Cliff Asness warned stocks may be overpriced and bond markets are signaling a major recession.
The AQR boss fears a financial crisis, and says Warren Buffett and quant traders have similarities.
Asness is worried about commercial real estate and is bullish on cheap stocks.
The billionaire investor and AQR Capital Management founder is also fearful of a financial crisis, sees parallels between Warren Buffett and quantitative traders, and expects cheap stocks to outperform in the years ahead.
He made the comments during a recent episode of "Bloomberg Wealth with David Rubenstein."
Here are Asness' 8 best quotes, lightly edited for length and clarity:
1. "We raised a billion dollars. And through diligence, hard work and some good calls, we've turned that into half a billion dollars." (Asness was recalling what he told people 18 months after he launched AQR.)
2. "Almost all the time our job is about brains. Once every 20 years, it's about another word that starts with 'b.' (He was underlining the need for investors to have conviction in their positions, even when they've trailed the market for several years.)
3. "My biggest concern is stocks and bonds seem to be taking a very, very different view. Bonds are pricing in multiple, severe cuts over the next year to two years. That is a forecast for a recession, and not a mild one. Equities are whistling past the graveyard."
4. "If inflation stays sticky, or it comes down because we enter a non-trivial recession, it's equities that I think are a scary place. They're not priced very consistently with bonds, and we're going to find out who's right in the next year."
5. "I worry about a financial crisis because they're very unpredictable. I don't think anyone wants a financial crisis. You think you'll do well, and something happens that boomerangs, and you don't."
6. "Commercial real estate, and banks that deal in that, may be a more nerve-wracking place — how that shakes out in cities. I'm worried enough to put it on my worry list."
7. "No one would call Warren Buffett a quant. Yet he is very correlated with what quants would call the value factor, the low risk factor, and the profitability factor. He buys companies that make a lot of money, aren't very risky. And then he looks for a decent price."
8. "I'll tell you what I'm doing with my own and my kids' money. We have our money pretty gigantically overexposed to this long-short value trade that I'm speaking of. It's not an entire portfolio. But I'm eating my own cooking."
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