“People ask what should I buy? The answer is you should be in cash,” in order to prepare for “much, much, much lower levels ahead.”
George Noble started his career at Fidelity Investments in the early 1980s working for stockpicking legend Peter Lynch, then running the top-performing Fidelity Overseas Fund. He later launched his own hedge fund, which tanked in 2009 when he turned bullish too soon. Now 65, Noble has found a new purpose in life, a crusade — to help investors navigate the collapse of what he calls “the biggest ‘everything bubble’ ever seen,” a bubble blown by central bankers “pursuing the most reckless monetary policies ever” by pushing real rates below zero while $5 trillion in federal pandemic stimulus sloshed excess liquidity over the U.S. economy.
Frustrated by what he considers to be nauseatingly unskeptical cheerleading on CNBC (which he refers to as the Cartoon Network), Noble in the past year dove into social media and created his own forum, on Twitter Spaces, Clubhouse and YouTube, where he has more than 4,000 subscribers to his unedited, hours-long conversations with market maven pals. Noble brings a New Jersey-born, no b.s., take-no-prisoners approach to castigating SPACs, NFTs, cryptocurrencies, tech stocks, and their promoters. Nine months ago he called online brokerage platform Robinhood “a flaming dumpster hot air bubble.” The stock is down 85% since.
The broad market downturn so far is just the beginning. “This decline will shock,” he says. “Interest rates and yields are going higher. Equities are toast.” There will be no soft landing. “They’re not going to get inflation down until the economy breaks,” but the Fed has no choice. “If they don’t raise rates, we’re on the road to Weimar.” He’s referring of course to the hyperinflation of Weimar Germany, where by 2023 goods cost a trillion times more than five years prior.
There’s nowhere to hide. Traditionally, when stocks zigged bonds tended to zag — thus the appeal of a traditional 60/40 portfolio split between those two primary asset classes. “The 60/40 model is dead,” Noble declares. “Right now stocks and bonds are correlated. Stocks are going down because rates are going up. There’s no buffer.”
Bond prices, of course, move in the inverse direction of yields, so as the Fed raises rates to rein in inflation and cool excessive demand for food and fuel, bonds lose value. And are set to lose a lot more. “If you came from Mars and saw that inflation was at 8% with the 10-year at 3%, an a bogus CPI number, you’d think that’s crazy. Even if inflation is 4%, what is the 10-year doing at 3%?”
The Federal Reserve is just now beginning its quantitative tightening cycle, allowing the trillions of dollars of bonds it’s acquired in recent years to mature and not replacing them. This removes a primary source of liquidity for the markets. “People ask, what should I buy? The answer is you should be in cash.” To prepare for the coming storm. He sees “much, much, much lower levels ahead” for stocks and bonds, and a wipeout of cryptocurrencies like Tether, “the biggest Ponzi scheme in history of the world, bigger than Madoff.”
Why should we listen to this guy? Noble started his career in 1980 as an intern at Fidelity Investments working for the legendary Peter Lynch when the company had just $8 billion in under management (it’s now $4.5 trillion). His most treasured Lynchian lesson: “Know what you own,” says Noble. “It’s not a lottery ticket. You own a piece of a company.” Noble managed the Fidelity Overseas Fund to top returns (137% over 5 years) and rode the Japan boom. He recalls that back in the 1980s Japanese markets enjoyed a “triple merit scenario” with declining interest rates, a falling dollar and falling energy prices, which all combined to push up asset valuations. But when that turned into a “triple demerit scenario,” with rates, oil and the dollar all rising in tandem (like today), he turned bearish in 1991 and wanted to short Japan; Fidelity founder Ned Johnson told Noble that Fidelity was a long-only shop, so he left and started the first of two $1 billion-plus hedge funds. He blew up the second one in 2009, when he turned bullish too soon after the global financial crisis meltdown, which he considers valuable experience for navigating 2022. “We will have the everything bear market,” and it will keep going until the imbalances are gone. “Markets bottom when the thing that is driving the market down stops and reverses.”
Last summer he started tweeting a lot, “calling out bullsh*t.” He tried out the Clubhouse app, a social media forum for live invite-only conversations, but it was “too much of a small pond.” He found he preferred Twitter Spaces, and started inviting old friends into the chatroom, which he admits he runs like the Soup Nazi character on Seinfeld. Noble relishes bringing new voice to a generation of money managers who felt they had lost their voice in the village square. “There’s a body of knowledge that has been lost,” he says. These are legitimate investing authorities like Marc Cohodes, Jim Chanos, Marty Fridson, Michael Belkin, Grant Williams, Bennett Tomlin and Alexander Stahel. Last weekend he talked with oil guru Anas Alhaji for two hours. They excoriated the idea of Congress instituting some sort of windfall profits tax on oil. “Why not a windfall tax on Apple, which has much higher profits and margins?” Conversations are archived on YouTube, Spotify and the Apple platform. Noble now has 33,000 Twitter followers, up from 2,000 a year ago.
He has no qualms about naming names of people he considers bad actors. Like Treasury Secretary Janet Yellen: “The same people telling you it’s peaking now are the same who said it was transitory last year. Why should you believe them?” And Jim Cramer of CNBC, who in late May said “it’s going to be a very nice summer” for stocks. The conversations castigate the likes of Bill Hwang, whose Archegos hedge fund flamed out spectacularly last year; SPAC-king Chamath Palihapitiya whose companies are down more than 75%; and Chase Coleman of Tiger Global, which has lost more than 50% betting on illiquid tech companies.
Noble heaps scorn on Cathie Wood of ARK Invest, whose core fund is down more than 70% since last year, but who said recently she expects to generate preposterous compound annualized returns of 50% in the future. (Noble thinks there’s still money to be made with the pair trade of long-energy, short-ARKK.) And then there’s Tesla. Noble says the SEC and other regulators haven’t clamped down yet on Elon Musk because they are loathe to be blamed for popping “the biggest symbol of excess liquidity in a narrative driven market.” Noble generally doesn’t give stock tips, but predicts Tesla at $200 by yearend (at $650/share it’s down 50% since November).
It’s fun to be a gadfly, especially when the downside is limited. Noble isn’t managing money for anyone other than himself right now, and he’s coy about efforts to figure out how to monetize his newfound following by launching a tightly curated research platform or perhaps even launching an exchange traded fund. To test listeners’ generosity, last month he crowdsourced $220,000 from 700 individual donors for Chef Jose Andres’ World Central Kitchen, which has provided more than 40 million meals to needy people in disaster zones like Haiti and Ukraine.
Noble right now is worried about investors underestimating the dangers of the current market, or getting back in before the coast is clear. “There’s no escape valve right now,” he said on Monday. “If you adjust for interest rates, the market is more expensive than it was on Friday.”