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Takeaways From the SALT Conference 2010

05/20/2010
I am back from Las Vegas and looking for thanks from my fellow New Yorkers for bringing back some Vegas weather - sorry I missed that Northeast rainstorm this week.
 
Attending the SALT Conference was enjoyable and, more importantly, insightful. The presence on Wednesday of Michael Milken reminded me that this current conference was similar to the old Predators Ball Milken hosted at the Beverly Hills Hotel back in the late '80s. The list of attendees included some of the most powerful and intelligent capital market executives on the Street. I would encourage folks to attend next year. Let me share some quick thoughts on what was presented.

First, former President Bill Clinton gave a 75 minute presentation that focused on, as he put it, "Americans wanting to stop the ride so that they could get off." He acknowledged American frustration with the state of our country. He went on to properly encourage private sector participation in solving the challenges our country faces. The litmus test on any future government spending, for the former President, needs to be "how will it get the job done?"  Otherwise, don't just spend the money and hope something works out for the benefit of the country.

For me, the takeaway from President Clinton is a subtle reminder that we can't have a capital markets recovery solely from Government stimulus and Government support for depreciating assets. Rather, we need the ingenuity of the global private sector to accept the "handoff' from our government. I wouldn't bet against the success of that handoff as most currently are. David Darst, the Managing Director and Chief Investment Strategist for Morgan Stanley Smith Barney gave a dynamic presentation that echoed my confidence in the private sector properly accepting the handoff. David was one of the few raging bulls that presented.

As the current selloff in the capital markets suggests, the handoff is not ready to be successfully made. David Faber, CNBC business anchor, did a masterful job moderating a panel of hedge fund titans. I felt that the panel offered the most insight for investors. The panel included James Dinan (York Capital), Glenn Dubin (Highbridge Capital), Marc Lasry (Avenue Capital), and Ken Griffin (Citadel). Maybe they read my baseball season of frustration quarterly white paper?   Anyone in attendance had to be taken aback by how cautious those four gentlemen were when discussing the capital markets. Their candor was remarkable, and the caution they expressed all seemed to be driven by the concerns that policy makers are way too involved in our markets. "When I wake up in the morning my biggest fear is what is the next move out of Washington, London, and Berlin."  To hear Ken Griffin passionately express that explains a lot of what we are currently witnessing in the markets.

Overall, those who assume risk and presented at the conference seemed more focused on reducing risk than on identifying opportunities to deploy fresh capital. On more than one occasion I heard money managers on their cell phones calling back to their home offices to find out "what is our exposure?"  A baseball season of frustration will do that. I am so excited to get past Halloween this year and I can't wait for my Thanksgiving dinner!

Virtus Investment Partners provides this communication as a matter of general information. The opinions stated herein are those of the author and not necessarily the opinions of Virtus, its affiliates or its subadvisers. Portfolio managers at Virtus make investment decisions in accordance with specific client guidelines and restrictions. As a result, client accounts may differ in strategy and composition from the information presented herein. Any facts and statistics quoted are from sources believed to be reliable, but they may be incomplete or condensed and we do not guarantee their accuracy. This communication is not an offer or solicitation to purchase or sell any security, and it is not a research report. Individuals should consult with a qualified financial professional before making any investment decisions.