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“The
question is whether or not our economy
can continue to be strong in a weak worldwide environment.
With consumer debt as high as it is here, there is reason to
doubt that it can."
Robertson says U.S. economy remains strong
but is dangerously close to 1930s-style recession
 Legendary
hedge fund investor Julian Robertson mixed a few comforting
words with many sobering ones during his keynote speech at the
dinner meeting.
“The United States
is in the best shape economically of any country in the
world,” he said. “We are sounder fiscally than any other
country and our economy, even though slowing, is the strongest
among the major powers of the world.”
That was the extent of the good news. Robertson went on to add
that “the rest of the world is fading fast,” and that
Japan, the world’s second greatest economic power, has been
in a downward spiral for more than a decade and shows no signs
of a reversal. It’s a collapse that burdens the United
States.
“The question is whether or not our economy can continue to
be strong in a weak worldwide environment,” he said. “With
consumer debt as high as it is here, there is reason to doubt
that it can.
“Not to throw cold water on our dinner tonight, but there is
probably more chance of a serious 1930s-style recession or
depression today than at any time in the last 50 years. What
other tricks can Mr. (Alan) Greenspan deliver? How many of you
manufacturers, in the face of falling demand, are willing to
expand your productive capacity just because the Fed reduces
interest rates by 50 or 75 basis points?”
Robertson wasn’t through. “Looking
at things in the worst light, suppose that domestic owners of
mutual funds pulled out 95 percent of their holdings, as
happened in Japan from 1988 to the present. What would happen
to the stock market? And what would the wealth effect on the
economy be if something that drastic did happen to the stock
market?
“I’m not saying this will happen, and I am saying that
basing an investment strategy on such calamitous possibilities
would be a mistake. Still, in my opinion, this is a time for
conservatism by both individuals and corporations.”
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