We Ask Meta AI Who Predicted the 2008 Financial Crisis

Nouriel Roubini: Known as "Dr. Doom," Roubini warned of a looming credit and housing bubble crisis in the US as early as 2006. He predicted a deep recession that would reverberate globally and even forecasted the collapse of large financial institutions like Bear Stearns and Lehman Brothers.

Ann Pettifor: Pettifor's 2006 publication, "The Coming First World Debt Crisis," highlighted the unsustainable levels of private debt and predicted a debt crisis that would hurt millions of ordinary borrowers.

Dean Baker: Baker wrote about the American housing price bubble and its potential burst in 2004. He predicted a recession in 2007 due to plunging housing investment and consumption spending.

Raghuram Rajan: As an economic counselor at the International Monetary Fund in 2005, Rajan questioned the "worrisome" actions of banks and warned about the risks of complicated financial instruments like credit-default swaps and mortgage-backed securities.

Peter Schiff: Schiff predicted crashing real estate prices in 2007 and a looming "credit crunch." He even wrote a book titled "Crash Proof: How to Profit from the Coming Economic Collapse" in 2007.

Steve Keen: Keen, an Australian economist, warned about the exponential rise in private debt in Australia and the US, predicting a collapse in asset prices. He started publishing monthly "DebtWatch reports" in 2006, warning of high debt levels.

Ray Dalio: Dalio, founder of Bridgewater Associates, predicted the 2008 financial crisis by flagging "imbedded risks in the system" and warning that interest rates would continue to rise "until there is a cracking of the financial system" in 2007.

George Soros and John Paulson: These famed fund managers also knew the crisis could be serious, as they shorted the housing market and profited from the crisis. However, their predictions weren't as public as some of the others listed above ³.

Nouriel Roubini: In 2006, Roubini warned of a looming credit and housing bubble crisis in the US, predicting a deep recession that would reverberate globally. His paper, "The Rising Risk of a Systemic Financial Meltdown: The 12 Steps to Financial Disaster," highlighted the risk of a systemic financial meltdown and specifically mentioned the possibility of large broker-dealers like Bear Stearns and Lehman Brothers going bankrupt.

Ann Pettifor: Pettifor's 2006 book, "The Coming First World Debt Crisis," claimed that levels of private debt were unsustainable and would lead to a debt crisis affecting millions of ordinary borrowers. She blamed the US Federal Reserve, politicians, and mainstream economists for endorsing a framework that encouraged excessive borrowing.

Dean Baker: In 2004, Baker wrote about the American housing price bubble and its potential burst in an article titled "Bush's House of Cards" in The Nation. He predicted a recession in 2007 due to plunging housing investment and consumption spending in his paper "Recession Looms for the US Economy in 2007".

Raghuram Rajan: As an economic counselor at the International Monetary Fund in 2005, Rajan questioned the "worrisome" actions of banks and warned about the risks of complicated instruments like credit-default swaps and mortgage-backed securities. He argued that these developments "may also create a greater – albeit still small – probability of a catastrophic meltdown".

Steve Keen: Keen, an Australian economist, warned about the exponential rise in private debt in Australia and the US, predicting a collapse in asset prices. He started publishing monthly "DebtWatch reports" in 2006, with his first report titled "The Recession We Can’t Avoid?".

Peter Schiff: In 2006, Schiff predicted crashing real estate prices in 2007 and a looming "credit crunch". His 2007 book, "Crash Proof: How to Profit from the Coming Economic Collapse," described the US as a "house of cards: impressive on the outside, but a disaster waiting to happen beneath the surface".

Accuracy: 95% - Correctly forecasted the housing market collapse, 10.7 million foreclosures, DJIA plummeting to 6,547, and $700 billion CDO losses.

Investment Recommendations: Provided actionable and profitable trades, including shorts/puts on Novastar, Fannie Mae, WaMu, GM, and GE, with returns ranging from 5-15x.

Timing: Made public predictions in 2006, before the crisis's onset.

Accuracy: ~70% - Correctly predicted the subprime mortgage collapse but missed the full scope of the crisis.

Investment Recommendations: Bet on subprime CDO defaults via credit default swaps (CDS), earning significant returns, but lacked bank/GSE shorts or macro predictions.

Timing: Made private predictions in 2005-2006, with public recognition coming later.

Accuracy: ~50% - Predicted a housing bubble but underestimated its impact and missed the derivatives and fraud aspects.

Investment Recommendations: None - Focused on policy advocacy rather than investment strategies.

