Mike Segar/Reuters
- Thomas Peterffy expects stocks to tumble and a recession to hit, and sees threats to the US dollar.
- The Interactive Brokers founder says his sizeable bitcoin wager could be worth a lot or nothing.
- Many of his customers have made bank on Big Tech stocks, but haven't cashed out due to tax concerns.
Prepare for stocks to plunge, a recession to hit, and the US dollar to falter, Thomas Peterffy has warned.
The billionaire founder of Interactive Brokers also said his bitcoin bet could be worth a fortune or zilch, China has become less of a threat, and many investors are sitting on massive Big Tech profits.
Stocks, recession, and the dollar
"I think the market should be much lower than where it is," Peterffy told MarketWatch on Tuesday. "I do think that it's going to go down pretty soon."
The chairman of the online discount brokerage argued investors are too positive about the economic backdrop. He cast doubt on predictions that inflation will keep falling and corporate earnings will rise, noting that unemployment usually needs to rise for price growth to slow — and more joblessness weakens demand and erodes company profits.
Inflation jumped as high as 9.1% last year, spurring the Federal Reserve to raise interest rates from almost zero to over 5% in under 18 months. Steeper borrowing costs deter spending, hiring, and investing, which relieves upward pressure on prices. However, they also tend to increase unemployment, drag down asset prices and corporate profits, and raise the risk of a recession.
While headline inflation cooled to 3% in June, Peterffy dismissed hopes for a so-called soft landing — where the Fed reins in price growth without triggering a recession — as "wishful thinking."
He also predicted the central bank would hike rates and signal further increases this week, ending the stock-market rally that has seen the Dow Jones Industrial Average climb for 12 straight sessions.
Separately, Interactive Brokers' largest shareholder echoed recent warnings about de-dollarization. There's growing concern that other countries could dump the greenback as the heart of their foreign-currency reserves, and their preferred medium for international trade and investment.
"It seems to be, maybe, slowly losing its prominence as the world's currency," Peterffy said. The dollar could depreciate if the euro and Chinese renminbi become the go-to choices for overseas contracts, he added.
Crypto, China, and call options
Separately, Peterffy described his stance on cryptocurrencies as "guarded skepticism," and confirmed to MarketWatch that he still owns a substantial amount of bitcoin.
"I believe it could become worthless," he said. "But it's also possible that it will become very valuable."
The electronic-trading pioneer — ranked 60th on the Bloomberg Billionaires Index with a $26 billion fortune — also pointed to recent signs of an economic slowdown in China, arguing there's less risk now of the US losing ground its eastern rival.
Moreover, Peterffy noted that many Interactive Brokers customers have made bank on Tesla, Nvidia, and the other "Magnificent Seven" stocks.
They have racked up "huge unrealized profits," but are reluctant to cash them out and pay taxes on their gains, he said. Instead, they're selling call options on their stocks to generate income, then rolling those options again and again to retain their holdings, he added.