At a time when many hedge fund managers are warning their investors of anemic economic growth, Steve Mandel has a decidedly optimistic view on the future of the stock market and the broader economy.
In Lone Pine’s 4th quarter letter to investors, which Business Insider obtained a copy of, the hedge fund manager says of the current economic climate:
“Global demand is recovering, government actions have stabilised the financial system and market indicators of risk have returned to normal levels. Indeed, most recent economic data point to a synchronised global economy.”
“Hard as it may be to believe, it is game on in the equity market.”
What a refreshing attitude.
Mandel also says the bears are wrong when they say that equity bubbles have formed as a result of the recovery.
(Joseph Stiglitz’s, for example, says there is an equity bubble in emerging markets.)
“Unlike in 2000-2002 (internet, telecom) and 2007-2008 (mortgage-related), we see no major bubbles in the world’s equity markets,” Mandel writes.
Finally, someone who isn’t a buzzkill.
But he is staying short in some equities, like those that have been hurt by “technological obsolescence,” and industries with chronic global overcapacity. Lone Pine lost money on their short positions when the market rallied this past year, but Mandel is still “sceptical of a sustained snapback in demand.”
“The developed world consumer, particularly in the US, will likely suffer an extended hangover from years of credit fuelled overconsumption,” he says. “It is hard to envision strong economic growth in the US beyond an inventory rebuild for a few quarters.”
Many hedge fund managers (like Whitney Tilson of T2) and economists (like Dr. Doom, Nouriel Roubini) predict it will take a few years for the US to return to strong growth, while Mandel apparently thinks we’re going to have a strong economy immediately, followed by a a slowdown after that.