I am on an email list that is from a group smart hedgies and strategists. The discussions range far and wide, and while I sometimes disagree with the conclusions, but I always find the conversation provocative.
Lately, they’ve been emailing a collection of warnings of various fund managers and strategists:
• Long time Dow Theorist Richard Russell set out this dire warning:
“Do your friends a favor. Tell them to “batten down the hatches” because there’s a HARD RAIN coming. Tell them to get out of debt and sell anything they can sell (and don’t need) in order to get liquid. Tell them that Richard Russell says that by the end of this year they won’t recognize the country. They’ll retort, “How the dickens does Russell know — who told him?” Tell them the stock market told him.”
• Reuters reported that well regarded hedge fund manager Seth Klarman “sees few bargains in the current environment and predicted on Tuesday that the stock market could suffer another lost decade without any gains.” Klarman is concerned that we could see “another 10 years of zero returns.” He has 30 percent of assets at his $22 billion Baupost Group in cash, he said. (His firm started in 1982 with $27 million and has averaged 20 percent annual gains ever since).
• Raoul Pal of Global Macro Investor got even more specific warning in his newsletter: Crash Is Coming In Two Days-To-Two Weeks. He sees as an “archetypal crash pattern — a sharp decline followed by a failed rally followed by a collapse.”
• But as Art Cashin of UBS pointed out in his morning missive, stark bear warnings are not restricted to equities. He cites Nouriel Roubini warned on the U.S. Treasury Market:
“Bond market vigilantes have already woken up in Greece, in Spain, in Portugal, in Ireland, in Iceland, and soon enough they could wake up in the U.K., in Japan, in the United States, if we keep on running very large fiscal deficits,” Roubini said at an event at the London School of Economics yesterday. “The chances are, they are going to wake up in the United States in the next three years and say, ‘this is unsustainable.”
• Lastly, I was tickled by this tongue in cheek warning about Gold from Jeremy Grantham: The GMO chair guaranteed that Gold will crash. Why the gold crash? Because he just bought some . . .
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