Sat, May 23, 2015
A A A
Welcome Guest
Free Trial RSS
Get FREE trial access to our award winning publications
Industry Updates

Another global recession likely to hit as early as 2012 but governments will be helpless, financial experts say

Wednesday, July 28, 2010
Opalesque Industry Update – A new round of global economic recession is likely to hit soon but governments around the world may not be able to raise bailout plans, some leading financial experts and hedge fund managers believe.

Jim Rogers, chairman of Rogers Holdings, told CNBC on Tuesday that the U.S. economy had been experiencing a recession every four to six years “since the beginning of time.” "When the next one comes, the world is going to be in a worse shape because it has shot all its bullets. Is Mr. Bernanke going to print more money than he already has? No, the world would run out of trees," Rogers declared.

The assessment given by Robert Shiller, professor of economic at Yale University and co-developer of Standard and Poor's S&P/Case-Shiller home price indexes in an interview with Reuters Insider the same day was similar. Shiller opined that while he was uncertain where home prices may be headed, he was confident the economy was on a precarious path.

"For me a double-dip is another recession before we've healed from this recession ... The probability of that kind of double-dip is more than 50 percent. I actually expect it,” Shiller said.

It is only a question of when
Indeed, several respected hedge funds and financial experts have agreed that a global recession is looming. The predictions, however, differ on the timing.

According to Tony Tan, deputy chairman of GIC, a global investment management company that manages Singapore's foreign reserves, risk of shocks may trigger world recession “sooner than expected.” Tan said last week that risks to the global recovery had increased due to Europe's debt turmoil, continued deleveraging in the U.S. and protectionist pressures.

In its June monthly market commentary released last week, U.K.-based listed hedge fund Brevan Howard forecasted a looming double-dip recession in the U.S. as risk appetite faded further last month in response to domestic and foreign threats expansion. The report added that investors are questioning the sustainability of the U.S. economic recovery which was stalled due to consumption spending, housing roll over, and the downshift in the labor market.

A research paper released by Man Group, one of the largest hedge fund groups in the world, yesterday warned of a bond crisis within the next three and five years if structural issues in the economy were not resolved. In its report entitled: ”Japanization of the West? A closer look at the looming global debt problem”, Man Group said that government debt exploded due to stimulus packages in the most advanced economies (See Opalesque Exclusive: here).

Hedge funds prepare for recession
Leading hedge funds across the globe have started to position their hedge funds in anticipation for a double-dip recession, the Financial Times reported last month as many of these funds have observed a major shift in the macro-economic environment over the last month.

Part of their preparation is to dramatically de-risk their portfolios or reposition their assets more cautiously, particularly after a disastrous performance in May.

Many large hedge funds try to protect their portfolios while taking a cautious stance on the global financial developments. Global hedge fund firm BlackRock, with $3.15tln in AuM, said it is taking a conservative positive outlook while acknowledging a high level of uncertainty (See Opalesque Exclusive: here).

Some remains optimistic
Although there is one hedge fund manager who does not believe in the “double-dip recession scenario”. Barton Biggs, head of New York-based hedge fund firm Traxis Partners, told Bloomberg in a radio interview early this week, that he remains confident in the U.S. economy and does not believe it is headed for a double-dip recession. In fact, Biggs said he took his fund to a 75% long position, from 35% long just three weeks ago.

“The odds of the world slumping into a significant slowdown have diminished,” he said.

Also yesterday, TPG-Axon Capital’s founder Dinakar Singh, who overseas $9bn in AuM, said he believes that U.S. companies are in a “much better shape” than the market is pricing and sees growth opportunities even if the economy slips into a "double dip" recession.

"I think people are right to worry about the fear ... but I think they're wrong in ignoring that there's a ton of upside potential as well," the hedge fund manager said.
- Precy Dumlao

What do you think?

   Use "anonymous" as my name    |   Alert me via email on new comments   |   
Today's Exclusives Today's Other Voices More Exclusives
Previous Opalesque Exclusives                                  
More Other Voices
Previous Other Voices                                               
Access Alternative Market Briefing


  • Top Forwarded
  • Top Tracked
  • Top Searched
  1. Comment - Top hedge fund managers talk about how easy their jobs have gotten, BlackRock to Schroders warn of Argentina’s $20bn bond glut, The 35-year “investment supercycle” is drawing to a close, says Bill Gross, Gundlach: When the Fed starts hiking rates, 'GET OUT' of this asset class[more]

    Top hedge fund managers talk about how easy their jobs have gotten From Businessinsider.com.au: Time was, before the financial crisis hit, corporate boards treated multi-billion dollar hedge fund managers like Jehovah’s Witnesses pounding on their doors and flashing bibles. But no more.

  2. T Rowe's challenge to Dell deal may fuel critics of 'appraisal'[more]

    From Reuters.com: An increasingly popular tactic used by hedge funds and others to extract more money from buyouts could soon face a major courtroom test when a big investor in Dell Inc may argue that it should be paid a higher price for the 2013 acquisition of the PC maker. The strategy, known as "

  3. News Briefs - Ergen says LightSquared plan unfairly favors hedge funds, Why hedge fund managers make good advisory clients, I learned a lot about dad-bros after spending 4 days in Vegas with 2,000 hedge funders[more]

    Ergen says LightSquared plan unfairly favors hedge funds LightSquared Inc.’s bankruptcy plan gives hedge funds that invested in the broadband company a leg up while blocking telecommunications firms from competing with it, a fund owned by Dish Network Corp. Chairman Charles Ergen said in

  4. Opalesque Exclusive: SEC approves proposed changes to Form ADV, '40 Act - comment period to follow[more]

    Bailey McCann, Opalesque New York: Hedge funds and providers of liquid alternatives will want to pay close attention to proposed reforms approved by the SEC yesterday. The changes will require more frequent reporting, as well as a closer look into social media, liquid alternative strategies, and

  5. New market regime has created more dispersion between managers[more]

    Komfie Manalo, Opalesque Asia: The month of April has marked the transition toward a new market regime, Philippe Ferreira, Lyxor AM’s head of research, managed account platform, commented in the May 5's Weekly Briefing. "The first quart

 

banner