Saturday, October 20, 2007

Julian Robertson Calling for "Doozy of a Recession"

Since I am not in front of a TV or CNBC during the day I don't know if this helped to cause the market to further weaken, but legend Julian Robertson had some bearish comments on Friday. There is a 3 part video found here at this link if you'd like to see the interview in its entirety. Again, this is one man's opinion; but a very smart man, and a man who has had billions of investors money in his palms over the years. He is up there with Buffet, Soros, et al as one of the best investors of the past few generations.
  • Hedge fund legend Julian Robertson said Friday he expects the U.S. economy is heading for a "doozy of a recession."
  • "I think we are going to have a doozy of a recession," Robertson told CNBC's Erin Burnett. "I think the credit situation is worse than anybody realizes, and...I think we're getting little inklings of that. I don't think any of the normal indicators you would look at in the economy are really very strong. As a matter of fact, they are weak, and not really getting any better."
  • Robertson, founder of the investment firm Tiger Management, also expressed some concerns about the devaluation of the dollar. "I think the Federal Reserve will trash the dollar until such times that there is some turn around in the economy, or until such time that they see that as self defeating," he said.
  • According to Robertson, Bernanke is doing what he can to help the economy. "I think in a sense, he is trapped in the sins of his forefathers," Robertson said. "I think he is doing exactly what he can do: ease ease, ease; cut, cut, cut; print, print, print."
  • Robertson is credited with turning $8 million in start-up capital into more than $22 billion at the peak of the tech boom.
Again, 1 data point but what I find is a lot of truth from old men with no stake in the government's happy go lucky song and dance. Even Greenspan, now that he can say things he could not as the Fed Chief makes a lot more sense, and sounds a lot more dour. Old men are cool like that. I also do think Uncle Ben is trapped. We have to print our way out of a recession and push the bubble along to a new place. Somehow to keep the US consumer going we need to reach a new nirvana of interest rates low enough that they can recapitalize their debt into new Adjustable Rate mortgages. The problem with that is home prices are falling. Oh brother.

As I keep saying, why is there ANY doubt we won't continue to be cutting? I am blown away smart money was up until Tuesday pricing in only a 1/3rd chance of a cut on Halloween. 4% is the minimum we are going; certainly could go lower the economy really starts to weaken. Watch those job numbers in the next 6 months (and no don't watch them when they are released, watch them on their 6th revision when the true number is released) In fact, strike that, ignore the government numbers (even though the market won't) and just read the job cuts from company after company in their press releases.

Wachovia, AOL, Boston Scientific, King Pharma, GMAC, Novartis, Intel, Johnson & Johnson - its not just financial companies.

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