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WHEN: Tuesday, September 12th
WHERE: CNBC's "Fast Money Halftime Report "
Following is the unofficial transcript of a CNBC EXCLUSIVE interview with Julian H. Robertson, Jr., Tiger Management Co-Founder, Chairman and CEO, live from the CNBC Institutional Investor Delivering Alpha conference in New York City on Tuesday, September 12th.
Following is a link to the video of the interview on CNBC.com:https://www.cnbc.com/video/2017/09/12/tiger-managements-julian-robertson-market-is-very-high-on-a-historic-basis.html.
Mandatory credit: CNBC Institutional Investor Delivering Alpha conference.
KELLY EVANS: Mr. Robertson, thank you so much for your time.
JULIAN ROBERTSON: Thank you, Kelly, for having me here.
KELLY EVANS: We are the only thing standing between these fine people and lunch. So just bear that in mind.
JULIAN ROBERTSON: No, I can see it beginning to empty out pretty quickly.
JULIAN ROBERTSON: It's a wonderful excuse.
KELLY EVANS: And by the end of our conversation, I'll probably -- you know, my Southern lilt, I'll be saying "y'all" in 20 minutes time here.
It's really a pleasure. We're so glad that you could join us. You started Tiger almost 40 years ago now, but this is the first time you've been here at Delivering Alpha. And it comes at a time of a lot of shakeout for the hedge fund industry. You've talked about this in the past. Do you think that shakeout is largely over now, or is it still going to be a rough time ahead?
JULIAN ROBERTSON: Well, if you look at the shakeout in the industry, I don't think that's the right term to use. What's happened to the hedge funds is that instead of competing with bank managers and trust funds, that sort of thing, hedge funds are having to compete with more hedge funds. And let me assure you, that's much more competition. So I think the difficulties that hedge funds are having is because of more competition within the industry rather than anything else.
KELLY EVANS: And that said, you still think there are some funds who are thriving in this environment; is that right?
JULIAN ROBERTSON: Some of them are thriving in this environment, and there's no question about it. We've talked about that.
KELLY EVANS: A couple of your own.
JULIAN ROBERTSON: Yes.
KELLY EVANS: Well, you've seeded a couple dozen ones now. That's a big, big part of what you do. And some of them are having great -- your Sparrow was, I think we talked about, loan tying are some examples.
What is it that they're getting right in this environment?
JULIAN ROBERTSON: Well, I think they're getting alpha well. And they are really, you know, getting good loans and good shorts. And that's the secret of this.
KELLY EVANS: And we'll come back and talk a little bit about, you know, how you've supported them. But I just wonder what you think generally of where we are in the equity market today, where we are in the stock market in terms of valuation.
JULIAN ROBERTSON: Well, we're very, very high -- have very high valuations in most stocks. The market, as a whole, is quite high on a historic basis. And I think that's due to the fact that interest rates are so low that there's no real competition for the money other than art and real estate. And so I think that's why the valuations are so high. I think when rates do start to go up and the bonds become more attractive to investors, it will affect the margins.
KELLY EVANS: Do you think they're dangerously high right now?
JULIAN ROBERTSON: Well, that's a -- you know, it's pretty -- they're high.
KELLY EVANS: Is it the Federal Reserve's fault or...
JULIAN ROBERTSON: Yes. It's the Federal Reserve's fault, and the Federal Reserves all over the world. I mean, in Germany, in order to buy a bond, until recently, you actually had to pay interest. And, you know, that's certainly going to discourage a lot of people from doing so. You know, you could get a fairly good dividend in Nestle, but if you wanted to buy a Nestle bond, you had to pay a fairly heavy penalty.
KELLY EVANS: Doesn't seem to make a lot of sense.
JULIAN ROBERTSON: It doesn't.
KELLY EVANS: That said, this morning, the Treasury Secretary Steve Mnuchin, who was here, said that he thought that Chair Janet Yellen is, in his words, "obviously quite talented," when asked about her potential to lead the Fed for another term.
Do you disagree with him?
JULIAN ROBERTSON: I think she's going to probably be asked to stay on for a while. But I think because there's been collusion all over the world, let's get interest rates down. And it's not just the United States, it's all over the world.
