“I think it is a truly scary time,” Andy Redleaf, CEO of $4.2 billion hedge and mutual fund manager Whitebox Advisors, said in an internal memo Sunday night obtained by CNBC.com.
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“We do not know exactly where all the credit creation of this cycle has gone. Certainly money sits idly as excess reserves, but just as certainly money that would not exist but for unconventional monetary policy has distorted prices and resource allocation,” Redleaf wrote.
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Redleaf also said that stock markets may similarly be propped up by sovereign wealth funds and the Swiss central bank owning large amounts of equities.
“There are some parallels with the collapse in home prices which preceded the financial crisis,” he explained.
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“Sometime in the next 12 to 18 months, there is going to be a panic in credit markets,” Redleaf wrote to investors in December 2006. “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.”
Full article: Hedge fund manager: It’s a ‘truly scary time’ (CNBC)
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