“Big Short” investor Michael Burry criticized the pace of the Federal Reserve’s effort to sell off its massive pandemic-era balance sheet – likening the central bank’s affinity for economic stimulus to drug addiction.
Fed officials have outlined a plan to steadily unwind the bank’s $9 trillion balance sheet as part of a process called “quantitative tightening.” But Burry asserted that the central bank is falling short of its own targets, citing a recent release from the New York Fed.
“Drugs are hard to kick. Fed was supposed to sell $30B Treasuries and $17.5B Mortgage-Backed Securities per month starting June 1. QT,” Burry said in the now-deleted tweet. “During June, MBS holdings rose almost $3 billion. Treasury holdings fell less than $10B.”
The Fed revealed in May that it would begin sell off bond holdings amassed as it aimed to prop up the US economy during the COVID-19 pandemic.
As Burry said, Fed officials indicated they would sell a maximum of $30 billion in Treasury securities for the first three months of their plan and then shift to a cap of $60 billion per month. The banks also indicated it would sell as much as $17.5 billion per month in agency debt and mortgage-backed securities before moving to a $35 billion-per-month regimen.
Fed representatives did not immediately return a request for comment on Burry’s remarks. Burry frequently deletes his tweets shortly after posting them.
Burry, who rose to national prominence after the 2015 film “The Big Short” chronicled his bet against the subprime mortgage crisis, has been critical of the Fed’s actions in recent months.
Last April, Burry tweeted that the Fed had “no intention of fighting inflation” as it took hold in the US economy.
“Serial half-point hikes are for getting elevation before stocks and the consumer tap out,” Burry said in the deleted post. “Same with rapid-fire QT. The Fed’s all about reloading the monetary bazooka. So it can ride to the rescue & rescue the fiscal put.”
Burry has also stepped up his warnings about the state of the US economy. Last week, he predicted that markets were likely only “halfway” through a debilitating downturn, even as the S&P 500 and the Nasdaq founder in bear territory.
“Adjusted for inflation, 2022 first half S&P 500 down 25-26%, and Nasdaq down 34-35%, Bitcoin down 64-65%,” Burry said. “That was multiple compression. Next up, earnings compression. So, maybe halfway there.”
