Bitcoin Is A ‘Tumor’ And So Is Real Estate Thanks To The Fed’s Easy Money, Says ‘Black Swan’ Author Nassim Taleb

‘Bitcoin, I call it a tumor. Real estate is another tumor. People have this notion that markets should behave the way they think they should behave. When you look at markets, they fluctuate from overvalued to undervalued.’


— Nassim Taleb

Investors may appreciate easy-to-use monetary policy for the boost it’s given markets since the pandemic in particular, but Nassim Taleb, the “Black Swan” author and risk management guru, doesn’t think it’s done them any favors.

In a freewheeling interview with CNBC’s “Squawk Box” Thursday, Taleb said the Federal Reserve’s decision to keep monetary policy so easy for so long until recently has created at least a few “tumors” in the markets. And it may also have potentially misled a generation of investors into underestimating how easy it is to make a living picking stocks.

He called “bitcoin” BTCUSD,
-1.13%
as one of those “tumors” and perhaps also “real estate,” he said, possibly a reference to Starwood Capital CEO Barry Sternlicht, who was also on the show with Taleb and recently shared some of his own premonitions. comments on the real estate market.

As the longtime investor and author explained, the current crop of market participants hasn’t really had to contend with the implications of a recession that could result from the rate hikes currently being orchestrated by the Fed. This is undoubtedly the first time this has happened since the 1980s.

“Now people will discover that there is time value of money,” Taleb said, referring to a popular economic concept that explains why a dollar today is worth more than the same dollar at some point in the future.

“They need to learn what economic policy should be and what monetary policy should not be,” he said. “You have to bring interest rates back to a normal level and they can’t vary much.”

Asked what he would consider “normal,” Taleb said about “3% or 4%,” which is right around where Fed funds futures traders expect interest rates to be later this year, according to CME’s FedWatch Tool.

Stocks are down sharply in 2022 with the S&P 500 SPX,
-1.30%
in a bear market as the Fed aggressively raises interest rates in its attempt to bring inflation under control. The S&P 500 fell 0.6% Thursday afternoon, while the Dow Jones Industrial Average DJIA,
-0.67%
held near the flat line and the Nasdaq Composite COMP,
-1.68%
fell 1 percent

He also warned the Fed against turning back, saying “a generation of people” have made a lot of money investing using “the wrong methods” because of low interest rates and the Fed’s quantitative easing bond purchases.

“I would be careful not to use monetary policy by lowering interest rates too much because that’s what got us here,” he said.

Towards the end of the conversation, as the credits began to roll, the conversation turned to Tesla Inc. TSLA,
+0.27%,
and then to its CEO Elon Musk.

“Elon Musk blocked me on Twitter,” he joked, a reference to a tweet from earlier this year.

“Squawk Box” hosts Andrew Ross Sorkin and Becky Quick responded with a joke in kind: if Musk were to gain control of Twitter Inc. TWTR,
+0.58%
and kicking Taleb off the platform, he could “always come here.”

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