This page has been archived and commenting is disabled.
Hedge Fund Legend Julian Robertson Warns Of A "Complete Explosion" Unless Fed Contains "Boiling, Bubble" Market
Legendary hedge fund manager Julian Robertson, who has been conspicuously absent from CNBC in recent months, spoke with Fox Business' Maria Bartiromo about his take on markets. He was hardly bullish, which may explain his absence from the cadre of CNBC bubble cheerleaders.
Robertson (in addition to some generic comments on the weather impacting the jobs numbers: apparently the weather only impacted the warmer March, not the freezing January and February) said that "the thing that worries me the most are the twin bubbles that are developing, certainly the Federal Reserve, the people that run their Treasury operations, are trying to create a bubble in bonds and they are doing it."
The other implied bubble of course is that of stocks, because with no upside left in bonds, capital appreciation starved investors have no choice but to go into stocks which as of today just hit 21x on a forward GAAP PE multiple surpassing even David Tepper's 20x bogey.
Asked how the bubble will end, Robertson notes that "nobody knows when bubbles are gonna burst. As a child when you are blowing a bubble you don't know when it's gonna burst and that's part of the fun of the "bubble" bubbles, but this is more serious and I am very worried about it"
Will a bursting bond bubble disrupt the equity rally? Robertson is honest enough intellectually to admit that bond and stock bubbles are connected and says that a bursting bond bubble will crush stocks and the Fed is "frightened to death" over fears a plunge in stocks will also crush the economy.
So what is the solution? According to Robertson the Fed must act and hike rates soon because “the economy warrants it and I think [the Fed is] not crazy enough just to let this thing boil over into complete explosion."
He adds: "I think that eventually we are going to see the Federal Reserve do the responsible thing which is put a little lid on this tea kettle that's boiling over, but I don't know when that's going to be. That will trigger a little bit of a slowdown in the overall economy."
Considering the Fed allowed both prior bubbles boil over into a "complete explosion" and considering this time it is not just the Fed but the BOJ, the ECB, the BOE and the SNB, one wonders why Robertson is so confident that nearly a decade after the start of ZIRP (which in Europe is now NIRP) some academic, somewhere, deep in the bowels of the Marriner Eccles building will do the right now.
Robertson's conclusion: we can certainly see a 2008-like market crash because "the bigger this bubble gets, the bigger the burst."
I am looking at a bubble that is almost sure to pop at some time and I don't know when it's going to happen, but I know it's going to happen.
His conclusion, and the reason why there is no CNBC any time in Julian Robertson's future is his answer to how big a selloff we could get: "I don't think it's at all ridiculous to think of a selloff like we saw in 2008." Obviously, he uses the term "selloff" loosely.
* * *
And so we hit peak irony: when even those who reap the biggest benefits of the Fed's idiotic, bubble-blowing policies explicitly warn that these same policies will lead to a bubble crash that results in a ~70% collapse in stocks. Only this time it will be far, far worse, because once the Fed loses credibility, and no amount of verbal intervention will restore some faith in the grand Ponzi, its only recourse will be to - literally - paradrop money from the skies - an endgame Bernanke himself warned about some 13 years ago. In fact, this final bubble burst may well unleash the war and/or revolution that Paul Tudor Jones warned about.
So buy stocks... unless you want mushroom clouds to become a permanent neighborhood fixture.
Full interview below:
- 108909 reads
- Printer-friendly version
- Send to friend
- advertisements -


Anyone who thinks Motorola would do a phone interview with the Kiev Post is an idiot.
you get paid by the word i see.
Anyone who has ever cooked knows that putting a lid on is the exact thing that causes a boil over.
You turn down the heat.
pop pop pop pop.
Fellas, its obvious. Stock and bond valuations don't matter one whit. The only thing that matters every day is whether a little old lady says she and her buddies are gonna do something to you or not. What makes the whole thing so damned ridiculous is the daily rumors. A bunch of rumors as to whether Janet and her buddies are gonna say something, or do something, but it appears mostly whether they just say something.
