Hedge fund manager Andy Redleaf warned investors about the last financial crisis…and now he’s warning them again.
“I think it is a truly scary time.”
Redleaf, who is CEO of $4.2 billion hedge and mutual fund manager Whitebox Advisors, said “I think it is a truly scary time” in an internal memo Sunday obtained by CNBC.com. He believes the loose monetary policy that has been pumping money into the markets could have negative implications soon, like it did in the 2007 U.S. subprime mortgage crisis. In fact, Redleaf warned investors of this back in December 2006:
“Sometime in the next 12 to 18 months, there is going to be a panic in credit markets. The driver in the credit market panic of 2007 or 2008 will be a sudden, profound and pervasive loss of faith in the alchemy of structured finance as currently practiced.”
He believes there are other factors propping up the stock market as well, such as sovereign wealth funds and the Swiss central bank owning a lot of equities. Regarding the current situation, Redleaf said “[t]here are some parallels with the collapse in home prices which preceded the financial crisis.”
He’s also worried about the euro’s drop in value. “It strikes me as completely plausible that a further decline in the euro triggers a recession in the U.S.,” he wrote in the memo.
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