If there is one person you, me, and every investor should listen to during a bear market, it is Michael Burry. You may know him from the movie based on his life, The Big Short, but he is the esteemed hedge fund manager who correctly predicted the subprime mortgage market meltdown in 2008.
He’s a certified bear market genius. No one knows how to navigate turbulent markets better than him. And he just issued a shocking warning to his 1.4 million Twitter followers about the current bear market – a warning that you may miss out on a monster rally of epic proportions over the next six months if you don’t buy stocks today!
That’s right. The bear market genius, Burry himself, is suddenly sounding bullish.
So, what exactly did Burry say? How is it bullish for stocks? And is he right?
Let’s take a deeper look.
The Tweet
Yesterday, Michael Burry sent the following tweet. In true Burry fashion, he has since deleted the tweet (for those who don’t know, he deletes all his tweets after about a day). But many stock market observers screenshotted the tweet because it is of paramount importance. A screenshot is posted below.
In short, Michael Burry is drawing parallels between the recent string of bank failures – Silicon Valley Bank, Signature Bank (SBNY), and now possibly First Republic (FRC) and even Credit Suisse (CS) – to the so-called “1907 Bankers’ Panic.”
In that bank panic, a multitude of market and economic factors sparked a bank run on Knickerbocker Trust, one of New York City’s largest banks at the time. The country was spooked. Suddenly, everyone started withdrawing their money from banks, and there was a massive credit crunch, also known as a bank run. Faith in America’s banking system was breaking.
In response, the stock market crashed. The Dow Jones dropped almost 50% in a hurry.
JPMorgan to the Rescue
Then, JPMorgan stepped in and saved the day. He pledged a chunk of his fortune to help shore up the banking system. He also convinced a bunch of other wealthy financiers at the time to do the same.
Collectively, they saved the U.S. banking system from collapse, restored consumer confidence, and stabilized financial markets.
Within weeks of JPMorgan pledging his capital, the stock market’s 50% “flash crash” ended, and stocks soared.
Mr. Burry thinks history is repeating right before our very eyes.
That is, the Bank Panic of 1907 ended when a stand was made to protect and shore up failing banks.
This past weekend, a similar stand was made by the U.S. government to protect and shore up failing banks Signature Bank and Silicon Valley Bank.
Then, just yesterday, another similar stand was made by the Swiss government to protect and shore up Credit Suisse.
The “stands are being made” all around us, so to speak.
Burry seems to think that these stands are a prelude to significant market bottoms – and huge stock market rallies .
After all, after the stock market bottomed in the Bank Panic of 1907 following a stand being made by JPMorgan, the market basically doubled over the next two years.
Could we be in store for a similar huge rebound rally over the next two years?
Burry’s cryptic tweets seem to suggest he thinks it’s entirely possible.
We believe a major stock market bottom was put in place late last year, and that right now, we are in the first innings of a new bull market breakout.
Recent developments in the banking sector – alongside the swift and strong response from major governments across the globe – have strengthened our bullish conviction.
This feels like when JPMorgan rescued the banks in 1907. It feels like when the government rescued the financial sector in 1998, and when it rescued it again in 2008. This feels like when the government rescued the economy in early 2020 as the COVID-19 pandemic hit.
When the government starts rescuing things, stocks start soaring.
The government started rescuing things this past weekend. Now, it’s time for stocks to start soaring – which they're doing today.
(Luke Lango)
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