Elliott Investment Management founder Paul Singer said the world is much more perilous than markets are pricing in and that investors should be more worried.
(Bloomberg) — Elliott Investment Management founder Paul Singer said the world is much more perilous than markets are pricing in and that investors should be more worried.
“The world is now completely dependent on the good sense of leaders to avoid an Armageddon,” he said, questioning just how much “good sense” is coming from Russia, China and Iran.
Singer, 79, was speaking Thursday at the Capitalize for Kids Investors Conference in Toronto.
Compared to the geopolitical chaos of recent weeks, Singer said, the markets have remained relatively calm.
“It’s hard to avoid the conclusion that investors aren’t nearly as worried as they should be,” he said.
The billionaire investor, known for his consistently bearish views, also flagged concerns about the huge investor push into private credit.
“Some of the money is being used to provide liquidity to troubled companies that are actually insolvent,” he added.
Singer left the crowd with a trade idea. While short-term US interest rates exceed 5%, Singer said the Federal Reserve will likely cut them to 1% to 3% if there’s a recession or major market downturn.
“If you are looking for portfolio protection you might look at receiver options,” he said. “They are not cheap, but they are very likely to work in a stressed market environment. We own a bunch of them.”
Receiver options give the holder the right but not the obligation to receive the fixed rate in a swap contract (typically at lower yields than the prevailing level), and are effectively a put option on yields.
–With assistance from Layan Odeh and Cameron Crise.
(Updates final paragraph with explanation of receiver options)
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