Michael bury is the king of short selling. He foresaw the dotcom bubble, the 2008 recession and is now predicting the biggest market crash in us. History bury recently warned about a vast array of indicators that may be pointing towards a massive crash ahead, but this video is not a typical market crash video, i'm simply going to objectively present and analyze the implications of china's situation and several indicators. The purpose of this video is not to spread fear, but to inform you about the serious risks ahead.

Michael bury always puts his money where his mouth is and usually makes large sums of money doing so from the years 2000 to 2008, burley averaged a return of 28.6 per year and from 2016 to the present day, burley averaged a return of 22.8 per year. These kinds of returns are on par with the greatest investors in the world, but this isn't to say that burley knows exactly when the market is going to crash timing. Market crashes is extremely difficult and bury is not immune to that difficulty. One of burries investors once said that a classic bury trade goes up by 10 times in value, but first goes down by half.

This type of pattern may be occurring again. Michael bury was early to the 2008 recession and could be early again, bury first warned of a market crash in december 2020, so he is likely down on his positions at the moment. Nevertheless, michael berry has always been right in the end and may be right again in this situation very recently shared a 53 page article talking about the micro and macro elasticity of markets and the intuition behind the giv estimator. Unless, if you're a market expert, you're - probably confused as to what i just said, although the research report sounds complicated, the concept is actually quite simple.

Let's say an investor says one dollar of bonds and purchases, one dollar of stocks. The question is what will happen to the overall valuation of the bond and stock market? A simple model would tell you that the bond market would go down by one dollar, and the stock market would go up by one dollar. That is not the case in reality. Using a variety of calculations, researchers found out that one dollar invested in the stock market would actually result in the market going up by five dollars.

This is because, when people purchase stocks, it incentivizes mutual funds to purchase stocks as well. For example, let's say someone invested 10 dollars in the stock market, which leads stock prices to increase by 10. This causes a mutual fund to invest 10 in stocks as well, because they want to get in on future returns, because that mutual fund invested 10 stock prices would increase by 10 again bringing the total increase to twenty dollars. That twenty dollar increase would then lead another mutual fund to invest ten dollars, bringing the total market increase to thirty dollars.

According to the mathematical models in this research report, every 10 invested in the stock market right now would cause the overall market to go up by 50. The problem with this ratio is that it won't always stay the same, bury tweeted that if five dollars of incremental market share results from one dollar added to stocks and ninety percent of millennials aka future wealth owners are in passive market vehicles. That five to one ratio will get much much sillier in time, covert, didn't stop it. Inflation might not hashtag epiphany.

We then elaborated by saying that the first step is to recognize that five to one is not a natural ratio. It is a product of a paradigm. So what will continue this paradigm? What may reverse it? This is the knife's edge, because we are at five to one. It may go to one hundred to one or become negative five to negative one, but parabolas don't resolve sideways, because market valuations are extremely high.

A small negative event could trigger a massive crash ahead. Nobody knows when a market crash is coming, but almost any bearish event can trigger a crash as i've covered in previous videos. Michael burley believes that we are in a situation similar to the dotcom bubble, bury found out that the price movement 15 years before the year 2000 was heavily correlated to the most recent 15 years. He tweeted that there was a 94 correlation between the nasdaq 100 and the 15 years today and the 15 years to 2000.

The s p 500 shows 95. This correlation implies that we are at valuations similar to the dot-com bubble. Many of us know that valuations are extremely elevated right now. The pde of the s p 500 is reaching all-time highs.

The buffet indicator is the highest. It's ever been margin. Debt, which are loans that purchase stocks, has also reached record highs, as well. All of these indicators are showing that the market is on a knife's edge.

One negative event could lead to the biggest crash of all time and that event could just be the collapse of evergrand. So what is evergrand evergrand is a real estate company that owns over 1300 real estate projects in roughly 280 cities in china. That sounds impressive on the surface, but evergrand is also the most indebted real estate developer in the world. The company has borrowed over 300 billion dollars worth of loans and is now failing to pay their interest on its debt.

Evergrand recently struck a deal for a 35.9 million dollar interest payment, but it still has one repayment of 83.5 million dollars coming soon. Evergreen's management team is backed into a corner and has already started to repay investors with actual real estate property. So why does this all matter? First of all, evergreen isn't just a developer in china. It's a company that has loaned out billions of dollars worldwide, which includes citibank, jp morgan, chase, ubs, hsbc and bank of america.

