Bitcoin is a “tumor” and so is the real estate sector 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 idea that markets should behave the way they think they should behave. When you look at the markets, you go from overvalued to undervalued. ‘


– Nassim Taleb

Investors may appreciate easy money monetary policy for the boost it gave markets after the pandemic in particular, but Nassim Taleb, the author of the “Black Swan” and risk management guru, doesn’t think he has. no favor.

In a freewheeling interview with CNBC’s “Squawk Box” on Thursday, Taleb said the Federal Reserve’s decision to keep monetary policy so easy for so long until recently created at least a couple of “tumors.” in the markets. And he may also have potentially induced a generation of investors to underestimate the ease of making a living by choosing stocks.

He called “bitcoin” BTCUSD,
-1.17%
as one of these “tumors” and possibly even “real estate,” he said, possibly a reference to Starwood Capital CEO Barry Sternlicht, who also starred in the program alongside Taleb, and who recently shared some of his disturbing comments on the real estate market.

As the longtime investor and author explained, the current group of market participants haven’t really had to deal with the implications of a recession that could come with the Fed’s currently orchestrated interest rate hikes. first time this has happened since the 1980s.

“Now, people will find that money has value over time,” Taleb said, referring to a popular economic concept that explains why a dollar today is worth more than the same dollar in the future.

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

When asked what he would consider “normal”, Taleb said around “3% or 4%,” which is precisely where Fed funds futures traders predict interest rates could be by the end of the year. , according to the CME’s FedWatch tool.

Shares fell sharply in 2022, with the S&P 500 SPX,
-1.26%
in a bear market as the Fed aggressively raises rates in its effort to keep inflation in check. On Thursday afternoon, the S&P 500 was down 0.6%, while the Dow Jones Industrial Average DJIA,
-0.62%
held close to the flatline and the Nasdaq Composite COMP,
-1.70%
collapsed by 1%.

He also warned the Fed not to go back and said that “a generation of people” made a lot of money by investing using “the wrong methods” due to low interest rates and the Fed’s purchase of bonds for the time being. quantitative easing.

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

Towards the end of the conversation, as the credits rolled, the conversation moved to Tesla Inc. TSLA,
+ 0.19%,
and then to its CEO Elon Musk.

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

“Squawk Box” hosts Andrew Ross Sorkin and Becky Quick responded with a joke: Should Musk take control of Twitter Inc. TWTR,
+ 0.69%
and kicking Taleb off the platform, he could “always come here”.

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