Milken Institute Global Conference Highlights Through the Eyes of Todd Harrison
Lessons learned from America's left coast.
Minyan Musings: April 28th, 2010
I walked into the breakfast panel on the final day of the conference as the Grateful Dead's Hell in a Bucket played over the loudspeaker. That immediately put some pep in my step -- and scored some major "coolness" points -- but I couldn't decide if it was telling or cutesy.
The theme for the opening panel, after all, was Reading the Tea Leaves: Investing for 2010 and Beyond.
Nick Calamos, President of Calamos Investments, is optimistic that we'll see a productivity led, earnings driven growth cycle. Later in the panel, however, his remarks were more tempered. He wasn't sure if the Euro was going to survive and "nobody in this room under 50 will get social security" as we're rationing health care--the promises of dead politicians will not be delivered." We've seen the socialization of risk and a historical collapse in velocity of money. Expanding government, he explained, results in lower wealth creation.
- Meredith Whitney, CEO of Meredith Whitney Advisory Group, offered that credit is tight -- if not absent -- for small business and has opened only for corporate America (which effectively rolled out obligations). $1.4 trillion in credit lines have been cut from the system and record numbers of small businesses are closing. How long can the recovery sustain itself? Nothing is more important than the trending direction of the credit markets, she observed. "Liquidity is looking for a home and the greatest risk between loans and default is distance".
- Thomas Joyce, Chairman and CEO of Knight Capital Group, noted that the complacency was pierced the last few days (this was as the sovereign sequel spread) and expects the market to trend sideways down the rest of the year. Debt service levels are 1-2% of GDP and we can afford that "for now". The dollar will continue to benefit from the flight of the Euro and may not be disaster many are expecting.
- Patrik Edsparr, Global CEO of Citadel Securities, noted that cost cuts are driving results, fiscal stimulus will turn into a drag, joblessness will drain spending, geopolitics are a real risk, and the markets may be ahead of themselves. Fannie Mae (FNM) and Freddie Mac (FRE), he opined, are the "black holes of bailouts."
- There's been $20 trillion in global market cap added since the low; that's real money.
- Corporate America is looking outside our borders for growth/consumption; global companies will out-perform.
- Risks? Too much debt will lead to trade wars (protectionism) and monetary events (higher interest rates).
- Stimulus 3.0 and 4.0, as well as more quantitative easing, is sitting in Uncle Sam's back pocket.
- Employment trends huge for housing and spending. 20 million state and local jobs are being cut and 44 states are under-funded. "Every state looks like Greece."
- We need proactive solutions coming out of Washington and clarity on regulation and tax policies. Until then, there will be reticence on the part of consumer. How can investors trust market? Where is the job creation? It may not be on the radar yet, but there is a structural deficiency in our job market. For instance, many home builders won't return to work and they won't change jobs.
I was particularly interested in the next panel, Online News: The Frontier of Financial Journalism. I didn't take many notes as I was active in the discussion and wanted to cut to the chase. With the proliferation of online content and a perceived "hierarchy" of journalists, bloggers and message board posters, I wanted to know if credibility, accountability and responsibility devolve as we scale that curve.
Minyans know we don't "do" acrimony in the 'Ville. It's not how we roll and it doesn't move the needle towards a positive place. Still, the stage for healthy debate was set as Felix Salmon, a well-known blogger for Reuters, was on the panel. As some of you may know, he offered an unflattering assessment of the 'Ville last month while referencing another topic. And I quote:
"…the beating heart of Clusterstock is the dynamic duo of Carney and Joe Weisenthal; now that he's fired Carney, Blodget must know that he risks losing Weisenthal as well. If he loses them both, he'll rapidly become something like 24/7 Wall Street or Minyanville: a site with lots of low-quality traffic and generally uninspiring editorial content."
It's no secret we pride ourselves on truth and trust in these parts -- as my grandfather taught me, all you have is your name and your word -- so suffice to say, I wasn't thrilled when someone sent me his assessment. I've always believed that if nothing else, the Minyanville editorial content was inspired by our mission to effect positive change through financial understanding. I thought we earned those stripes proactively preparing people for the financial crisis, but I respect other people's views and vibes.
Todd Harrison is the founder and Chief Executive Officer of Minyanville. Prior to his current role, Mr. Harrison was President and head trader at a $400 million dollar New York-based hedge fund. Todd welcomes your comments and/or feedback at firstname.lastname@example.org.
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