If all of these banks suddenly lose billions of dollars, then they may stop lending money and therefore freeze the financial system. There may also be another segment impacted, which is crypto. One cryptocurrency named tether is a very popular stablecoin, which means that it's a coin, that's supposed to be worth one us dollar for every coin. The problem with this is that tyler doesn't actually have one us dollar for every tethered coin.

Tether claims to have a reserve of holdings to ensure that each tether is worth one. Us dollar, as you can see in this pie, chart over 65 percent of tether's reserve is in commercial paper. Commercial papers are short-term debt notes issued by companies to investors, for example, if apple wanted to issue 100 worth of commercial paper or cp in short form, then apple would sell 100 of cp to a lender. That lender would then receive interest for a certain period of time, which is usually up to one year.

The ultimate question in our current situation is what kind of commercial paper does tether have and by the way this is not a small amount of money. Tether reportedly has 42 billion dollars worth of crypto reserves, and these reserves are very questionable. Michael bury recently retweeted a twitter thread that hypothesized that tether was financing china, property developers via cp. That might sound crazy, but if it is true, then evergran's collapse could create a crash in the entire crypto market.

The twitter thread stated that by now everyone knows about the tether reserves, notably they claim 50 of their reserves are commercial paper. Many, including myself, assumed the cp was just some sort of loan between tether and the exchanges, but it's notable that tether has empathetically denied this tether's legal game is to say positive, true things, while not revealing the bad true things. So the d boasts a cnbc interview. Yesterday was incredible categorically affirming that the cp is real.

Double a rated international cp are refusing several direct questions on whether it's chinese. Every commercial paper has a letter rating that goes from a to c, with triple a being the lowest risk and c being the highest risk. Tether claims to have double a rated cp, which is usually deemed as not risky, but tether may be talking about the borrower's banking affiliates, not the actual borrower itself. One reuters article described how cp has been used as a legal loophole for chinese companies to obtain funding, because cp usually does not have to be reported in financial statements.

This is not the case anymore. Chinese regulators are now demanding that developers have to report their monthly cp. The reuters article also explained how one evergreen affiliated bank is under investigation for illegally loaning up to 20 billion dollars. The question is, who is the loner of this 20 billion dollars and who is the borrower? Several clues are indicating that tether is a lender of the 20 billion dollars.

First of all, no reputable borrower would ever do business with tether, because tether is very shady, and even if reputable borrowers did do business with tether, they wouldn't borrow tens of billions of dollars unless they really needed it. Further clues also point towards tether as a lender. On july 1st, after the chinese bank was investigated, fitch rating, a noteworthy credit analyzer explained how stablecoins could be posing credit market risks. Fitch directly mentioned tether as a potential candidate for credit collapse.

This happened around the same time that the boston fed president stated that stable coins are posing a major risk, janet yellen, the u.s secretary of treasury and jerome powell. The fed chairman have recently also been attempting to act quickly on stable coins, as if it couldn't get any worse. Jim kramer has been calling tether a ticking time bomb and has said that he is quote unquote chinese sources, suggesting that tether's commercial paper is chinese. That's right: kramer source is saying that tether is a ticking time bomb.

Instead, in the last months, lots of important institutions and politicians have started looking into the risks from stable coins, especially tether, perhaps at our incessant prompting. I think that's fine, but it's also a step in the right direction, but not enough is being done to fix what many, including some of my chinese sources say, is a ticking time bomb. So we know that tether may be lending large sums of money to chinese real estate developers more specifically evergrand, but why does this all matter? First of all, this is not a small scale event. Tens of billions of dollars are invested in tether right now and if tether collapsed, it may just destroy the entire financial system.

Michael bury retweeted a tweet that said again, it's certainly possible tethers buying other chinese bank or developer cp or making up the cp concept entirely. But consider the implications if true the crypto universe may be riding on the back of china's collapsing property developers. The collapse of evergreen may not just mark the crash of one real estate developer, but the entire financial system bury added his own comment by saying when chinese cp is not the communist party and is maybe a bigger deal, to sum it all up, the market is On a knife's edge right now and the collapse of evergreen could become the trigger for a massive crash, so there you have it michael bury's prediction of how the biggest crash in u.s history may occur soon. I personally think that tether and evergreen are both very shady.

However, when it comes to the market crashing, i actually agree more with ray dalio who thinks that evergreen will be a manageable situation. Given everything the market has gone through, i can't see evergreen crashing the entire stock market, but that's just my personal opinion. Let me know what you think about evergreen down below. Will this be the trigger of a humongous crash? Thank you for watching.

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