what comes next.

Then overnight none other than the Big Short, Michael Burry, who has been rather busy making waves within the financial community with his hot takes (most recently, his slam of Robinhood and his bullish view on Uranium), picked up on the theme of Weimar Germany and specifically its hyperinflation, as the blueprint for what comes next in a lengthy tweetstorm cribbing generously from Parsson's seminal work. And while the details are familiar to most monetary historians, the fact is that now none other than the man who was made famous in the Big Short is calling for Weimar-style hyperinflation in the US. Below is an easily digestible repost of Burry's lengthy Saturday tweetstorm, which shows just how similar our world is to that prevalent in the years just before Weimar Germany saw the most explosive hyperinflation in history.

The US government is inviting inflation with its MMT-tinged policies. Brisk Debt/GDP, M2 increases while retail sales, PMI stage V recovery. Trillions more stimulus & re-opening to boost demand as employee and supply chain costs skyrocket. #ParadigmShift

"The life of the inflation in its ripening stage was a paradox which had its own unmistakable characteristics. One was the great wealth, at least of those favored by the boom..Many great fortunes sprang up overnight...The cities, had an aimless and wanton youth"

"Prices in Germany were steady, and both business and the stock market were booming. The exchange rate of the mark against the dollar and other currencies actually rose for a time, and the mark was momentarily the strongest currency in the world" on inflation's eve.

"Side by side with the wealth were the pockets of poverty. Greater numbers of people remained on the outside of the easy money, looking in but not able to enter. The crime rate soared."

"Accounts of the time tell of a progressive demoralization which crept over the common people, compounded of their weariness with the breakneck pace, to no visible purpose, and their fears from watching their own precarious positions slip while others grew so conspicuously rich."

"Almost any kind of business could make money. Business failures and bankruptcies became few. The boom suspended the normal processes of natural selection by which the nonessential and ineffective otherwise would have been culled out."

"Speculation alone, while adding nothing to Germany's wealth, became one of its largest activities. The fever to join in turning a quick mark infected nearly all classes..Everyone from the elevator operator up was playing the market."

"The volumes of turnover in securities on the Berlin Bourse became so high that the financial industry could not keep up with the paperwork...and the Bourse was obliged to close several days a week to work off the backlog" #robinhooddown

"all the marks that existed in the world in the summer of 1922 were not worth enough, by November of 1923, to buy a single newspaper or a tram ticket. That was the spectacular part of the collapse, but most of the real loss in money wealth had been suffered much earlier."

"Throughout these years the structure was quietly building itself up for the blow. Germany's #inflationcycle ran not for a year but for nine years, representing eight years of gestation and only one year of #collapse."

His punchline: the above was "written in 1974 re: 1914-1923" and then makes the ominous extrapolation that "2010-2021: Gestation" adding that "when dollars might as well be falling from the sky...management teams get creative and ultimately take more risk.. paying out debt-financed dividends to investors or investing in risky growth opportunities has beaten a frugal mentality hands down."

We are there now. The only question is when do we enter the exponential currency collapse phase.



16 replies
Deal Addict
Apr 10, 2011
2233 posts
1809 upvotes
GVRD
CMHC's prediction last year of a 20-30% drop in real estate prices was so accurate!

On inflation, the gov't says that as long as the price of bread, eggs and milk stays the same, THERE IS NO INFLATION!
Deal Addict
User avatar
Apr 12, 2013
1865 posts
816 upvotes
Markham
RxMills wrote: CMHC's prediction last year of a 20-30% drop in real estate prices was so accurate!

On inflation, the gov't says that as long as the price of bread, eggs and milk stays the same, THERE IS NO INFLATION!
Yup because very soon bread, eggs and milk will be the only things we can afford.

Heres the inflation rate as per BOC

https://www.bankofcanada.ca/rates/indic ... inflation/
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Deal Addict
Jul 29, 2006
4125 posts
949 upvotes
someone wake me up when Garth Turner starts telling us to invest in real estate
Deal Addict
Apr 10, 2011
2233 posts
1809 upvotes
GVRD
At the moment, things have been rocketing upwards in many real estate markets. That's an appropriate response to massive gov't spending and bottom-level interest rates. History has shown that the gov't occasionally pulls a new leaver to change things with little notice that can immediately affect the markets (interest rates, stress tests, taxing capital gains, foreign buyers tax, etc. etc.). Extremist projections from anyone (CMHC's extreme bearish, or ZeroHedge's extreme bullish) are usually wrong. Notwithstanding that, no one knows what will happen in other significant countries around the world over the next year, let alone the next month, that may affect local markets and economies, positively or negatively.

