Scion Asset Management founder Michael Burry — whose story was featured in the film “The Big Short” after he predicted the 2008 housing crisis — has sold all of his firm’s stocks except for one, according to a Monday filing with the Securities and Exchange Commission.
After holding stock in firms such as Meta and Alphabet by its previous filing submitted at the end of March, the firm has cut its holdings from $165 million to $3.3 million. Scion reported holding no stocks save 500,000 shares of GEO Group by the end of June, which invests in private prisons and mental health systems.
Burry made a name for himself by betting against technology stocks during the dot-com bubble, earning 55% returns while the S&P 500 dropped 12%, according to a profile in Business Insider. Burry likewise bet against the housing market after evaluating bank balance sheets and subprime mortgage data, earning $100 million for himself and $700 million for his investors — an experience that formed the basis of the 2015 film “The Big Short,” in which actor Christian Bale stars as Burry.
At the end of last week, Burry warned about consumers’ tendency to spend even through economic turmoil. “Net consumer credit balances are rising at record rates as consumers choose violence rather than cut back on spending in the face of inflation,” he said per The Street. “Remember the savings glut problem? No more. COVID helicopter cash taught people to spend again, and it’s addictive. Winter coming.”
Indeed, several metrics show that consumers’ financial troubles are on the rise following COVID and the lockdown-induced recession. Debt service payments for consumer loans as a percentage of disposable income have risen from 5.1% during the second quarter of 2020 to 5.6% during the first quarter of 2022 after a marked decline, according to the Federal Reserve Board of Governors. The number of general-purpose credit cards surged past 500 million for the first time during the second quarter, according to a report from Fidelity. TransUnion Vice President of Research and Consulting Michele Raneri noted in the report that “high inflation and rising interest rates” are primary challenges impacting Americans’ personal finances.
Last month, the United States met the technical definition of a recession since the economy shrank at a 1.5% annualized rate in the first quarter and contracted at a 0.9% pace in the second quarter. In response, the Biden administration has been carrying out damage control by eroding the rule-of-thumb definition.
“While some maintain that two consecutive quarters of falling real GDP constitute a recession, that is neither the official definition nor the way economists evaluate the state of the business cycle,” the White House said in a recent blog post. “Instead, both official determinations of recessions and economists’ assessment of economic activity are based on a holistic look at the data — including the labor market, consumer and business spending, industrial production, and incomes. Based on these data, it is unlikely that the decline in GDP in the first quarter of this year — even if followed by another GDP decline in the second quarter — indicates a recession.”