Expert investor James Stack warned of rampant market speculation, predicted inflation, and blasted the Fed in a recent interview. Here are the 8 best quotes

• James Stack called out massive speculation in stocks, real estate, crypto, and other markets.
• The investor said Federal Reserve policies are fueling reckless behavior on Wall Street.
• Stack drew parallels between the current market boom and the dot-com and housing bubbles.

James Stack warned of rampant speculation across multiple markets, rang the inflation alarm, and urged investors to be careful in a recent MarketWatch interview.

Stack is the founder and CEO of Stack Financial Management, as well as the publisher of the InvesTech Research newsletter. He compared the Federal Reserve's stimulus efforts to spiking Wall Street's punchbowl, cautioned houses are more overpriced now than during the mid-2000s housing bubble, and likened the hype around SPACs and NFTs to the dot-com boom.

Stack's firm takes a "safety-first" approach to investing, paying close attention to market risk and historical trends. It boasted a $1.2 billion stock portfolio at the end of March, which included a $97 million stake in Microsoft, and roughly $50 million stakes in each of Accenture, Cisco, and Walmart.

Here are Stack's 8 best quotes from the interview, lightly edited and condensed for clarity:

1. "The Fed brought the punchbowl back to the party and, particularly when the pandemic hit, they decided to add more and more alcohol to it. There's a lot of participants on Wall Street investing like they're a little bit inebriated." - describing the impact of the Federal Reserve's expansionary policies since 2019.

2. "We have more of an upside disparity between housing prices and long-term inflation than we did in the housing bubble in 2005." - Stack Financial's housing barometer estimates US house prices are 43% above the long-term inflation trend, exceeding their 35% premium in 2005.

3. "Speculative psychology tends to spill over into multiple asset classes. Stocks are very, very expensive by most historical measures, but we're also seeing it in real estate, we've seen it in cryptocurrencies - bitcoin shot up to $60,000 and now is struggling to stay above $30,000."

4. "Our housing prices have gone ballistic. It seems that everyone's quitting their job to become a realtor. It brings back all the memories of 2005-2006." - describing the local housing market in Flathead Valley, Montana.

5. "Speculative excess is spilling over into all of the new IPOs, the SPACs. We're raising money and we don't know what we're going to do with it. Then we've got the new NFTs, digital art - it's so extreme, it's almost nonsensical. But it's not unusual. We saw it in the late 1990s, when companies could go public that had never made a penny. We're starting to see a lot of that today in the meme stocks favored by new, young traders."

6. "The bubble is invisible to those inside the bubble. Don't go to someone investing in NFTs and try to tell them that they're speculating in a bubble that could be almost worthless. You're going to get in an argument that you can't win except in the aftermath."

7. "We are in one of the most overvalued markets in history and one of the most speculative-excess periods in history, so you don't have to be fully invested today. If you're going to invest in today's market, don't go out buying the SPACs, or the stocks that have infinite PE ratios, because they have yet to make earnings. I would put higher allocations into those sectors that are going to benefit from, or at least be resilient to, increasing inflation."

8. "When the Fed does decide to start taking the punchbowl away, growth stocks are where the pains could be felt the greatest. Think 'safety first,' walk softly, and carry a comfortable cash reserve."