One thing's for sure. All gov'ts want their citizens to spend much more to grow the economy - whether in real estate, furniture, new car purchases, whatever. They need that for job growth and for tax revenues. We're in a bad economic state and even with a vaccine, COVID limits are going to be in-place for quite a lot longer. That's Canada's situation. There are other countries in better, and much worse, shape. Canada doesn't live in its own economic bubble.
Newbie
Feb 19, 2015
66 posts
106 upvotes
Toronto, ON
nx6288 wrote: someone wake me up when Garth Turner starts telling us to invest in real estate
or starts pumping his crypto portfolio
Member
Aug 13, 2020
267 posts
338 upvotes
If we compare with 2008 crisis, this time the intervention was much faster. Basically they learnt from history and were quicker in response. So, may be this time they will be able to handle the overall situation in a better way(based on learnings from past).
Deal Guru
Feb 9, 2009
10761 posts
9132 upvotes
Hyperinflation is coming? It’s largely already here.

And if rates go up re prices will go down as less people can afford to buy. Hyperinflation is not good for stocks and real estate.

The hyperinflation of real estate has already happened and is happening right now.... but on the back end not so good...
Member
Jul 18, 2020
361 posts
544 upvotes
Yes hyper inflation is starting with RE price, I bet our government is going to implement much stricter rent control policies going forward to make sure there will be no inflation in rent. Property price goes up but rent is not, so much fun for being landlords going forward.
Member
Dec 23, 2012
328 posts
329 upvotes
RICHMOND HILL
Sanyo wrote: Hyperinflation is coming? It’s largely already here.

And if rates go up re prices will go down as less people can afford to buy. Hyperinflation is not good for stocks and real estate.

The hyperinflation of real estate has already happened and is happening right now.... but on the back end not so good...
it's not even slightly here, hyperinflation is defined as something like 50% monthly inflation.
Jr. Member
Nov 5, 2017
168 posts
147 upvotes
Hyperinflation: No, Never

Inflation: Yes for all Canadians except one (Tiff Macklem). BOC will never acknowledge inflation.

It is going to be very hard for low income earners and house poor Canadians.

Unrecognized inflation is equal to death by thousand cuts
Member
Apr 15, 2009
217 posts
234 upvotes
toronto
Hyperinflation guide for poor: ( been there done that)
When your check is paid, go spend it or better buy currency which is not in high inflation. Max your CC and wait for the last day to pay it off.
In the meantime inflation eats away your debt. Month later sell your hard currency or gold or whatever you bought and cover your debt with 50% of money. ( if inflation is 50% a month.) You keep half.. rinse and repeat.
Where I was cigarettes were like gold. Inflexible demand and inflexible supply. You see people on the streets opening coats and showing they have cigs for sale ( as everyone is after any goods, stores are getting empty and sales moves to underground)
I can see cooking oil, TP, cans flour etc being sold on the streets. However for that to happen money needs to reach the people. Fact that money was printed and given to banks to buy bonds etc.. that doesn’t cause core inflation. It has to get out and start being used in spending .. in much larger quantity than usual.
My money is on that not happening. Sure we can have 5 or 8 or even 15% inflation A YEAR but hyperinflation.. no.
Deal Fanatic
User avatar
Sep 8, 2007
8946 posts
10126 upvotes
Way Out of GTA
Here’s how I feel right now

“I’ve never been so scared to be in cash, and never so scared not to be in cash”

Unprecedented times in many ways, but the previous examples do give us some instructive guidance. Interesting was BofA is so woke they couldn’t even say Weimar Germany.
Deal Addict
Jul 30, 2015
2583 posts
1555 upvotes
Toronto, ON
cartfan123 wrote: Here’s how I feel right now

“I’ve never been so scared to be in cash, and never so scared not to be in cash”

Unprecedented times in many ways, but the previous examples do give us some instructive guidance. Interesting was BofA is so woke they couldn’t even say Weimar Germany.
As someone who has no knowledge of Germany, what's wrong with saying Weimar Germany?
Deal Guru
Feb 29, 2008
13885 posts
10155 upvotes
RxMills wrote: CMHC's prediction last year of a 20-30% drop in real estate prices was so accurate!

On inflation, the gov't says that as long as the price of bread, eggs and milk stays the same, THERE IS NO INFLATION!
Where is Mr. Evan Siddal. People made some big time decisions based on his words. Neutral Face
Deal Guru
Feb 29, 2008
13885 posts
10155 upvotes
lechan wrote: Yes hyper inflation is starting with RE price, I bet our government is going to implement much stricter rent control policies going forward to make sure there will be no inflation in rent. Property price goes up but rent is not, so much fun for being landlords going forward.
I can't see how they can be more strict in Ontario at least. Anyways, I saw this so long ago and soured oon rentals. Then I see a friend who shows me pictures of her brand new luxury rental getting torn to shreds after 3 years of renting it out to a professional tenant. Things are actually broken and there's not much she can really do to get compensated. Imagine that. No thanks.

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