Black swan hedge fund says Fed rate cuts will signal market crash

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Mark Spitznagel Nouvelles

Interest Rate,Financial Markets,Market Volatility

While U.S. financial markets debate the timing of interest rate cuts, one tail-risk hedge fund is warning that investors should make the most of recent...

NEW YORK - While U.S. financial markets debate the timing of interest rate cuts, one tail-risk hedge fund is warning that investors should make the most of recent economic optimism while it lasts, as a shift to lower rates will signal a dramatic market crash.

Funds such as Universa often use credit default swaps, stock options and other derivatives to profit from severe market dislocations. Generally they are cheap bets for a big, long-shot payoff that otherwise are a drag on the portfolio, much like monthly insurance policy payments. "This economy is built on low interest rates," said Spitznagel. "There are lag effects when you reset interest rates like we had."

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