Michael Burry and Jeremy Grantham are bracing for a devastating crash across financial markets. They’re far from the only experts to warn that rampant speculation fueled by government-stimulus programs can’t shore up asset prices forever.
Billionaire investors Leon Cooperman, Stanley Druckenmiller, and Jeffrey Gundlach have also sounded the alarm. The same is true for “Shark Tank” star Kevin O’Leary, market prophet Gary Shilling, and “Rich Dad Poor Dad” author Robert Kiyosaki.
Michael Burry described the state of markets in June as the “greatest speculative bubble of all time in all things,” and warned that retail investors are buying into the hype around meme stocks and cryptocurrencies before the “mother of all crashes.”
The investor of “The Big Short” fame, who runs Scion Asset Management, pointed to Tesla, GameStop, bitcoin, dogecoin, Robinhood, and the red-hot US housing market as signs of speculative excess earlier this year.
Jeremy Grantham labeled the market a “fully fledged epic bubble” in January, and described it as the “real McCoy.”
“When you have reached this level of obvious super-enthusiasm, the bubble has always, without exception, broken in the next few months, not a few years,” the legendary investor and GMO cofounder continued.
“We will have to live, potentially, possibly, with the biggest loss of perceived value from assets that we have ever seen,” Grantham added.
Leon Cooperman expressed deep concerns about financial markets in May.
“Everything I look at would suggest caution, intermediate to long term, would be the rule of the day,” the billionaire investor and Omega Advisors boss said. “When this market has a reason to go down, it’s gonna go down so fast your head’s gonna spin.”
However, Cooperman described himself as a “fully invested bear” because that factors that typically cause bear markets — rising inflation, recession fears, a hostile Federal Reserve — weren’t present.
Stanley Druckenmiller said in May the current bull market reminds him of the dot-com boom, but he cautioned that asset prices could continue rising for a while.
“I have no doubt that we are in a raging mania in all assets,” the billionaire investor and Duquesne Family Office chief said. “I also have no doubt that I don’t have a clue when that’s gonna end.”
“I knew we were in a raging mania in ’99, but it kept going on, and if you had shorted the tech stocks in mid ’99, you were out of business by the end of the year,” Druckenmiller added.
However, the investor indicated he would pull his cash out of equities in a matter of months.
“I will be surprised if we’re not out of the stock market by the end of the year, just because the bubbles can’t last that long,” he said.
Equities are undeniably expensive, Jeffrey Gundlach said in March.
Claiming the stock market was “anything other than very overvalued versus history is just to be ignorant of all the metrics of valuation,” the billionaire investor and DoubleLine Capital boss said. He warned that stocks would fall by upwards of 15% when the downturn comes.
Gundlach, whose nickname is the “bond king,” predicted the retail investors that have piled into meme stocks and other speculative assets wouldn’t stick around once prices started dropping.
“We’ll have a tremendous unwind of a lot of the money that thinks that the stock market is a one-way thing,” he said.
Kevin O’Leary warned in April that stocks would eventually crumble, but he framed the downturn as an educational opportunity for rookie investors.
“Buying the dip is more rock and roll, but what invariably happens is you go through a massive correction and you learn a very important lesson,” the “Shark Tank” star and O’Leary Funds chief said.
“The generation that is trading right now has never gone through a sustained correction. It’s coming — I don’t know when, I don’t know what’ll trigger it, but they will learn their lesson,” he continued.
If you have a lot of leverage on, it’s a hell of a lesson because you end up in a negative net-worth position,” O’Leary added. “But you do learn from it.”
“Biggest bubble in world history getting bigger,” the personal-finance guru said. “Biggest crash in world history coming.”
Kiyosaki has blamed the Federal Reserve for overstimulating markets and devaluing the dollar. He’s advised investors to prepare for the downturn by stocking up on precious metals and cryptocurrencies.
“ARE YOU READY?” he tweeted in April. “Boom, Bust, Mania, Crash, Depression. Mania in markets today. Prepare for biggest crash, depression in world history. What will Fed do? Print more money? Save more gold, silver, bitcoin.”
Gary Shilling warned in April that financial markets would nosedive, but he declined to hazard a guess at when the crash would arrive.
“I’m not making any firm prediction as to when this thing is going to collapse,” the veteran forecaster and president of A. Gary Shilling & Co said.
“Speculations outrun any logic and that’s probably going to be true of this one,” Shilling continued. “But at some point, boy, there’s going to be a lot of blood on the floor.”
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