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Wall Street Superstar Predicts Worst Recession Since 1930s

The New York Sun interviewed hedge fund superstar Jim Melcher on Monday, who is “worried about a recession. Not a normal one, but a very bad one. The worst since the 1930s. I expect we’ll see clear signs of it in six months with a dramatic slowdown in the gross domestic product.” Melcher heads Balestra Capital, a $350 million New York-based hedge fund which has increased in value by 175% as of the interview. Melcher is known for his uncanny ability to spot nearly every market meltdown over the past 25 years, including the stock market crashes of 1987 and 2000, the bond woes of 1994, and the emerging market crisis of 1998.

According to the Sun:

Mr. Melcher, a market bear, had some pretty discouraging words. ‘What I think is not good for the country, but good for me.’ he says. His basic advice to the country’s roughly 80 million stock players: Run for the hills — the worst is far from over… Our bear figures the next six to 12 months will be awful for investors as the market goes down ‘pretty substantially.’ His frightening outlook calls for an additional 20% to 30% decline from current levels. A drop of that magnitude would put the Dow down in a range of roughly 9,100 to 10,400.

Global equity markets will not be immune from the carnage either:

Given his grim expectations, he says there is no equity market in the world he would play right now. ‘When the American market goes down, other equity markets around the world should follow,’ he says.

The hedge fund operator added that the downturn in housing is far from over, credit markets continue to deteriorate, consumption is slowing, and unemployment will rise sharply. Higher inflation is around the corner as the Fed and central banks around the globe debase their currencies. Finally, Melcher is worried about the prospect of foreign investors pulling their money out of American assets due to the falling dollar, the credit crisis, and a slowing economy.

The New York Sun reporter asked Jim Melcher, “Is the world coming to an end?” He replied, “I don’t think so, but as I mentioned, the ingredients are in place for the worst kind of a recession, which means it’s the wrong time to own stocks.”