Sheesh... Me? I don't give a rats ass whether Janet and her buddies talk up some bullshit or talk it down. I think its pretty silly to be focusing my attention on what some little old lady might say... from one day to another.
More control, more BS. These people are insane thinking they can manage everything.
He was right before - just early, and with the depression that truly happened and got papered over over the last 7 years I wouldnt dismiss his call so easily:
Legendary Funds Manager Predicts Utter Global Collapse Stemming From Bursting of Property Bubble
http://www.freerepublic.com/focus/news/1447026/posts
It must be about time to break out the macro-prudential regulations.
1. Pull my finger
2. ??
Unfortunately ZH has become a pulpit for the insane, the conspiracy theorists, and the Putin mob. It no longer delivers any value. Once I figure out how to de-active my account that is what I will do. Meanwhile I will simply stop visiting this site.
Bye
Tombstone: Well Bye
https://www.youtube.com/watch?feature=player_embedded&v=i0BTdo6qGwo
You look at ZH for some kind of WISDOM or truth? That is funny.....
Value? Yep! Lots of laughs! Daily!
do not let the mouse hit you on the way out.
I would do it for you... if I knew how.
@LoP. Wasn't going to log in, just lurk. but had to log in to Green your-
tick tock motherfucker
Thanks. you made my day
5 years and 5 weeks here and you act like that's the first time LoP ever said that. If I had a nickel for every post he's used that tagline, I'd be a fuckin millionaire.
Do you guys think that the next market correction will be synonymous with the decline (or as some like to call it, the death) of the USD? So even those who timed their shorts will be losers as well?
@LoP. Wasn't going to log in, just lurk. but had to log in to Green your-
tick tock motherfucker
Thanks. you made my day
{So what is the solution? According to Robertson the Fed must act and hike rates soon because “the economy warrants it and I think [the Fed is] not crazy enough just to let this thing boil over into complete explosion."}
Does anyone really believe that the Fed and their US government minons are capable and smart enough to stop a macro correction without inflicting more damage?
ROFL.
Not with big guns like William Dudley getting on the business channels and pumping stocks today.
In my humble opinion, the only way to defuse the bomb without exploding it is to gradually increase the equity and margin requirements on any investment or speculation. Interest rate rises can follow gradually afterwards.
Any sudden jerk in the interest rate sphere will decimate the market place.
In my view leverage has been every bit as responsible for the bubble as low interest rates have been.
That is the current approach of the RBNZ, faced with very low inflation on one hand , and a housing debt bubble on the other.
Raising interest rates will screw the productive economy, and will be insufficient to deflate the bubble.
Your suggestion is one of the few macro-prudential tools available. Raising the reserve requirements for banks, raising the level of deposits on house purchases etc.
Anything else?
Some jurisdictions allow losses on borrowings for investment property to be offset against other income as well as very generous depreciation allowances. This places the investor at a great advantage to the home buyer and perhaps should be reigned in.
Perhaps a hike in the capital gains tax if the property is held for less than a certain period.
The idea is not to stop the activity but to stop the manic flipping that is going on.
The problem of course is that many governments are revelling in the duties they collect from such transactions.
You're not going far enough. There needs to be tax parity for all sources of income. Taxing "capital" at a lower rate than "labor" is favoring one over the other. It needs to end.
Problem with that is that capital can always walk away, while labor needs to eat. In other words, if you can afford to invest a million dollars e.g. to open a restaurant, you can also afford not to. So the tax burden falls on labor no matter how the laws are written.
So how about a broad-based tax at a low rate?
Like a financial transaction tax at <5% on EVERYTHING. Capital transactions , income of every sort, including interest, and GST/VAT.
Everything at <5%.
And big penalty for avoidance by using cash for trade.
Easy to follow the money in today's environment, I think.
