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At Davos: Paul Singer To Warn Of Derivatives Catastrophe

Stocks in this article: GS

Paul Singer, the outspoken hedge fund manager at Elliott Management, will not disappoint when he speaks in Davos, Switzerland at the World Economic Forum this January 22 at about 9:45AM EST. In fact Paul Singer's speech and later debate on the topic "Are Markets Safer Now?" is expected to shake the very foundation of the elite event, according to a letter to investors reviewed by ValueWalk. The topic was briefly mentioned in Singer’s Q1 2013 shareholder letter.

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Paul Singer

Based on a rough outline of Paul Singer's remarks reviewed by ValueWalk, the seventy year old activist investor will pull no punches as he will dismantle the notion of global financial stability and tear right into unregulated derivatives which he asserts are likely to be at the heart of the next economic crisis.

"We can only assume that the reason the global financial system is still… overleveraged, opaque, reliant upon the implicit and explicit support of governments for its very existence… is that fixing the problem would be too painful for powerful special interest groups," the rough draft says, setting up for the next warning and pointing to government bailouts and the political lobbying machine that ensures they remain intact.

In 2007 with fellow hedge fund manager Jim Chanos, Paul Singer warned the G7 finance ministers of impending global financial catastrophe and said the large banks were close to sinking the world economic system. Messrs Chanos and Paul Singer were ignored, which later caused a political uproar in the UK after the financial crisis they predicted occurred in 2008. Seven years after recognizing the last economic collapse, Paul Singer will be delivering a similar warning in Davos - and his message is similar that that of other derivatives experts.

After taking aim at political institutions caught in the self-serving spider web of lobbying, Paul Singer will note some progress has been made and then identify what he considers the primary issue facing the world economies today.

Paul Singer identifies key problems

"The major financial institutions those bailed out or implicitly supported in the last crisis have taken important steps to reduce their trading risks since the 2008 collapse. However, it is impossible to verify such progress from public financial statements or even to assess these institutions' true financial risks. Unfortunately, opacity and extreme leverage still reign supreme."

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