KELLY EVANS: What about, you know, actually the last time we spoke was just before the election and we were talking about some of the news in currencies. And you said you thought that the peso was hit way too hard, the Mexican peso, and would start to come back. That partly because you thought Hillary Clinton was going to win, there would be no wall, and I think you said you were actually apoplectic at the idea that she was going to win. But, before we get into any politics, just on this point about the dollar, which is now -- I mean, you know, Trump got elected and it went up so strongly, and now it's come down so much. Is there anything there that you think is linked to what you're saying about the way that central banks have handled policy?
JULIAN ROBERTSON: Yeah, I'm sure there is. But I also think that the main thing there is that Trump has made it fairly obvious that he is not a proponent of a strong dollar. And he has a pretty good faction of people who would probably, as voters, who would probably do better with a weak dollar.
KELLY EVANS: Are you okay with that kind of policy? Do we need a strong dollar policy?
JULIAN ROBERTSON: Well, I think we need interest rates to appreciate, to go up, and to be . . . Because I think we are creating a bubble.
KELLY EVANS: A bubble in the market?
JULIAN ROBERTSON: Yes.
KELLY EVANS: In the stock market?
JULIAN ROBERTSON: Yes, ma'am.
KELLY EVANS: So there's a couple of things, you know, you've been a longtime supporter of the GOP and of its candidates and of its causes. And when we spoke last time you said you were going to vote for the Bill Weld, the Libertarian candidate in the election, and I'm just wondering if you did so and what you think about the job President Trump has done so far.
JULIAN ROBERTSON: I voted for Weld and --
KELLY EVANS: Was it Gary?
JULIAN ROBERTSON: Gary, whatever his name is, the jokester.
JULIAN ROBERTSON: But I voted for them.
KELLY EVANS: And that's a reference to his use of marijuana, right?
JULIAN ROBERTSON: But I think, you know, Donald Trump is our President, and I've tried to support the choices he's made that I agree with. I've contributed towards the Supreme Court Justice that he elected, and I'm going to give him my support while he's there.
KELLY EVANS: Even if he's making deals with Schumer and Pelosi?
JULIAN ROBERTSON: Well, he's got to make deals from time to time. That's part of the game. I mean, I'm not -- they all do that.
KELLY EVANS: All right. One more question just because we spoke a lot this morning about tax reform and different people have come out here and said, you know, they think it's going to be a 23% rate or a 25% rate and -- but it looks like it's definitely coming.
Is that a prerogative of yours? Is that a big deal for this country to see that happen, drop the corporate tax rate into reform?
JULIAN ROBERTSON: I think definitely this country needs a lower corporate tax rate and tax reform so that we can get our profits that we've made overseas back into the country without heavy penalties. And if that happens, I think that would be very good for the market and all of that. And I think they are smart enough to know that probably those tax cuts will not benefit people in this room and . . . I mean, directly, anyway.
KELLY EVANS: And that's a good thing?
JULIAN ROBERTSON: Well, I think it's necessary to get the bill through.
KELLY EVANS: All right. Let me ask you about a couple of particular companies, just thinking about Apple, for example, which has a lot of cash overseas.
You were a holder of that going back a couple of years, and they have a big event today and are launching a bunch of new products. But has it just become too expensive for you guys, is it not -- or would you look at investing in Apple again?
JULIAN ROBERTSON: No, I think we should definitely look at Apple. Apple is not that expensive of a stock. There are a lot of disadvantages of being an old goat. One of the few advantages is the fact that we've seen all this a little bit before. And right now the Apples, the Facebooks, the Googles, those great growth companies are priced cheaper than they would have ever been in the '60 s , '70 s , and '80 s .
KELLY EVANS: Hmm.
JULIAN ROBERTSON: And I don't think a lot of people realize that.
KELLY EVANS: Well, you're trimming your positions in Facebook, and Google, and you're not in Apple right now.
JULIAN ROBERTSON: Well, I don't think I've . . . I kind of trade Facebook and those things a little bit. And I consider myself kind of a long-term player of Facebook.
KELLY EVANS: Even though you think the markets overall are expensive, these emblematic tech same names you actually don't think are that expensive?
JULIAN ROBERTSON: Correct.
KELLY EVANS: And we've spoken about Netflix before, too, which then you said that one might maybe got a little out of reach.
JULIAN ROBERTSON: That might be a little out of reach, but that one is awfully tempting to me because it's run by really good people and -- and I love it, too.
JULIAN ROBERTSON: Anybody that doesn't like Netflix, that's like saying you hate Santa Claus.
KELLY EVANS: Do you have a favorite show right now?
JULIAN ROBERTSON: No, but I just . . . I like all of them.
