New York is a city of transactions, the cabbie told me.
I chuckled, took nothing of it and continued making small talk. It wasn’t until I strolled down 7th Avenue that I began to see what he meant.
It wasn’t just the financial deals on Wall Street or the real estate deals symbolised by all the cranes, it was everything.
The man and woman debating whether she had bought a ticket and for what price…the couple in Times Square haggling with the costume mascot over the price of a picture…the guy opening the door, carrying the bag, serving the table and driving up 7thAvenue…
All of it was motivated by that transaction…maybe even a fat tip…
Fresh and back from the Grant’s Interest Rates Observer Conference, I plan to give you exactly that. Tips…insights…ideas…and all of it won’t cost you a dime.
More bears than bulls in seats
On Tuesday, you might remember I told you about the great opportunity I had. I was lucky enough to be on my way to a Grant’sconference.
It was going to be in one of the most iconic hotels in NYC: The Plaza. I was also going to be hearing ideas and views from some of the most intelligent minds in finance.
I did have to look up some names, mind you. But every speaker was enjoyable, every speaker was great and they all brought their own unique viewpoints.
Having said that, I could sense there were more bears than bulls in seats.
I could tell right away from the conversations I was having.
One guy I talked to, for example, had done so well investing in stocks that he and his brother had gone out on their own. But he didn’t ask me the typical fund manager question: ‘What do you like?’…as in what stocks do I think are worth buying.
Instead, we got to chatting about holidays. On his mind was his upcoming trip to China with the wife.
Another self-made man working in the options space was also more interested to talk about tennis: his passion away from the office. And as soon as he learned my name was Swedish, he just had to tell me about his love for Swedish tennis players from the 80s.
The couple I sat next to for the majority of the conference were also less eager to talk about stocks. They were more eager to talk about their trip to NYC. They were from Boston you see, and the Grant’s conference, along with the opera at the Met, was a far more interesting topic.
But why? [openx slug=inpost]
Why weren’t stocks the topic on everyone’s mind? Maybe you already know the answer. Just look at the market right now…
Price multiples are high. Debt is high. Market cap to GDP is high…
It’s not exactly thrilling to be a stock investor starting today.
And it’s because we all have the same problem. There are plenty of great businesses out there. There are just not enough good names at a decent price…not in the top end of the market at least.
And it’s there, in the top end, where a lot of these money managers and high net worth individuals are looking.
Bob Farrell, who’s been studying and writing about markets for 60 years, told Jim Grant on stage…things aren’t quite the same as they used to be.
And I couldn’t agree more.
We’re still living through this great modern monetary theory (MMT) experiment. We’re no longer backed by that valuable yellow metal. And central banks, run by PhDs, who believe low rates equals stimulus…and they believe it absolutely.
Yet as we’ve seen, this distorting and deforming practice on markets leads to some pretty — let’s call them interesting — outcomes. So understandably, investors want to know what they should be doing and what they should buy.
Gold was a crowd favourite. Emerging market debt was another idea. Even art was thrown out there.
The latter seemed like more of a speculative bet than the others. The whole idea, after all, is to buy a piece, which you think could be in vogue months or years into the future.
I can remember Giulia Costantini, co-founder of Art Strategy, mentioned that British XYZ style might be a good buy as the art world is seeing more people interested in those kind of pieces.
To me, it sounded like buying this cryptocurrency because you think these institutions will pile in. Great if it works, but how likely is it that you’ll predict others and their behaviours?
Of course, the art world (valued as an US$3–4 trillion industry) has the uber-wealth, think Russian princes and the royalty of Saudi Arabia as their supporter base. I’m not so sure bitcoin can boast the same.
But if we’re going to compare it to anything, buying art sounds a lot like buying physical gold. These are not collectables, we were told. These are assets.
They’ll diversify your portfolio. They’re the safe haven to buy in times of turmoil…oh, on that point, did you know the market for art rebounded in about six months after the 2008 meltdown compared to the 60-plus months it took for stocks?
Perhaps the best evidence that art is an asset like gold is the fact that private banks are willing to accept art collections as collateral for loans. These are appreciative assets (hopefully) in their minds. Why not shell out the coin if these reliable, dependable assets are on the line.
While the talks from both founders of Art Strategy were incredibly fascinating, I just couldn’t stop thinking of the Keynesian beauty contest where you don’t bet on the prettiest girl, but the one everyone else thinks is the prettiest.
Yet as I looked to my left and then to my right, attendees who were likely high net worth individuals themselves were feverously take notes on this latest asset diversifier. I asked on Monday, how bad do things have to get before you start buying securities knowing you’ll lose money?
Well, how bad do the opportunities have to get in the stock market before you start considering buying art?
More ideas to come…
Don’t get me wrong, I could see a few bulls at the table.
Founder of the US$500 million Quantum Capital Management fund, John Hughes, had two incredibly interesting stock ideas, both of which I’ll share with you in the days to come.
And while Anthony Scaramucci, co-founder of two hedge funds and one-time communications director to President Trump, agreed that it was tough to be a low- to middle-income wage earner, he did see a path to a stronger and healthier economy.
Russell Napier, founder of the macro investment letter Solid Ground, while not bullish at first, does see a way for the world (particularly China) to progress forward, and maybe opportunities will spin off of that.
Bottom line: a lot of people are scared. This is uncharted territory. Even the bulls are nervous of what might happen next. But there are always opportunities. There is always something to buy.
And in the next few days, I’m going to give you an idea of what…
Stay tuned,
Harje Ronngard
Harje Ronngard is one of the editors at Money Morning New Zealand. With an academic background in finance and investments, Harje knows how difficult investing is. He has worked with a range of assets classes, from futures to equities. But he’s found his niche in equity valuation. There are two questions Harje likes to ask of any investment. What is it worth? And how much does it cost? These two questions alone open up a world of investment opportunities which Harje shares with Money Morning New Zealand readers.