As the Federal Reserve again eases inflation concerns, some market sharks, including "Big Short" investor Michael Burry, are signaling the opposite.

What is the latest message from the Fed?

During his semiannual testimony before the US Congress, Fed Chairman Jerome Powell reiterated that the central bank has learned to keep inflation under control and that high inflation "is not an issue for the moment."

He said that although inflation could fluctuate over the next few months, the effects "will not be large or long-lasting". Said inflation has been at a 25-year low and it will not change.

Powell even said that central banks must get rid of the money supply relationship, noting that M2 growth is no longer related to economic growth!


Fed Chairman F

When asked to elaborate on a few of the top inflation indicators, Mr. Powell noted that inflation dynamics will evolve over time, not changing overnight. “Inflation is something I remember very well,” he said. We are in a low inflation environment. And we have guidance telling the markets when the tapering action will begin or when we will raise rates.”

However, this is being questioned, including Michael Burry.

'Big Short' investor Michael Burry

These comments contrast with the alarm that is sounding on Wall Street. The latest influencer to comment on this is Michael Burry, an investor featured in Michael Lewis' book "The Big Short" on the mortgage crisis and now runs Scion Asset Management. 


Poster for the movie adaptation of The Big Short with famous actors​

Burry issued a warning on Twitter that investors must prepare for inflation, pointing to the massive money injections taking place.

Burry tweeted over the weekend: “The US government is 'inviting' inflation with MMT (modern monetary theory) policies. Debt/GDP increased rapidly, M2 money supply also increased while retail sales, PMI, recovered in a V-shaped pattern. More trillions from stimulus packages to boost demand, jobs, and costs supply chains will skyrocket.”

Burry is known for spotting the mortgage crisis and monetizing the housing bubble in America. He became famous after being featured in the book and movie of the same name: "The Big Short". In 2019, Burry invested in GameStop, just before the retail craze, raking in millions.

Michael Burry

He also cites the book "Death for Money: Lessons from Great German and American Inflation" when it comes to inflation, saying that history is not useless and that in an inflationary crisis the government does will try to “squeeze” assets like gold and Bitcoin.

Below are continued inflation concerns from major financial institutions:

JP Morgan

Last week, JPMorgan said signs of inflation had emerged, suggesting that higher prices would trigger a new commodity super cycle.

Goldman Sachs

Goldman Sachs noted that inflation fears are driving some of the market, warning that inflation is likely to rise sharply this year.

Citigroup

Citigroup said that as the economy improves, inflation concerns are increasing. Leading economic indicators suggest inflation concerns are looming, and companies with price flexibility stand to be the winners.

Vanguard

According to Vanguard, inflation is a major risk to the market whether it is temporary or something with deeper roots.

In short, the Fed is still focusing on the goal of economic support and full employment, lowering the risk of soaring inflation, however, the giants think otherwise, they are seeing something wrong.