Black swan fund managers worry the market is hiding a “Great Depression” level time bomb, and short sellers are also singing short stories | Stocks Anue tycoon-USA

The so-called “black swan fund” hedge fund Universa Investments has warned clients that massive debt in the global economy is about to cause a shock similar to the Great Depression in the market. Wall Street short seller Jim Chanos (Jim Chanos) also saw the market’s flash warning signs, saying he has never seen a bear market like this one in his more than 40-year career.

Mark Spitznagel, chief investment officer of Universa Investments, said: “From an objective point of view, the financial market is hiding the biggest powder keg time bomb in history. It is already bigger than the late 1920s, and it can cause similar consequences.”

The fund is advised by Nassim Taleb, author of the famous book “Black Swan” It belongs to the so-called “tail risk fund” and its aim is to protect investors from the most difficult market conditions. Periods often have favor them.

Spitznagel predicted last year that if the credit bubble burst because central bank rates were too low, there would be a catastrophic market failure the likes of which no one had ever seen before. He further said on global debt levels this week: “What was a natural and healthy correction has now become an infectious purgatory which can destroy the whole system. The world is too heavy and it’ the debt structure is too big.”

Chanos, who is very short on Wall Street, also said on Monday (30th) that he has never seen a bear market like this in his career, “I’ve been on Wall Street since 1980, and there’s never been a bear market like this. . The trading price is unprecedented. Nine to 14 times higher than peak corporate profits.”

He believes the market cannot overcome the twin challenges of rising interest rates and declining corporate profitability.

Chanos said that although the stock market is still cheaper than it was 18 months ago, the market is pricing in a “Goldilocks” economy, which is optimistic about a 12% growth in corporate profits this year, The inflation rate reduced to 2%, and the US Federal Reserve (Fed) will cut interest rates in six to seven months. But Chanos doubts that such a bull scenario will happen.

The release of the two experts’ comments made investors cautious, as this week coincides with the Fed’s decision-making meeting and the debut of the heavyweight earnings season, and January’s important non-farm payrolls report will was released on Friday. The S&P 500, which has risen nearly 5 percent this year, closed up 1.3 percent at 4,017.77 on Tuesday.

Spitznagel and Taleb sounded warnings last year, but not every time their predictions came true. For example, after Spitznagel warned in October 2013 of an imminent market crash that could plunge as much as 40%, it emerged that the S&P 500, despite some volatility, largely held up to a month March 2020 due to the eruption and collapse.

On the other hand, there are still many analysts and economists who believe that the recession will not do much damage to the US economy. Mark Zandi, chief economist at Moody’s Investors Service, wrote this month that the US economy will avoid a full-blown recession, although it will still slide into a kind of “slow recession” that includes rising unemployment and stagnant economic growth. .