By Linette Lopez From business Insider

This may be the darkest thing we’ve read about the market in a while.

In a letter to investors marking his hedge fund’s 10th anniversary, James Litinsky of JHL Capital said he would rather be investing back in the dark days of 2008 than in the market we’re seeing today.

You see, in 2008 the world’s assets were simply deflating and reinflating. Opportunities, in that case, abounded.

Now, however, things are very different. Because central banks around the world have kept interest rates at or near zero for so long, asset prices have inflated while real economic growth has remained anemic. Value is increasingly hard to find.

So as investors search desperately to find it, we have what Litinsky described as a “Venezuela” in capital markets:

“When people think about inflation, they often envision a situation like Venezuela, where there are skyrocketing prices and severe shortages of basic goods and services. This is a garden variety inflation example of too much money chasing too few goods that leads to spiraling prices. The chaos caused is very obvious.

“Global Central Banks have given us another kind of inflation, currently isolated to financial assets. They have printed so much money and so severely manipulated market prices (via an extreme floor on bond prices) such that there is a ‘Venezuela’ happening in the capital markets. Think of it as chaos in the streets for money people who are ‘searching for yield’ or lining up to find the assets they need. Clearly, a financial asset shortage is not as dire as a real goods shortage like Venezuela. We do not consume our bonds like rice, packaged soup or toilet paper. Yet, it is naïve to think that there will not be dramatic long-term societal consequences.”

What are these “long-term societal consequences”? Low rates have been, in part, a monetary solution where a political one was and is more necessary. They are a symptom of the global political class’ abdication of responsibility. They help explain why so many people desperately want change.

It’s where you get your Donald Trumps, your Brexits, your far-right this and your far-left that. It’s where you get into a world of “unknown, unknowns.”

There will be blood
In the meantime, there will be crowding. That crowding will lead to some interesting circumstances. Back in May, billionaire money manager Steve Cohen of Point 72 Asset Management said such crowding blew a hole in his portfolio earlier this year.

“One of my biggest worries is that there are so many players out there trying to do the same strategies … if one big one goes down, will we take collateral damage?” Cohen said at the Milken Institute Global Conference in Los Angeles. “We were down 8% in February, and for us that’s a lot … My worst fears were realized.”

That’s one consequence. Another will happen when rates eventually rise and asset prices fall.

Back in October, at the Grant’s Interest Rate Observer conference in New York City, Litinsky presented his vision of what would happen. He hypothesized that all of the companies that had taken advantage of low interest rates and piled into debt to grow into massive conglomerates over the past few years would get punished.

Of course, who knows when that will happen.

“No one knows whether this environment will last for another decade or if investor psychology will reverse tomorrow,” Litinsky wrote in his letter. “One truth is very clear to me. Plenty of rewards may be available, but they entail assuming ever higher levels of risk with diminishing rewards.”

IMAGE: An empty section where toilet paper should be on display in a supermarket in Caracas, Venezuela, in 2013. Reuters