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Legendary Investor Julian Robertson Warns of Bubble Trouble

The Tiger Management founder says most stocks have “very high” valuations, though he doesn’t count certain high-flying tech stocks among them.

  • Stephen Taub

Legendary hedge fund manager and Tiger Management founder Julian Robertson Jr. thinks the stock market is danger of falling into bubble territory, telling the audience at the CNBC Institutional Investor Delivering Alpha conference that the market as a whole “is quite high on a historical basis” and that “we have very very high valuations in most stocks.”

The major reason is historically low interest rates, for which Robertson blames the Federal Reserve in the U.S. and central banks around the world. He even accused them of colluding to bring rates down so low. “There is no real competition for money other than art and real estate,” added Robertson.

He also said it doesn’t help that President Trump seems to support a weak dollar, which also holds down rates. Robertson says the market’s valuation will change once rates start to go up and bonds become more attractive to investors.

Robertson is one of the hedge fund industry’s pioneers and was one of just a handful of managers running more than $1 billion in the 1980s. He shut down his hedge funds in 2000 after missing the dot-com bubble, which eventually burst. Since then he has run his own money and seeded other managers

Robertson, who joked that he voted for Libertarian Party vice presidential candidate William Weld for president — rather than his “dopester” running mate, presidential candidate Gary Johnson — stressed the need for tax reform, which would lower corporate tax rates and coax companies to bring their huge sums of overseas profits back to the U.S.

Best known for his ability to pick longs and shorts on individual stocks, Robertson said he continues to like several of the internet and technology stocks that have driven market indexes in recent years. They include Apple, Facebook, and Alphabet, the parent company of Google.

In fact, he stressed that despite their recent price surges and widespread popularity, these stocks are still not expensive to buy on traditional valuation measures. “They are great growth companies,” he told the audience. “But they are priced cheaper than they ever would have been in the ‘60s, ‘70s or ‘80s. I don’t think people realize that.”

He said that although he may have trimmed his position in Facebook, for example, he declared himself a long-term investor in the stock. Robertson virtually gushed over Netflix, noting it is “run by really good people,” and got a laugh when he asked, “Does anyone not love Netflix? It’s like saying you do not like Santa Claus.”

Robertson, who has long owned a vacation home in New Zealand, also seemed excited about cruise stocks such as Royal Caribbean Cruises and Norwegian Cruise Line, after noticing people of his generation taking cruises.

He also still likes Air Canada, which has tripled in price since he got into the stock. Yet it still trades for the same price-to-earnings multiple, five times earnings. “I have too much [of the stock] but I can’t make myself sell,” he admitted.

On the other hand, he conceded he does not get the Bitcoin phenomenon, joking that he hoped there was a panel later in the day so he could learn more.

On a more serious note, he conceded something he told Alpha several years ago: He regrets getting angry when the first wave of key people left Tiger to start their own firms, rather than embracing their entrepreneurial goals and taking a seeding position in their funds.

His biggest piece of advice for people considering getting into the hedge fund business: Make sure you really like it, and perhaps take an aptitude test to see which profession is the best match.

“Get in to what you love and really want to do and can do,” he said.