Hedge Fund Bears

 as reported in the Financial Times on May 10, 2013

In the week of May 10, 2013, some of the biggest names in the hedge fund world met to share investment tips at the Ira Sohn Conference, a high-profile gathering in New York.

The differences between the fund managers were in their degree of pessimism.

Underlying the various calls was one theme: the effects of emergency action taken by governments and central banks since the global financial crisis erupted five years ago.

Ben Bernanke, chairman of the US Federal Reserve, loomed large as the greatest distorter of markets. His bond-buying programs have boosted prices for government debt, the effects of which, according to the speakers, had trickled into asset markets of all types.

Stanley Druckenmiller, lieutenant to George Soros and head of Duquesne Capital Management and without a losing year in 30 years, opined that the recent retracement in commodities markets was no mere cyclical swing. "The commodity supercycle is over. It is not a correction; it's the beginning of a trend."

Jeffrey Gundlach of Doubline had an ominous warning: "I recommend you take all the money out of any bank account you have."

Pointing to Cyprus - where depositors saw 40-60% of their savings used to pay for a bank bailout - he said such a move was unlikely in the US, but why take the chance? "Many are likely to say Cyprus is just one country, to which I say the Lusitania was just one small boat." [Side note: Lusitania was one of the largest passenger carrying ships of its time. It was a British ship sunk by the Germans in WWI.]

Paul Singer of Elliott Management, notorious for his attempt to impound an Argentine ship amid a battle with Buenos Aires, said, "Everyone wants a safe haven. There is no such thing in today's markets, and that's one of the elements of the distortion."

There was also a consensus that it was foolish to challenge the Fed. Mr. Gundlach said that investors must realize there would be no end to quantitative easing, at least in the near term.

Kyle Bass of Hayman Capital, however, has bet against the Bank of Japan. He sees in its recent actions signs of stress that he has been predicting for three years. "The beginning of the end has begun."

haditaheri is also on twitter