‘Big Short’ investor Michael Berry predicts a recession in the consumer – and warns companies to face more pain in earnings

• Michael Barry predicted consumer stagnation and further pressure on the company’s profits.

• People are saving less, borrowing more, and spending what they saved during the pandemic, he said.

• The “The Big Short” investor expects these trends to affect consumer spending and corporate results.

Americans are saving less, borrowing more, and spending the extra money they stashed during the pandemic. These trends could portend a sustained decline in consumer spending, undermining corporate profits, Michael Perry warned Friday.

“Personal savings in the US fell to 2013 levels, the savings rate to 2008 levels – while revolving credit card debt grew at a record pace to its pre-COVID peak despite all those trillions of dollars down over their periods,” he said in a tweet . “Looming: Consumer stagnation and more trouble in profits.”

In other words, if people become more indebted and their money dwindles on rainy days, they will likely cut back on their spending, undermining economic growth and hurting corporate profits.

There is no doubt that rising food, gas and housing costs is one factor. Inflation puts pressure on consumers and makes them less spendable.

Barry is best known for his billion dollar bet against the mid-2000s housing bubble, immortalized in the book and movie “The Big Short.”

He also helped pave the way for GameStop stock to skyrocket in January 2021 by investing in a video game retailer, and placing high-profile bets against Elon Musk’s Tesla and pioneering Ark Innovation fund last year.

The head of Scion Asset Management previously raised concerns about American consumers. He tweeted in April that American households increased their wealth during the pandemic thanks to stimulus checks, revocable loans, cash-refinancing offers and indirect economic aid.

This may sound positive, but Perry wondered how people could rebuild that wealth. Perhaps he was referring to inflation fears preventing further stimulus, higher prices, higher interest rates, declining asset prices, and limited wage gains weighing on people’s finances.

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Brie is notorious for his dire predictions. Diagnosing the “biggest speculative bubble ever in everything” last summer, he warned buyers of meme and cryptocurrency stocks that they were headed for the “mother of all meltdowns.”

Read more: Insider interviewed CEOs of C . SweetsAnd the Dairy QueenAnd the rivetAnd the brooks running During the annual meeting of Berkshire Hathaway. They offered a look inside Warren Buffett’s company, and shared how they’re dealing with the pandemic and inflation.

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