I suspect it will be DOW 40k. Inflate away until you can't anymore. I've paid off my mortgage. I've tried buying puts on an overstretched market. How would I be screwed hardest? Massive inflation (no debt, savings and some hard assets). I just don't play the game much anymore ( I confess to the occasional derivative bet when I'm feeling frisky) but sudden debt is right, it's rigged and if you get the timing right it's just coincidence, cause we're not in the club.
A couple things.........what about all these discussions we've had regarding how the Fed "can't raise" rates because they will implode?
Secondly, regarding his comment "because the economy warrants it".......does that mean he believes all the BS economic reports and we shouldn't be listening to his crap in to begin with?
It's funny. In 06/07 some people were warning about the fed and the housing market, but were called nut jobs and kooks by the MSM.
Now more people are calling for a correction/sell off and the fed still doesn't do the right thing, nor will they. The market still goes up but there is no actual economic indicators to justify it rise.
It's very maddening and sad at the same time to know that most people will still not understand before it's too late why they got raped!
I guess people like being raped which proves the old adage; when being raped it's better to enjoy it rather than fight it.
Long lube.
I have a clue for you all most houses were bought by investors once again, But this time they are renting them out.
After the crash they will not be able to rent them for enough to pay the bill.
Hilarity ensues.
UNLESS the banksters never paid for the homes...
Look 6 months after a home is foreclosed on and who is the "owner"?
Economy = Bubble
Rate Hike = Pin
Correct. Rate hike means bonds will crash, stocks will crash, then bear money will go back to bonds out of fear again, or maybe not since rates are higher. Seriously why borrow from Uncle Sam at paltry yields when you make more depositing money with any meaningful rate hike? Low yield junk will crash. It's a ripple effect of interest rates. A rational Fed (in Fed context) will want to keep yields low, and borrowing dirt cheap. It's a classic credit bubble. No way the Fed can raise rates without pricking the bubble.
Correct. Rate hike means bonds will crash, stocks will crash, then bear money will go back to bonds out of fear again, or maybe not since rates are higher. Seriously why borrow from Uncle Sam at paltry yields when you make more depositing money with any meaningful rate hike? Low yield junk will crash. It's a ripple effect of interest rates. A rational Fed (in Fed context) will want to keep yields low, and borrowing dirt cheap. It's a classic credit bubble. No way the Fed can raise rates without pricking the bubble which is actually more collasal than the previous financial crisis (which never really left).
CNBC viewship could easily fit on a shorty school bus.
Bottom line, the USA needs to pay off its foreign debtors with the printing press--no brainer! The USD is golden so take advantage of it. Then, pay off debts to domestic holders and we are done...debt free!!! The Fed is buying its own notes and bonds now so new debt isn't an issue. I imagine China and other foreign holders aren't keen on this idea so are demanding gold instead, and the Federal Treasury bonds aren't callable. This is probably why Gold is being suppressed so we can pay our foreign debt holders in low priced Gold?
poor yorick
The last crashmade the rich richer can we get one that makes them dead broke this time.
It’s almost over.
Today I went to the bank for some flash cash. The bank only had $4,000 in hundred dollar bills on hand. Anything more had to be in twenties.
LOL
It's very difficult to spend hundos anyway - many places won't take any bills larger than a $20.
Pop-pop-fizz-fizz-... I think Hillaries boils will pop before anything that a$$wipe thinks will happen
But the only Question that Matters Julian, is are You or Proteges Positioned to BOTH PROTECT Accumlated Capital AND PROFIT from it ?
The Answer to that Question, is NO.
At the Real Bottom, Mea Cupla AnteS, won't be "worth a bucket of warm spit" to coin John Nance Garner.
As I've said,
Why Lose ?
Seems like this (ad nauseam) "bubble" talk has become the chronic, proverbial broken record. What year is this, '08. '11, '15, '18?
The LYING COCKROACH! FORWARD P/E > GAAP< is 27, the FUCKING ASSHOLE GOT HIS MORE BILLIONS, NOW HE'S A FKING LIAR!
The only possible crash is the currency.
The only possible crash is the currency.
