Our Man at Milken (Day 2) – More Thoughts from “Where the World Connects”

Tuesday was another full day at the Milken Institute Global Conference. In my last post, I gave you a session-by-session recap of Monday’s events. Today, I thought I’d examine the past two days of presenters and panels with the intent of addressing the recurring questions called out in my previous post. First, how should we think about risks in the current environment? And second, when and where should we look for real growth? That second question of course implies a corollary, where will we find investment returns?

On the risk side, three concerns have been voiced again and again around the conference – none of them should be a surprise. One is the lack of political will in the U.S. and the current paralysis of our political system. In a very interesting session today on restoring U.S. growth, former Treasury Secretary Robert Rubin said this country should be the best place to invest in the long term, with the critical caveat that the political system is “dysfunctional.” He said our biggest single challenge is to “resurrect the system of compromise.” A colleague related to me that Al Gore spoke to the same issue in a subsequent session, citing the “degradation of democracy.”

A second recurring worry is the situation in the Eurozone. Not surprisingly, several sessions discussed the persistent uncertainties, growing unrest, and deeply rooted structural barriers to growth; almost all touched on issues in the region at some point. There have been a few cautiously optimistic notes over these past couple days, mostly around the dogged determination of Eurozone leaders to slog on. As a panel member commented in Tuesday’s “Institutional Investors: Where in the World Will Returns Come From?,” Europe has shown an ability to step up and solve at least enough of the problem to keep moving.

Rounding out the “big three” is uncertainty about when central banks around the world will end quantitative easing, and whether they’ll be able to manage the exit successfully. It is important to note there was by no means consensus that the exit must inevitably be ugly, with runaway inflation, painful market dislocations, etc. Rather, there is broad recognition that central bankers are operating in uncharted territory, since the scale and global scope of liquidity injection is unprecedented.

Enough on sources of risk; let’s move on to sources of growth and returns. I’ll start by noting that, despite significant uncertainties in the economic and political environment, the prevailing tone at the conference can perhaps best be characterized as “appropriately cautious optimism.” If, for the sake of symmetry, I had to cite the three sources of growth and returns have been talked about most frequently, they would be

  • selected emerging markets (moving beyond the BRICs, and with some mention of frontier markets),
  • the U.S. (over the long term, despite current policy gridlock),
  • and alternatives (with particular shout-outs to real estate and infrastructure).

I’ll close today with an anecdote. Late yesterday, a colleague of mine, George Jamgochian (he’s the executive director for U.S. Sales at Principal Global Investors), said something that really spoke to the benefits of our firm’s presence at the Milken Global Conference. George has attended the conference for several years now, and feels our impact this year has been bigger than ever. By the end of the conference, our senior leaders and investment professionals will have presented in seven very well-attended sessions, sharing expertise on a wide range of topics. On top of that, George explained that they’ve had dozens of individual meetings with government and investment industry thought leaders, as well as several media opportunities. As I mentioned yesterday, on top of all this has been the opportunity to spend quality time with some of our major clients. George noted, “Call me biased, but it makes me proud.”

More tomorrow, after the conference concludes. Be sure to check out the conference’s website if you’d like to experience the Milken Conference virtually!

 

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