'Big Short' investor Michael Burry warns of a massive bubble and epic market crash

[specuvestor]

UST 30years also just dipped below 3%.Hopefully Fed will hike 50bp in July and 25bp in Sept to signal they can see what is coming rather than what has happened. I guess the economy probably can at best absorb 2.5% fed funds and QT for next 12 months. The new normal still lives.

It's a catch22. If Fed funds goes 3.25-3.5% I suspect the yield curve might invert. Market is already looking at 2Q23 recession. Question is whether it will be a mild one.

2H22 inflation should come off to maybe 5% by year end due to higher base in 2H21. In fact the Core CPI and PCE is already showing that trend even as CPI bounced up to 8.6%

US 30 yr mortgage rates doubled to above 6% in a month. SG fixed mortgage rate above 2%. There will be short term economic pain for sure but I think the market looks forward so it's important to see what is the Fed thinking in next week's testimony and post July 50bp hike (if they hike 75 I think it sends wrong signal already).

I think economists underestimate 200bp hike in 6 months with QT on consumption and economic activities. Logistical bottlenecks including transport costs and energy prices are expected to come off in 2H22

But I do agree with Mike Burry that Biden's populist fiscal pump prime provided the spark. Biden signed the package in March and US inflation hit 5% in May and Powell say it was transitory

https://fred.stlouisfed.org/series/T10YFF

US 10 year treasury should be around 1.5% to 2% above Fed's benchmark rates.

According to the “dot plot” of individual members’ expectations, the Fed’s benchmark rate will end the year at 3.4%, an upward revision of 1.5 percentage points from the March estimate.

https://www.cnbc.com/2022/06/15/fed-hike...-1994.html

If the Fed expects 3.4% by year end, then likely that 10 year treasury will probably hit 5%.

If the 10 year treasury bond rate is used as risk free rate, imagine the valuation of risk assets if it really hits 5%. Plus lower earnings due to recession, it would be a double whammy when you do valuation.

The next Fed meeting will be 45 days later and it is expected to raise rates by 0.5% to 0.75%. That meant that the 10 year treasury rate will probably rise to 4% by end July...



With no share buyback due to earnings announcements and probably earnings downgrade, things do not look good.

The sovereign bonds are probably going to get squeeze further with US increasing interest rate. Another good reason for me to like gold.

Anyone wants to buy the dip???
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The funny thing about the phrase "fortune favors the brave" is that the Roman author Pliny the Elder famously said this just before setting sail toward Mt. Vesuvius mid-eruption, and then immediately died