That’s the message coming out of a prominent European hedge fund manager. Jamil Baz of GLG Partners old investors at a conference yesterday that the crisis could last another 15-20 years. Some of the key insights (via Reuters):
“This crisis has not even started. It will take an extremely long time to reach its peak velocity, and by a long time I mean at least 15-20 years,” Baz, who co-manages GLG’s Atlas Macro fund, told delegates on Tuesday.
“The economic impact of this crisis will be devastating,” he added. “Risky assets will look very ugly as a result.”
He estimates that the implied equity risk premium – the extra return the stock market must provide over the return on government bonds to compensate for market risk – was likely to be less than 3 percent, below current consensus.
“This means, believe it or not, that equities are still expensive (relative) to bonds.”
However, he said that corporate debt was being priced far more cheaply in bond markets than in equity markets.
“This is as close as you can come to macro arbitrage,” he said. “Corporate debt is by far cheaper than equities.”
Mr. Roche is the Founder and Chief Investment Officer of Discipline Funds.Discipline Funds is a low fee financial advisory firm with a focus on helping people be more disciplined with their finances.
He is also the author of Pragmatic Capitalism: What Every Investor Needs to Understand About Money and Finance, Understanding the Modern Monetary System and Understanding Modern Portfolio Construction.