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Forum - Wall Street Pit    Stock Due Diligence for All

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From: franconia (Rep: 102) reply to franconiaDate: 04/21/2017 06:50
Forum: Wall Street Pit - Msg #2671862Thread #673922533 (Rec: 0)
Re: "years of low interest rates have bloated stock valuations to a level not see...

"While Jones, who runs the $10 billion Tudor Investment hedge fund, is spooked, he says it’s not quite time to short. He predicts that the Nasdaq, which has already rallied almost 10 percent this year, could edge higher if nationalist candidate Marine Le Pen loses France’s presidential election next month as expected. Jones tripled his money in 1987 in large part by correctly calling that October’s market crash.

While the billionaire didn’t say when a market turn might come, or what the magnitude of the fall might be, he did pinpoint a likely culprit.

Just as portfolio insurance caused the 1987 rout, he says, the new danger zone is the half-trillion dollars in risk parity funds. These funds aim to systematically spread risk equally across different asset classes by putting more money in lower volatility securities and less in those whose prices move more dramatically.

Because risk-parity funds have been scooping up equities of late as volatility hit historic lows, some market participants, Jones included, believe they’ll be forced to dump them quickly in a stock tumble, exacerbating any decline.

“Risk parity,” Jones told the Goldman audience, “will be the hammer on the downside.”



Reply to franconia - Msg #2671861 - 04/21/2017 06:30

"years of low interest rates have bloated stock valuations to a level not seen since 2000, right before the Nasdaq tumbled 75 percent over two-plus years. That measure -- the value of the stock market relative to the size of the economy -- should be “terrifying” to a central banker,"

If you know Paul Tudor Jones record pay attention

https://www.bloomberg.com/news/articles/2017-04-20/paul-tudor-jones-says-u-s-stocks-should-terrify-janet-yellen
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