Who is Paolo Pellegrini? Pellegrini is a Rome-born analyst who helped hedge fund operator John Paulson make tons of money in the subprime crash of 2007-2008.
It was Pellegrini who led the number crunching on mortgages and home prices and came to the conclusion that housing prices were about to collapse. Paulson's hedge fund took advantage of this data and proceeded to make $3.5 billion on his trades.
Pellegrini is now investing his personal money via his firm PSQR Capital. What are his latest thoughts and predictions?
First off, he calls Bernanke's easy money policy "sheer lunacy." Bernanke is keeping interest rates low in an effort to jump start the economy. In doing so he is creating a new asset bubble that is luring unwitting investors in a "one-way trip to oblivion."
Pellegrini believes that the recent rally is bear market rally, only to be followed by another down market, To support this view he says that 3% of the 3.5% increase in GDP in the recent quarter came from the stimulus money. When this dries up he sees another down market.
What remedies is Pellegrini proposing? Well, Bernanke must shed the easy money policy. Next, U.S. household debt must be paid off. In addition, he proposed a plan to use TALF money to restructure underwater mortgages. Finally he feels that regulators must be given the authority to prevent banks from taking huge risks.
We are already seeing the effects of Bernanke's loose money policy. Gold is setting record highs. The dollar is falling sharply and stock and commodities are being inflated to levels not consistent with reality.
Do you agree with any of Pellegrini"s proposals?
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Reader Comments (Page 1 of 1)
11-17-2009 @ 3:00PM
Peter Van Schaik said...
Pellegrini's proposals may make sense for the long haul but, as they say, in the long run we are all dead. One thing is for sure: If we tighten the screws on monetary policy and every consumer cuts current consumption to the absolute minimum and instead focuses their funds on their debt, the pundits will no longer need to debate whether we are in a recession or depression. It will be obvious and it won't be pretty. But, on the bright side, the depression won't last forever and our grandchildren can enjoy robust growth.
11-17-2009 @ 6:59PM
william lindblad said...
No. Bernanke runs the Fed - not the banks.
1. We all know that the current mess was caused by the banks.
2. We all know that the current mess is also being continued unabated - by the same banks.
As to 1 above, I mean loose credit.
As to 2 above, I mean tight credit.
We have went from one extreme to the other and the simple answer to all the financial problems is to get back into the middle.
Money has to flow in order for an economy to work.
Banks are in business to lend money - responsibly
I really am not going to elaborate as a jackass could figure this out. I still am at a loss for why we have executives running financial institutions for big bucks and why these same companies even had boards of directors?