Hedge fund manager John Burbank, who successfully bet against subprime mortgages during the 2007 housing crisis, believes the extraordinary accommodative policy of the Federal Reserve and its forthcoming undoing will cause the next financial disaster, according to a new interview with Real Vision, an on-demand video platform for finance.
The founder of Passport Capital, which has more than $4.1 billion in assets, said in the interview:
"This is the unwind of QE (quantitative easing), an era where it wasn't QE one and done it was two, Twist and three and I think there's no doubt there's going to be a four, but it's going to be a very painful path before we get to four.... Six months before they should have been hiking, they did QE3, which to me was an epic mistake along the lines with Greenspan cutting rates in October '98."
"This is the next one (crisis) ... I guess I'd say this is the fourth one in 20 years," Burbank added.
Burbank, who successfully bet against crude oil earlier this year, believes the rising U.S. dollar and a lack of market liquidity will be the catalysts for the coming selloff.
He said if the Fed does hike rates, it will only exaggerate the problem.
To be sure, not all is lost for long-term investors, according to the hedge fund manager. Biotechnology, technology and consumer stocks, which have disruptive secular trends backing them, will do well, he said.
Burbank's full interview from Real Vision can be viewed here.