Chris Remington, institutional portfolio manager for Eaton Vance Investment Management, called the U.S. "a bright spot globally" because "companies have been deleveraging over the past five years." Remington is yet another who gave the Fed some double-edged compliments by pointing out that the institution has come up with "leveraged loan guidance" for companies, with rules about non borrowing more than seven times EBITDA and guidelines for payback periods. In a capitalist society that used to thrive on private equity deals and companies being able to access and deploy cash as they see fit, leveraged loan guidance seems to some big players like Fed handcuffs.
James Swanson, chief investment strategist for MFS Investment Management, said, "The Fed is haunted by her parents in the Depression." Swanson does not believe the Fed is going to change course anytime soon. He commented that the Fed wrongly thought debt creation would stimulate the economy. "They have this mistaken notion that to raise interest rates would actually be tightening," he said.
Less the Fed go unpunched by a panelist, Dan Fuss, vice chairman of Loomis Sayles & Co, added, "The Fed is trapped; they have a domestic mandate and an international problem."
The "Walmart World"
A lot of the money managers' themes in Boston centered on the depth of the global credit problems and how to best clean up the mess after having a globally "open bar" and all-night party for seven years and counting.
To lend some perspective to the problems of a globally deflating credit bubble, Ellison pointed out, "The bond market is four times the size of the stock market in this country alone."
"Be careful in areas of the economy where there has been a lot of lending," he said, citing housing and commercial real estate. "We need to start the process of allowing money to have value again." He said that a lot of money has been lent, which means that companies now have to deal with that.
Citing what he sees as the biggest U.S. positive, Ellison said, "The market is a place where you price assets ... a place to dump money and also to pull money out. ... We have the most liquid market in the world."
Joshua Jones, CFA and portfolio manager for Boston Partners Global Long/Short, described China's data as "hard to analyze" because their "synthetic GDP creation" causes a "mathematical problem".
"Where there are excesses in credit creation is always where there's the largest adjustment period macro economically," said Jones. He said that in the last six months, all the money his firm has made is on the short side and that they have been covering their shorts lately.
Sosa, channeling DoubleLine’s founder Jeffrey Gundlach, said, "Our sense is that everyone is overweight credit." He said, "Everyone is long credit ... because they can't get yield anywhere else." He added, "The credit sector has gone from yields up to 10 percent down to zeroish. There's no better fuel for rising interest rates than yield."