Julian Robertson is a name most Crikey readers will not know. To use a Keating rhetorical flourish, he could be described as the Placido Domingo of the hedge fund industry.
Robertson founded the first mega-hedge fund in the 1980s, called Tiger, and his protégés (cubs is the industry jargon for them) now run some of the world’s most influential hedge funds from London to Singapore. Given he apparently turned $8m in seed money into a $22b fund by the late 90s, when Robertson talks, people take notice.
On Friday, Julian Robertson on CNBC stated that the United States is heading for a “doozy of a recession,” and on the credit situation in the US stated that “I think the credit situation is worse than anybody realises.”
His comments coincided with another day where listed US mortgage insurance companies got pounded, highlighting that investors tend to agree with him on the US credit cycle.
This week has the potential to be a very bad week for the US market. Both existing and new home sales data will be released in the US where there is rising concern that the US housing market is not correcting but collapsing. On Thursday last week the California Building Industry released data showing that sales of newly built homes in August fell a staggering 45% year on year.
This week will also see five Initial public offerings (IPOs) hit the US market. To put that number in perspective, only four IPOs occurred in the US for the month of September. If these IPOs flop, then you could see negative sentiment really kick in again and deals get pulled.
Finally, these IPOs will also occur against the backdrop of hundreds of companies reporting results and most importantly providing guidance. Caterpillar, a Dow component member and a key US global growth play, delivered a disappointing result Friday, but then their CFO went one step further in a Reuters interview and provided more detail on the guidance, “We’ve put (the chance of a) recession in probably a 50-50 type range.”
No wonder Julian Robertson is sounding so bearish.