This week Hedge Clippings attended the 500+ advisor/fund manager annual info-fest run by Graham Rich's Portfolio Construction Forum (PCF). Run is probably an understatement, as is managed - the event is a superb example of organisational efficiency, or should we say control.
PCF is a longstanding annual event and thus has the benefit of years of experience, some serious theatrics, audio volumes to rival a Bruce Springsteen concert and, led by Rich himself, with an excellent line up of speakers, plus the obligatory "pay to perform" fund managers. In case you're wondering, this is not a paid endorsement or return favour for a freebie or contra ticket - Hedge Clippings coughed up the $795 entrance fee and will happily do so again next time around.
Why? Simply the professionalism of the production and the quality of the speakers - in spite of the geographically impossible location in deepest Redfern, which it seems, as we wandered hopelessly lost* (as Google Maps doesn't call it Redfern do they, probably preferring the more fashionable Eveleigh) around the streets. It seems Redfern has been transformed from "no go" to "inner city chic" in the blink of Sydney's property boom.
But we digress - back to the speakers, the main morning attraction being a global economic review from the likes of Jonathan Pain who is seriously bearish on property. Another, Longview Economics' Chris Watling from London, who held an equally bearish view based on his concern over the expansion of global debt at record low rates (in some cases, zero) which now exceeds GFC levels.
Watling's theme was that "bubbles always burst", having always started with cheap money, and always ending when it gets more expensive. He particularly singled out BBB corporate bonds issued by companies he described as "Zombies" who, after paying their bond holders, had nothing left to invest in R&D or production, and who in a normal interest rate environment would not be able to survive. He was equally critical of valuations, citing We Work currently priced at 20 times revenue!
Watling was unable to predict the timing of the bubble's burst, but one got the impression that, even though he might have been singing from the same song sheet for a while, time was running out.
Watling was followed by Ron Temple from Lazard Asset Management who was more sanguine, but cautioned that global growth was slowing, was surprised by the Fed's recent "pivot" but believed Euro growth will rebound.
Forecasters are notoriously good at predicting the future, but equally bad at calling the timing. We're reminded of the old adage that "the right trade, but with the wrong timing frequently results in a bad outcome."
*OK, our fault. A little prior preparation the day before would have averted the long walk, but at least Redfern was a pleasant revelation, and who would have thought we'd say that twenty, or even ten years ago.
