A "Global Margin Call" Is Coming: Harris Kupperman
"The US now appears to be entering into a fiscal solvency crisis, which is starting to be felt through the Treasury market..."
One of my favorite investors that I love reading and following, Harris Kupperman, has offered up his latest thoughts on the market this week.
Harris is the founder of Praetorian Capital, a hedge fund focused on using macro trends to guide stock selection.
Harris is one of my favorite follows and I find his opinions - especially on macro and commodities - to be extremely resourceful. I’m certain my readers will find the same.
Please be sure to read both my and Harris’ disclaimers, located at the bottom of this post.
Taking My Ball…
I like to think of myself as an aggressive investor. I rarely hedge, and I rarely take my net exposure down below 100. More ideas than capital is how I like to run things; then I press the accelerator through some moderate leverage. Therefore, I find it somewhat odd that I’m writing to you today with nearly a 40% cash balance, which is one of the highest levels of cash in my career. How did I get here?
To start with, I’m really bearish. I’m convinced that the US is on the path from a Developed Market (DM) to an Emerging Market (EM) financial system. This path now seems unavoidable. You can say similar things about Europe, Japan and many other leading, yet overindebted economies. The fact that there is no historical precedent for this concerns me, as it means that most investors are woefully unprepared for what may be coming.
The US now appears to be entering into a fiscal solvency crisis, which is starting to be felt through the Treasury market. This isn’t a call for things to imminently fall out of bed, this process will play out for years to come. However, in our over-levered world, things have a habit of breaking in unpredictable ways. Had anyone ever contemplated Taiwanese life insurers until a few weeks ago?