If the FED moves rates up with a relatively strong dollar won't the end result be more demand for dollars chasing yield and risk. For some bizarro reason they world thinks the US economy is strong (propaganada) and ergo since they all / we have fiat worldwide, then demand pushes again demand for dollars strengthens FX rates and US exports go to hell in a hand basket and unemployment ramps. This to me is insanity trying to understand exactly what to do. PMs yes, asset rich equities that have pricing flexibility yes. Fixed debt instruments no. RE probably, maybe leverage. Farmland looking good (value) + cash flow. Commodities down and variable which may squirrel crops and farmland. What do you do to minimize risk? I already have the lead side covered.
USA in my opinion will print fiat till the cows come home. Who ya gonna borrow from the Chinese or the IMF? The pols can't stomache higher intrest on the debt and would have to (gasp) cut something meaningful. The FED won't jump rates but I don't consider .25% earth shattering. The pols will get a taste of the budgetary impact and won't "like it", not one bit. I am so confused.
Keep it simple. This is the DOG now waging the TAIL.
Robertson is obviously hedged for the downside. DUH!
KEY POINTS: 1) When Maria has to fill in the blanks ponder what he can't say. 2) When he drinks his water glass you know he can't hide the big lie very well. 3) Watch the body language near the face whichs tells he thinks he knows yet its still a variable.
ANOTHER DUH. Threw Amazon under.
With ZIRP policy these last few years, the liquidity pumped to the Bankers who control the system, all pension funds in Stocks and Bonds (& the quadrillion odd derivatives) anyone who thinks the system is fine has to be certified insane.
There are so many bubbles within the all encompassing bubble that only a few need to go off inside to break the biggest outer bubble.
Of course these bankster crooks will try to profit from these bubbles but most often the best laid plans never function
What? No. The next recourse is confiscation of everything to fund banks.
Robertson is too optimistic
We should be so lucky as to see a selloff like that. A panic that calm. I suppose it was because nobody then knew the truth. Everybody knows the truth now.
Agree.
Living in NZ can do that to you after a while.
Godzone.
Before raising rates.
The fed et al, needs to start making the little guy whole again. The free money for wall street and other political donors needs to go to some more useful things, before rates are increased.
Target infrastructure repair and expansion. Make some jobs, some things that are useful, ( to business as well as the little people. )
Get some money into the average persons pocket. To make sure they do the right thing with that money. Tighten up the lending criteria. Get them paying down debts, before borrowing more.
Tougher mortgage standards, to avoid a bubble happening with the new jobs and money.
Let that work for a while, before raising rates. Raise rates now and you will crush the average people. Defaults all over the place. There has to be a multifaceted plan in place for a time, before raising rates.
kedi - Only if you think that the immoral, short fingered, vulgrians at the Fed and Inv Banks (I repeat myself) actually wanted the socio-economic environmrnt to become better balanced would they institute the type of actions you recommend.
It is far beyond that now... someone has to take the fall... for the Fall. The Fed emmebers must be tried and jailed.
"
"
now that's something you can take to the bank. lmao
here's the place for your funds robbie
http://rt.com/business/247145-ruble-winner-gains-economy/
The Ruble is a high stakes crap shoot, you would do better to play Vegas, at least the odds are known there.
With Putin... not so much.
QE has ended awhile back. The market is trading sideways ever since. Economy is not improving and is actually getting worse.
Eventually ZIRP is not enough to keep floating the turd.
Looks like we are going to see a rate hike sooner than later to quell this sort of thinking...
Its interesting to watch the algos on Coinbase. I watched a 62 bitcoin order feed itself tens upon tens of .0x at like 10cents above its ask. Takes a long time before it sells itself to itself.
I expect the markets to keep going up. How do I know? Central Planners are in charge and politicians are not. Nuff said.
With your feet on the air
And your head on the ground
Try this trick and spin it, yeah
Your head'll collapse
If there's nothing in it
And then you'll ask yourself
I'm beginning to wonder whether this "plane" (economy) has got enough fuel left, to even get to the crash site.