Elliott Investment Management has a new acronym for you: FOGO. That stands for the "fear of getting obliterated," and the $80 billion hedge fund thinks it could replace FOMO in a hurry.
In its latest investor letter, as reviewed by The Wall Street Journal, the firm led by Paul Singer and Jonathan Pollock compared today's debt-fueled, tech-heavy markets to the Roaring '20s before the Great Depression. The mood music, in other words, is upbeat right up until it isn't.
"At present, virtually every alarm bell warning of a substantial bear market ahead is ringing," the letter said.
A Stack of Tail Risks
Elliott flagged widening U.S. budget deficits, persistent inflation, private-credit portfolios and AI hype, including circular investments between tech firms and infrastructure makers, plus debt-financed capital spending.
It also called out zero-day options and meme-stock betting, which it said were more like gambling than investing. That is a polite way of saying a lot of people are treating the market like a casino with a brokerage app attached.
"So many factors have lined up to cause this great boom that it might take disruption in only one or two of them to shift this momentum into reverse," the firm wrote, warning of "a cascading, self-reinforcing unwind of this bull market."
The Price of Protection
Elliott's performance reflects these concerns. It went flat in the third quarter and up a little under 2% through September. In contrast, the S&P 500 returned nearly 13% over the same period. Being early to a bear market is a bit like buying insurance that hasn't paid out yet: the premiums add up while everyone else is at the party.
Distressed debt and hedges tied to gold, currencies, stocks and interest rates lost money. Commodities, arbitrage and credit hedges made money. So the hedges were a mixed bag, which is what hedges often are.
"Over Elliott's five-decade existence, fallow periods have existed, but these have historically been accompanied by market turbulence and followed by periods of rare opportunities," the letter said.
"Our goal is to be well positioned, protected on the downside, and with capital to deploy into the bargains, when the tide turns again."
The firm sees opportunities in healthcare activism, producing energy properties and, eventually, forced sellers in dislocated credit markets. That last one is the classic distressed-investing playbook: wait for the margin calls, then go shopping.
Inside the Defensive Wall
Elliott's latest 13F filing dated August 14 shows the firm's lean on hard assets. Triple Flag Precious Metals Corp. (TFPM) led at $3.99 billion, 18% of the total.
Phillips 66 (PSX) followed at $3.25 billion, then Suncor Energy Inc. (SU) at $1.58 billion and Hewlett Packard Enterprise Co. (HPE) at $1.46 billion.
Southwest Airlines Co. (LUV), where Elliott won a board overhaul in 2024, remains a $1.25 billion position. PepsiCo Inc. (PEP) and Synopsys Inc. (SNPS) are small stakes, at $173 million and $101 million.
Derivatives holdings are significant, primarily for downside exposure. Puts on Invesco QQQ Trust (QQQ) carried $2.56 billion in notional value.
Puts on iShares Expanded Tech-Software ETF (IGV) added $1.43 billion, with more on Industrial Select Sector SPDR (XLI), Consumer Discretionary Select Sector SPDR (XLY), and Consumer Staples Select Sector SPDR (XLP).
So the picture is a fund that owns gold royalties and energy, holds a big airline activist stake, and has bought a lot of protection against a tech-led selloff. It is not a bet that everything goes up. It is a bet that if everything goes down, Elliott will have cash and courage when others have neither.
The letter's warning is worth taking seriously precisely because it is uncomfortable. Bull markets are built on the idea that the good times will continue, and bear markets are built on the idea that they won't. Elliott is positioning for the second one, even if the first one is still paying the bills for now.
