Paul Singer’s Elliott Management gained 3.1 percent in the last quarter. Like other conservative minded investors, Singer is not concerned that his returns lagged the performance of equity markets over the same period. Singer talks about his surprise at the recent fall in gold prices. He admits that it is logical to assume that gold will lose its worth if the economic picture stabilizes, however at a time when the economy will simply not be able to take any more money-printing, holding gold will return in a big way. He says that gold may not fit into the definition of safe-haven any more but it is an irreplaceable must-have.
Paul Singer on Euro Unwind
Being a longstanding critic of the European Union, Singer expresses his misgivings about the eurozone’s assurance that Cyprus will be an isolated case. His quarterly letter repeats his no-confidence in the integrity of the Union which he thinks is flawed at the basic level. He stresses that what EU needs more is to cut down on its lavish lifestyles and early retirement opportunities and implement more austerity measures. Singer calls the crisis that is worsening in the EU a horror movie, “Euro Unwound”. Looking at the current state of the eurozone, he does not see any near term solution to the crisis and expects it to grow.
For several months, and especially in light of the unique Cypriot bailout, the fear of banks runs from European lenders has exacerbated. Singer fears that while these runs may have not materialized yet, people in European countries are contemplating the possibility that Cyprus could not be an isolated example and governments taking possession of their property is a reality after all.
Experimental Fed Policy
Paul Singer takes almost exactly the same tone with the Fed and Ben Bernanke as Seth Klarman, both are strong believers in the unsustainability of QE and repeat their opinions with more conviction than before in every letter. When the time comes that the enthusiastic money-printing stops and the Fed is left with trillions in bonds, the economy could be thrown into depression once again. Paul Singer calls the executives of the Federal Reserve, “frantically-flailing, over-educated, posturing bureaucrats”. He also said according to the recently released Fed’s meeting minutes from 2007, it is clear that the complex financial machinations are too difficult for Feds to understand and it lacks the ability to maneuver through the modern financial environment.
The letter also comments on the record low interest rates that have made lending to corporates a decidedly unexciting prospect. Investing in bonds has lost its charm as monetary easing has hammered yields into flattened curves.
Elliott Management Corporation has over $21.8 billion in assets under management.