The Best Hedge Fund Manager Of 2010 Explains Why We Should Keep Printing Money

don brownstein

Photo: Courtesy of Bloomberg Markets Magazine

Hedge fund legend Don Brownstein made millions by correctly betting on the crash of the sub-prime mortgage market.Last year Brownstein and his co-manager at Structured Portfolio Management, William Mok, earned returns of +49.5% in their $1.1 billion Structured Servicing Holdings LP fund. The fund returned 185% in 2007.

Yesterday at an event hosted by Bloomberg Markets Magazine, Brownstein talked about a range of issues, from how to fix the housing market, to a solution to the debt crisis, to why he thinks Dodd-Frank is tantamount to one new traffic light on a treacherous intersection.

Brownstein, a former philsophy and metaphysics professor, has long argued that the crash of the housing market can be traced back to milestone events in history.

“We’re at another watershed moment”

“I think you have to look back to the Great Depression and World War II as crucial moments for what we have experienced up through 2006,” Brownstein said last year.

Now, he says, we’re on the precipice of another major turning point.

“There’s a good chance, a significant chance we’re at another watershed moment, as we were at the end of World War II,” Brownstein said yesterday. “There will be a change in the way Americans live. How they live; where they live; and the conditions under which they live. Expect deep changes in American lifestyle.”

Another migration may be underway, Brownstein said, back towards the city centres. “Drive until you qualify is over.”

The debt debacle

An audience member asked Brownstein about the debt crisis and how we solve it.

“Isn’t it obvious?” Brownstein said. “We’ll make more money. We’ll print more money.”

The questioner asked how we get out of that cycle.

“Why do we want to get out of it?” Brownstein responded. “I don’t know about you, but if someone would lend me money at 3% and I had something useful to do with it, I’d take it all day.”

His thesis on reducing the deficit was as frank: “It’s simple: stop spending. Duh. And people like me have to pay higher taxes. It’s not even calculus. It’s simple arithmetic.”

On needing more stimulus

Brownstein is looking for more stimulus, but he’s indifferent to the form in which it arrives.

“At this point, we need some additional stimulus,” he said. “Whether it be monetary of fiscal, it doesn’t matter. At a deep level it doesn’t really matter — there’s no fundamental difference. It’s about the transmission mechanism.”

He lamented how political the debate has become, since it’s a straightforward situation, in his opinion. Brownstein also expressed concern that people are honing in on economic issues that can be dealth with at a later date: “If you’re worried at this point about inflation, you’re worrying about the wring thing.”

Don’t miss: Hedge Fund Legend Explains How To Fix The Foreclosure Crisis >

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