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Julian Robertson: “we’re in the middle of a kind of a bubble market”

Normally when I see “bubble talk” my gut tells me to raise the skepticism flag.  But there are cases when I think it merits some real discussion.  And hedge fund manager Julian Robertson, who is a very level headed guy, is now saying the market looks bubbly.  When he says something like that it should get your attention.  In an interview with CNBC yesterday he said:

JULIAN ROBERTSON: That’s really the way I’m looking at stocks primarily now. I think we’re in the middle of a kind of a bubble market, where it’s going to take something– bubble-like to happen. And– prick the bubble and we’ll probably have pretty bad– reactions to the breaking of the bubble. But– probably not right now. And somehow I think we’ll wallow through the political and fiscal crisis we have in front of us. And then we’ll sort of see what happens.

MARIA BARTIROMO: So when you look at the broad averages, you think that– this market’s full of value then?

JULIAN ROBERTSON: I think the market is reasonably– yes, is fully valued.

I don’t know if we’re in a bubble right now.  My bubble radar is usually okay, but the S&P 500 isn’t screaming “bubble” at me right now.  I see some signs of potential disequilibrium (like margin debt and the potential lack of safe assets), but those are things that would likely exacerbate the downside instead of actually cause it.  So the real question is – if this is a stock market bubble then what is the catalyst to send it lower?  My guess – recession.  What’s your guess?

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