Famous billionaire Thomas Peterffy, founder and CEO of investment company Interactive Brokers, also shared his views on the cryptocurrency market in an interview with Forbes.
Inflation in the USA exceeded forecasts in June, breaking a record and reaching its highest level in 41 years with an annual rate of 9.1 percent. After the critical data, stock indices fell, while cryptocurrencies lost momentum. Thomas Peterffy says investors need to get used to inflation and adds:
"I believe that the inflationary environment will continue for years, not months. This is not a short-term problem."
According to Peterffy, who has a net worth of $18.1 billion, inflation persists for several reasons: decades of US deficit spending; ongoing disruption to supply chains as globalization “reverses”; shortage of skilled workers and increased automation; self-imposed ESG (environmental, social and governance) requirements that companies “increase production costs”; and rising interest rates, the mechanism aimed at reducing inflation.
According to the billionaire, as the Fed raises interest rates, it also raises the amount the country has to pay for its foreign debt. This is a vicious cycle that will eventually result in a debt crisis. Most traders expect the Federal Reserve to raise interest rates by at least 75 basis points, or even 100 basis points, by the end of this month. The 0.75% rate hike last month was the biggest in 28 years. But Peterffy reminds us that the Federal Reserve caused a recession in the 1980s by raising interest rates to double digits. According to Peterff, inflation will hover around 6% for the next few years. There will be stagflation for a while.
Despite his gloomy forecasts, Peterffy expects stock markets to bottom soon after the drop. The executive suggests the S&P 500 could drop as low as 3,000 around October. This is a 21% decrease from the current value of approximately 3,800. The S&P 500 index fell more than 20 percent from its record high last November. According to the expert, stocks will enter a long bull market period triggered by inflation.
So the bear market is a great time to do research and collect stocks of companies. In this environment, Peterffy says, investors should target companies that invest in their competitiveness and gain market share. In January, Peterffy stated that investors should keep between 2% and 3% of their wealth in cryptocurrencies to avoid inflation. After the dips and liquidity crisis that has shaken the crypto industry, Peterffy seems more pessimistic about Bitcoin, adding:
“At some point, inflation will take years. I think the chances of Bitcoin becoming worthless or illegal are very high. The US government is concerned about the use of digital assets to “finance illegal activities”, as well as the US Treasury Department’s “inability to control payments or may ban cryptocurrencies because of their concerns about "not being able to track and collect taxes."