KELLY EVANS: Well, I remember we talked about Uber, as well, the last time we spoke, and that was something you guys had invested in. What do you think about -- I don't know if you're still in it, but I mean --
JULIAN ROBERTSON: I don't know, I can't get this across. I've never been in Uber.
KELLY EVANS: Oh, you've never been in Uber?
JULIAN ROBERTSON: No, I'm sorry, I haven't. My God. I think I'm in it through -- a small amount through a fund I'm in --
KELLY EVANS: Got it.
JULIAN ROBERTSON: -- but not really.
KELLY EVANS: Well, one thing that's interesting as well are your views on the cruise industry. You guys have Royal Caribbean, I think you recently added Norwegian, and if I have this right you said it's because, you know, it's easy to get your hands on an airplane and it's a lot harder to get your hands on a cruise ship. Is that part of why these are interesting areas to invest in for you?
JULIAN ROBERTSON: Well, I think the cruise industry has come of age. And older people my age are attracted to the cruise ship industry. And they are booming right now, and all over the world they are booming. And I think they're for the golden oldies, and there are more and more of them around.
KELLY EVANS: So you like the industry, broadly speaking, for a generational mode.
JULIAN ROBERTSON: Oh, Yeah.
KELLY EVANS: Air Canada, was one last time. You said you thought it was the best investment in history, practically. It was trading at 3 1/2 times earnings. And now I think there's a couple others, Ryanair, that you guys are involved with as well. So is that just simply kind of a valuation thing. You look and you see a cheaply valued company, and has that done well for you? And why no U.S. airlines?
JULIAN ROBERTSON: Well, Air Canada is really just sort of what you said. Air Canada, I think we got into it at around 8 or 9. And it's now 23, approaching 24. And the multiple is about the same as when we got in, which is all of five times earnings.
KELLY EVANS: Wow.
JULIAN ROBERTSON: So we have too much Air Canada, but I can't make myself sell it. I mean, I think it's going to be -- continuing to be a great stock.
KELLY EVANS: One thing you did sell a little of last time, I think you said you were almost throwing in the towel on Gilead, which just did a big acquisition of Kite Pharma and a promising new area of therapies.
JULIAN ROBERTSON: Well, that's what -- if they wanted me, they should've done that earlier, because they were slow to get that underway. And we like that area.
KELLY EVANS: Of the CAR-T therapeutics. So you could get involved in Gilead and some of these other companies like that again?
JULIAN ROBERTSON: Oh, yeah. I mean, those companies, the developments that are occurring in science are just unbelievable. I mean, remember Jimmy Carter caught cancer, you know, several months ago and had a few shots and he's fine. I mean, that's this development of the body's immune systems to fight the cancer themselves. It's a whole new thing. This is a whole new thing. It's huge.
KELLY EVANS: Yeah. That was a Merck drug, Keytruda.
Let me ask you about one more investment that I know you're a big proponent of right now, before we move on, this Alibaba. And Jim Chanos was just on our network talking about how he doesn't trust the accounting. There have been plenty of other short sellers out there who say no way can we believe in this company. Why are you confident in Alibaba's prospects?
JULIAN ROBERTSON: Well, I mean, it would have to be such a giant fraud. I mean, I can't imagine anything would be that colossal.
KELLY EVANS: Well, we've seen a few. We've seen an Enron. We've seen a few.
JULIAN ROBERTSON: I mean, that's drivel compared to this. I mean, this thing is -- and I mean, I don't think you can disguise sales figures. They are really going . . .
KELLY EVANS: The 60% sales growth. Yeah.
So you guys, you're in -- by the way, there are a lot of hedge funds in Alibaba right now, which is up something like 70% this year. I mean, it's just been huge. So is this a momentum kind of thing where you go, you know what? Great prospects, great growth, or is this a long-term holding for you?
JULIAN ROBERTSON: Well, I've had a long-term history with Alibaba. I bought Alibaba at a very low price, you know, probably seven or eight years ago. And then sold it when it got to about a hundred. And I've just gone back into it. And I think they're clicking on all burners. And you're not talking about rules, penny junctions, roadways. I think we're talking about something like 50% improvement in earnings this year. And that's unbelievable for a company that massive.
KELLY EVANS: Yeah, it is. It's pretty shocking. By the way, also shocking -- and I know we talked a lot about bubbles and maybe what's happening in the stock market, but what do you think about Bitcoin? I mean, that thing has been parabolic. Got any thoughts just in general about what's playing out here?
