Secrets of the strategic investors

How do you calculate ROI on investment conferences? They often require travel expenses, time away from the office and some eating of rubber chicken with mysterious sauces. But the right conference can result in a whole new way of looking at your portfolio. To evaluate the recent Altegris/Mauldin Strategic Investment Conference in San Diego,

The Gold Report asked attendees for their insights on the major themes from thought leaders such as Former Speaker of the House of Representatives and host of CNN's Crossfire Newt Gingrich, Gluskin Sheff + Associates Chief Economist David Rosenberg and Hoisington Investment Management Executive Vice President Lacy Hunt.

Thoughts from the Frontline writer John Mauldin captured some of the debate waged from the stage during the 2.5 days at the Altegris/Mauldin Strategic Investment Conference when he said, "Our economic future depends on a race between two accelerating curves—debt and innovation."

Attendees saw much to fear and some glimmers of hope.

The Gold Report: On the debt side, where does the biggest threat exist? China? Europe? Japan? The U.S.? Consumers? What is the highest likely outcome from the accelerating debt curve and how will that impact the U.S., Europe and Asia?

Santiago Pinson Correa, vice president of asset management, Invercap: China, Europe and Japan all concern me. Japan is the one that concerns me the most as it is the country with the largest variability of possible outcomes. Overall, I believe that the most likely outcome on a global basis is a long period of sluggish global growth.

David Hay, chief investment officer, Evergreen GaveKal: In order of our concerns: China, Japan, Europe, U.S. We see sluggish growth being the most likely near-term outcome, with the possibility of deflation leading to hyperinflation being a longer-term possibility. If so, we see Japan leading the world down that terrifying path.

Nathan Sonnerberg, chief investment officer, Glassman Wealth Services: Japan is the scariest debt situation out there, particularly given its demographic composition and current lack of structural reforms. I believe the U.S. is best positioned to manage its debt load. We have the best demographics of most developed countries, natural resources, a continuous pool of new immigrants and this amazing desire to succeed (the American Dream), not to mention that most innovation happens here in the U.S. We need time for Washington policymakers to dismantle the obstacles for our true growth potential—lower corporate taxes, simplified tax code, etc.

Europe has greater challenges with its debt load. Even with its common currency, the euro, the countries are each distinct and different from one another (e.g., Northern Europe vs. Southern Europe). Their banks need time to recapitalize to allow the bad debt to run off. Also, the European Central Bank (ECB) has a different stated objective than the U.S. Federal Reserve. As such, it remains to be seen whether ECB President Mario Draghi actually is willing to employ unconventional means of monetary policy and stimulus.

TGR: Depending on where you see the greatest threat and opportunity, how are you adjusting your portfolio to prepare for what is coming?

SPC: There are many scenarios that could lead to a spike in systemic risk, hence I believe that the best way to protect a portfolio is to take advantage of the current very low levels of volatility prevalent in many asset classes to build "optionality."

DH: We feel that one of the most unappreciated ports in the storm is Canadian corporate debt denominated in its currency. Canada has outperformed all other OECD (Organisation for Economic Co-operaton and Development) countries. It is not printing money, and it is close to moving into a fiscal surplus. Additionally, thanks to a 10% sell-off, the Loonie looks undervalued. We believe it will trade back up to par versus the U.S. dollar.

NS: One needs to stay diligent in this environment. There are both deflationary risks and inflationary risks. Depending on which takes hold first implies a somewhat different structural approach. We are inclined to believe the greater risk is inflation, something the Fed desperately wants. As such, we want to own productive assets with pricing power and real assets that are scarce or hard to replace—real estate, infrastructure, energy infrastructure MLPs.

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