
Paul Singer is bracing for ‘all hell to break loose’ in the stock market - champagnepapi
http://www.marketwatch.com/story/why-one-hedge-fund-titan-is-bracing-for-all-hell-to-break-lose-on-wall-street-2017-05-26
======
lisper
"Lately, the stock market has been stubbornly buoyant."

In other words, Singer is wrong.

There are two facts about stock market prognostication:

1\. At any given point in time you will always be able to find someone on Wall
Street predicting that the market will crash Real Soon Now.

2\. Market crashes are inevitable.

Hence, when market crashes happen you will always be able to find someone who
predicted it. The trick is to sort out that correct prediction from the myriad
wrong ones _before_ the crash. No one has cracked that nut yet.

------
ericd
Market prognostication isn't generally good for your sanity or financial
wellbeing, and MarketWatch is kind of a trash site, given to talking about
technical indicators and support levels and other BS like that.

That said, there are a number of aspects to the current economy that I find
deeply worrying - incredibly high housing/healthcare prices that are seemingly
disconnected from reported inflation metrics and median wages, the US at
record debt levels relative to GDP (if you count household+government debt),
worldwide cash printing, with only assets growing in price to match, and a
ferocious property bubble in China. If the last one pops, it seems likely that
the money flowing out of China into US property markets will drop out, which
would take out the upward pricing pressure, and probably ding US property
values quite rapidly, since most people here can't reasonably support the cost
of houses here on median wages with anything over rock bottom interest rates.
This would seem to make existing secured loans a whole lot less secured than
they were before. Also worryingly, banks are compensating for unaffordability
by requiring less money down, and covering the difference with PMI
(insurance). I think the US populace might simultaneously be nearing the
breaking point in terms of the debt it can support due to years of easy money
discouraging frugality. If spending dropped off due to an inability to spend
more, that would ding the corporate earnings supported by credit, which would
spike PE ratios, unless P dropped a lot.

In short, if these things come to a head in proximity to each other, it seems
like we might really be in for a shitstorm, which may include a large dose of
inflation and bond yields rising if central banks need to redeem a chunk of
that US debt they've been gobbling up for its historical safety, in order to
compensate for flagging economies to meet their spending obligations.

I really hope I'm wrong (and please tell me why, if I am), but our
fundamentals don't seem to support the prices, unless the market is saying the
dollar is worth a whole lot less than we think it is.

~~~
elicash
I wonder (genuinely) if somebody couldn't just as easily create a list of
positive signs. Consumer confidence, steady job growth, whatever...

For example, you mention growing healthcare costs (true!). But isn't it ALSO
true that far fewer people (50%) are filing for bankruptcy since before the
ACA? Shouldn't that be a stabilizing force? (Assuming it remains.)

To be clear, I'm not arguing you're wrong. Just that it's hard to predict
anything, which I think you'd agree with.

~~~
ouid
It seems like the economy is largely debt driven. The amount of personal debt
that people can accumulate before declaring bankruptcy is finite, and when
their credit drops, the economy contracts.

~~~
ellius
"Debts that can't be repaid won't be repaid."

------
lettergram
I find it interesting how rare it seems that people "analyzing the market"
don't (at least openly) look at what is actually causing the market to grow.

They seem to focus more on the financial signals, as opposed the the
underlying innovation, infrastructure, logistics, or even sales in some cases.

Overall, We've seen a pretty massive uptake, but we also only recently
returned to pre-2008 valuations of companies. That's a decade of next to no
growth in businesses (supposedly). However, I seriously doubt most businesses
that survived the crash don't have more infrastructure today. __Meaning __, I
'm confident they are actually worth more today (on average), regardless of
what the financial signals say today.

That being said, I'm actually working on a project[1] which uses other signals
(other than financial) to determine a companies worth. Primarily, we are
focusing on identifying "experts" in a companies field, and determining the
brand strength with those experts. We are also looking at financials,
generally how often they are discussed, etc. but the real value comes from the
experts opinion. Seems to work better than Paul Singer's approach.

Although, the one thing I will say about the potential for economic collapse
is:

> Singer is among those fearing that very scenario. He is betting that an
> economic recession may be on the horizon and believes that, with interest
> rates already near ultralow levels, the Federal Reserve won’t be able to
> provide a sufficient quantitative-easing cushion, as it did during the
> 2008-’09 financial crisis.

He is correct about that :p, that's probably my largest fear in regards to the
current fed policies.

[1] [https://projectpiglet.com/](https://projectpiglet.com/)

------
themgt
I'm no macroeconomist, but I would agree the signs have been building to a
crescendo, very reminiscent of 2005-2007 feel when more and more voices were
sounding the alarm.

In brief I would mention: credit card & student debt bubble; housing market
re-inflation to pre-crash levels; stock market at new highs and a decade since
the last recession; being in ZIRP and pushing on a string for so long we're
out of monetary policy ammo and have a near total lack of political willpower
for real fiscal policy changes, leading to the lack of much apparent recovery
or health in the real economy outside a few sectors; the worsening inequality
continuing to hollow out the middle class; the ongoing / accelerating wave of
automation; approaching shark-jump territory in tech with a lot of signs the
zirped-VC is drying up.

The whole "main street" economy has a _Weekend at Bernie 's_ feel of a dead
guy being dragged around by some people who don't want the party to stop.

------
idiotdummy
Here's Paul Singer warning us in 2014 that "the threat of a widespread
blackout from an electromagnetic surge the "most significant danger" in the
world":

[http://www.cnbc.com/2014/07/29/paul-singer-this-threat-is-
he...](http://www.cnbc.com/2014/07/29/paul-singer-this-threat-is-head-and-
shoulders-above-all-others.html)

All the signs are there! Seriously, some financial blowhard says something
like this _every day_ ; why is this news?

------
havella
It's apt to point out that Mr. Singer intends to profit on the long side. How
many souls find themselves in the same predicament. Fearmongers will benefit
from reading Triumph of Optimists by Dimson, Marsh and Staunton.
[https://www.amazon.com/Triumph-Optimists-Global-
Investment-R...](https://www.amazon.com/Triumph-Optimists-Global-Investment-
Returns/dp/0691091943)

------
olivermarks
Mr Singer is a bottom feeding parasite, the poster child for vulture
capitalism. Anything he can do to destabilize financial markets for his own
gain, regardless of cost to everyone else, is all he cares about. I hope karma
is a bitch for him....

Separately there are lots of very worrying issues about the global economy, Mr
Singer would love to upset the applecart and profit from the carnage.

------
notadoc
All the signs are there, but as usual there's no shortage of people claiming
this time is different again.

~~~
vasilipupkin
what signs? it's hard to predict the future. Assets are expensive but it
doesn't mean they can't get even more expensive

~~~
daxorid
If nothing else, one can examine the current expansion's duration against the
history of other expansions.

The longest business cycle expansion in U.S. history lasted 119 months. The
current one is going on 97 months.

Even in the absence of "signs", one could make a rational bet that we are much
nearer the end of the current run than the beginning, particularly with the
headwinds of rate hike expectations.

Unless, of course, it _really is_ different, this time.

