Mark Spitznagel, founder and chief investment officer of Universa Investments, warned investors of the upcoming stock market crash that could surpass the 1929 burst.
Spitznagel, known on Wall Street as one of the most pessimistic hedge fund managers since last year, has sounded the alarm about the upcoming bursting of the “greatest credit bubble of human history.”
The hedge fund manager echoes Nassim Taleb, author of “The Black Swan,” as he declares that the crash will come very soon with the massive bubble in the US credit market.
“We are in the greatest credit bubble of human history,” he said.
“It’s entirely because of artificially low-interest rates, artificial liquidity in the economy that this has really happened in a big way since the great financial crisis.”
Spitznagel remarked that these bubbles in the end will blast, and “there’s no way to stop them from popping. Debts need to get paid, or they end in default. And, of course, the debt burden today is at a level that cannot be repaid.”
On Wall Street, Spitznagel was known for his tail-risk hedging investment strategy. His firm exploits market crashes by purchasing derivative contracts that increase value during unexpected market declines.
One remarkable example was his firm’s big-time comeback after the 2020 stock market crash, which achieved a huge return of 4,144 percent.
Even other market experts expressed concerns as rising interest rates burden the US economy. The Bank of America remarked that the accumulated debt in the past ten years, when interest rates were extremely low, would get into trouble. It also warned that private debt is heading for potential default as it reached about $1 trillion this year.
Charles Schwab predicted that total corporate defaults and bankruptcies would surge by the end of the year, peaking in the first quarter of 2024.
Even public debt is alarming, as the US total debt reached $33 trillion this year.
Despite the seemingly rapid economic growth, Spitznagel said that this was a “pyrrhic victory.”
“You take a victory now for suffering later. That’s exactly what monetary interventionism does: It’s giving you something now, and you have to pay for it with a lot of interest later. And, of course, that’s what federal debt is too—it’s our grandchildren’s problem.”
“It will destroy the entire forecast,” Spitznagel said of the credit bubble bursting. “So I’m certainly not saying I don’t think there will be a crash. I think there will be a huge crash coming,” he added.
