Julian Robertson - There Are Two Bubbles That Can Bite Us

Julia La Roche
Business Insider
Sepember 22, 2014

Legendary hedge fund manager Julian Robertson gave a warning about two bubbles that could "bite us" at Bloomberg Market's Most Influential Summit.

"I agree with the fact that the economy is definitely getting better. I think the cause of that is two bubbles that will bite us. The first bubble is that bonds are at ridiculous levels...The small saver has no place to put his money except stocks. I think that the situation is serious on that score. No one seems to be concerned about that. It's  a world-wide phenomenon that countries are buying bonds to keep them moving along economically."

He said he doesn't know when it will end, but it will be in a "very bad way."

Bill Conway from the Carlyle Group was also on the panel. Conway later said that he agrees with the bubble idea intellectually, but he didn't see a catalyst that will cause it to burst.

Robertson also said that there are some "great companies around" to invest in. He said that Alibaba, which became public last week, is a "fabulous company."

"If Alibaba and some of the other things do as well as they are projected to do, then they are probably reasonable valued. Look, we are always looking for bargains...that's sort of the way it goes in our business," he said later on the panel.

Last week, CalPERS said they would redeem from all their hedge fund investments citing fees and complexity. CalPERS only had $4 billion allocated to funds. Robertson said that he didn't think their move was all that important for the industry.

"Well it's less than 1% of their holdings. They weren't very seriously involved. I think it's definitely much harder to run a hedge fund today than it used to be. In my opinion, it's because there are more hedge funds to compete with. We had a field day before anyone knew anything about shorting. It was almost a license to steal. Nowadays it's a license to get hosed."

The moderator asked Robertson about returns in the hedge fund space.

"I think that depends on the way you run your hedge fund. A lot of people are running hedge funds, a lot of very good people are running hedge funds, and you really couldn't say that these things are 'hedge funds' because they might be 30 percent hedged, but that's about it. They're almost no truly 'hedge funds'--one hundred percent hedged. I think it's still, particularly a good thing in view of the bubble, to have an anchor windward."

He said that the worst situation he's seen in the markets was October 1987 and it just "came out of the blue."

"There really was no reason for that. The economy was strong. There was a bubble and it was pricked and boom!"

Read more: http://www.businessinsider.com/julian-robertson-bloomberg-panel-2014-9#ixzz3EAVBPcGL