CNBC Writes: Scary! This bearish call points to 40% market drop
The stock market is trading at unsustainable levels that could eventually lead to a major sell-off, with a possible 40 percent drop in stock prices, hedge fund executive Mark Spitznagel told CNBC Wednesday.
“The simple answer, the mom and pop answer, I think, is just to step aside,” said Spitznagel, founder of Universa Investments and an associate of “Black Swan” pioneer Nassim Taleb.
Spitznagel, incidentally, has some Street cred when it comes to predicting downturns: He called it in 2000 and 2008 and made one of the biggest profits on Wall Street during the 2008 financial crisis, while many other investors were losing money.
Appearing on “Closing Bell,” Spitznagel suggested the Federal Reserve, which last month reaffirmed its policies on bond purchases and record-low interest rates, is basically propping up stocks and otherwise distorting the market.
“It’s a market that is sort of set up, I think, for a major crash, a major sell-off,” said Spitznagel. “I would argue all the major tops we’ve seen in the market over the last 100 years look very much like it does today.”
“The ultimate causes of crashes is the distorted environment we’re in,” he continued.
In turn, Spitznagel recommends retail investors step aside and wait for opportunities to come.
I agree with his analysis 100%. The only thing I would add is my mathematical timing work. There will be a 40% decline but it will happen over the next 2-3 years and not in a crash type of an environment. It will be very similar to the 2000-2003 move. Further, my work indicates that this decline will really get going after March of 2014.
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