Billionaire investors Warren Buffett and Carl Icahn warned about market valuation yesterday on “Closing Bell.” Michael Novogratz, Fortress Investment Group, reacts. “Wet blanket thrown over the economy is confidence” he says
Michael Novogratz video and transcript below
Also see Fortress Macro Loses In Japanese Equities, But Up 9 Percent in 2013
what’s your take on this? 27 17 times earning, you heard what carl icahn and warren buffett said. is this market fully valued? to contradict carl icahn and warren buffett might make me the biggest fool out here. no, listen, i think the fed is dovish. they shocked the market on their view of the economy as tepid, continuing to pump liquidity in the system. the taper, was that a surprise, the fact they did not pull back on the stimulus? it was a big surprise. maybe roubini was calling for it but i think he was the only economist that was thinking no taper. most people thought in a 10 to 15 billion they would start this process of getting out of the qe regime. they didn’t. it was kind of a wildly dovish signal. we were expecting it here on the closing bell only because every ceo talks about this anemic economy. what do you think about the economy? there are some pockets of weakness but there’s a wet blanket thrown over the economy. the government can’t get their act together. it’s not a high probability but a possibility of a government shutdown. we have a lame duck president in some ways and he has 3 1/2 years left. we can’t find an example in the last 50 years when a president couldn’t get a fed chief approved. four democratic senators stabbing obama right in the back. so, that doesn’t build a lot of confidence in the system. yeah. knowing what we’ve got in washington, are you expecting volatility going into the next couple of weeks? given the fact that we are probably going to see a fight over the debt ceiling. both sides are not moving on this. i don’t think that was priced into the market, right? i think the market was so focused on fed and taper. you had a bit of relief right afterwards. i think part of the selloff today, and i think the volatility we’ll see in the month end is just that. you know, fear of how this is going to play out. do the republicans feel more emboldened now that the president looks so weak. yeah. so, at the end of the day here, we’re closing at the lows of the day, down 185 points on the dow joendz industrial average. i know you were on your way in. what’s your observation at the end of the day, volume very strong, rebalancing. what was going on? i think you could wake up after we had a very dovish fed. then we had, for the most part, confirmation janet yellen will most likely be the next fed chief. if you’re a fixed income dove, equity bull, most of the good news is in the market. now i think this is going to be kind of choppy back and fill. i don’t think the market has a major correction here. i just think there was a buyer’s exexaugs. gold had a 6 0-point move yesterday and halved it today. i think the market will get the next way until we get set up. i spoke with james bullard. he said tapering could be possible in october. would you expect tapering or do you think the economy is not showing enough improvement? i think the fed tapering priced in and they didn’t have enough. they aren’t going to flip back. they aren’t day traders. they have a medium term view of where the economy was going and i think they must have thought long and hard with what they did. i think bullard’s comments were partly to say, don’t get overdone the other direction. don’t get so dovish. we think the economy is doing okay but not enough for lift-off speed. returning 18% in 2012 and 19% in 2013 year to date, about that? a little higher. how do you allocate capital? how do you keep those returns going and move it higher? this was the year for the first half where there were great trends in the market. there were great stories. there were correlations that broke down. the first half of the year is what i call a hedge fund nirvana. hinged markets with uncorrelated assets 37 japan was a big theme for people. china slowing down, hence, capital coming out of the emerging markets was a big theme. a fixed income bubble in the u.s. being unwound was a big theme. so, the second half, i think, will be tougher. i don’t think markets will trend nearly as much as they did in the first half of the year. correlations which have broken down jumped back up. and so we think it’s going to be more of a trader’s market. we think if there’s one trend, it’s probably stocks continuing to go higher. fixed income market probably trades both sides, as do currency markets. would you reallocate within the bond market? would you look for higher yielding corporates or is there anything worth your time in fixed income? i think there had been such a massive selloff in emerging market fixed income, there’s still catch-up. people will reallocate capital there for a little while. i think ten years will probably trade in a range of 2.6 to 3%, or 2.50% to 3%. that’s the new range after the fed inaction. do you still like japan? still like japan. i think the japan story is real. it’s the only story i think has legs. abe economics is a shocking change. we continue to meet politicians from the ldp. shocking change is the first two things they care about is nikkei and yen. i can’t imagine sitting down with john boehner and him talking about the currency. that’s their objectives, higher nikkei, higher yen. policy objectives, so ride that wave. don’t fight it. i have a blackberry and iphone. i keep trying to make the full shift but i’m a keyboard guy. i have the new blackberry. i don’t love it. good to have you on the
