Michael Burry May Have Called 35 Of the Past 5 Recessions, But This Is Why He's Probably Right About This One

• The 2-10 Treasury spread remained inverted from 2022-2024, followed by rapid steepening—a pattern that has only preceded recessions historically
• Current inflationary pressures prevent central banks from using easy-money policies and rate cuts that successfully countered recessions in the 2010s
• Elevated long-duration bond yields and rising annual interest payments for the U.S. government could force market intervention that triggers rather than prevents the next recession

Summary

Key Analyst and Thesis:

Michael Burry, the investor famous for predicting the 2008 subprime crisis, is warning of an imminent recession. While critics note his multiple premature recession calls in recent years, the article argues his current warnings carry more weight due to fundamental economic differences from the 2010s.

Critical Economic Indicators:

The 2-10 Treasury yield spread remained inverted from 2022-2024, a pattern that has historically only preceded recessions. The rapid steepening following this prolonged inversion, combined with elevated long-duration bond yields and rising annual U.S. government interest payments, signals potential market intervention that could trigger rather than prevent a recession.

Key Difference from Past Predictions:

Unlike the 2010s, when policymakers could deploy easy-money policies and interest rate cuts to counter economic downturns, today's inflationary environment severely limits these options. This constraint makes the current economic situation fundamentally different from previous periods when Burry's recession calls proved premature.

Market Context:

Current market indices show: S&P 500 at 6,794.40 (-0.26%), Dow Jones at 48,383.20 (-0.43%), and Nasdaq 100 at 24,937.00 (-0.36%). Burry has also expressed skepticism about AI stock valuations and has taken short positions against companies like Palantir and Nvidia.

Investment Implications:

The article suggests Burry's recent cautionary posts represent genuine warnings rather than premature bubble calls. The inability to use traditional monetary policy tools in an inflationary environment could make any coming recession more severe and prolonged than recent downturns.