Andrew Redleaf, chief executive officer, Whitebox
Steins law ordains that if a thing cannot
go on forever, it must someday stop. Consider, for example,
housing prices and the late bubble therein. Clearly, housing
prices could not continue rising at the rate they were.
Therefore, the rise would eventually stop, with predictable
consequences for a credit market increasingly premised on the
proposition that housing prices would soon account not for all
the wealth in the known universe, but much that still lies
where no man has gone before. Prices having become entirely
self-reflexive, it was also clear that as soon as they stopped
rising, they would fall.
Similarly, if current spreads cannot widen forever, they
must stop somewhere. And, insofar as the widening had been
driven by momentum, rather than value, they must then
This suggests a large and wide-ranging opportunity in
fixed-income markets. To get some...