Investors should brace for asset prices to plummet, interest rates to remain elevated, and outsized returns to dry up, Nassim Taleb has warned.
Inflation spiked as high as 9.1% last summer, prompting the Federal Reserve to hike rates from almost zero to upwards of 4.5% to curb the pace of price increases. Higher rates incentivize saving over spending and investing, and make it more costly to borrow, which can relieve upward pressure on prices. Yet they can also temper demand and sap economic growth, increasing the risk of a recession.
"Interest rates at zero bring tumors," he said, explaining that they drive the prices of bitcoin, real estate, and other assets to unsustainable heights, and also exacerbate inequality. "It doesn't rain money anymore," Taleb said."Disneyland is over," he continued, warning the period ahead won't be as smooth as the past 15 years.Taleb nodded to an old-school stock picker as a reliable guide for investors going forward.Buffett, the CEO of Berkshire Hathaway, specializes in identifying undervalued businesses. He famously invests in them for the long term, based on fundamentals such as the value of their assets and the size of their cash flows.