'Big Short' investor Michael Burry says Jerome Powell should butt out and let markets set asset prices

• Michael Burry wants Fed Chair Jerome Powell to stop commenting and interfering.
• The "Big Short" investor said that could allow markets to set asset prices once again.
• The Fed intervened to help make Silicon Valley Bank's depositors whole after the lender collapsed.

Jerome Powell should stop sharing his views and interfering in markets, Michael Burry has said.

"Powell should have just said 'I don't know,'" the investor of "The Big Short" fame tweeted on Saturday. He was likely referring to the Fed chair's comments to reporters after the US central bank's policy meeting last week.

"And say it again and again as he sits on his hands for the next 6 months," Burry continued. "Then we might get some real price discovery."

Burry's view appears to be that the Fed's running commentary and policies are distorting financial markets. The Scion Asset Management boss seems to want Powell and his colleagues to butt out for a while, allowing investors to determine the correct prices for various assets.

Steering the ship

The Fed cut interest rates to zero and ramped up its bond buying during the pandemic. Its goal was to shore up the economy against sweeping lockdowns, business closures, and supply chain disruptions.

Those efforts contributed to historic inflation. Surging prices have spurred the central bank to hike rates to north of 4.75% over the past 12 months, and begin to shrink its balance sheet.

Powell has also been providing frequent updates on the Fed's view of the economy, and the actions it expects to take. For example, he said on Wednesday that more hikes may be needed to slow inflation from around 6% to the Fed's target of 2%.

He also reassured investors that the banking system is sound. Moreover, he hinted federal authorities would make depositors whole if their bank fails — as they did after the recent collapse of Silicon Valley Bank and Signature Bank.

"We have the tools to protect depositors when there's a threat of serious harm to the economy or to the financial system, and we're prepared to use those tools," Powell said. "And I think depositors should assume that their deposits are safe."

Stocks, bonds, commodities, cryptocurrencies, and other assets have swung sharply in recent weeks, as investors braced for more runs on lenders or even a banking-sector meltdown. Powell's comments may have helped assuage those worries, limiting the scale of price declines.

Staving off a crash

Burry diagnosed the "greatest speculative bubble of all time in all things" in 2021, and warned buyers of meme stocks and crypto that they were signing up for the "mother of all crashes."

He hinted in August that the market collapse was under way. Yet the S&P 500 has gained 4% this year, and both Tesla stock and bitcoin are up roughly 60%.

The investor's tweet suggests that he believes the Fed — by adjusting rates, addressing investors' concerns, and intervening to stop panic spreading — is influencing asset prices and the chances of a market downturn.

Burry, who specializes in spotting and scooping up bargains, probably wouldn't mind if the Fed took a step back, allowing fundamental factors such as company profits to determine asset valuations.

The Scion chief is best known for predicting and profiting from the collapse of the mid-2000s housing bubble. His massive, contrarian bet was immortalized in the book and movie "The Big Short."

Here's a screenshot of Burry's tweet: