University of Virginia Investing Conference Examines a Financial World in Turmoil

CHARLOTTESVILLE, Va., Nov. 15, 2011 /PRNewswire-USNewswire/ -- A corps of financial experts touched on the high and low points of a world in economic turmoil during the two-day fourth annual University of Virginia Investing Conference.  

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The experts — many who oversee billions of dollars in assets — spoke on topics ranging from the fate of Greece and the future of Japan to the chance of a bull market or runaway inflation in the United States. During the conference titled "The Political Cycle, Political Change and Investing" and held 10-11 November at the Darden School of Business, they examined how government policies will affect investment returns in 2012 — a year in which no fewer than 26 countries will elect a head of state.

The investors raised provocative questions. Where do emerging markets fit in? Should savvy investors pour money into China or India or Russia? How do you handle the crazy volatility of the stock market? Has the housing market finally bottomed out?

The vitality of emerging markets was a hot topic. "The emerging markets are no longer the tail," says Steve Galbraith, a partner at Maverick Capital. "They're the dog. They're no longer the small part of the puzzle. …The best investment market, long or short, is China."

China is growing so rapidly it "creates a New York City every year," says Galbraith. "The emerging markets serve as a little bit of a mitigator to the European crisis."

Europe, all agreed, is a mess. "What I'm sure of is that next year Europe's going to have a recession," says Kyle Bass, the managing partner of Hayman Capital Management LP. The statistics for unemployment for young adults in Europe are stunning; Spain's rate is almost 50 percent and Greece's is more than 40 percent.

The U.S. presents a less gloomy economic profile though the investors warn that the world should brace for some hard knocks. "Cash holdings (at companies) are at all-time highs," says Galbraith, but short-term thinking prevails. "People are not investing; they're trading pieces of paper."

One of the United States' problems — like those of Europe — is the bloated banking system. "The financial sector is shrinking," says Peter Fisher, senior managing director and head of fixed income at BlackRock. "Our banking system got much, much too big. They have to shrink back, and that's painful."

The good news? Bass thinks the U.S. housing market will level out soon. "I think the housing crisis peaked in '06," he says. "All signs point to three years to the bottom. I'm not going to say housing prices are going up, but we're not going to dump much from here."

And what about all that cash out there in the hands of the wealthy and corporations? "I think there's a lot of wealth looking for real returns and that's why they'll see equities as their only shot," says Jason Trennert, managing partner and chief investment strategist at Strategas Research Partners. Trennert formed part of a panel on the "Macro Economy: Fiscal and Monetary Environment," moderated by Bloomberg News Editor-at-Large Tom Keene.

Trennert doesn't expect a bull market, but he sees plenty of investment opportunities in the United States. "I think you can buy a lot of inexpensive companies here,'' he says.

The conference began on Thursday, 10 November, with a historical perspective given by Liaquat Ahamed, the Pulitzer Prize winning author of Lords of Finance: The Bankers Who Broke the World.

Ahamed said history has a lot to say about the country's current economic travail. He says unemployment will be high, social turmoil will occur and a rethinking of government will sweep the country.

"Be prepared. There are big changes in store," he says.

For more views from the event, please see the video playlist hosted by Darden's YouTube Channel. For more information, contact [email protected].

SOURCE University of Virginia's Darden School of Business