Some of the biggest, bravest investors in the world are gathered here at the CNBC/Institutional Investor Delivering Alpha Conference, and as they do year after year, they’re sharing their views on monetary policy and its impact on the bond market.
We’ve watched these investors go from loving Bernanke, to hating Bernanke, from saying that we should be buying bonds to saying it’s time sell bonds. This year, it’s something completely different.
All these investors do is stay out of Bernanke’s way.
“You can protect against certain scenarios better than you can predict them,” said Michael Hintze, Founder & Chief Executive Officer, CQS.
Also joining Hintz were Gregory J. Fleming, President, Morgan Stanley Investment Management, Joshua S. Friedman, Co-founder, Co-chairman and Co-Chief Executive Officer, Canyon Partners, and Andrew J.M. Spokes, Managing Partner, Farallon Capital Management.
Through the talk, the four money managers sitting on stage were basically throwing up their hands and saying — “lets just go with it.” Yes, they still think this an unprecedented time of central bank action. Yes, something unforseen is goign to hapen eventually — but there were few predictions on stage, and even fewer hands-ringing.
Resistance, as they say, is futile.
Here’s a perfect illustration: CNBC’s Becky Quick opened up the conversation asking if The Great Rotation (what everyone is calling the move from bonds into stocks) is upon is.
The short answer: Who knows?!
Gregory J. Fleming, President, Morgan Stanley Investment Management said simply, “very few economists would have told you on May 1st that the 10 year could be at 2% in the next month… It’s very hard to call.”
It was hard to call, and it was also hard to invest in. Fleming and his fellow panelists didn’t sound ready to see that happen again full tilt.
His advisers over at Morgan Stanley are figuring out how to alter their asset allocation, but mostly they’re still moving more into stock market — in 2008 they had less than 40% of their cash allocated there, now they have about 50%.
As for the credit markets, “the only observation I would make is that in credit markets… you’re a lot closer to record low levels than you are to record high levels,” said another panelist.
Not necessarily a big call.
Now, while this talk was going on, Quick called on Leon Cooperman to approach the stage and give his case for why he’d never invest in bonds.
Genius that he is Cooperman threw down a stunning six point argument that all came down to this — Why buy bonds when the Fed is buying bonds? I’ll take my chances with equities, thanks.
Bernanke, do your worst. These guys are just going to watch.
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