Wall Street hedge fund Universa Investments founder Mark Spitznagel warns that the US is in the midst of “the largest credit bubble in human history” and a market crash is imminent.
Summary:
After the peak of the S&P 500, a sharp drop of 10% occurred, with funds flowing into Bitcoin and gold. Is this a precursor to an economic recession in the US?
Additional Background:
Wall Street Dream Script: 2024 “Mild Economic Recession” followed by interest rate cuts, the battle against inflation has been won.
Table of Contents:
Wall Street Big Short Warning: Market Crash is Coming
Wall Street Giants: Debt Crisis is Indeed Present
Spitznagel: S&P 500 Will Outperform All Hedge Funds in the Market in the Next 20 Years
The US Federal Reserve (Fed) has announced a temporary halt to interest rate hikes in the FOMC meetings held in September, November, and December, leading the market to believe that the most aggressive interest rate cycle in decades has come to an end.
Wall Street economists have previously made predictions about the future of the US economy, stating that in 2024, the economy will not experience excessive decline, as efforts to curb inflation have been successful and interest rate cuts are on the horizon.
Wall Street Big Short Warning: Market Crash is Coming
However, according to foreign media outlet “Business Insider,” on the 26th, Mark Spitznagel, the founder of the hedge fund Universa Investments, which specializes in profiting from risks at the end of market cycles, raised the alarm, stating that the US is currently in “the largest credit bubble in human history” and a market crash is imminent.
Although current economic data shows strong economic growth momentum, Spitznagel holds a negative view, calling it a “Pyrrhic victory.” Spitznagel is a protege of Nassim Nicholas Taleb, the author of the bestselling financial book “The Black Swan” in 2007, and Taleb also serves as an advisor to Universa Investments.
Wall Street Giants: Debt Crisis is Indeed Present
In fact, not only Spitznagel, but some other Wall Street financial institutions have also expressed concerns about the US credit and debt issues. Bank of America stated that over the past decade, the US has accumulated a large amount of debt due to extremely low credit rates, and this debt is expected to lead the US economy into trouble, with an estimated $1 trillion of private debt defaults as borrowing costs rise.
Charles Schwab also pointed out that the number of debt defaults by high-risk companies has begun to rise, and it is expected that by the end of this year, the total number of corporate defaults and bankruptcies will likely surge and reach its peak in the first quarter of 2024.
In addition, Goldman Sachs warned that the total amount of US national debt exceeded $33 trillion for the first time in 2023, and under the mechanism of long-term higher interest rates, the total cost of US public debt is likely to reach a historical high in 2025.
Spitznagel: S&P 500 Will Outperform All Hedge Funds in the Market in the Next 20 Years
Although Spitznagel did not specify the exact timing of the economic crash, he emphasized that this crisis is not too far off and once the market crashes, interest rates are likely to drop to very low levels within the next one to two years.
However, despite Spitznagel’s insistence that the market will experience significant turmoil, he also added that investors should “long-term” invest in stocks without hesitation.
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Tags:
Mark Spitznagel
Universa Investments
Credit
Debt
US
US economy