“The Big Short” Greg Lippmann Thinks Recession Risk Has Meaningfully Increased

There’s lots of debate about how likely a recession is, and Greg Lippmann of LibreMax Capital, whose massive short of subordinated tranches of residential mortgage-backed securities at the beginning of the Great Financial Crisis was chronicled in The Big Short, is on the side of those who think the likelihood has increased.

Optimism + complacency

In his first-quarter letter to investors, which was obtained by Hedge Fund Alpha, Lippmann said the markets began the year optimism and a dose of complacency. Higher stock prices, tight credit spreads and sentiment assuming the “Good Trump” scenario drove the early-year optimism, also seeming to discount any economic risks that could occur with “Bad Trump” outcomes.

Lippmann believes there’s merit to some of the Trump...