Michael Steinhardt: 'Investing in Treasuries Now is Foolish'

The legendary hedge fund manager Michael Steinhardt has recently voiced his distaste for Treasuries over the long-term. In a recent Bloomberg television interview, he said:

To be a long-term investor in Treasuries at this point I think is foolish. The rates are low, and the danger is high.

If you're unfamiliar with Steinhardt, he ran one of the first truly successful hedge funds, garnering a 20% return each year for almost thirty years. His Steinhardt Management Co, which he opened in 1967, earned 24% a year for multiple decades. He truly is a successful hedge fund manager with a proven long-term track record.

And, with that in mind, it's interesting to see that Steinhardt has joined numerous other well-tenured investors in his dislike of treasuries. He thinks that government bonds are not safe investments and shares Jim Rogers viewpoints on this subject. Rogers, of course, has a solid background as well, having run the successful Quantum fund with ex-partner George Soros.

So, we now see that both Steinhardt and Rogers see Treasuries as poor investments for the future, as we noted in our Jim Rogers portfolio update. In the past, we here at Market Folly have even gone as far as to lay out the rationale behind shorting treasuries. (That play has picked up steam as of late and we still need to do a follow-up post on that subject).

Steinhardt goes on to say that he thinks the current market rally will not last and that we are not out of the woods yet. He says:

The economy is still a scary place. My net feeling is that this rally doesn't have all that much more to go and the dangers out there remain consequential.

Clearly he sees this as a bear market rally and thinks we have large fundamental problems still unsolved.

Nowadays, Steinhardt is the chairman of WisdomTree Investments, a firm that creates exchange traded funds (ETFs). Steinhardt also has an autobiography out entitled No Bull. It is a fascinating read detailing the life of one of the first true hedge fund managers out there, as his firm survived the collapse of the 1960's. This book also recently appeared on hedge fund Blue Ridge Capital's suggested reading list, in their biographical/historical category. We'll continue to track Steinhardt's words of wisdom whenever he makes a sporadic appearance.

Read more: "Hedge Fund Legend Michael Steinhardt Says Treasuries Are Foolish ~ market folly" - http://www.marketfolly.com/2009/05/hedge-fund-legend-michael-steinhardt.html#ixzz0GgCqXVVB&A

Comments

[Tony Daltorio:]

The absolute worst investment right now is buying medium-to-long term Treasuries. The bubble has just begun to burst.

May 27 01:18 PM

[user396040:]

I tend to agree. I find it hard to imagine a scenario over the next five years in which you would do better with treasuries than with a portfolio of reliable dividend paying stocks (JNJ, PG, XOM, T, KO, MSFT).

May 27 03:24 PM

[Graham and ...:]

China seems to agree. That country is "shortening" the maturities of its holdings as fast as possible.

May 27 06:35 PM