The legendary Michael Burry thinks he has uncovered a similar scandal in the market as he did in 2002. Will history…

Michael Burry has done great things in the market. But what made him most famous was 2008 and the movie that was made about him. Now, he's coming out with a warning again, saying that he once again senses a danger similar to 2002.

Michael Burry says he senses danger again

Investors are rightly worried. This year has already caused them enough trouble. Their fears are reflected in developments on the financial markets. The stock market is flying wildly up and down. It also, understandably, often lets down growth-risk titles, which suffer as a result.

Investors usually buy shares in such companies when they are doing well. But once the economy stumbles a bit, the stocks of tech growth companies are the first to suffer. Well, here comes the notorious pessimist Burry with his latest report.

https://twitter.com/michaeljburry/status/1603069578778738691

"In early 2002, investors asked me why I didn't buy WorldCom." "This is the exact same situation," he tweeted.

On June 25, 2002, a huge blow hit the investment world: WorldCom, the second-largest long-distance carrier in the United States, officially admitted that it had artificially inflated its profits by about $3.8 billion. .

This scandal has caused an avalanche on all stock exchanges around the world and further weakened the entire technology sector. The cold shower also hit the auditing firm Arthur Andersen, which was already involved in the Enron scandal, which had manipulated its accounts.

By the way, we wrote about the Enron case on our Twitter and Instagram - if you don't follow us there yet, fix that!

The telecom giant, wracked by turmoil and overwhelmed by debt, collapsed barely a month after the accounting manipulations were revealed. In total, more than $7.1 billion was misbooked between 1999 and 2002. The scandal, at least as serious as the Enron bankruptcy, dealt a huge blow to Americans' confidence in their companies' accounting.

It was the latest in a series of financial malpractices uncovered in US companies such as Enron, Global Crossing and Iclone.

So what is Burry talking about?

That might be a bit of a stretch. After all, Burry doesn't exactly go to a lot of trouble to explain his reports (like Musk). Even this time he doesn't specify whether he's referring to the recent cryptocurrency exchange FTX crash or something else.

https://www.youtube.com/watch?v=vtVNn-6aNbQ

But Burry classically continues to criticize the Fed's actions and considers the current market an extreme bubble that is bound to burst at any moment. He also generally dislikes the state of the economy and the direction of the Fed.

"We are getting into contractionary territory," Fed Chairman Jerome Powell told reporters in Washington. "It's not so important now how fast we go. It's much more important to think about what is the ultimate level and how long we stay restrictive."

"There's a strong view on the committee that we're going to have to stay there until we're really sure that inflation is falling permanently, and we think that's going to take some time," Powell pointed out.

The Fed raised its benchmark interest rate by 50 basis points, capping a year of seven hikes that added 4.25% to the rate, and said more increases would be necessary. The central bank also indicated it would likely move the rate above 5%, implying at least another cumulative 0.75% increase, and then hold at that level for most of next year.

Rates are at an unusually high level. Source

Many economists and business people believe that this aggressive monetary policy designed to fight inflation, which is at its highest in 40 years, will cause a so-called hard landing, or recession.

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Disclaimer: This is in no way an investment recommendation. This is purely my summary and analysis based on data from the internet and other sources (YTB, Tradingeconomics, Yahoo). Investing in financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.