Veteran investor and bitcoin bull Michael Novogratz doesn’t have a rosy outlook on the economy, which he described as headed for a substantial downturn, with the likelihood of a “fast recession” on the horizon.
“The economy is going to collapse,” Novogratz told MarketWatch. “We are going to go into a really fast recession, and you can see that in lots of ways,” he said, in a Wednesday interview before the Federal Reserve decided to undertake its biggest interest-rate hike in nearly three decades.
“Housing is starting to roll over,” he said. “Inventories have exploded.”
“There are layoffs in multiple industries, and the Fed is stuck,” he said, with a position of having to “hike [interest rates] until inflation rolls over.”
Central-bank policy makers agreed to deliver an unusual 0.75-percentage-point rate increase, concluding a closely watched two-day policy meeting with a move that would push the Fed’s benchmark federal-funds rate rising to a range between 1.5% and 1.75% as it steps up the effort to quell an inflation rate that is hovering around a 40-year high.
It was the largest increase in the central bank’s policy rate since November 1994.
Before the Fed announced its decision, Novogratz speculated — accurately, it turned out — that the central bank would lift interest rates by 75 basis points and that the market would rally on that news. He also predicted that stocks will sell off in the coming days.
“They are hiking into the popping of a bubble,” Novogratz said, referencing the soaring price tags on luxury Swiss watches and other assets.
So far, the noted investor’s prediction has played out, with the Dow Jones Industrial Average DJIA, +1.00% rising more than 300 points, or 1%, after briefly running its gain to 600 points, after the Fed meeting broke up and a news conference hosted by Chairman Jerome Powell got under way.
The S&P 500 SPX, +1.46% advanced nearly 55 points, or 2.5%.
The Nasdaq COMP, +2.50% bested both with its gain of 2.5%.
On Tuesday, Novogratz, chief executive of crypto merchant bank Galaxy Digital BRPHF, +12.33%, drew parallels between the 1998 collapse of highly leveraged LTCM fund and the current implosion playing out in assets such as bitcoin BTCUSD, +4.00% and Ether ETHUSD, +4.47% on the Ethereum blockchain.
The tumble of Long Term Capital Management sent shock waves through global financial markets and ultimately required a multibillion-dollar bailout by Wall Street banks.