This page has been archived and commenting is disabled.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

Tyler Durden's picture




 

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:

 

- advertisements -

Comment viewing options

Select your preferred way to display the comments and click "Save settings" to activate your changes.
Mon, 04/06/2015 - 21:06 | 5965340 mendolover
mendolover's picture

Anyone who thinks Motorola would do a phone interview with the Kiev Post is an idiot.

Tue, 04/07/2015 - 01:11 | 5965790 dogismycopilot
dogismycopilot's picture

you get paid by the word i see.

Mon, 04/06/2015 - 17:27 | 5964725 thecrud
thecrud's picture

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.

 

Mon, 04/06/2015 - 19:00 | 5964740 Arthur Schopenhauer
Arthur Schopenhauer's picture

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.

Mon, 04/06/2015 - 17:33 | 5964745 Bumbu Sauce
Bumbu Sauce's picture

More control, more BS.  These people are insane thinking they can manage everything.

Mon, 04/06/2015 - 17:37 | 5964758 manhattanexile
manhattanexile's picture

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

 

 

 

 

Mon, 04/06/2015 - 18:34 | 5964765 all-priced-in
all-priced-in's picture

It must be about time to break out the macro-prudential regulations.

 

1. Pull my finger

2. ??

 

 

 

Mon, 04/06/2015 - 17:48 | 5964785 Izznogood
Izznogood's picture

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.

Mon, 04/06/2015 - 18:25 | 5964899 Berspankme
Berspankme's picture

Bye

Mon, 04/06/2015 - 19:50 | 5965183 Ban KKiller
Ban KKiller's picture

You look at ZH for some kind of WISDOM or truth? That is funny.....

Value? Yep! Lots of laughs! Daily! 

Mon, 04/06/2015 - 20:02 | 5965211 lakecity55
lakecity55's picture

do not let the mouse hit you on the way out.

Tue, 04/07/2015 - 14:15 | 5967313 Clowns on Acid
Clowns on Acid's picture

I would do it for you... if I knew how.

Mon, 04/06/2015 - 17:48 | 5964787 QEsucks
QEsucks's picture

@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

Mon, 04/06/2015 - 18:19 | 5964880 Not My Real Name
Not My Real Name's picture

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.

Mon, 04/06/2015 - 17:49 | 5964788 stranglesnstraddles
stranglesnstraddles's picture

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?

Mon, 04/06/2015 - 17:49 | 5964789 QEsucks
QEsucks's picture

@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

Mon, 04/06/2015 - 17:51 | 5964799 SMC
SMC's picture

{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.

Mon, 04/06/2015 - 17:52 | 5964805 yogibear
yogibear's picture

Not with big guns like William Dudley getting on the business channels and pumping stocks today.

Mon, 04/06/2015 - 18:15 | 5964865 Peter Pan
Peter Pan's picture

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.

 

 

Mon, 04/06/2015 - 18:41 | 5964959 farmerbraun
farmerbraun's picture

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?

Mon, 04/06/2015 - 19:02 | 5965038 Peter Pan
Peter Pan's picture

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.

Mon, 04/06/2015 - 19:30 | 5965129 Thisson
Thisson's picture

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.

Tue, 04/07/2015 - 01:45 | 5965845 DaveA
DaveA's picture

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.

Tue, 04/07/2015 - 02:41 | 5965899 farmerbraun
farmerbraun's picture

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.

Mon, 04/06/2015 - 18:32 | 5964917 drdolittle
drdolittle's picture

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.

Mon, 04/06/2015 - 18:49 | 5964987 rsnoble
rsnoble's picture

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?

Mon, 04/06/2015 - 18:52 | 5964998 Shitgum Suicide
Shitgum Suicide's picture

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.

Mon, 04/06/2015 - 18:52 | 5965002 PacOps
PacOps's picture
Can Rolling Stone be trusted? If so then ... http://www.rollingstone.com/politics/news/the-9-billion-witness-20141106... The $9 Billion Witness: Meet JPMorgan Chase's Worst Nightmare Meet the woman JPMorgan Chase paid one of the largest fines in American history to keep from talking BY MATT TAIBBI November 6, 2014 Chase whistle-blower Alayne Fleischmann risked it all. Andrew Querner She tried to stay quiet, she really did. But after eight years of keeping a heavy secret, the day came when Alayne Fleischmann couldn't take it anymore.  "It was like watching an old lady get mugged on the street," she says. "I thought, 'I can't sit by any longer"
Mon, 04/06/2015 - 18:53 | 5965003 thecrud
thecrud's picture

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.

Mon, 04/06/2015 - 19:48 | 5965175 Ban KKiller
Ban KKiller's picture

UNLESS the banksters never paid for the homes...

Look 6 months after a home is foreclosed on and who is the "owner"? 

