Andrew Redleaf, chief executive officer, Whitebox Advisors
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 reverse.
This suggests a large and wide-ranging opportunity in fixed-income markets. To get some...