Julian Robertson: Stocks & Bonds in Bubble, Especially Bonds ~ market folly

Wednesday, September 28, 2016

Julian Robertson: Stocks & Bonds in Bubble, Especially Bonds

Julian Robertson of legendary hedge fund Tiger Management appeared on Bloomberg late yesterday in an interview with Tom Keene.  In it, they touched on a myriad of topics, including the hedge fund industry, which Robertson said was facing the most challenging time ever.  He also said a bubble is brewing in financial assets.

Here's a quick summary with the video below:

- While interest rates aren't negative in the US yet, thinks it's tragic they're down this far

- Says Janet Yellen's not willing to see the American public take pain

- Robertson said negative and near-zero rates from central banks have sped up borrowing at low costs and money is flowing into financial assets.  Thinks bubble in equities and when it bursts, will spread to real estate. 

- "I would tell them (investors) in my opinion, there's going to be chaos created by the negative and low interest rates."

- Thinks investors should have at least some money allocated to hedge funds, so that they can truly be hedged and have some protection

- That said, thinks some great companies are undervalued, cited healthcare, biotech, and technology stocks specifically.  "A company like Celgene is very reasonably priced.  The Google's, those type things, Microsoft.  They're available at very reasonable multiples."

- Invests his own money but the rest is allocated to Tiger Cub hedge funds, or funds founded by managers that used to work for him (you can see many of those funds' portfolios in our quarterly newsletter).

- Specifically called out bonds as stretched with all the bond-buying programs.  Yields at record lows has forced prices to levels that aren't sustainable

- Thinks China will come out with a strong program against hydrocarbons

- Feels there's already a lot of regulation in the hedge fund industry, especially compared to what it used to be.  But says that's normal as an industry grows.

- "It's the most difficult time I've ever seen in the (hedge fund) business.  Because there are a lot of people who are squeezing shorts and they make a business of doing that.  Furthermore, I don't quite know how the quants work, but I think they have a way of squeezing shorts that is very tough too.  At any rate, I think it's tougher to be a hedge fund investor than ever before.  Hedge funds ordinarily don't outperform the markets except when the markets go down.  But right now it's a very difficult time for them."

- "There's a distinct drift occurring in the fee structure." (2% management fee and 20% performance fee)

- Says you make every effort to avoid any areas where insider trading could be possible:  "It's very difficult to determine whether something is an excellent job of research or is in fact inside information."

- On the UK: "I think London is gonna be durable, but this gonna be tough on the UK.  I think it's gonna be very tough."

- On Europe: "I'm reasonably pessimistic on Europe.  But I think the immediate problem is probably rougher in the UK.  George Soros has written a lot about this and I have a lot of respect for him."

- On America: "I'm extremely optimistic because I think we have really great young people and I've always worked with young people."

Embedded below is the video of Robertson's interview:

You can view somewhat recent portfolio activity from Tiger Management here.

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