US is “heading for a crisis” but “equities are the best value” for now

Investors at the largest hedge funds are getting increasingly worried about what to do to protect themselves against the forthcoming crisis. Speakers at the Skybridge Alternative investment (SALT) conference talk about the danger of debt and deficits.

They feel the approaching of the woe but they don’t know how to stop it or when to finally bail out and quit riding the stock market bullet train.

“We’re heading for a crisis,” said Leon Cooperman, chairman of Omega Advisors. “I just don’t know when.”

Recollecting his previous work at Goldman Sachs where he served as chairman Cooperman says he feels the same as in those days when the company conducted a public relations campaign in the 1970s to warn about budget deficits. He believes the current shortfall will cause an eruption in the markets.

“People are scared. They don’t know what to do,” Cooperman said. “We all know we’re kicking the can down the road. We don’t know when it will hit. (Until then) equities are the best value in a bad neighborhood.”

In fact, Cooperman delivered a basket of stocks he believes will be strong plays now: E*Trade, General Motors, Transocean, Teva Pharmaceutical, Mortgage Guaranty Insurance and CVS.

Nevertheless, his concern about the future is apparent, even if he thinks the coast is clear for now.

“I am worried. I don’t think equities are priced for a crisis,” he said. “I think it’s further out. I think right now, we’re OK.”