Investment Strategy & Financial Economics
On the Economic Crisis of 2008
In his 2006 working paper, titled U.S. Economic Risks and Strategies, Med Jones warned about several socioeconomic risks in the decade of 2007 to 2017. In Feb 2007, he published a policy white paper challenging the US President's State of the Union Address, the Federal Reserve Chairman and the popular opinion of mainstream economists. He warned about the burst of the housing bubble and the subprime mortgages, consumer debt, and other risks. He wrote: "Since 2001, the U.S. economic growth has been largely fueled by rapid increases in asset prices (housing bubble) and consumer debt, rather than development projects, which result in non-sustainable debt-driven growth.... Due to the housing bubble in recent years, U.S. homebuyers took on more debt to buy overpriced homes, thus reducing share of disposable income. Many Americans refinanced their homes during the real-estate boom to pay for living expenses. With the expected housing bubble bust, Americans could lose a significant part of their wealth and savings. The slowing economy will lead many small businesses and consumers to go bankrupt... Any economy that is built on uncontrolled debt will eventually crash."
In the following month (March, 2007), in a Reuters' Interview, he, again, said the impact of the subprime mortgages will not be limited to the housing sector, he warned about increased bankruptcies, stock market crash, and a loss of the confidence in the US economy. According to Reuters, "He said the bursting of the real estate bubble and high consumer debt were a major worry" and "if people started to think there may be a lot of bankruptcies (in the subprime lending market), then you're going to see the stock market sell off." More importantly he explicitly warned about a much worse economic crisis as a result of the subprime mortgages, stating that "The worst thing that could happen to any economy is the loss of confidence".
In August 2007, the New York Fed reported that for the most part, Bear Stearns' (mortgage-related financial) problems did not pose a substantial risk to the economy. (CNN)
Until mid 2008, the Federal Reserve Bank and mainstream economists were still blind to the crisis leading to the Great Recession. The Fed Chair stated that: "The housing market has looked a bit more solid, and the worst outcomes have been made less likely". In May 2008. In a congressional testimony, the Fed Chairman said he saw only a "limited" impact of subprimes on "the broader housing market." (Newsweek).
In September 2008, the financial markets
crashed. According to the
New York Times, "Across Wall Street, no one could quite believe
what was happening".
In 2009, top economists and some Nobel laureates, defended their failure to see the crisis, stating that the economic crisis was unpredictable (The Atlantic). "What made it worse is that, not only they failed to predict it, they positively denied that it will happen". (Wharton University)
Two years after the crash, in 2010, President Obama, mainstream economists, and leading think tanks, were all talking about restoring "economic confidence". In addition to the failure of mainstream economists to warn about the subprime mortgages, housing bubble and the Great Recession, seven years after the crisis, in 2015, academic researchers presented a paper at the World Economic Forum explaining that economic confidence was not fully taken into consideration in academia and it was a major factor for recovery from great recession.
On the Economic Recovery of 2010
In Jan 2009, when many economists were expecting a US economic collapse, a great depression, and a prolonged economic decline for decades, he accurately forecasted the bottom of the stock market in 2009, the bottom of the housing prices in 2010 and start of the economic recovery in 2010-2011. (Atlanta Business Journal, FO Magazine, Politicus USA & CEO Q)
2016-2017-2018 Financial Markets Forecasts
Media Note: After 2012, Mr. Jones stopped giving public interviews on economic and financial market forecasts. However, in 2016-2017, he published another early warning paper highlighting the risks leading to the next financial crisis. For successful forecasts, please see 2016-2017-2018 Financial Market Calls.
2022 Bond and Equity Bubble Burst and Bear Market Warnings
In 2021, Jones warned the institute's clients about 2022's severe S&P correction (up to -30%) and NASDAQ bear market (up to - 40%), along with the crash of many of the high-flying tech stocks (up to 70-90%), higher inflation risk, and elevated probability of a Fed mistake leading to a slowing economy in 2022 and a higher recession risk by end of 2023 or mid of 2024. The institute also warned about unreported / under-reported brewing private equity loans, contagious ETFs and derivatives risks such as collateralized loan obligation (CLOs), Leveraged Loans (LL) and debt instruments containing significant percentage of BBB and lower credit ratings) and other subprime consumer loan risks (especially in auto industry and student loan defaults) in the financial markets that may materialize gradually starting in 2022 (up to ~$1.2 Trillion of financial instruments are at risk of 20-50% losses, followed by similar losses for up to ~$1.6 Trillion in 2023 and $1.5+ Trillion in 2024. If the Fed and central bankers do not address these risks in a timely manner, many US and international investors could lose 20-50% of the value of their investments (bonds and equities). The series private client warning and free public service educational posts were published on the institute LinkedIn page.
Risk management warning and forecast for 2022 bonds & equities
Risk management warning and forecast for 2022-20223 risks of further decline in SPX to 3600 - When most Wall Street strategists were forecasting SPX to close above 5000
Warning and Forecast in 2022 About 2023 Outlook for Bonds & Equities - Part 1
Warning and Forecast in 2022 About 2023 Outlook for Bonds & Equities - Part 2
Warning and Forecast in 2022 About 2023 Outlook for Bonds and Equities - Part 3
For research and consulting services, please contact the institute's investment think tank
R6 Predictive Analytics and Investment Management System - A Quarterly and Annual Forecasting Model and Asset Management System. (2021)
For bio and media, please visit Med Jones' Bio page
Notes: Role, Purpose and Conflict of Interest
The Institute is a think tank and education organization. Our opinion is incidental to our profession. We do not function as a rating agency. We do not accept compensation from companies for review or rating purposes. We do not manage external assets. We are not seeking outside capital. The expressed opinions should not be considered as an endorsement for or against any asset, company, investment firm, industry or an economy. Any recommendation for or against any asset or a strategy is made for an educational purpose only. Markets are hyper-dynamic, our forecasts continuously change with changing events and data; they are used as an input to complex risk management and valuation decision-models. Despite past success in economic forecasting, market timing, and investment out-performance, we do not provide any guarantee for future forecasts or performance.
- For speaking and consulting engagements, please contact the International Institute of Management
- Please note that Mr. Jones is available for interviews related to business strategy, economic development, happiness and well-being economic, he does not give economic forecasting or investment related media interviews. For institutional investment think tank research and consulting services, please contact the Institute.