Eager to Say ‘I Told You So,’ Paul Singer Warns of Trouble Ahead

(Bloomberg) - Hedge fund titan Paul Singer can't wait to say, "I told you."
The 76-year-old billionaire offered in a letter to customers of his Elliott Management Corp. $ 42 billion suggest that an "extravagant lineup" of excesses will return to haunt investors. For Singer, who long warned of an ugly end to the Federal Reserve's easy money policy, everything is just a little too much.
"We believe that, in hindsight, the champion of insane madness on the American stock market will be the time that is right now," Singer wrote in the January 28 letter.
In his view, the Fed's current iteration of quantitative easing coupled with trillions of dollars in incentives to fight the pandemic are preparing things for a decline. Rampant inflation will shock policy makers, stock pickers and bond investors alike.
“'Trouble Ahead' is signaled by a rare combination of low quality stocks, astounding valuation metrics, overfunded capital structures, a lack of honest profits, a desperate lack of understanding exhibited by the most active traders, and macro economic prospects that are not as exciting as the mobs that 'Buy! To buy! "Seems to be thinking," he wrote.
Singer says long-term bonds are a "pointless" speculative trade
The markets have started to show cracks in the past few days. Benchmark 10-year government bond yields rocketed to their highest level in more than a year, stocks fell and traders preferred their opinion on how quickly the Fed will tighten monetary policy.
While Singer vowed to stick to the basics of his multi-strategy operation, which has lost money in just two years since it was founded in 1977, he exuded frustration at the hysteria that powers everything from Bitcoin to national debt - a "return ". free risk ”, as his letter put it.
Elliott made money every month in 2020, even in March, gaining 12.7% for the year thanks to "a combination of portfolio protection trades on interest rates and gold along with our core activities," including distressed debt and equity activism and private equity.
The company has grown by around 13% annually over its 44 years, outperforming the S&P 500 index.
For a "reality check" on US stocks, he referred to Musks Tesla Inc., which is trading at roughly 1,000 times earnings while "every other major automaker in the world will be bringing electric vehicles to market in the near future". Before his shareholders he said: "Good luck, you few, you happy few, you gang of brothers and sisters," he wrote.
But nothing has exercised the Republican giver like the boom in cryptocurrencies, which he has long termed a fraud. Bitcoin is up nearly 70% this year alone, hitting a record $ 57,350 on February 21. When the fund manager watched the digital currency rocket based on stummulus measures, he was looking for coping mechanisms.
"Pulling your hair out is an option, but only if you have hair left over," wrote the mostly bald singer. “Hiding under the bed to avoid people enjoying Bitcoin for a long time can be… exhausting. Breathing exercises can work, but only for a short time. We carry on for the day when we can say, "We told you."
And even as the world begins to recover from the pandemic, Singer urged to keep expectations in check. Certain industries and activities, such as commercial real estate, movie theaters, retail, restaurants, and business travel, continue to be severely challenged - in some cases permanently, he said.
Meanwhile, he wrote, recovery is being hampered by virus variants and strategies "which sometimes seem to be driven by short-term political pressures rather than what is best for society in the short and long term."
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