Mon, 04/06/2015 - 19:06 | 5965048 NoWayJose
NoWayJose's picture

Economy = Bubble

Rate Hike = Pin

Tue, 04/07/2015 - 02:39 | 5965896 MagicMoney
MagicMoney's picture

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.

Tue, 04/07/2015 - 02:42 | 5965897 MagicMoney
MagicMoney's picture

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).

Mon, 04/06/2015 - 19:07 | 5965052 22winmag
22winmag's picture

CNBC viewship could easily fit on a shorty school bus.

Mon, 04/06/2015 - 19:15 | 5965074 Thalamus
Thalamus's picture

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?  

Mon, 04/06/2015 - 21:44 | 5965431 bid the soldier...
bid the soldiers shoot's picture

poor yorick

To sleep.  Perchance to dream

Mon, 04/06/2015 - 19:20 | 5965094 thecrud
thecrud's picture

The last crashmade the rich richer can we get one that makes them dead broke this time.

Mon, 04/06/2015 - 19:25 | 5965111 p00k1e
p00k1e's picture

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 

Mon, 04/06/2015 - 19:32 | 5965135 Thisson
Thisson's picture

It's very difficult to spend hundos anyway - many places won't take any bills larger than a $20.

Mon, 04/06/2015 - 19:34 | 5965141 FSFT
FSFT's picture

Pop-pop-fizz-fizz-... I think Hillaries boils will pop before anything that a$$wipe thinks will happen

Mon, 04/06/2015 - 19:52 | 5965187 Livermore Legend
Livermore Legend's picture

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 ?

Mon, 04/06/2015 - 20:30 | 5965254 European American
European American's picture

Seems like this (ad nauseam) "bubble" talk has become the chronic, proverbial broken record. What year is this, '08. '11, '15, '18?

Mon, 04/06/2015 - 20:43 | 5965297 saveUSsavers
saveUSsavers's picture

The LYING COCKROACH! FORWARD P/E > GAAP< is 27, the FUCKING ASSHOLE GOT HIS MORE BILLIONS, NOW HE'S A FKING LIAR!

Mon, 04/06/2015 - 21:05 | 5965332 realWhiteNight123129
realWhiteNight123129's picture

The only possible crash is the currency.

 

Mon, 04/06/2015 - 21:05 | 5965333 realWhiteNight123129
realWhiteNight123129's picture

The only possible crash is the currency.

 

Mon, 04/06/2015 - 21:05 | 5965334 TheAntiProgressive
TheAntiProgressive's picture

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.

Mon, 04/06/2015 - 21:32 | 5965404 Dirtt
Dirtt's picture

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.

Mon, 04/06/2015 - 21:47 | 5965441 nathan1234
nathan1234's picture

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

Mon, 04/06/2015 - 21:59 | 5965464 devo
devo's picture

its only recourse will be to - literally - paradrop money from the skies

What? No. The next recourse is confiscation of everything to fund banks.

Mon, 04/06/2015 - 22:38 | 5965544 bid the soldier...
bid the soldiers shoot's picture

Robertson is too optimistic

"I don't think it's at all ridiculous to think of a selloff like we saw in 2008."

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.

Panic me once shame on me.  Panic me twice......

 

Tue, 04/07/2015 - 02:36 | 5965892 farmerbraun
farmerbraun's picture

Agree.
Living in NZ can do that to you after a while.
Godzone.

Mon, 04/06/2015 - 22:58 | 5965592 kedi
kedi's picture

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.

Tue, 04/07/2015 - 11:09 | 5966680 Clowns on Acid
Clowns on Acid's picture

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.   

Tue, 04/07/2015 - 01:27 | 5965816 basho
basho's picture

"

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.

"

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/

Tue, 04/07/2015 - 08:32 | 5966230 headhunt
headhunt's picture

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.

Tue, 04/07/2015 - 01:43 | 5965842 walküre
walküre's picture

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.

Tue, 04/07/2015 - 02:46 | 5965906 falga
falga's picture

Looks like we are going to see a rate hike sooner than later to quell this sort of thinking...

Tue, 04/07/2015 - 03:50 | 5965943 q99x2
q99x2's picture

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.

Tue, 04/07/2015 - 08:23 | 5966206 f16hoser
f16hoser's picture

I expect the markets to keep going up. How do I know? Central Planners are in charge and politicians are not. Nuff said.

Tue, 04/07/2015 - 09:48 | 5966439 rickybobby1hundo
rickybobby1hundo's picture

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

Tue, 04/07/2015 - 12:31 | 5966908 Rastech
Rastech's picture

I'm beginning to wonder whether this "plane" (economy) has got enough fuel left, to even get to the crash site.

Do NOT follow this link or you will be banned from the site!