Market Fears

Market Watch

“It is a truly scary time”

17 Mar , 2015  

One hedge fund manager who correctly predicted the last financial crisis has warned that he is seeing parallels in today’s market.

In an internal memo, Andy Redleaf, the CEO of Whitebox Advisors, said that “[he thinks] it is a truly scary time”. Whitebox Advisors is a $4.2 billion hedge and mutual fund.

In the same memo, Redleaf suggested that the stimulus being used to put new money into the markets could end badly, in the same way that slack credit standards in property proved fatal to the markets in 2007/2008.

He also noted that the massive fall in price of crude oil from $100 to $43 a barrel may have been overly inflated by China "buying on easy credit" and other excess money going to oil producers who in turn increased supply.

In a similar way, Redleaf implied that stock markets may be propped up by sovereign wealth funds and the Swiss central bank owning large amounts of equities.

Andy Redleaf, who has an impressive history in predicting crises, is also concerned about the euro’s drop in value.

"It strikes me as completely plausible that a further decline in the euro triggers a recession in the U.S.," Redleaf wrote. "The U.S. has a bear market, high-yield spreads move to 1998 type levels (1,000-1,200 [basis points]), U.S. weakness and market tightening of credit probably make the recession global."

Further reading:

Guest Lecture by Andrew Redleaf - Open Yale Courses

Andrew Redleaf, a Yale graduate and manager of Whitebox Advisors, a hedge fund, discusses his experience with financial markets. He addresses one of the ...

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