Dave Collum, professor of organic chemistry at Cornell University, was able to sidestep the financial crisis after he noticed a calamity brewing in subprime mortgages as early as 2002.Today, he sees vast corporate excesses, massive debt loads, and extremely exuberant valuations as cause for concern.Collum warns of a 50% stock crash that would bring valuations back to historical averages.Click here for more BI Prime stories.Investor anxiety in today's marketplace is palpable.Much of that nervous, jittery feeling can be attributed to the coronavirus as fears of a global pandemic weigh on market sentiment.Still, outside of the virus vaccum, some think that stocks are long overdue for a downturn.Dave Collum, professor of organic chemistry at Cornell University, aligns with that school of thoughtand he thinks the Federal Reserve is to blame."I think they're idiots; I think they're delusional," he said on the "Jelly Donut Podcast," which focuses on investing. "I think the Fed's goal is to somehow deflate this whole mess, and somehow bridge asset prices right across the valley of death to get to the other side."He continued: "I think we'll have a colossal disaster at some point."This isn't the first time Collum's seen trouble brewing from a mile away. In 2002, he wrote a letter to Goldman Sachs warning of the nefarious activity taking place in subprime mortgage lending. Due to his foresight, Collum was able to sidestep the crisisand according to him, compounded his returns at a rate of 13% from 2000 to 2009.Collum's diagnosis of today's market is rather simple: Both stocks and bonds are in "monstrous" bubbles initiated by the Federal Reserve's lax policies."This bubble is the entire bubble," he said. "The Fed won't let it drop; that's moronic."Read more: 26 units and $1 million a year: Here's the 'supercharged' real-estate-investing system a former engineer used to flee corporate America in just 3 years timeCollum points to vast corporate excesses, swaths of borrowed cash used to fund stock buybacks, and extremely overstretched valuations to build upon his thinking.What's more, he says that GDP has grown maybe 50% (he's skeptical over the official numbers) from the depths of the financial crisis. He contrasts that with how equity markets have more than quadrupled over that same time frame. He thinks this is a clear dislocation."They're supposed to track each otheramong the many metricsthey're supposed to track each other. That's Buffett's favorite, right'" he said in reference to the US' stock market capitalization to GDP ratio. "Somethings out of whack."In addition, Collum says that the idea that low interest rates are bullish for equities is a misnomer. He says that rates are low because the economy is weak, and therefore don't justify lofty stock market valuations.Against that backdrop, Collum delivers a stark warning."My model is we're either going to have a very, very mean recession or I'm wrong," he said. "Regression to the mean is a 50% cutand that'll destroy CalPERS, and that will destroy hedge funds (except the smart ones).He concluded: "That'll destroy all the endowments. 50% is a monster."SEE ALSO:A renowned market bear says investors should be 'braced for zero or negative total returns' over the next 10-12 years ' and reiterates his call for a 67% stock meltdownJoin the conversation about this storyNOW WATCH: Why hydrogen cars will be Tesla's biggest threat
Click here to read full news..
