Most people don’t think about the Federal Reserve very often, and only a select few contemplate the effects the US central bank has on investors. But in recent years, that has begun to change. Many economists and keen market watchers are arguing that years of loose monetary policy by the Fed and other central banks following the Great Financial Crisis (GFC) helped create a “global bubble”—and now it’s bursting.
The whole bubble idea is not new. For years before the stock market woes of 2022, Wall Street’s foremost minds, including investment legend Jeremy Grantham, warned of a brewing “superbubble.” 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 – have pushed investors toward riskier investments, allowed unsustainable business models to thrive on cheap debt, and fueled a “wildly unhealthy” surge in home prices.
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This is early days, but in retrospect many extravagant financial predictions have accompanied this era of easy money. And the repercussions for Americans have not been pretty, as inflation continues to rage and recession fears mount. But there is a silver lining for the financial community. The bubble altogether has delivered some of the most ridiculous and hilarious predictions in history.
From cryptocurrency experts and hedge fund managers to economists and investment bankers, the era of easy money was filled with bulls who believed the good times would never end. Here’s a look at some of their weirder calls.
Bitcoin bulls
The cryptocurrency boom of 2020 and 2021 was unprecedented. Between January 2020 and the peak of cryptocurrency fervor in November 2021, the total value of the industry grew to more than $3 trillion and Bitcoin prices increased by around 800%.
Crypto loyalists were sure the party was just beginning. Billionaire venture capitalist Tim Draper said in June 2021 that Bitcoin would hit $250,000 by the end of 2022. “I think I’ll be right about that,” he assured CNBCis Jade Scipio.
Bitcoin ended up finishing 2022 just above $16,500, but just last month Draper repeated his call for Bitcoin to hit $250,000, this time he said it would be by mid-2023.
“I expect a flight to quality, decentralized cryptocurrencies like bitcoin, and for some of the weaker coins to become relics,” Draper said CNBC.
Tim Draper did not respond Fortunerequest for comment.
Draper wasn’t the only prominent figure to jump on the Bitcoin train during the easy money era or even make lofty predictions. 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.
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The gamble led Wood to face serious criticism from his peers, but aside from a brief crypto winter in 2018, it paid off as the price of Bitcoin soared to over $65,000 by November 2021.
Wood was sure the good times would last throughout the bull market. In November 2020, he said Barronis that institutional adoption of cryptocurrencies would drive the price of Bitcoin to $500,000 by 2026 and would repeatedly “buy the dip” whenever Bitcoin prices fell. Wood also said The globe and the mail in a February 2020 interview that Bitcoin was “one of the largest positions” in his retirement account.
The ARK Invest CEO also remained optimistic into early 2022, when Bitcoin prices had fallen from their highs of over $65,000 to just under $50,000. He argued that the leading cryptocurrency will hit $1 million by 2030 in ARK’s “Big Ideas 2022” annual research report.
The price of Bitcoin has fallen more than 60% since then, but Wood and his team aren’t fazed and still believe their prediction is right.
“We think Bitcoin is coming out of all this smelling like a rose,” Wood said Bloomberg in December, arguing that institutions will eventually buy Bitcoin after it is “battle-tested” by the cryptocurrency winter.
Cathie Wood did not respond 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. In early 2022, he predicted that Bitcoin would hit $200,000 in the next few years.
And despite the recent decline, which he admitted was “horrific” for investors, Lee said CNBC in November who still believes Bitcoin will break out of the current downtrend and hit its target. But while many crypto forecasters are sticking to their high estimates, Wall Street has taken some of theirs back.
Tom Lee did not respond Fortunerequest for comment.
Great stock forecasts
Investment bankers have made some pretty dramatic predictions during the cheap-money era. After the stock market skyrocketed during the pandemic, returning 28% to investors, Wall Street was hopeful things would slow down in 2022, but not to the extent that they actually have.
Investment banks had expected the S&P 500 to end 2022 at 4,825, representing only a small 1% increase for the year. Instead, the blue chip index fell about 20%.
The (perhaps unwarranted) upward trend among investment banks has been particularly evident when looking at price targets for growth stocks that have benefited from pandemic trends. Online used-car retailer Carvana, for example, has skyrocketed during the pandemic as used-car prices have soared to record highs.
The company has been able to capitalize on consumers’ inability or unwillingness to buy vehicles in person during COVID, leading some analysts to provide shockingly bullish forecasts.
In January 2022, Morgan Stanley automotive analyst Adam Jonas called Carvana the “predator of the apex in auto retail” and assigned the stock a $430 12-month price target. Since then, shares of the online auto retailer have tumbled more than 97% to just $4.48, and some analysts believe investors are in even more trouble.
Mario Tama—Getty Images
Morgan Stanley did not respond Fortunerequest for comment.
New Construct CEO David Trainer warned investors in June that Carvana was burning through cash at an unsustainable rate and might not survive.
“Time is running out for cash-burning companies kept afloat with easy access to capital,” Trainer said Fortune. “These ‘zombie’ companies are in danger of failing.”
Coinbase is another example of the fervor that has developed on Wall Street in recent years. When the cryptocurrency exchange went public in April 2021, the shares soared 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, said that he “liked Coinbase at $475”. And it wasn’t just that, the investment banks’ average price target for the swap was more than $400 per share in early 2021.
Since then, however, Coinbase’s shares have dropped more than 90% during the cryptocurrency winter. And Cramer changed his mind, saying in a December 13 tweet that he “wasn’t a Coinbase buyer here,” calling it “too soon.”
CNBC did not respond Fortunerequest for comment.
The era of cheap money may have led many forecasters to assume that asset prices would continue to rise, regardless of valuations, but this year has proven to be a wake-up call. Wall Street analysts have cut their price targets for many of the stock market’s pandemic darlings. It’s a new era for markets and forecasts, said Tim Pagliara, chief investment officer at investment advisory firm CapWealth Fortune last month.
“We’re going to unravel a lot of speculation,” he said. “There will be a lot of reevaluation of everything from commercial real estate to the way the investing public looks at things like cryptocurrencies.