Friday, 1 May 2015

Ten key thoughts from the first day of SIC 2015

Fascinating first day at the Strategic Investment Conference 2015 (link here).

Looking at all my notes and thinking through all the conversations I had here are ten key takeaways (in no particular order) and matters to think about from my perspective:

1.What the Fed does next - There are 'lots of things to be worried about...but the Fed is not one of them' observed David Rosenberg who cited evidence that the US indices tend to fall after the last interest rate rise.  Paul McCulley noted that the Fed is 'paid to be once they get off zero they want to stay off zero'. 'Monetary policy is ineffectual if not negative' said Lacy Hunt noting the velocity of money continues to fall. Jim Bianco put the chances at 50/50 that the US gets more QE if the stock market falls by 10%.

2. The required mindset - 'Professionally i need to fall apart to make money' said Peter Briger whilst David Harding opines that 'everyone knows leverage is the route of risk'.  Meanwhile Louis Gave believes 'money managers are paid to adapt'. Thoughts which then leads you to...

3. ...theoretical opportunity set - Specific rather than general opportunity was seen by Peter Briger as 'everything we are doing is idiosyncratic'.  David Harding cited historic managed futures data showing that 'everything is much, much better than the US stock market' which 'defied explanations of an efficient market'.

4. Bonds - 'I wouldn't buy any bonds' said David Rosenberg highlighting 100% of supply being purchased by 'non-price entities'.  Meanwhile Peter Briger noted 'credit sucks'.  Lacy Hunt however thought that the US Treasury market is likely to be next decade as 'deflation changes the rules'.  Paul McCulley put fair value of 10 year Treasuries at around a 3% yield.

5. Earnings season is warped in the view of Jim Bianco who noted that there was even a 58% proportional beat in Q408.  Acknowledge that numbers are lowered to 'beat' and you will be a better investor...

6. Trade and related - The recent sharp FX moves pertained to 'beggaring' trade partners observed Lacy Hunt cited comparisons with the inter war years

7. On distressed energy opportunities both Peter Briger and Jim Bianco noted many people - too many people - were awaiting opportunities to invest.  Louis Gave noted that the corruption crackdown and Russia's below market deal with China both helped induce the violent shifts of energy markets in the last year.

8. International investing - Louis Gave said that 'China will double and you have nothing in your portfolio' and hence 'every index fund in the world is going to chase its tail' meanwhile 'the one big underweight you should have today is the US' and the big recent move of the Chinese markets means 'all of you are being front-runned'.

9. Longer-term predictions - The end game for Central Banks is inflation mentioned David Rosenberg.  Paul McCulley observed that his 'biggest forecast for the next 5 years is that public investment will cease to be an oxymoron' and that there is not a shortage of savings / budget deficit expansion capability to fund this.

10. Tactical observation - Jim Bianco made the excellent point that after poor Q1 data 'anything data starting with "April"' is going to be of huge interest.

Now the challenging job of extending these intellectual capital insights into active investment thoughts and choices...  I am sure that day two on Friday will be just as interesting and useful.


  1. Having trouble understanding this quote in bullet 8: 'the one big underweight you should today is the US'. Is there a word missing before 'today'?

    1. yes 'have'. Thanks for spotting. Will amend.

  2. Learn to read without being a pedant

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