What the Greatest Investment Minds Are Saying
By Paul Lamont
January 31, 2012
Ray Dalio, Bridgewater Associates - largest, one of the most successful hedge funds
· “Credit cycle of typically 50 to 75 years in length.”
· “No matter what is solved in Europe you will have a deleveraging” which “…means we’re going to have more debt problems.” - November 2011
· Bridgewater Takes Grim View for 2012 – “We’re in a secular deleveraging… and stocks remain vulnerable to ‘air pockets’ from shocks…” - January 2012
Jeremy Grantham, GMO - $107B asset manager and expert on bubbles
· Sees “Seven Lean Years” which started in 2007
· “Historians would notice that all major equity bubbles broke way below trend line values and stayed there for years…did not reach trend at all in 2002, and the second in 2009 – took only three months to recover to trend. This pattern is unique. Now with wounded balance sheets, perhaps the arsenal is empty and the next bust may well be like the old days.” - December 2011
· “My longer-term advice in April (Ed Note: 2011) was to stay ducked until either equity markets get to be cheap or, for the speculatively inclined, until we enter the next Year 3 in October 2015, whichever comes first. This still looks like good general advice.” - December 2011
Jim Rogers - Co-founder Quantum hedge fund
· “The market puts pressure on them (Ed Note: Europe) then they step back. Eventually, Rhonda, the market is not going to put up with it anymore...The market is going to say no more. And then we are going to have an uncontrolled disaster. The governments will not be able be able to control the chaos in the market and then we are going to have something much worse than 2008 and 2009. The market is not going to put up with this for forever.” - October 2011
George Soros - Co-founder Quantum hedge fund
· 75% in cash as of July 2011
· “The euro-zone debt crisis is "more dangerous" than the global downturn of 2008.” – January 2012
· “The situation is about as serious and difficult as I've experienced in my career.” – January 2012
Bill Gross, PIMCO - largest bond fund manager in the world
· “The financial markets are slowly imploding – delevering – because there’s too much paper and too little trust.” – January 2012
Kyle Bass, Hayman Capital - hedge fund manager made millions shorting subprime
· “One question you have to ask yourself if you are investing capital today is: Does debt matter? Because if it doesn’t, go buy stocks, go buy houses, go buy bonds, lever up because everything is going to be fine - if debt doesn’t matter. But if it does matter, like it has for the last 3000 years every time, then you better think a little harder about how you are allocating your assets and why…” - September 2010
And while these successful investors have their expectations, the investing public has a directly opposite view. The investment herd’s optimism remains at the near record levels we discussed last month. Also for the first time in months, the investing public is allocating money into long term equity mutual funds. So the question is, how will this play out? Will regular investors who are generally busy with their own jobs and spend only a few hours a month on their investments be correct in their rosy view? Or will the professional investors previously mentioned continue with their successful track record? You know our strong bias.
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