Hougan: 7 Takeaways From Our Global Macro

Contrarian plays, bad investing and authenticity in social media dominated the day.

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Reviewed by: Matt Hougan
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Edited by: Matt Hougan

We just wrapped up our Global Macro conference in New York on Wednesday, and it was awesome.

 

While I love all our conferences—including our big one, the 3.5-day Inside ETFs—Global Macro is one of my favorites. It’s deliberately small—about 220 people this year—and high-end. We invite the smartest people we know on stage and ask them where to invest in the world.

 

For those of you who didn’t make it to the event, here are my 7 big takeaways.

 

Takeaway No. 1: Mark Yusko Is Super Smart … And Loves Everything You Hate

Mark Yusko of Morgan Creek Capital is one of the smartest investors I know. With a background running University of North Carolina’s endowment, he has an amazing ability to cut through the nonsense and speak about investments in a way that just makes sense.

 

Yusko’s talk at the event was phenomenal. In fact, it was so good we invited him to speak at Inside ETFs 2016 on the spot. But what stood out most about his speech was that he basically loves everything that most investors hate.

 

Russia, he said, was a deep bargain—making the Market Vectors Russia ETF (RSX | B-74) a good buy. Greece is a potential steal, making the Global X FTSE Greece 20 (GREK | C-64) interesting. And his biggest passion of the day was Argentina.

 

Yusko’s palpable excitement for the energy fields in Argentina and the potential for that economy to unlock had me thinking about the Global X MSCI Argentina ETF (ARGT).

 

It’s not a perfect ETF by any means, and Yusko might prefer individual stocks. He also might have changed his tune after yesterday’s bad news regarding Argentina’s elections, but I’m not sure: He seemed pretty excited despite the problems.

 

Russia, Greece and Argentina comprise a brutal list. But maybe that’s why he’s such a good investor.

 

Takeaway No. 2: Investors Are Bad At Investing

Yusko opened with a group of statistics that were staggering: Over the past 20 years, the average return on stocks has been 8 percent. The average return on bonds has been 6 percent. The average return for investors has been 3 percent.

 

The single biggest impact advisors can have on investor returns is narrowing that gap between available returns and realized returns. Worry less about 5 basis point differences in expense ratios and more about 5 percent differences in returns.

 

It’s a good reminder.

 

 

Takeaway No. 3: Richard Bernstein Is Probably Right: High Yield Munis Are An Amazing Deal

Like Mark Yusko, Richard Bernstein of Richard Bernstein Advisors is also a great investor AND a great speaker. His talk was wide-ranging and incisive, but the insight that stood out to me was this (I’ll paraphrase the commentary since I didn’t record the session):

 

“When we go looking for income, we love high-yield munis. High-yield munis are cheaper than the bonds of Iraq or the bonds of Lebanon. That’s absurd. There isn’t even a government in Lebanon, but people are willing to loan it money cheaper than they would the high-yield U.S. muni market.”

 

Investors are falling all over themselves to buy emerging market debt, and overlooking a big opportunity right in their back yard. The muni space is full of headline risk, but the actual default rates are low, particularly when the economy is doing well. A fund like the Market Vectors High Yield Muni ETF (HYD | C-59) is yielding 5.51 percent tax-free.

 

Takeaway No. 4: The Smart Money Loves Spain

The opening panel of the day brought together three sharp minds—Susanne Alexandor of Cougar Global, Neil Azous of Rareview Macro and Jay Pelosky of J2Z Advisory—for a discussion of where to invest. While there were positive feelings about Japan and a united distrust of both China and the U.S., the group got most excited about Spain and Italy.

In fact, the iShares MSCI Spain Capped ETF (EWP | A-95) probably got more mentions than any other fund during the day. People are certain Spain’s economy is about to take off, and shares are cheap—the price/book ratio is just 1.44. Spain could be the new hot investment in the second half of 2015.

 

Takeaway No. 5: Oil Is … Confused

As mentioned, there were a few consensus picks at the conference—pro Spain and Japan, anti-China and the U.S.—but there was no consensus on oil. For every investor who said it was heading to $80, there was another saying it will go to $30.

 

Takeaway No. 6: SPLV Doesn’t Own Utilities Anymore

The team from PowerShares and Standard and Poor’s had a nice presentation on their low volatility fund, the S&P 500 Low Volatility ETF (SPLV | A-63). The fund, which owns the 100 lowest-volatility stocks in the market, was historically criticized for loading up on utilities stocks. But as the presenters pointed out, in the last rebalance, the position in utilities fell to 2.74 percent. Financials now dominate the portfolio, with a 36 percent weight.

 

That says something scary to me about the market.

 

Takeaway No. 7: Social Media Is A Big Deal (And Josh Brown Is Awesome)

Josh Brown closed the conference with a speech on the importance of social media to advisors. Josh—better known perhaps as The Reformed Broker—is one of the most talented bloggers on the market, and provides the best Twitter-focused commentary about the economy there is.

My colleague Olly Ludwig covered Josh’s speech, but what captured me was his passionate message: To succeed on social media, be authentic. Too many people approach social media just as a marketing mechanism, and that’s doomed to failure. You have to use it to connect authentically, and the marketing will follow from there.


At the time of this writing, the author held no positions in the securities mentioned. Contact Matt Hougan at [email protected].

 

Matt Hougan is CEO of Inside ETFs, a division of Informa PLC. He spearheads the world's largest ETF conferences and webinars. Hougan is a three-time member of the Barron's ETF Roundtable and co-author of the CFA Institute’s monograph, "A Comprehensive Guide to Exchange-Trade Funds."