SP500 could dump to 1800?!?! Burry shorting 30yr bonds (TBT)? His 3rd bubble which is the biggest? CPI housing prices are wrong (5% vs 12%)? Shiller PE ratio 36 -> 16?? Trading volumes are down?? Personally, my regression line is at SP500 8% level since 1980 which would be 3440. Still quite a steep decline from current levels. Dropping to 1800 would be a -48% from the 3440 which is unpredecented. Since 1980, the worse has been -23% from the 8% line.
The fed controls this soft landing or hard crash with interest rates. Anyone predicting a market outcome in the next 2 years is predicting what the fed will do. That's entirely political. They'll react to the screams of the masses like they always have. When you stop complaining about inflation and start complaining about a failing economy then they will rotate back to QE.
I agree. But that doesn't mean the ball won't have fallen off the cliff by the time they react...markets tend to exaggerate in one direction ...I would tend to agree with Burry. Prepare for mass amounts of downside.. there is more optionality to being liquid and prepared for downside then thinking we just recovery from this point and taking all that risk imo...although I agree with your premise about political risk....if Biden reacts to a crash by taxing the rich that will only create more market friction and more downside
Yes, you have to predict how low the S&P will go before the Fed comes in to save the day. In 2020 the S&P went down -35% before the Fed saved the day. In 2008 the S&P went down -58% before the Fed saved the day. No one can really pin point this next market low before hand, but if those two previous bear markets are anything to go by, the low this time will be somewhere between 2000 and 3000 in the S&P.
I agree with him for the long run. I am so tempted to buy some LEAPS QQQ/SPY puts. You cannot invest in this market only trade it,maybe buy some Latin American bonds?
Don't expect history to repeat. The rates just came off the lowest level, and for the longest time, ever. They are starting to raise now, but its a fraction of what was necessary in the past in order to control inflation. If they truly want to kill inflation, the rates will need to go much higher, and the economy is absolutely crushed. If they reverse direction and starting printing more money, what does this say to everyone about the value of US dollars? If you print half of the amount of GDP, but then inflation goes up 50%, you are basically back at square one. And each time they print, most of it goes to asset holders. They literally make the middle class and poor even poorer with more printing. Lastly, what the world needs most right now isn't dollar, but food and energy, which they cannot print. In conclusion, the FED can't do anything now to prevent what is coming.
It certainly seems that way. Another 35 - 60% correction in stocks is not the end of the world. We have lived throughs those before in the recent past, we lived through an 80% correction in the Nasdaq and the likes of Amazon fell 95%. Life went on as normal. Although having said that, i am not old enough to remember the 1930s depression..
Maybe, but the Fed seems more and more eager to rescue the markets these days. It allowed drawdowns of 49% for the S&P 500 during dot-com (Nasdaq was down over 80% then) then 57% in 2008-9. However, they changed their tune quickly on raising rates in late 2018 (S&P down about 20%) then "rescued" the markets after just a few weeks of the March 2020 COVID crash. They seem to act much faster these days, though we didn't have an inflation threat during other crashes...reducing/holding rates steady now has an added risk. So it's hard to say.