报告一下CFA institute(Association of Investment Professionals)年会

The CFA institute held its annual meeting in Boston. There are several hot topics in the meeting

1) inflation / deflation debate
2) the future of the euro, gold, and China
3) financial regulation

Super stars speakers in the Conference:

Kenneth Rogoff,
Seth Klarman,
Jeremy Grantham,
Van Hoisington,
Cliff Assness,
Jim Chanos
Michael Kurtz

Here are the summary of the key points of those speakers:

After another messy week the despair feels as high as ever during the last 18m which is amazing but it’s a brave man who steps in front of this market.

Ken Rogoff - per his book this time is different sees sovereign default as a natural after shock of financial crisis not a new crisis in itself. Expects Greece to default, but the euro will survive even if Greece is put on “sabbatical”. Global growth is likely to continue but be subdued, unemployment / housing woes will continue, but Equities could continue to rally. No obvious correlation of inflation with debt but central banks likely to bow to political pressure (as we have seen in Europe recently). PPP of EUR/USD points to range of 1.10 to 1.30. Does not believe that Germany is strong enough to absorb the problems. Views China as the next “this time is different argument”.

-----------------Year of IMF package------- Year of Default
Argentina --------- 2000 -------------------- 2001
Indonesia --------- 2000 -------------------- 2002
Indonesia --------- 1997 -------------------- 1998
Uruguay ----------- 2002 -------------------- 2003
......

Seth Klarman probably the greatest living “value” manager continues to struggle to find much value in the market which is reflected by his $6.6bn of cash pile. He thinks that the Euro bailout will fail and he is more worried about the world than at any time during his career! He is worried about all paper currencies and whilst he doesn’t view commodities as investments he sees room for Gold in anyone’s portfolio. However he is concerned that the biggest group think (within Baupost) is that Gold is a good investment and that the ECU will break up. They are buying selective commercial real estare (but privately, REITs don’t offer value currently) and long dated deep out of the money puts on interest rates that only payoff if rates exceed 7%.

Jeremy Grantham has been very critical of value managers in the past and focuses primarily on bubbles. The current 30yr Credit bubble has removed 0.5% of growth per annum from the world economies. All 34 of their identified bubbles end eventually. The two largest bubbles he sees currently are the UK and Australian housing markets which are both due a 40% contraction. Key to the GMO approach is that everything returns to trend. see below for current forecasts:

Fact:

Historical Long term US Equity Return is 6.5%

GMO 7-year Asset class return forcasts:

U.S.equities (large cap) 0.3% - 2.1%
U.S.equities (smallcap) (-1.9%) - (-0.1%)
U.S. High Quality: 5.8% - 7.6%

Int\'l equities (large cap) 3.2-5.5%
Int\'l equities (smallcap) 0.8-3.1%
equities (emerging) 4.7-8.4%

U.S. Bonds(gov\'t) 0.8-1.7%
Int\'l Bonds(gov\'t) (-0.2) - 0.7%
Bonds(emerging) 1.5- 4.5%
Bonds(inflaiton indexed) 0.7-1.6%
US treasury (30 dys to 2 yrs) (-0.6) - 0.8 %

He think EM is overvalued but is yet to turn into a bubble so sees further upside. Finally he discussed the Presidential cycles and the fact that there has never been a bear market in year 3. (Averages Year 1 -3.4%, Year 2 -10%, Year 3 +15.3% and Year 4 0.3%).

Van Hoisington; a thousand hands shot up as this Texan bond manager asked who in the room thought that we would have an inflation problem within 3 years. If this wasn’t concerning enough he then proceeded to give a very compelling case as to why Deflation remains substantially more probable. The essence of this can be seen by comparing the nonfederal debt and federal debt. The contraction in private credit has massively dwarfed the expansion in Federal debt and the Money Multiplier has halved meaning that even if Friedman is right about Inflation there is no reason to see it yet. From this perspective the main factor that will create it is a significant expansion in bank lending and financial innovation (neither of which feel likely any time soon). The most concerning part of his talk was that whilst Fiscal Spending had a multiplier of less than 1 the tax multiplier is significantly more than 1….leading to the conclusion that the economy is worse off than if nothing had been done by the state.

Niall Ferguson presented a similar picture to Rogoff but said that in a Sovereign default there are usually only 3 ways out; fiscal pain , increased seinorage or default. Only Britain between 1815 – 1914 have reduced debt burden exclusively by budget surpluses, lower interest rate and higher growth.

Cliff Assness primarily described the concept of Hedge fund beta improving the efficient frontier.

Jim Chanos: In 25 years, ALL major frauds were discovered by journalists, whistle-blowers and short sellers. Short selling bans result in bear markets -- 1932, 2008, Germany this week? - Recurring themes in short selling...
- Booms that go bust, i.e. debt-fueled manias where returns on assets < interest costs, e.g. telecom mania in 1999 or subprime
- Consumer fads, e.g. Cabbage Patch, George Foreman -- make for great souvenirs though
- Technological obsolescence, e.g. Schumpeterian change -- word processors, Kodak, DVDs by mail?
- Structurally-flawed accounting and serial acquirors, e.g. ENE, TYC. Spent extra time focusing on serial acquiror accounting

Closing line from Chanos was that there is currently 30bn sq ft of Class A office space under construction in Tier 1, 2, 3 cities in China, i.e. enough for a 5 sq ft cubicle for every Chinese man, woman and child!

Michael Kurtz: Macq\'s China strategist presented the other side of the china argument. Whilst he sees some long-term structural issues facing the Chinese economy, he thinks that the bears are over stating the case in the near-term and many of their arguments are already discounted by the market. 1. Housing Bubble?...maybe in some cities, but not a nationwide problem...2. Rapid credit expansion to lead to massive NPLs?...loan growth has been kept substantially below nominal GDP from 03-08. 09 was the binge year, but 1 year of lending doesn\'t typically lead to a systemic banking failure. With much of the focus of the conference on looming sovereign debt issues, Michael highlighted the fact that Asian fiscal balances are generally in much better shape than their developed world counterparts.