2017 GAME VII

The goal of the GAME conference is to fill the gap between what happens in the classroom and what happens in the real world of finance. -Dr. Sauer

Top 5 takeaways from Dr. Moore

  1. Much like real estate agents, Wall Streeters tend to say it is always a good time to buy.
  2. We need legal immigration for growth.  U.S. productivity not increasing and I suspect declining value applied to education and training is a major culprit.
  3. Removal of U.S. from TPP was a big blunder.  It was an anti-China policy.  This makes the U.S. less important in Asia trade.   Brexit was a mistake like the TPP pullout. [3]
  4. Analytical skills are critical to get a job.
  5. Soft skills such as communication are lacking.  Can you communicate the truth with clarity?

Global markets panel

  • Abbey Cohen?
    • Low unemployment data shows 2nd of 2016 was a period of accelerating economic growth globally and in the U.S.
    • Equity markets are fairly priced given the economic conditions. [1]
    • U.S. political policy creates uncertainty.  Inconsistent policy proposals by current administration, elections around the world, Brexit, all add to uncertainty.
    • Given the solid economic baseline, it will take a lot to unsettle markets, but they can be unsettled.
    • Bonds are overpriced around the world therefore rates are tools.
    • Rates are very, very, very low.  Even with a few raises, rates will be very, very low.  This won’t be a big damper on homes, cars, or other rate-sensitive sectors.
  • David?:
    • U.S. economy has a supply-side problem.
    • Plain-vanilla investing won’t generate much return.
    • Don’t disregard Europe.
    • We have a healthy tortoise, not a sickly hare.
    • We don’t have enough workers and their productivity has not grown.
      • Baby boomers retiring in large numbers
      • U.S. economy can not grow further without legal immigration. [2]
      • We are at full employment.
    • Recommended portfolio warning label: past returns can harm future results.
      • Last 30 years 60/40 stock/bond portfolio -> 8%
      • Next x years 60/40 stock/bond portfolio -> 4%
    • Last year: Return of the Jedi
    • This year: Empire strikes back
    • Investing in Europe can add alpha
    • 30 year bond bull market
    • 8 year equity bull market
    • Stocks are a little high. [1]
  • Ralph
    • Must be aware of what is going on outside of markets.
    • Wall Street loved Ronald Reagan.  Reagan/s honeymoon lasted 6 months (markets up 15%).
      DJM question: Was there also a George W. Bush honeymoon?
    • Many trends reversed course after repeal and replace did not occur.
    • Ralph raised his cash position after 1st policy failure.  May raise more.
    • Dow -27% in 1.5 years after Reagan/s honeymoon.
    • 3rd year is strongest in presidency.
  • Abigail from Bloomberg
    • Need to look beyond equity markets.
    • Reinflation is being watched
    • Oil peaked then fell off
    • USD peaked then fell off
    • Bonds: 10 year yield rose from 2.05 to 2.30
    • VIX trading at all time lows for long time. [1]
    • Will oil remain low.
  • David
    • Saudi is losing oil power.
    • Expectations of shale oil production is high.
    • Shale production can ramp up and down quickly.
    • Will see oil @ $40-$60 for a long time.
    • Where will Saudi Arabia be in 10 years?  Need to know this or think about this when considering an Aramco purchase.
    • When you buy a stock you buy a stream of earnings.
  • Abbey Cohen
    • China accumulated cash largely as a result of U.S.
    • USD is a global reserve currency -> adds to China’s USD holdings.
    • China has a desire to be a global reserve currency, starting with a regional reserve currency.
    • Removal of U.S. from TPP was a big blunder.  It was an anti-China policy.  This makes the U.S. less important in Asia trade. [3]
  • David on Brexit
    • Brexit, like the TPP pullout, is a huge mistake.
    • We need to educate voters.
    • Brexit is bad for Britain, not so bad for Europe.
    • Tariffs are bad:
    • An eye for an eye makes everyone blind. – Ghandi

    • Euro is like Hotel California.  You can check in but you can’t check out.
    • Brexit will be cautionary tale for the rest of the world.
    • Smart regulation is better than deregulation.
  • Abbey Cohen
    • Little understanding of long-term improvement
    • Need immigration + education. [2]
    • 2 million unfilled manufacturing jobs: need more skilled workers.
    • Beware: short-term “goosing” of GDP growth may not help in the long-term.
    • Shortage of dollars spent on research.  We were at the top, now were are at the bottom of the top 1/3. [2]
    • Basic research down 30% in current administration budget proposals -> not investing in capital / people / research. [2]
    • Retail spending was low even though consumer confidence was up.
      DJM: Can those “confident” consumers actually spend?
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