Wall Street hedge fund Universa Investments founder Mark Spitznagel warns that the United States is in the “largest credit bubble in human history” and that a market crash is imminent.
Wall Street giants: Debt crisis does exist
Spitznagel: S&P 500 will outperform all hedge funds in the market in the next 20 years
The Federal Reserve (Fed) announced a temporary halt to rate hikes at the September, November, and December FOMC meetings, leading the market to believe that the most aggressive rate hike cycle in decades has come to an end.
Wall Street economists have also made predictions about the future of the US economy, stating that there will not be a severe recession in 2024, as efforts to curb inflation have been effective and rate cuts are imminent.
Wall Street bears warn of an impending market crash
However, according to a report from Business Insider on the 26th, Mark Spitznagel, founder of Universa Investments, a “black swan” hedge fund specializing in profiting from risks at the end of market cycles, has sounded the alarm, stating that the US is in the “largest credit bubble in human history” and a market crash is imminent.
Despite the current economic data showing strong growth momentum, Spitznagel remains pessimistic, calling it a “victory that is not worth the cost.” Spitznagel is a disciple of Nassim Nicholas Taleb, author of the best-selling financial book “The Black Swan” in 2007, and Taleb is also an advisor to Universa Investments.
Wall Street giants: Debt crisis does exist
In fact, not only Spitznagel, but also some other Wall Street financial institutions have expressed concerns about the US credit and debt problems.
Bank of America stated that over the past decade, the US has accumulated a large amount of debt due to ultra-low credit rates, which is expected to lead the US economy into trouble, and as borrowing costs rise, it is predicted that there will be $1 trillion in private debt defaults.
Charles Schwab also pointed out that the number of high-risk corporate debt defaults has begun to rise, and it is expected that by the end of this year, the total number of corporate defaults and bankruptcies is likely to increase significantly and reach its peak in the first quarter of 2024.
In addition, Goldman Sachs warned that the total amount of US national debt surpassed $33 trillion for the first time in 2023, and under a long-term higher interest rate mechanism, 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 turbulence, he also added that investors should not hesitate to “long-term” invest in stocks.
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Mark Spitznagel
Universa Investments
credit
debt
United States
US economy