Big Names Explain Outlook at TIGER 21 Event



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June 9, 2014

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BIG NAMES EXPLAIN OUTLOOK AT TIGER 21 EVENTStaff / February 14, 2013Over a three-day period, during which the Dow Jones Industrial Average reached 14,000, Members of TIGER 21gathered for their Annual Conference to discuss investment strategies, opportunities, and a host of other wealth-related issues.Among the notable presenters were Kyle Bass, founder of Hayman Capital Management; Glenn Hutchins, co-founder of Silver Lake; Pierre Lagrange, co-founder of GLG; Marc Lasry, co-founder of Avenue Capital Group; andEric Sprott, founder of Sprott Asset Management.The speakers did not all agree on the direction of the economy, although bears outnumbered bulls.George Friedman, founder of global intelligence firm Stratfor, set the tone early when he discussed his geopoliticalperspective on the economy. He explained that from a macro perspective the world periodically undergoes aspasm ‚Äì usually a war or some other change in control in a major country ‚Äì and if you are prepared for the spasm,you can live through it.Friedman highlighted hot points around the globe where changes in government and wars were a possibility ‚Äì inChina where the government is more interested in maintaining employment rather than growing the economy; inEurope, where economic problems are forcing a divide in the EU that is untenable; and he suggested that even theU.S. is not immune because more middle class families cannot afford to live middle class lives.Read: Despite problems U.S. still strongHere are some of the key takeaways from notable presenters:KYLE BASSHe sees problems ahead due to inflation and suggested investors need to insulate themselves from it.”As equity prices keep going higher, it is easy to lose sight of what’s important. If you are so focused on nominalpricing and equities and the monetary base is growing as fast as it is, you have to really focus on the insidious natureof what inflation is and how real returns might be negative in both equities and bonds. You’re losing purchasingpower,” Bass said.”To protect yourself you need to own productive assets such as apartment complexes or an oil well or a globalbusiness that sells things in various different currencies. And if you really want to protect yourself you put long-term fixed rate debt on these businesses, just don’t put too much debt on these businesses,” he added.GLENN HUTCHINSHe stressed the need to think about the global macro environment when allocating capital. “If you get the macropicture wrong, you can make the best micro decision and still get killed,” he said.Hutchins explained what he sees as a recipe for inflation ‚Äì slow growth, persistently high unemployment, mutedconsumption, and low interest rates for a long period of time.Yet, for all the issues facing investors, Hutchins is optimistic that America has the means to reinvent itself andrestore international economic preeminence.PIERRE LAGRANGELagrange explained his views on the attraction of Europe for equity investments:”It is a bubble that we have to ride because it is going to last for quite a period of time. The economy is so weak andthe restructuring is so slow and social pressure is so high that the central banks are going to be forced to continueto put a lot of liquidity at work ‚Äì so you have all the ingredients of a bubble.”He thinks Northern Europe is where the opportunities are, and adds that “European companies have to go out oftheir way to find other things to do because they don’t have domestic demand. They have to get out of Europe ‚Äìwhich we love because then investing in European companies provides exposure to emerging markets.”He explained that investing in emerging markets through European companies is more palatable legally, in regardsto governance, disclosure, and working with company managers.MARC LASRYHe is bullish in regards to opportunities presented by global volatility. As a distressed investor, he has defined astrategy to take advantage of the long-term recessionary environment in Europe.”There are issues in Europe that will work themselves out over time. This provides opportunities over the nextfive years,” he said. Lasry favors investments in Northern European countries where the legal structure providesvarious safeguards. “These are countries where the rule of law dominates.”ERIC SPROTTHe conveyed a negative outlook on the economy, focusing on the financing of the U.S. government deficit and theinflationary pressure that will eventually need to be reckoned with.According to Sprott, if the current course of the U.S. continues, “social security will not be paid, Medicare will notbe paid, and government civil service pension plans will not be paid.”But Sprott sees value in commodity investing. “Gold bugs see the logic of what is going on and know how to reactto it,” he said, adding he has between 70% and 80% of his personal assets in precious metals, which situates himwell if countries keep printing money because gold and silver prices will continue to increase. He is a big believerin owning the physical commodity ‚Äì whether it be gold or silver.