Most major countries in the developed world “are long-term insolvent and have financial systems chock-a-block with debt and derivatives,” Paul Singer and Elliott Management observe in their first quarter letter to investors, as an odd herding mentality in the market is noted that defies logic. In this environment, the Elliott team finds itself in the peculiar position of not wanting to miss a market rally, but wary of drying up liquidity and following the herd. Despite this, Elliott appears to be positioning itself to reap the benefits of a bull market rally fueled by quantitative easing, but at the same time positioning the portfolio for a value adjustment opportunity when it arrives. In this regard, they are not unlike many other major hedge fund managers, such as Seth Klarman, who has a significant hoard of cash sitting on the sidelines with an itchy trigger finger waiting for the big opportunity.
- Central bank central planning is scripting a wonderful life on the surface, its what lies underneath that worries Elliott
- Elliott: Herd behavior blindly assumes others know what is really going on, but look at their track record in 2008 for the truth
- Elliott: Independent thinkers need to come to grips with reality, it will slap investors in the face one day, waking them up from their dreamland
- Elliott: Go along for the ride, but be prepared when the roller coaster comes off the rails
Central bank central planning is scripting a wonderful life on the surface, its what lies underneath that worries Elliott
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