Elliott Says Failed Policies Mean Markets Face Severe Disruption

Elliott Management Corp., the hedge fund manager founded by billionaire Paul Singer, said markets may face a period of “severe market disruption” after the policies of the past years failed to fix underlying problems.

“Those who think they can time the next crash are hopeless,” Elliott wrote in an investor letter, a copy of which was obtained by Bloomberg News. “To those who believe a crisis is nowhere on the visible horizon, we say the following: nearly every economic and financial metric is worse than it was pre-2008.”

The 70-year-old Singer, one of the biggest backers of Republican politicians, uses the Elliott letters to opine on politics, taxation, monetary policy and risks to the economy and financial system. He has repeatedly criticized the Federal Reserve and central banks globally for quantitative easing and politicians for failing to enact policies to revive economic growth.

His New York-based firm said in the latest letter that zero interest rate policies have distorted asset prices and encouraged buybacks instead of production, and that leverage globally hasn’t decreased in a meaningful way since the 2008 financial crisis. The global banking system, in particular, isn’t sounder than it was and “in fact might be on a hair trigger compared with 2008,” he wrote.

“All of these factors suggest to us a springboard for a period of severe market disruption in the future, but without any hints as to when this turmoil will occur, nor the shape and sequencing of it,” the firm wrote.

“Our hunch about the next one is that some combination of financial institutions and sovereigns will get into serious trouble, providing the loss-generator and contagion mechanism necessary to overwhelm the considerable power of the world’s central banks to stem the crisis quickly.”

Contents of the letter were earlier reported by Reuters.

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