“Prepare for stocks to skyrocket even higher, only to experience a devastating decline” – predicts Mark Spitznagel.
“For more than three years, I have been watching for such a euphoric peak in stock markets – followed by the worst crash since 1929.” – wrote the founder and main investor of Universa Investments in an email to Business Insider.
And he thinks it could happen quickly.
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“This euphoric peak is still building. It is likely to culminate in the coming months“Spitznagel added.
Universa specializes in the so-called hedging against extreme risk (tail-risk hedging), i.e. protecting investor portfolios against rare, extreme and unpredictable events. “Black Swan” author Nassim Nicholas Taleb, who previously ran a hedge fund with Spitznagel, is a scientific adviser to the company.
Spitznagel remains optimistic heading into 2022, but expects the stock to eventually fall off the cliff. Huge interest in artificial intelligence, the prospect of interest rate cuts in the US and record government spending have pushed stock prices almost continuously.
The head of Universa told Business Insider that is a “big supporter of AI”, but emphasized that “speculative bubbles have a life of their own, regardless of the idea behind them.”
He also added that similar euphoria is fueling the record gold rally, although in his opinion the precious metal will probably be “an important asset in the coming years.”
See also: OpenAI is a big loser. Apple is changing its AI strategy
Goldilocks and Papa Bear
Spitznagel made a similar forecast in a January letter to Universa investors.
“I still believe in the long-term thesis for gold, but I expect it to fall — sharply — along with other risky assets as the turnaround occurs,” he wrote. — “Just like cryptocurrencies, it is now a growth play,” he added.
Spitznagel predicted the so-called a Goldilocks zone for investors, including “falling inflation and interest rates, slowing the economy – but not by much – and sentiment turning to euphoria” before “the final run-up in share prices.”
He also warned that The “biggest bubble in human history” is coming to an endwhen “a Goldilocks-style market reaches its peak and the Papa Bear (a bear market is said to occur when a stock declines for a long time – ed) comes with the historic collapse that logically should follow.”
Spitznagel is not the only one who sees a market bubble and predicts a painful crash. Michael Burry, known from the movie “The Big Short”, and Jeremy Grantham from GMO have been sounding the alarm for years.
On the other hand, investors Ross Gerber and Kevin O'Leary told Business Insider that they are not concerned because artificial intelligence drives economic growth and productivity.
The above text is a translation from American edition of Business Insider
