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Cliff Asness warned that stocks could be overvalued and bond markets are signaling a major recession.
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AQR boss fears financial crisis and says Warren Buffett and quantitative traders have similarities.
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Asness is worried about commercial real estate and bullish on cheap stocks.
Momentum stocks may have lost touch with economic reality, bond markets are crying recession and commercial real estate could be in trouble, Cliff Asness warned.
The billionaire investor and founder of AQR Capital Management also fears a financial crisis, sees parallels between Warren Buffett and quantitative traders and expects cheap stocks to outperform in the coming years.
He made the comments during a recent episode of “Bloomberg Wealth with David Rubenstein.”
Here are Asness’s 8 best quotes, slightly edited for length and clarity:
1. “We raised a billion dollars. And through diligence, hard work and a few good calls, we turned that into half a billion dollars.” (Asness remembered what he told people 18 months after starting AQR.)
2. “Almost all the time our work is about brains. Once every 20 years it’s about another word that starts with ‘b’. (It emphasized the need for investors to be convinced of their positions , even when they have lagged the market for several years.)
3. “My biggest concern is that equities and bonds seem to be taking a very, very different view. Bonds are forecasting multiple severe declines over the next year to two years. This is a recession forecast, not soft. Actions hiss past the graveyard.”
4. “If inflation remains sticky, or if it’s falling because we’re entering a sizeable recession, it’s equities that I think are a scary place. Their price isn’t very consistent with bonds, and we’ll find out who’s right next year.”
5. “I worry about a financial crisis because it’s very unpredictable. I don’t think anyone wants a financial crisis. You think you’ll be fine, and something goes boomerang, and This is not the case.”
6. “Commercial real estate, and the banks that deal with it, can be a more nerve-wracking place – how it’s done in cities. I’m worried enough to put it on my worry list.”
7. “No one would call Warren Buffett a quant. Yet he is highly correlated with what quants would call the value factor, the low risk factor and the profitability factor. He buys companies that make a lot of money, don’t are not very risky. And then he is looking for a decent price.”
8. “I’ll tell you what I do with my money and my kids’ money. We’ve got our money pretty gigantically overexposed to this long-short value trade I’m talking about. It’s not a whole portfolio. But I’m eat my own cooking.”
Read the original article on Business Insider