- Today, on CNBC's Street Signs, legendary investor (Tiger Mgmt), Julian Robertson said during the past week he picked up shares of these stocks: Apple (Nasdaq: AAPL), Microsoft (Nasdaq: MSFT), Baidu (Nasdaq: BIDU), Mastercard (NYSE: MA) and Visa (NYSE: V). He said all these stocks are all trading at very attractive valuations.
- Multi-millionaire investor Julian Robertson told CNBC that the United States is "just getting into the recession," and that the poor economy will last as long as 10 to 15 years.
- Last year, Robertson had said that the U.S. economy was in for "a doozy of a recession." He said the reason was the credit situation was worse than anyone had thought. [Oct 20: Julian Robertson Calling for a Doozy of a Recession"]
- "I don’t mean to imply that this is going to last quite as long as what’s been happening in Japan, but when they went into their decline in 1990, almost 20 years ago, their people were loaded with savings—but [Americans are] all broke," he said. "...If we leave out the home in the calculations, I’d say that 80-85 percent of Americans are broke. So they have to cut back on their spending."
I disagree 100%; the world will lead us out - and we'll be the last to recover. That's what an economy based 70% on Americans spending over their heads will do, when Americans finally run out of money after a 25 year binge. Just like we have been in denial about the credit issues (once we get rid of those subprime people everything will be ok) - and housing issues (housing will never go down nationwide) - this sense of arrogance has us denying that we are in for a long road ahead as savings needs to be rebuilt household by household. And that doesn't happen in 12 months, sorry. But I understand the denial, because facing the future reality will be a stark difference from where we came from in the last 25 years.
Needless to say I am pleased to see I am on the same page as one of the best minds ever in the business. For readers, you get the same thinking as one of the best hedge fund managers of all time, for "cheap" ;) with my future fund.
EDIT 8 PM (here is the video)
Long Apple, Mastercard in fund; no personal position
7 comments:
Just don't get the Japan comparisons. Japans problem is that their citizens won't spend and still don't. US citizens spend too much so i'd expect us to continue down the same path. Though I think its been proven that Americans actually have alot more assets then the reports about savings lead us to believe. Money earned via investments never get counted in those numbers. $3.5T in money market accounts disagree with the fact that AMericans are out of cash.
I saw that interview on CNBC as well.
What do you think of his "curve steepener" trade? I assume it means go long the short end of the treasury curve and short the 30-year? Robertson says that the Fed will continue to be accomodating and dovish on the short-term rates, but that long-term yields will start to factor in inflationary pressures due to all this easing.
So deflation in the short term, and inflation in the long term. Do you believe him? Would you trade it?
Rob
You are reading what you want to read
Read what he, and I, say - we are not saying all Americans. I have a piece I post almost every week - about the bottom 80%. He says 80-85% are broke
We are talking the dispersion of assets in this country. It's the most weighted to the top since 1929. So if you average anything or take aggregate numbers you see a far different picture. It is not that there is not wealth in America - its that its become increasingly concentrated. The average retail shop is not catering to the top 3-5%. It needs the middle 50% to shop.
Stonefox I think you were incredulous about some of the earlier credit predictions 3-4 months ago - I remember something like "that seems extreme" to some of the comments I made, and they have been borne out. I will say you won't know, or I won't know if I'm correct on the economic issues for a few years. I think the AVERAGE person in America will be far more impaired than he has been the past 25 years. Both median wages are stagnating and their debt load is higher; now their household value has been wiped out and their 401k (twice in 1 decade) I am talking average Joe, not the guy whose net worth just fell from $18M to $11M or the guy who dropped from $2M to $1.3M.
There are exceptions - those who have saved all these years, and paid off their mortgage and are not that exposed to the stock market. But guess what - those are the SAVERS not the SPENDERS in America. The SPENDERS are those who have been beaten up by multiple fronts. Those are the ones we need to keep the spending spree going - they were pulling money out of house, credit card, and now 401k to spend. Now that's over. The SAVERS will continue what they've been doing for 20 years - SAVING. Which is fine but not helping to grease the US economy.
It is not class warfare, it is simple fact - as our GDP has grown more and more has gone to (a) capital versus labor and (b) of the labor the very few top % got more than in any other time since pre Depression.
There are many things you can google to read up on it. But figures lie and liars figure - as they say.
Rob, I did not see the interview since I'm not near a TV - I saw the blurb on CNBC.com
I don't know what the curve steepner is but in my "World of Shortages" scenario as more humans compete for a finite set of resources I expected inflation in the 2010s to be steep. Now with all this money supply it will be even steeper. This is yet another reason I think commodities have a long way to go - the next time we begin an economic upswing (globally anew) I think the stresses in the system will be far tougher than they were this time around. The hope is technological innovations will help to offset that to some degree.
One more thing Rob
The heavier the US goes into debt the higher (in theory) the long term rates on our Treasuries need to go. The more in debt we go the more a risk we become. And in the past 6 months our debt has exploded. So just like an emerging market economy has to pay higher rates to attract capital so will we. Especially as we overlay Medicare obligations on TOP of everything else. Higher rates are punitive for normal Americans since we expect low borrowing costs in this country. So one could argue if that is inflationary - I will say from a borrowing cost standpoint for normal Americans it will be.
We have dug ourselves a massive hold and each 'solution' creates a new problem down the road - kick the can policies.
$3.5T in money market accounts disagree with the fact that AMericans are out of cash.
In order to make any valid analysis you would need to see where all that money is grouped. $3.5T in the top 10% means americans are out of cash. I can walk out of my house and see that people are out of cash. The stores don't have as many people in them, I don't see as many people eating out, and popular lunch places are even empty now. Heck, I've noticed less traffic on my way to work. Americans in general don't save money and are in a lot of debt (much like the country). I saw a stat a couple years ago that said the average american carries $8k in CC debt! CC debt that probably has 18%+ interest.
So deflation in the short term, and inflation in the long term. Do you believe him? Would you trade it?
I don't know if I'd trade it because timing is 1/2 the trade and that's the hardest part to get right. I am expecting runaway inflation at some point in the future. You just can't dump all this money into the pool and not have inflation at some point in the future.
And in the past 6 months our debt has exploded.
And will continue to do so. Obama has come out and said he's going to spend even more money and McCain hasn't said much beyond he wants to cut pork barrel spending. Neither candidate has mentioned actually shrinking government!
Or, put another way - when BilL gates and I are in the same room, and it is only us two, the average wealth in the room is $30B or something ;)
However we shop at different places and figures lie, and liars figure ;)
When some people spend more in 1 month on art than a group of 10,000 people make that month - you just have to wonder what our system is about. No problem with certain subsets of society being rich but when 1/3rd can't get health care and abject poverty strikes another 15%, I just can't imagine they are all "lazy".
Pork, is a symptom of the political disease. Its only like $18B or something which in this day and age is not even 1/4th of a company bailout. But what is represents and how it works is the problem. You buy influence - you get what you want by sponsoring the candidate. It's completely broken. It has been for a long time, but it is now getting exposed in times of crisis.
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