JULIAN ROBERTSON: I've never understood it, and I don't think I'm going to. And I had a very close friend of mine's son who was very big into Bitcoin. And he tried to explain it to me. And I don't know what it is. Have you got anybody here today that's going to talk about that?
JULIAN ROBERTSON: Because I'd love to stick around.
JULIAN ROBERTSON: Unfortunately, I'm totally incapable of discussing the subject.
KELLY EVANS: Well, you know, we've heard various people say, oh, it's not really a currency. It's a software. And oh, it's not about the currency, it's about the underlying blockchain technology, and that's really going to change the world. And meanwhile, you know, there's a scarcity valuing the coin. I've heard probably 30 different rationalizations of it. So you're -- what would you -- are any of the Tiger funds allowed to invest in these cryptocurrencies, or would that just make you. . .
JULIAN ROBERTSON: I've certainly not put out anything that says they can't do it. But to my knowledge, no one has. I'll probably get a phone call this afternoon from somebody --
JULIAN ROBERTSON: -- That says I'm very big in Bitcoin, you don't know what you're talking about. But at any rate, I don't understand it.
KELLY EVANS: What are you proudest about when you look at a lot of the funds that you've spawned, and the way -- and a lot of them, they're in your office. Right? I mean, you've got a couple dozen of these guys, some of which have been around for a couple decades on their own right now with incredible track records. Of course, others have struggled. It's not a perfect batting average. But what are you proudest about in terms of how they've all blossomed?
JULIAN ROBERTSON: I'm really, I think, proudest of the men those people have become -- and women, too. They're all going to make this place better than it was when they came. And that's by far the thing I'm proudest about.
KELLY EVANS: Any regrets?
JULIAN ROBERTSON: Yeah, there are a lot of regrets. There are a lot of regrets. But by and all -- large, it's been a fabulous, fortunate thing for me to have gotten exposed to those wonderful people that we have working for us. And I'm glad -- thrilled every time I see the progress they're all making.
KELLY EVANS: Do you have any mistakes that you've made along the way, things you would've done differently?
JULIAN ROBERTSON: Boy, a lot. And we've gone forever.
KELLY EVANS: How about just a couple examples?
JULIAN ROBERTSON: Well, the biggest example is that instead of being hurt, when these good employees of mine that are almost like brothers and sons, instead of getting upset when they left, the thing I should've done was say let me help you start and, you know, just give me a tiny little bit of your action.
KELLY EVANS: But that's what you ended up doing, ultimately.
JULIAN ROBERTSON: Not really, no. Not really. I don't have much of that.
JULIAN ROBERTSON: But, look. They're fabulous people. It's been my great privilege to know them.
KELLY EVANS: What would you say to people who want to get into the hedge fund industry today?
JULIAN ROBERTSON: Have you got two minutes?
KELLY EVANS: We do.
JULIAN ROBERTSON: When I got out of the Navy, I knew a lot of . . . I had gone through the naval ROTC program. And so I knew I vy League people. I was from North Carolina, a southern school, and so I got to know some of them while I was in the Navy. And guess where all those hotshots, the guys that were really smart and attractive and all that, guess where they were going? They were going into advertising. That was the hot thing then. Now they're all headed for hedge funds and the financial field, various exotics, I think. I think they ought to be darn sure they love the field.
That should be what guides them. They should take -- I mean, I took a test what, sort of -- and you can get them from any college, and they try to marry your best abilities with your best interests. And I would take that test and say, What am I best fitted for? And if it came back, you know, a shoe salesman, you know, think about that.
KELLY EVANS: Yeah. And what did yours say?
JULIAN ROBERTSON: Mine kind of agreed with what I wanted to do.
KELLY EVANS: Which was?
JULIAN ROBERTSON: You know, finance. But it was so fortunate. I mean, I was a late bloomer and I didn't carry much of a record from college. And, you know, the investment banks were desperate for people, so they'd take a swab like me.
KELLY EVANS: So your message to young people today is get into advertising.
JULIAN ROBERTSON: My message is get into what you love and really want to do and can do. And there are these tests you can take for that. All the colleges have them. And they should spend a couple hours and do that.
KELLY EVANS: I think we should pass one out to everybody here.
JULIAN ROBERTSON: I don't have one just right on me now.
KELLY EVANS: (Laughing) Julian, thank you so much for your time today.
JULIAN ROBERTSON: Kelly, thank you.
KELLY EVANS: It's really been a pleasure. Thank you so much.
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