Several adverse influences and circumstances are currently plaguing markets and investors. Unfortunately, two big names on Wall Street don't have good news for us either. They even believe that we are heading for a small market apocalypse that will surpass that of 1929.
"Quite possibly the situation will be significantly worse than any we know in history." Stanley Druckenmiller, the legendary investor, has been saying for some time.
I have also written about his long term position on the Fed's actions and on the markets here: Urgent Warning from a Famous Billionaire and Manager. Why does he believe the markets will soon fall to their knees?
And he's joined by an even bigger name - Michael Burry. When you hear such a big and scary warning, the first question to ask is: who is it coming from? Is the person issuing the warning trustworthy?
Yes, Burry should be taken seriously, despite some of his recent actions and attitudes. He was one of the first to see through the US housing bubble in 2008. What's more, he made $100 million for himself and $700 million for his investors. Well, most people know him for the fact that a movie was made about this very situation.
Was Burry just lucky in 2008? Probably not. He also made huge profits during the bursting of the dot-com bubble. Burry's fund gained 80% in 2001 and 2002. The S&P 500 index fell 32%.
And he doesn't like the situation now. He has a clear explanation and reason. As you know, in 2020 and 2021, the government showered the population with free cash - sending out more than $5,000 to tens of millions of bank accounts. It has also cut interest rates to zero. According to Burry, these unprecedented moves have warped markets and inflated the mother of all bubbles - which has only just begun to burst. Simply Burry's favourite MOAC - Mother Of All Crashes.
Since last year's peak, the S&P has plunged as much as 27%. If we are indeed facing the mother of all crashes, total losses could approach 55%, as they did in 2008. That would bring the S&P 500 down to about 2,150, 43% below current levels.
But Burry is known for his aggressively pessimistic views, so it's a little disturbing that another very smart and very credible investor has similar thoughts:
Stanley Druckenmiller says that owning stocks today "doesn't make much sense...". And that's an opinion that needs to be taken extremely seriously. In fact, he is widely considered one of the top five investors of all time.
He's low-key and rarely gives interviews. But his track record is astonishing. From 1980 to 2010, he averaged annual returns of 30% a year. And Druck has never had a losing year... ever!
He also made a profit in 2001 during the dot-com crash. And in 2008 he reportedly made $260 million while most investors lost money.
But lately he's been repeating and warning over and over again that the situation really isn't good and that trouble is coming. Druck is worried for the same reason as Burry. In short, he says low interest rates and loose monetary policy were the drivers of the long-term bull market from 2011-2021, which ended earlier this year.
Now the Fed is raising interest rates at the fastest pace in history.
"All of these factors that are causing the bull market are not just stopping, they are reversing, every one of them. As a result, its most likely that the stock market will be at zero for the next decade," Druckenmiller said.
What do you think? Are these two top investors right, or will the bull wake up again and continue its upward ride?
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Disclaimer: This is in no way an investment recommendation. It is purely my summary and analysis based on data from the internet and other sources. Investing in the financial markets is risky and everyone should invest based on their own decisions. I am just an amateur sharing my opinions.