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Michael Burry just dropped a bombshell on one of the most shocking crises of all time. Just like 1999 and 2008, nobody knows what Burry sees, but the world is about to wake up soon. In Burry’s own words, “the theater took more than a decade to overstuff. Not likely everyone gets out in less than a year”. While it took ages for the theater to be stuffed with millions of people, the collapse will be quick and painful. Some people are inevitably going to be left behind, and it’s going to be their fault for not catching on. Even though the signs have been there for years, investors worldwide will still be in for a rude awakening.

I’m not going to point out the obvious and explain why money printing was a terrible idea. Everyone knows that the government messed up, but that’s not what I’m about to tell you. The Federal Reserve printed $5 trillion and this unsurprisingly led prices to rise. The inflation rate is currently at 8.6% as a result of this. Contrary to the mainstream media, Burry doesn’t think that inflation is going to remain elevated in the short term. It’s true that the Fed printed at an annual rate of $1.5 trillion during the pandemic, but the opposite is now playing out. The Fed is planning to cut the money supply at an annual rate of $1.1 trillion. If prices rose after the Fed printed trillions of dollars, it’s logical to assume that prices will drop after the Fed pulls back trillions. This is happening at the same time that supply chains are catching up to demand. Supply chains have been under pressure over the past couple of years, but this is starting to change. The world hasn’t been sitting back and letting the pandemic gloom over. It’s in our nature to adapt to the changing environment. New supply chains have been set up. Businesses have been becoming more efficient. More container ships are being built. The supply panic is on full speed by all means. One shipping analyst said that “last week, 13 more container ships were ordered, bringing the total for the year to 239. This is already the fifth-largest year on record for container-ship orders and we are only halfway through the year”. Such a large increase is obviously not sustainable. Another analyst explained how “the size of the overbook is obviously a reason for concern.” We’re starting to see the scramble to produce supply in the growth of inventories. Wholesale inventories are up 24% year over year. The problem with this newfound supply is that consumers are not spending as much. Consumer sentiment is at a one-and-a-half decade low according to the UMichigan consumer sentiment index. When you have an oversupply of goods and low consumer demand, prices are bound to drop at a rapid pace. Burry tweeted: “Question: In 2022, what brings a Christmas in July? Answer: A disinflationary overstocked consumer recession at Christmas”. Burry is hinting at an upcoming supply glut. A supply glut is when retail stores suddenly have far too much supply and not enough demand. As a result of a supply glut, retail stores will have to start dropping prices by introducing mass sales. That’s what Burry means when he says that Christmas will come early in July. Christmas sales always happen because businesses produce too many goods that need to be sold. The only way to sell those goods is by dropping the price. July 2022 will be an early Christmas, and not for a good reason. When there are too many goods on the shelves, corporate profits will drop immensely, which will eventually cause people to be laid off or see their salaries cut. Burry expanded on this concept by saying “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 quantitative tightening → Cycles”. The bullwhip effect is when a spike in demand causes the suppliers to order too much supply. This is because businesses tend to order a little more supply than needed as a safety net.