market folly

Yesterday, there was an introductory post that outlined key takeaways from the event. Then there was also a separate post that detailed the "Case For Global Equities in 2010" from a panel of prominent long/short equity hedge fund managers. The next panel discussed the Global Investment Landscape In 2010. Hedgies in this discussion included Duquesne Capital's Stanley Druckenmiller, Elliott Management's Paul Singer, and Everest Capital's Marko Dimitrijevic.

The Global Investment Landscape In 2010: The government's role, the global landscape, and monetary policy.


Paul Singer (Elliott Management): Singer talked about how government has always been a part of investing, but even more so now. He says that capital will flow to wherever it is welcome and wherever there are defined rules and laws. Singer honed in on some particular legislation that he feels will have damaging impacts. He focused on the Wall Street Reform and Consumer Protection Act of 2009. This would charge banks over $75 billion and hedge funds over $10 billion in open-ended assessment. He wonders why hedge funds would have to pay for the mistakes of 'highly levered and "mis-managed financial institutions'.

He also lashes out at the notion that this legislation designates institutions that are 'too big to fail'. He wonders how the government could identify those institutions ahead of time? Rather than forcing this definition on a few select companies, why not focus on making all of them NOT too big to fail. He thinks the way to do this is via margin requirements and regulations. Singer almost led a "call to arms" with his talk as his main point was that leaving capitalists worried about future punishment isn't the way to fix the system. On the topic of emerging markets, Singer actually thinks there is a "fair race" between the developed world and emerging markets going forward. Last year, we also covered Singer's thoughts at the Ira Sohn Investment Conference.


Stanley Druckenmiller (Duquesne Capital): Druckenmiller focused on monetary policy and asserted that it is not responsible for the financial crisis. He notes that zero and/or negative interest rates often cause dislocations that don't have anything to do with inflation. Instead, they affect other factors by discouraging saving, encouraging spending, and causing financial institutions to lever-up even more.

Druckenmiller did admit that cutting rates was appropriate as it truly was an emergency, but thinks an increase in rates is past due. (He disagrees with the assertion that low rates are needed for growth). Druckenmiller's thoughts overall could be summed up as bearish. In terms of investing, he mentioned that emerging markets offered much better balance sheets and faster growth. At the same time, he notes that the US dollar is the reserve currency and so monetary policy outside of America becomes less meaningful. We haven't covered Druckenmiller on the site much, but in the past have noted that he was on Forbes' billionaire list.


Marko Dimitrijevic (Everest Capital): Dimitrijevic focused on his niche topic of emerging markets and said they represent almost 13% of the MSCI index. He points out that this figure is misleading since nominally, emerging markets are a third of world assets. Additionally, emerging markets surged past developed markets on a purchasing power parity basis for the first time ever. One of Dimitrijevic's most intriguing points was the notion that the emerging market consumer overtook the US consumer and this shift seems to be overlooked. For more on Dimitrijevic, we've previously profiled Everest Capital.


This wraps up the "Global Investment Landscape In 2010" conversation. Head to the overview of the hedge fund panel and also coverage of the long/short equity panel. Check back tomorrow for summaries of the rest of the panels.