Asset Management: Elliott warns of more pain to come
Plus, Vanguard’s UK funds upended, disappointing results for US corporates and the culinary delights of Notting Hill
Singer warns of hyperinflation risk, societal collapse
Paul Singer, the billionaire founder of Elliott Management, is known for some rather bearish views over the years, but the firm’s latest musings have taken that caution to a whole new level.
In its most recent letter to investors, the roughly $56bn hedge fund warns of a potentially catastrophic outcome for the global economy as policymakers battle high inflation and looming recession, writes Laurence Fletcher.
The world is “on the path to hyperinflation”, which could lead, Elliott bluntly states, to “global societal collapse”.
The coming financial crisis could exceed anything seen since the second world war, it adds, and investors should not think that they have “seen everything” simply because they have lived through past calamities such as the 1970s oil shock, the dotcom bust or the 2008 financial crisis.
Elliott has long been critical of central bankers’ ultra-loose monetary policy since the 2008 financial crisis, and it did not waste this opportunity to hold them to account, labelling them “dishonest” about the causes of inflation.
The hedge fund reckons investors will find it difficult to make money and says that equity markets could drop 50 per cent from peak to trough, which would mean the S&P is not even halfway through its fall.
While starker than many, Elliott’s warning is not the only one to come from a big-name hedge fund manager recently.
Boaz Weinstein, the founder of Saba Capital credited with spotting the “London whale” a decade ago, recently told the FT that global stocks could be heading for a Japan-style bear market lasting decades and that “there isn’t a rainbow at the end of all this.”
Equity bulls have clung for some time to the prospect that the US Federal Reserve will somehow be able quickly to tame inflation, while also engineering a soft economic landing. That, in theory, should allow them to resume looser monetary policy again in the not-too-distant future.
Elliott’s warnings highlight how badly wrong the bulls could be. With a record of only two negative years since launch in 1977, would you bet against Singer being right?