the WSJ reports,"participants at the SALT hedge-fund conference in Las Vegas generally were upbeat about the U.S. economy and stock market, with a number comparing the environment to the late 1990’s, when the country pulled ahead of other nations in economic growth.
Some pointed to Japan as an area of profit for many hedge funds lately, however.
Gregory Fleming, the president of Morgan Stanley’s wealth-management unit, said the firm recently polled clients and received a more upbeat reaction about the outlook for the United States than about investing abroad.
“The U.S. is the place investors are most confident of and most focused on,” he said. The feeling of many investors is that “it’s back to the nineties…the U.S. is on the leading edge of technology.”
Fleming agreed with the optimism about the country. “Corporate balance sheets are better than they have, literally, ever been,” he said".
"Austan Goolsbee, former chairman of President Obama’s Council of Economic Advisers, argued that the stock-market’s climb is not solely due to aggressive monetary policy by the Federal Reserve".
“I don’t think the primary thing driving equities is monetary policy,” Goolsbee said. “Earnings have never been higher as a percentage of GDP…and price-earnings multiples are not out of line.”
Michael Novogratz, president of hedge-fund firm Fortress Investment Group, said he doubts the bond market will cause problems for stock investors any time soon.
“I’d be shocked” if bonds prices tumbled, Novogratz said. He argued that yields on the 10-year Treasury notes would stay in a range of 1.5% to around 2% for the foreseeable future. The hope is the strength in stock and bond markets “trickles down” to the rest of the economy, Novogratz said.
One notable, if expected, bear at the conference: Nouriel Roubini, chairman of Roubini Global Economics, who warned that the stock market’s gains don’t reflect underlying problems in the economy.
“There’s a gap between Wall Street and Main Street,” he said.
Fleming also noted that Morgan Stanley clients are just “wading into equities” and remain cautious. They are still allocating big chunks of money to bonds and safer investments, despite the run-up in stocks this year. Fleming said the lack of exuberance is unusual, given how far the market has come.
“I would have thought (the gains) would have led to more robust interest,” he said. “This time is different.”
Despite the impressive showing in U.S. markets, Novogratz argued macro-oriented hedge funds are making more money in Japan than anywhere else lately. “Seventy to 100% of the return of macro funds is coming from Japan,” he said. “It’s the most exciting place to invest in world…there’s energy on the streets” in the country.
Still, he argued that Japan only has a 50% chance of succeeding in its efforts to kill deflation.
