A look back at the wildest financial predictions from the everything bubble

Most people don’t think about the Federal Reserve very often, and only a select few think about the effects that the US central bank has on investors. But in the past few years, that has started to change. Many economists and keen market watchers argue that years of loose monetary policies by the Fed and other central banks after the Great Financial Crisis (GFC) helped create the “everything bubble” – and now it’s popping.

The idea of ​​everything bubble is not new. Years before 2022 stock market troubles, leading minds on Wall Street, including investment legend Jeremy Grantham, warned that a “superbubble” was brewing. The idea is that near-zero interest rates and quantitative easing (QE)—a policy in which the Fed would buy mortgage-backed securities and government bonds to boost lending and investment in the economy—led investors toward risky investments, leaving unsustainable business models. . thrive on cheap loans, creating a “wildly unhealthy” increase in house prices.

Jeremy Grantham stops for a photo in Boston.
Renowned investment manager Jeremy Grantham believes we are in a “superbubble”.

Lane Turner – The Boston Globe/Getty Images

It’s early days, but in the past many strange financial predictions have been made with this era of easy money. And the result has not been good for Americans, as inflation continues to rage and fears of a recession mount. But there is a silver lining for the financial community. The bride of all things has produced some of the most perfect—and hilarious—forecasts in history.

From cryptocurrency experts and hedge fund managers to economists and investment bankers, the easy money era was filled with bulls who believed the good times would never end. Check out some of their weirdest calls here.

Bitcoin bulls

The cryptocurrency boom of 2020 and 2021 was unprecedented. Between January 2020 and the peak of the crypto craze in November 2021, the total value of the industry increased over $3 trillion and Bitcoin prices increased by approximately 800%.

Crypto believers were convinced that the party was just getting started. Billionaire investor Tim Draper said in June 2021 that Bitcoin will reach $250,000 by the end of 2022. “I think I’ll be right about that,” he confirmed. CNBC‘s Jade Scipioni.

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Bitcoin ended up just above $16,500 by the end of 2022, but just last month, Draper reiterated his call for Bitcoin to reach $250,000 – this time he said it would be by mid-2023.

“I expect a flight to high-quality, decentralized crypto like bitcoin, and that some of the weaker currencies are left behind,” Draper said. CNBC.

Tim Draper did not respond ExistenceRequest for comment.

Draper wasn’t the only leading figure to jump on the Bitcoin train and make lofty predictions in the age of easy money. ARK Invest’s Cathie Wood was the first public asset manager to launch Bitcoin Investment Trust (GBTC) in 2015 as part of its technology-linked exchange-traded ETFs.

Ark Invest CEO Cathie Wood
CEO of Ark Invest, Cathie Wood is long on Bitcoin and critic of FTX’s Sam Bankman-Fried.

Hugo Amaral – SOPA Images/LightRocket/Getty Images

The bet caused Wood to face serious criticism from his peers, but because of a short crypto winter banned in 2018, as the price of Bitcoin by November 2021 above 65,000 the dollar increased.

Wood was sure the good times would continue throughout the lake market. In November 2020, she said Barron‘s that institutional acceptance of the crypto will push the price of Bitcoin to $500,000 by 2026 and that Bitcoin prices are repeatedly “buying” as they fall. Wood also said The Globe and Mail in a February 2020 interview that Bitcoin was “one of the largest positions” in her retirement account.

The ARK Invest manager remained bullish even at the start of 2022, when Bitcoin prices fell from a high of $65,000 to just under $50,000. She pointed out that the leading cryptocurrency will reach $1 million by 2030 in ARK’s annual research report “Big Ideas 2022”.

Since then, the price of Bitcoin has fallen by more than 60%, but Wood and her team are not disappointed, and still believe that their prediction is fair.

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“We think Bitcoin is coming out of this rose smell,” Wood said. Bloomberg in December, said that institutions will eventually buy Bitcoin after it is “battle tested” by the crypto winter.

Cathie Wood didn’t answer ExistenceRequest for comment.

Tom Lee, head of research at Fundstrat Global Advisors, who previously worked as chief strategist at JPMorgan and spent more than 25 years on Wall Street, has also become a lifelong Bitcoin bull. In early 2022, he predicted that Bitcoin would reach $200,000 in the coming years.

Lee said, despite the recent crash, which he acknowledged has been “brutal” for investors CNBC in November that he still believes that Bitcoin will break out of the current downtrend and reach its target. But while many crypto forecasters are sticking to their lofty estimates, Wall Street is backing some of them back.

Tom Lee didn’t answer ExistenceRequest for comment.

High stock market forecasts

Investment banks made some pretty dramatic predictions in the era of cheap money. After the stock market soared throughout the pandemic, returning 28 percent to investors, Wall Street was convinced that things would slow down in 2022, but not as much as they actually were.

Investment banks had expected the S&P 500 to end 2022 at 4,825, representing only a slight 1% gain for the year. Instead, the blue-chip index dropped about 20%.

The (perhaps unauthorized) bullishness among investment banks was particularly evident when looking at price targets for growth stocks that benefited from pandemic trends. Online used car retailer Carvana, for example, boomed throughout the pandemic as used car prices soared.

The company has been able to take advantage of consumers’ inability or unwillingness to purchase vehicles in person during the COVID-19 pandemic, which has led some analysts to make huge forecasts.

In January 2022, Morgan Stanley auto analyst Adam Jonas called Carvana an “apex hunter in the auto market” and set a $430 12-month price target on the stock. Since then, the online car retailer’s shares have fallen 97% to just $4.48 – and some analysts believe more pain is ahead for investors.

Morgan Stanley did not respond ExistenceRequest for comment.

New Construct CEO David Trainer warned investors in June that Carvana was burning cash at an unsustainable rate and might not survive.

“The time is running out for cash-burning companies that are kept afloat by easy access to capital,” Trainer said. Existence. “These ‘zombie’ companies are at risk of bankruptcy.”

Coinbase is another example of the enthusiasm that has developed on Wall Street over the past few years. When the cryptocurrency exchange went public in April 2021, the shares rose from the reference price of $250 to $381 per share.

CNBC’s Jim Cramer, a former hedge fund manager, took to Twitter after the IPO, first words that he “loved Coinbase at $475.” And it wasn’t alone, the average price target of investment banks for the stock in early 2021 was more than $400 per share.

However, since then, Coinbase stock is down more than 90% amid the crypto winter. And Cramer has changed his mind, in a December 13 tweet that he was “not a Coinbase buyer here,” calling it “too early.”

CNBC did not respond ExistenceRequest for comment.

The era of cheap money may have many forecasters predicting that asset prices will continue to rise, regardless of valuations, but this year has proven to be a wake-up call. Wall Street analysts have lowered their price targets for many of the market’s pandemic darlings. It’s a new era for markets and forecasters, as Tim Pagliara, chief investment officer of investment advisory firm CapWealth, said. Existence last month

“We’re going to eliminate a lot of speculation,” he said. “There will be a lot of re-evaluation of everything from commercial real estate to how the investing public views things like crypto.


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