Leon Cooperman of Omega Advisors and Howard Marks of Oaktree just finished a pnel at the Bloomberg’s Most Influential Summit talking about the market and the state of the hedge fund industry.
Bloomberg TV’s Stephanie Ruhle was the moderator.
The two titans have known each other for 40 years.
Ruhle asked them about the concerns about asset bubbles, inflation, etc.
Marks with interest rates down, people migrate out along the risk curve. He said that they forget to be cautious.
Marks then made a Warren Buffett reference.
“Buffett says ‘the less prudence with which others conduct their affairs, the greater the prudence with which we should conduct ours’. There’s not that much prudence around. It’s our job to be prudent,” Marks said.
Cooperman said that he thinks the market is “fairly valued.”
“I think the stock market is reasonably fairly valued, but not priced to perfection.”
He referenced John Templeton’s observation about bull markets being “born in despair, grown amid scepticism, mature in optimsim and they die in euphoria.” He said we are “somewhere between scepticism and optimism.”
Cooperman said that bonds are “overvalued.”
Marks said that interest rates are unnaturally low which implies that bond prices unnaturally high.
Cooperman said half the fund managers were “playing little league” the last time the Federal Reserve raised rates.
“There might be 11,000 hedge funds out there, but they’re not run by 11,000 geniuses,” Marks said.
Cooperman said that there are more people going into the hedge fund business than deserve to go intot he industry, but there’s a weeding out process.
Cooperman said that the higher your fees, the harder it is to achieve your objectives. He said that he has lower fees than the industry’s standard “2 and 20.”
“Money will go where money is treated best.”