The CFA conference continued yesterday at gale wind speed, leaving us with little time to collect our thoughts until today. Things started out with a bold opening panel that included Barry Ritholtz, John Mauldin, David Rosenberg and Anatole Kaletsky. The topic du jour was the global debt crisis, and if you’ve ever seen any of these folks speak or read their work, you know you can’t do much better than this group on that topic. What are we looking at on the global stage moving forward?
- The Possibility of a Broken EU – Rosenberg believes that the continued isolation of Germany may be a warning sign of rough waters ahead and the dissolution of the EU. Mauldin believes that there are too many people with a strong interest in keeping the union together, and that the ECB will need to step up. Kaletsky had a decidedly sunnier view, arguing that the downside risk in Europe is known, and that it’s the U.S. we should be more worried about. So, sort of sunnier… at least for Europe.
- Japan Still Sucks – The panel was in resounding agreement on one issue – the mess that is Japan. With nonexistent GDP growth, Mauldin aptly described the country, as far as investing is concerned, as a “bug looking for a windshield.”
- The JOBS Act is Going to Shake Things Up – Mauldin was the champion of this topic, arguing that the new regulatory changes would create a world that rivaled the introduction of money markets and mutual funds, with a slew of new products hitting the street. Ritholtz was not as rosy on the topic, believing that the disclosure issues would complicate an already complex issue.
We’ll be honest, though. The best part of the presentation came from a tidbit of wisdom out of Ritholtz, as he harped on the fact that we shouldn’t worry about what we can’t control. The goal, instead, should be to figure out what is happening now. It definitely got us thinking. On one hand, the man has a point. We spend a lot of time speculating on what the future holds, but the reality is, figuring out what’s happening in the moment is difficult enough as it is. Focusing on the current climate is important, and likely more fruitful.
That being said, we can’t give up on speculation altogether (I mean, we are managed futures people). Can’t there be a happy medium? Think about it like this – you’re deciding to go out for a Sunday picnic, and are trying to figure out whether it’s a good idea. It’s sunny out, the weather is nice, but realistically, it could always start raining. If you were to choose to stay in, despite the current sunny weather, because there was some unknown risk of rain… well, under that logic, you’d probably never leave your house. Ritholtz is essentially arguing that you should go on that investing picnic if the weather right now is nice, and we agree. Investing based on known variables may make a lot of sense, but at the same time… it can’t hurt to bring an umbrella.