dChan - Q Origins Project Archive

Veteran hedge fund manager issues grim warning over the future of the US stock market: 'This is a stark red flag'

Aug.18, 2024

This month's stark stock market swing serves as an indicator of things soon to come, warns one veteran hedge fund operator.

Mark Spitznagel, president and chief investment officer of Universa Investments, made the prediction in an interview with Fortune, almost two weeks after the scare.

At the time, markets from Japan to the US fell without warning, following a weak jobs report surging volatility amid conflict in the Middle East.

In the wake of the dip, markets have since rebounded - but Spitznagel on Sunday insisted that may be misleading.

The billionaire investor said we're instead on theverge of the biggest stock market bubbles in history, which inevitably will end with a burst as it did in 2008.Back then, mortgages unloaded to high-risk borrowers resulted in a period of turmoil, following a euphoric bull run.

'These whips are the market process,' the 53-year-old said of the more recent unrest, as the S&P 500 on Sunday stood about 5 percent from its August 5 low.

'This is the market zigging in order to zag.'

Of the panic seen from investors days before, the hedge fund manager declared, 'It was amateur hour. I have never seen anything like that in my career.'

He went on to explain that while another bull run is in the cards most investors will not be prepared for what comes next over the course of the next several months.

'This is a stark red flag, it's a stark warning sign,' he said, forecasting financial ruin.'

'[It's] a great comparison to 2007.'

Citing the weight of the Fed's repeated rate hikes and the fact that interest rates have been near zero for over a decade following the financial crisis created by the reckless lending, he added, 'But I think we're going to see a compressed path.'

Unlike the buildup to the Great Recession, which took the better part of a year, he said that this time around, 'I don't think we've got a year of this.'

As for his rationale, he explained, '[B]ecause the connectivity is greater…the fragility is greater.'

At the time, markets from Japan to the US fell without warning, following a weak jobs report surging volatility amid conflict in the Middle East.

In the wake of the dip, markets have since rebounded - but Spitznagel on Sunday insisted that may be misleading.

Explaining how Americans are essentially in the midst of a global economy that's more interwoven than ever, he said the Fed's policies move markets worldwide.

This is what caused Japan's Nikkei 225 worst day since 1987, when it fell more than 12 percents, and South Korea's KOSPI simultaneous reduction of eight percent.

A mid-day halt to trading ensued, followed by a sell-off on the global scale.

'Dips are the price of stock market gains,' Spitznagel said of the scare.

'You've got to be able to pay that price. The problem is, the big ones. They're too destructive of a price,' he continued. 'That's where we could be headed.'

He went on to disclaim how the key word in that warning is 'could', advising onlookers to not take unnecessary risks for betting big against his predicted bubble.

'I think if anybody shorts the market or is too under invested relative to their temperament, they’re going to get squeezed in at a euphoric height that is probably still coming in the months ahead,' Spitznagel said.

Instead, he urged investors to be patient, by first investing in basic S&P 500 index funds, andto also maintain a safety net as to not be forced to make a sudden sale at any given moment.

https://www.dailymail.co.uk/yourmoney/article-13755491/Mark-Spitznagel-hedge-fund-stock-market-investor-warning.html