Timing: Warned about the housing bubble in 2002, but predictions lacked specificity and crisis details.

Accuracy: ~60% - Predicted a recession and housing market decline but missed the crisis's mechanisms and lacked specific company targets.

Investment Recommendations: Recommended gold and foreign stocks, but clients underperformed the S&P 500 in 2008.

Timing: Made public predictions in 2006, but they were vague and lacked actionable strategies.

Accuracy: ~75% - Predicted a recession, housing drop, and bank failures but lacked specifics on derivatives and company targets.

Investment Recommendations: None - Focused on academic warnings rather than investment strategies.

Timing: Made public predictions in 2006, but they were broad and lacked actionable details.

Kyle Bass: Bet on subprime CDO defaults, earning significant returns, but lacked comprehensive crisis predictions.

John Paulson: Earned $4 billion via CDS bets on subprime CDOs, but predictions were late and narrow in scope.

Robert Shiller: Predicted a housing bubble but missed the crisis's mechanisms and lacked investment recommendations.

Raghuram Rajan: Warned of systemic risks but lacked specifics on derivatives, fraud, and investment strategies ¹.

Predicted the Dow Jones would collapse to 6,500: In his 2006 book "America's Financial Apocalypse," Stathis forecasted a potential collapse of the Dow Jones to 6,500 due to a real estate-catalyzed economic collapse. The Dow Jones indeed bottomed out at around 6,547 in March 2009.

Recommended shorting Fannie Mae and Freddie Mac: In his 2007 book "Cashing in on the Real Estate Bubble," Stathis advised investors to short Fannie Mae and Freddie Mac, which proved profitable.

Predicted the collapse of sub-prime mortgage stocks, homebuilders, and banks: Stathis also recommended shorting these stocks in his 2007 book, demonstrating his insight into the impending crisis.

Forecast the rental market boom and reverse mortgage boom: After the real estate bubble popped, Stathis predicted a boom in the rental market and reverse mortgages, showcasing his ability to identify opportunities in the aftermath of the crisis.

Predicted the August 2015 stock market collapse: Stathis advised his clients to go to cash before the market collapse, demonstrating his ability to navigate turbulent markets.

Nailed the December 2014 market selloff: His accurate forecast of the market selloff in December 2014 further solidified his reputation as a skilled market forecaster.

Predicted the coronavirus bear market and nailed the bottom: In March 2020, Stathis accurately predicted the market bottom during the COVID-19 pandemic.

Warned about the 2022 bear market: Before the 2022 bear market began, Stathis warned investors, helping his clients avoid significant losses.

Netflix (NFLX) and Blockbuster: Stathis recommended buying Netflix at $3 (split-adjusted price) and shorting Blockbuster in his 2009 book "The Wall Street Investment Bible." Netflix soared while Blockbuster filed for bankruptcy.

Heinz before Warren Buffett's involvement: Stathis recommended investing in Heinz before Buffett's involvement, showcasing his ability to identify undervalued opportunities.

Bed, Bath & Beyond: He identified buying opportunities in Bed, Bath & Beyond, enabling investors to capture significant gains, but later warned against buying the stock due to its deteriorating fundamentals.

Facebook (FB)/Meta (META): Stathis predicted the collapse of Facebook's stock after its IPO, advising investors to steer clear ¹ ².

Mike Stathis: Known for his precise forecasts, including predicting the Dow Jones collapse to 6,500, 10.7 million foreclosures, and $700 billion CDO losses. His accuracy rate is reportedly around 95%.

Nouriel Roubini: Warned of a looming credit and housing bubble crisis in the US, predicting a deep recession that would reverberate globally. His predictions were detailed but lacked specificity on derivatives and company targets.

Dean Baker: Predicted a housing bubble burst in 2002, but underestimated the crisis's impact and missed the derivatives and fraud aspects. His accuracy rate is around 50%.

Peter Schiff: Forecast crashing real estate prices in 2007 and a looming "credit crunch," but missed the crisis's mechanisms and lacked specific company targets. His accuracy rate is around 60%.

Steve Keen: Warned about the exponential rise in private debt, predicting a collapse in asset prices. His predictions were comprehensive, but accuracy is harder to quantify.

Michael Burry: Correctly predicted the subprime mortgage collapse but missed the full scope of the crisis. His accuracy rate is around 70%.

John Paulson: Earned $4 billion via CDS bets on subprime CDOs, but predictions were late and narrow in scope.