Insisting on buying trillions of dollars in assets, including MBS into a supply constrained housing market during a time of record fiscal stimulus causing a historic asset bubble while purposefully targeting to run inflation above their target was a colossal boneheaded mistake.
— Sven Henrich (@NorthmanTrader) October 21, 2022
Michael Burry called out the Federal Reserve for not shrinking its balance sheet as much as planned in June, comparing its failure to resist stimulating the economy to a drug addiction.
“Drugs are hard to kick,” Burry said in a now-deleted tweet. “Fed was supposed to sell $30B Treasuries and $17.5B Mortgage-Backed Securities per month starting June 1. QT.”
“During June, MBS holdings rose almost $3B. Treasury holdings fell less than $10B,” the investor of “The Big Short” fame added.
Burry’s tweet refers to the Fed’s plan to reduce security holdings by up to $30 billion worth of Treasuries and $17.5 billion worth of mortgage-backed securities each month, with deeper cuts to follow. However, the central bank managed less than one-third of its Treasuries target in June, and actually added $3 billion of mortgage-backed securities to its stockpile.