Michael Burry Ditches Gold as US CPI Hints at Fed Rate Cut

Michael Burry who famously called the 2008 financial crisis has recently decided to sell his entire position in Sprott Physical Gold Trust ($PHYS). Over the past six months, the trust recorded a 23% increase, and gold acted as a protective measure against inflation.

The decision of Burry to close this position may indicate some changes in his view on the economic situation, especially taking into consideration the slow down of inflation in the US.

Michael Burry Ditches Gold as US CPI Cools

Michael Burry has sold out his entire position in the Sprott Physical Gold Trust ($PHYS). Within the last six months, the trust reported a good increase of 23%; this may have been due to gold’s general function of being an inflation-proof asset.

Burry’s decision to exit this position indicates a change in his investment approach, given that he is seemingly stepping away from inflation-linked investments.

Burry shockingly sold out of all his Gold

He is now heavily bullish on the consumer, strength of the dollar, China, and the US Job Market

We think we have a good reason why he changed his mind on the US economy…

🧵 A thread worth reading below pic.twitter.com/sryRQSmZYU

— Michael Burry Stock Tracker ♟ (@burrytracker) August 15, 2024

This comes after the most recent US Consumer Price Index (CPI) report showed that inflation has slowed down considerably. In July, the CPI went up by 0.2% on the month, and the annual rate fell to 2.9%, the slowest since March 2021. This decline in inflation could be viewed as the Federal Reserve contemplating a reduction in interest rates, which may have played a role in Burry’s thinking.

Burry Bullish Shift Towards Consumer Spending and the US Dollar

In addition to selling his gold position, Michael Burry has made a significant bet on the US consumer and the strength of the dollar. He has taken a substantial stake in Shift4 Payments ($FOUR), a payment processing company serving over 200,000 businesses in sectors like retail, hospitality, and restaurants. 

This position now makes up 13.97% of Burry’s portfolio showing that he still believes in consumer spending.

This decision is timely given that the latest retail sales figures for July revealed a 1% increase, which is much higher than the predicted 0.3%. Burry’s investment in Shift4 Payments seems to be a strategic move to benefit from this continuing consumer sentiment. This move towards consumer-related stocks may also signify his increasing confidence in the strength of the US economy as inflation declines and the dollar appreciates.

Investments in Real Estate Signal Confidence in Recovery

Expanding his investment range, Burry has also invested in the real estate investment trust, Hudson Pacific Properties ($HPP), which has lost more than 49% of its value in the current year. Burry, who has been famous for his bearish approach to investment, seems to be betting on the rebound of the beaten-down commercial real estate.

Hudson Pacific Properties has not been performing well of late but Burry’s bet can be seen as him thinking that the company is set to bounce back especially if the Federal Reserve decides to reduce rates which is usually positive for the real estate sector. This investment is consistent with Burry’s past approach of investing in sectors or assets that are currently unfavored but have the capability of bouncing back.

Following the recent inflation numbers, Bitcoin has suffered a sharp pullback and is now trading at $57,200, down more than 4% in the past 24 hours, and dipped to $56,750 at one point. This decrease in BTC price has resulted in a liquidation of other major cryptocurrencies. Ethereum (ETH) for instance dipped by 5% trading at $2,543, while XRP price has plummeted by  2% to $0.5584. 

Consequently, the crypto market’s sensitivity to U.S. economic data has become increasingly evident, as investors appear to favor stability over riskier assets amid the shifting economic landscape.