Julian Robertson: The market is a bubble & that “it’s the Federal Reserve’s fault, & the Federal Reserves all over the world.”
KELLY EVANS: … I just wonder what you think generally of where we are in the equity market today, where we are in the stock market in terms of valuation.
JULIAN ROBERTSON: Well, we’re very, very high — have very high valuations in most stocks. The market, as a whole, is quite high on a historic basis. And I think that’s due to the fact that interest rates are so low that there’s no real competition for the money other than art and real estate. And so I think that’s why the valuations are so high. I think when rates do start to go up and the bonds become more attractive to investors, it will affect the margins.
KELLY EVANS: Do you think they’re dangerously high right now?
JULIAN ROBERTSON: Well, that’s a — you know, it’s pretty — they’re high.
KELLY EVANS: Is it the Federal Reserve’s fault or…
JULIAN ROBERTSON: Yes. It’s the Federal Reserve’s fault, and the Federal Reserves all over the world. I mean, in Germany, in order to buy a bond, until recently, you actually had to pay interest. And, you know, that’s certainly going to discourage a lot of people from doing so. You know, you could get a fairly good dividend in Nestle, but if you wanted to buy a Nestle bond, you had to pay a fairly heavy penalty.
KELLY EVANS: Doesn’t seem to make a lot of sense.
JULIAN ROBERTSON: It doesn’t.
KELLY EVANS: That said, this morning, the Treasury Secretary Steve Mnuchin, who was here, said that he thought that Chair Janet Yellen is, in his words, “obviously quite talented,” when asked about her potential to lead the Fed for another term. Do you disagree with him?
JULIAN ROBERTSON: I think she’s going to probably be asked to stay on for a while. But I think because there’s been collusion all over the world, let’s get interest rates down. And it’s not just the United States, it’s all over the world… I think we need interest rates to appreciate, to go up, and to be . . . Because I think we are creating a bubble.
KELLY EVANS: A bubble in the market?
JULIAN ROBERTSON: Yes.
KELLY EVANS: In the stock market?
JULIAN ROBERTSON: Yes, ma’am.
And yet, despite what he himself admits is a central bank-created “market bubble”, Robertson is unable to stay away from his beloved tech names, as he admitted in the same interview:
KELLY EVANS: All right. Let me ask you about a couple of particular companies, just thinking about Apple, for example, which has a lot of cash overseas. You were a holder of that going back a couple of years, and they have a big event today and are launching a bunch of new products. But has it just become too expensive for you guys, is it not — or would you look at investing in Apple again?
JULIAN ROBERTSON: No, I think we should definitely look at Apple. Apple is not that expensive of a stock. There are a lot of disadvantages of being an old goat. One of the few advantages is the fact that we’ve seen all this a little bit before. And right now the Apples, the Facebooks, the Googles, those great growth companies are priced cheaper than they would have ever been in the ’60 s , ’70 s , and ’80 s. And I don’t think a lot of people realize that.
KELLY EVANS: Well, you’re trimming your positions in Facebook, and Google, and you’re not in Apple right now.
JULIAN ROBERTSON: Well, I don’t think I’ve . . . I kind of trade Facebook and those things a little bit. And I consider myself kind of a long-term player of Facebook.
KELLY EVANS: Even though you think the markets overall are expensive, these emblematic tech same names you actually don’t think are that expensive?
JULIAN ROBERTSON: Correct.