Concern about the future of dollar was very topical at Value Investing Congress as veteran fund managers made a case for Gold and other dollar hedges. Julian Robertson believed that Norwegian Krone (oil reserves), New Zealand dollar, and Czech koruna were strong currencies. David Einhorn pointed out that the Fed is buying long dated assets and Treasury is shortening the duration of government debt, which would result in both fiscal and monetary issues from higher rates. Julian Robertson has been buying curve caps (liquid puts on 30 year bonds out 5 years) to protect against high rates and Einhorn finds Gold an attractive hedge.
Sean Dobson touched upon impending threats in CMBS Market, which was characterized by adverse selection in the bubble years as the riskiest Hospitality/Retail loans Exploded more than 10x from 2000-2005. Most CMBS loans are simply extended upon maturity without recognizing any loss. On the other hand, delinquencies continued to rise in the residential mortgage, with 1-4 family homes topping 10%. While wave of resets from subprime are mostly behind us, delinquencies in prime and Alt-A mortgages are soaring. Whitney Tilson pointed out that the wave of prime loan losses, jumbo loans, and commercial real estate are mostly ahead of us. Banks might be able to plug these holes if the losses happen over an extended period and banks earn their way out. However, any sudden shock from defaults could crack the system again.
Value Investing Congress is a great platform to ask questions from high-profile managers such as Bill Ackman and David Einhorn, and to gain access to an array of interesting investing ideas. Ideas in this year’s conference spanned across sectors and market cap, from small-mid cap bank ideas by M3 funds to natural resource stocks by Sprott Asset Management, and from Waste Management (NYSE:WM) by Paul Issac to Corrections Corp (NYSE:CXW) by Bill Ackman. Following are some of the ideas/ historical investments presented by this year’s speakers:
David Nierenberg. D3 Family Funds – BRKS, MOV, HPY
Lloyd Khaner – long SBX, and historical turnaround cases (MOLXA, PX, CPB)
Candace King Weir/ Amelia F. Weir – WTSLA
Paul Issac – WM
Jason Stock, M3 Funds – Mutual banks (long FXCB, long BNCL)
Kian Ghazi, Hawkshaw Capital – long CORE
Alexander Roepers, Atlantic Investment Management – SJM
Glenn Tongue, T2 Partners – long IRDM
Zeke Ashton, Centaur Capital Partners – long Y, long LH, long MVC
Bill Ackman, Pershing Square LP – long CXW, short O