More than one manager is worried about "a credit event" in China this year. That is, the central government might precipitate a crisis in the financial system (a bond default or a bank run) in order to begin cleansing a nearly insolvent banking system. The central government is concerned about disarray in the provinces and a propensity for banks and industries to accept unsecured IOUs. They are acting to pursue gradual institutional reforms (e.g., stricter capital requirements) but might conclude that a sharp correction now would be useful. One manager thought such an event might be 30% likely. Another was closer to "near inevitable."
More than one manager suspects that there might be a commodity price implosion, gold included. A 200 year chart of commodity prices shows four spikes - each followed by a retracement of more than 100% - and a fifth spike that we've been in recently.
More than one manager offered some version of the following statement: "there's hardly a bond out there worth buying. They're essentially all priced for a negative real return."
More than one manager suggested that the term "emerging markets" was essentially a linguistic fiction. About 25% of the emerging markets index (Korea and Taiwan) could be declared "developed markets" (though, on June 11, they were not) while Saudi Arabia could become an emerging market by virtue of a decision to make shares available to non-Middle Eastern investors. "It's not meaningful except to the marketers," quoth one.
Comments
One of the guys I met is wildly successful, but I might be hesitant to let him in my house. One seemed an earnest, dedicated nerd. Two were clearly bright guys with interesting products but not enormously voluble. Mr. Yockey seemed utterly centered and at peace with himself and his discipline, more predisposed to listen closely than to talk.
The question becomes, how much of that matters in any way other than mutual fund celebrity gossip? I remember interviewing the manager of Mairs & Power Small Cap and thinking, "if he got any less passionate, he'd slip into a coma." (Check the fund's record.) Met Jerry Jordan years ago, thought he was a cold and distant twit, who then posted several great years and (lately) a series of squishy ones. That all makes me a bit reluctant to share too much of my visceral reaction with folks since it's only a so-so indicator of professional competence. (Folks who combine consistent excellence and an delightful personality are a delight, though.)
Cautiously, as ever,
David
http://www.cnbc.com/id/100818020