Most people don’t think of the Federal Reserve very often, and only a select few compare the effects the US central bank has on investors. But in recent 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 in the wake of the Great Financial Crisis (GFC) helped create a “all bubble– and now it jumps.
The idea of everything bubble is not new. For years before the stock market woes of 2022, leading minds on Wall Street, including investing legend Jeremy Grantham warned about a brewing “superbubble”. The idea is that near zero interest rates and quantitative easing (QE) – a policy where the Fed would buy mortgage-backed securities and government bonds to stimulate lending and investment in the economy – pushed investors into riskier investments, allowing unsustainable business models to thrive on cheap debt and fueling awildly unhealthysoaring house prices.
Lane Turner—The Boston Globe/Getty Images
This is only the beginning, but in retrospect, many wild financial predictions have accompanied this era of easy money. And the fallout for Americans has not been pretty, as inflation continues to rage and recession fears grow. But there is a silver lining for the financial community. The Everything Bubble has provided some of the most ridiculous and hilarious predictions in history.
From cryptocurrency pundits and hedge fund managers to economists and investment banks, the easy money era was filled with bulls who thought the good times would never end. Here’s a look at some of their weirder calls.
The Bitcoin Bulls
The cryptocurrency boom of 2020 and 2021 was unprecedented. Between January 2020 and the peak of crypto fervor in November 2021, the total value of the industry reached over $3 trillion and Bitcoin prices soared around 800%.
Crypto devotees were sure the party was just getting started. Billionaire venture capitalist Tim Draper said in June 2021 that Bitcoin would hit $250,000 by the end of 2022. “I think I’m going to be right on this one,” he assured. @CNBCThis is Jade Scipioni.
Bitcoin ended up ending 2022 just above $16,500, but last month Draper repeated his call for Bitcoin to hit $250,000 – this time he said it would be in the middle of 2023.
“I expect a flight to quality, decentralized crypto like bitcoin, and some of the weaker coins to become relics,” Draper Told @CNBC.
Tim Draper did not respond to Fortunerequest for comment.
Draper wasn’t the only figurehead to jump on the Bitcoin bandwagon in the era of easy money and make high predictions either. ARK Invest’s Cathie Wood was the first public asset manager to gain exposure to Bitcoin through the Bitcoin Investment Trust (GBTC) as part of its technology-focused exchange-traded ETFs in 2015.
Hugo Amaral—SOPA Images/LightRocket/Getty Images
The gamble led Wood to face serious criticism from his peers, but barring a brief crypto winter in 2018, it paid off as Bitcoin’s price soared to over $65,000 in November 2021.
Wood was sure the good times would last throughout the bull market. In November 2020, she Told Baronit is that institutional crypto adoption would drive the price of Bitcoin to $500,000 by 2026 and on several occasions.bought the dipevery time bitcoin prices fell. Wood even said The Globe and Mail In a February 2020 interview, Bitcoin was “one of the biggest positions” in his retirement account.
The CEO of ARK Invest remained optimistic even in early 2022 when Bitcoin prices fell from their highs of over $65,000 to just under $50,000. She argued that the leading cryptocurrency would hit $1 million by 2030 in ARK.Big Ideas 2022annual research report.
Since then, Bitcoin’s price has fallen over 60%, but Wood and his team are unfazed and still believe their prediction is correct.
“We think Bitcoin comes out of this smelling like a rose,” Wood Told Bloomberg In December, arguing that institutions will end up buying Bitcoin after being “battle tested” by the crypto winter.
Cathie Wood has not responded to Fortunerequest for comment.
Tom Lee, head of research at Fundstrat Global Advisors, who was previously chief equity strategist at JPMorgan and spent more than 25 years on Wall Street, has also been a perennial Bitcoin bull. At the beginning of 2022, it predicted that Bitcoin would reach $200,000 in the coming years.
And despite the recent fall, which he admitted was “horrible” for investors, Lee Told @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 has pulled back on some of their own.
Tom Lee did not respond to Fortunerequest for comment.
Good stock market forecasts
Investment banks made some pretty spectacular predictions in the days of cheap money. After the stock market soared throughout the pandemic, returning 28% to investors, Wall Street was confident things would slow down in 2022, but not as much as they actually did.
Investment banks expected the S&P 500 to end 2022 at 4,825, which is only a slight 1% gain for the year. Instead, the blue chip index fell around 20%.
The (perhaps unwarranted) bullishness of investment banks was particularly evident when looking at price targets for growth stocks that have benefited from pandemic trends. online used car seller carvanafor example, have soared throughout the pandemic as used car prices hit record highs.
The company was able to take advantage of consumers’ inability or reluctance to purchase vehicles in person during COVID, leading some analysts to give incredibly optimistic forecasts.
In January 2022, Morgan Stanley automotive analyst Adam Jonas called Carvana “aapex predator in Automotive Retailing” and assigned a 12-month price target of $430 to the stock. Since then, shares of the online car retailer have fallen more than 97% to just $4.48, and some analysts believe more trouble awaits investors.
Mario Tama—Getty Images
Morgan Stanley did not respond to Fortunerequest for comment.
New Construct CEO David Trainer warned investors in June that Carvana was burning cash at an unsustainable rate and may not survive.
“Time is running out for energy-intensive businesses to be kept afloat with easy access to capital”, Trainer Told Fortune. “These ‘zombie’ companies are in danger of going bankrupt.”
Coinbase is another example of the fervor that has grown on Wall Street in recent years. When the cryptocurrency exchange went public in April 2021, shares went from their benchmark price of $250 to $381 per share.
CNBC’s Jim Cramer, a former hedge fund manager, took to Twitter after the IPO, saying that he “liked Coinbase at $475”. And he wasn’t alone, the investment banks average price target for the exchange was over $400 per share at the start of 2021.
Since then, however, Coinbase’s stock has fallen over 90% amid the crypto winter. And Cramer changed his mind, saying in a Tweet from December 13 that he was “not a Coinbase buyer here”, calling it “too soon”.
CNBC did not respond to Fortunerequest for comment.
The era of cheap money may have led many forecasters to assume that asset prices would continue to soar regardless of valuations, but this year has proven to be a wake-up call. Wall Street analysts have cut their price targets for many stock market pandemic darlings. It’s a new era for markets and forecasters, said Tim Pagliara, chief investment officer of investment advisory firm CapWealth. Fortune last month.
“We’re going to unravel a lot of the speculation,” he said. “There is going to be a lot of re-evaluation of everything from commercial real estate to how the investing public looks at things like crypto.
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