“Everyone Is Extremely Long ‘Frothy’ Stocks,” World’s Biggest Hedge Fund Warns; Sees Gold Soaring as Dollar Loses Reserve Status

The comments below are an edited and abridged synopsis of an article by Tyler Durden

With the market melt-up accelerating, hitting new highs even as broad S&P valuations sit at nosebleed levels last seen during the dot-com bubble, investing luminaries are issuing warnings to stock buyers.

“Everyone Is Extremely Long 'Frothy' Stocks,” World's Biggest Hedge Fund Warns; Sees Gold Soaring as Dollar Loses Reserve Status | BullionBuzz
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Greg Jensen, the co-CIO of Bridgewater, warned that his fund was cautious on stocks, describing them as ‘frothy,’ and predicted that gold would soar to $2,000 or more, because the Fed and other central banks would let inflation run hot and there would be no attempt by any of the world’s major central banks to normalize interest rates.

Jensen said gold could rise 30% from its current price of $1,550 and should be considered a cornerstone of investors’ portfolios.

Addressing the weakest link in the bubble-bust loop (the Fed’s inability to measure and target inflation), Jensen said even if inflation were to reach the central bank’s 2% target, the Fed won’t be pre-emptive. In short, the Fed now owns this bubble.

Recession fears in 2019 prompted 49 central banks around the world to cut rates 71 times. The Fed reduced interest rates three times last year, and launched QE4 in October to ‘fix’ the repo market, but in reality, to push stocks higher.

Jensen says that he would not rule out the Fed slashing rates to zero this year as it looks to avoid recession and disinflationary pressures.

But the main reason why Bridgewater is going long gold is also the most startling one: As a result of the coming inflation surge and ballooning US budget and trade deficits, the status of the US dollar as the world’s reserve currency could be threatened.

As for other assets, if there was one word to summarize Jensen’s position it would be: sell.

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