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Victor Sperandeo
Today a legendary trader and investor spoke with King World News about the Fed's move, and also warned that an unknown event may trigger an avalanche of selling in global markets. Victor Sperandeo has been in the business 45 years, and has worked with famous individuals such as Leon Cooperman and George Soros. Another legend, hedge fund manager Paul Tudor Jones, said, "Victor Sperandeo is gifted with one of the finest minds I know. No wonder he's compiled such an amazing record of success as a money manager."

Incredibly, Sperandeo was interviewed in Barrons in September of 1987, where, with astonishing accuracy, he predicted that the stock market would crash. The market crash took place one month later and it just added to his legendary reputation. Below are the warnings issued by Sperandeo.

Eric King: "Victor, the Fed has tapered another $10 billion and they are talking up the economy."

Sperandeo: "The reason the Fed has to stop QE is because in 2008 the Fed balance sheet as a percentage of GDP was 6 percent, and now it's a staggering 26 percent....

The reality is the Fed doesn't want to cut this program back, but it has to. That's an important fact. The Fed is going to own about $4.5 trillion worth of securities at the end of the year. Approximately 2/3 of those are Treasuries. So the Fed has been eating up a great deal of the float. If the Fed kept going at the rate they were, they would end up owning all the Treasuries in just 6 more years. So now you see how absurd it is what the Fed has done.

Right now we are already more than 5 years from when the recession was supposed to have officially ended, and yet we have virtually the same kind of policies we had in September of 2008. Doesn't that tell you something? The economy is really in an iron lung, it's still a disaster. What the Fed is telegraphing with its policies is the United States is still essentially in emergency conditions and the economy is in horrible shape. So I want to be clear about this, right now the risk in major markets is astronomically high. And that is why the Fed is keeping its zero interest rate policy in effect and also continues pumping money into the system."

Eric King: "In light of what you've just said, Victor, what do you expect in the back half of this year?"

Sperandeo: "First let me just say that anyone who believes anything the government says or puts out in terms of official economic releases has their head where it shouldn't be. So when the Fed says today that GDP was up 4 percent, if somebody wants to believe that, good luck to them. GDP wasn't up 4 percent. I want KWN readers to understand something important: The U.S. government can make that GDP number anything they want. Meaning, it's fantasy, or the 'big lie' as Joseph Goebbels would say.

Again, the economy is much weaker than what the government is telling people. The unemployment situation is still a disaster. So anything can happen to set the stock market off on a 20 to 30 percent plunge in a very short period of time. But I don't recommend shorting the market because the government and the Fed wants the stock market elevated. What will set off this collapse in stocks is an unknown event that the Fed can't control.

So in the back half of this year people should expect a continued weak economy, but not necessarily a weak stock market, even though the stock market is totally disconnected from reality. The key is, what is the unknown event that is going to trigger the avalanche of selling?"

Sperandeo added: "The gold market is, of course, being manipulated by central banks. The major buyers of gold on a consistent basis are India, China, and other nations in the East. But investors need to own gold for insurance, as a hedge against the potential disaster the Fed's insane policies may unleash."