‘Crash Guy’ warns: Markets look like 1929, but first a party

On Wall Street, all major US stock indices were closed on new records on Friday, while gold also reached a highest stand ever. Yet there is a strong warning from the man who wears the nickname ‘Crash Guy’. Bitcoin (BTC) seems to have more difficult at the moment.

Parallels with 1929

Mark Spitznagel, founder of Hedgefonds Universa Investments, is known for its hefty profits during Marktpaniek. In 2015 he earned a billion dollars in one day during the so -called Flash Crash. Also during the credit crisis and the Coronapanic, he benefited from sudden exhibition decreases with his strategy.

Spitznagel sees striking similarities with the year 1929, when a historic stock market crash followed after the Roaring Twenties. According to him, the market is now in a similar euphoric phase. “I am the crash guy, and I will stay that way,” he says.

He emphasizes that he cannot predict exact timing. Universa buys so -called tail risk derivatives, which yield enormous profit if the market suddenly goes down. Such insurance policies against extreme falls are now relatively cheap because investors see little danger.

Latest revival possible

Spitznagel expects the prices to be able to rise by around 20 percent before a large correction starts. Since 1980, the S&P 500 has risen on average 26 percent in the year prior to a bear market, much higher than the long -term average.

According to figures from State Street, the share exposure of large investors has now been at the highest point since November 2007, just before the major crisis of 2008. American households have also put more money into shares than during the peak of the internet soap around 2000.

Signals of recklessness

There are more signs that investors underestimate risks. The premium for bonds with high creditworthiness has fallen to the lowest level since 1998. At the same time, the trade volume is on the American stock exchanges just below the record of April.

“The markets are pervers,” says Spitznagel. “They exist to mislead people.”

According to him, the absence of natural corrections through years of intervention of governments and central banks can ultimately lead to a “fire storm” in the financial markets.