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This Billionaire Investor Says “Bonds Are The Bubble, Not Stocks”

This Billionaire Investor Says “Bonds Are The Bubble, Not Stocks”

The founder of Omega Advisors says investors should stay away from bonds. Here’s why.

Many of the biggest names in the financial world have been sounding the alarm bells that a recession is looming as stocks have reached record valuations.

But billionaire Leon Cooperman, founder of Omega Advisors with nearly $4 billion under management and former partner at Goldman Sachs, disagrees and sees no signs of recession on the horizon.

“The economy, if anything, is too strong,” Cooperman told CNBC on Wednesday. “The economy is on fire. … The conditions that normally lead to a big decline just aren’t present.”

While others have been shouting from the rooftops that stocks are in a bubble and declines are ahead, Cooperman’s concern is for bonds.

“My world is cash and stocks. I think bonds are the bubble, not stocks,” Cooperman said while also suggesting that stocks are “fundamentally cheap” following last week’s rout.

His comments have come after the 10-year benchmark note yield climbed to 3.261% last week – the highest level seen in more than 7 years. This sharp spike in rates had investors nervous worldwide, just as stocks were falling sharply around the globe.

The Fed is now in a tightening phase after years of historically low interest rates after the financial crisis. With interest rates near zero, bond prices were pushed high enough for Cooperman and others to say they were in bubble territory.

As the Fed raises rates, many investors have been concerned that rising rates would lead to higher borrowing costs, causing the world economy to slow, but Cooperman believes the market can handle more rate hikes and thinks stocks will bounce back after declining 4.1% late last week.

“My central view is the market will be higher than it is today at year-end,” Cooperman said. “We’re in a zone of fair value and it’s going to take a recession or change in the Fed’s posture” to get us out of this zone.

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