Bloomberg Hedge Fund Summit 2012 Capital Markets panel with Steven G. Einhorn, Vice Chairman, Omega Advisors, Inc
David J. Kostin, Chief U.S. Equity Strategist, Goldman Sachs Leon M. Wagner, Co-Founder and Retired Chairman, GoldenTree Asset Management.
10:38AM: Steven Einhorn thinks the US can deliver the best returns in 2013. If the US can get a 2-3 trillion deficit reduction package over the next ten years, the returns can be even better.
10:42: On a cyclical basis, Draghi has reduced tail risk in the Euro-zone with his recent plans. Europe, which was a significant tail risk, will start to dissipate, because he has made the ECB what it should be.
10:44: Bank lending will start to spread across the economy, including the small companies, which actually need it. This will generate returns. Raising taxes on capital will not help.
10:46: David thinks that M&A will increase soon as more confidence enters the economy.
10:47: Steve says that for the M&A and risk assets will not be great if we do not get some type of grand bargain. Either business confidence has to rise or consumer confidence to decrease, the current disparity makes little sense.
10:49: Leon says that the landscape now is different. The minimum is for Washington to get a deal. After the deal, the question is what will get investors to buy risky assets.
10:50: Steve looks at stocks on a comp basis to other asset classes. He believes that when looking at other assets, stocks are clearly the best asset out there.
10:51: David thinks from a PM perspective people should assume rates will increase, housing prices will rise, growth will be slightly better.
10:52: Leon does not dislike the President, but wishes there was leadership like Reagan or Clinton. If we get that, we can get returns like the 1980s.
10:54: Steve says that the GOP is incentivized to make a deal, because they cannot afford to lose the House in 2014, and polls show they will be blamed if we go over the fiscal cliff. The Fed is helping investors feel comfortable, all we need is fiscal discipline to get stocks booming.
10:56: On hedge funds lending at all? Leon says that hedge funds are lending,
10:58: On how the economy will grow in regulatory and tax environment Steve thinks it will constrain growth and GDP growth will be closer to 2%, which is below average. However, interest rates are low, which helps lending. There is still tremendous pent up demand, and the corporate sector is in great fiscal shape. Inflation is low. Finally, even with sub-trend employment, it is picking up. These all show signs of growth and the odds of recession are very low.
11:01: Steve thinks earnings in 2013 will disappoint consensus. However, if we get a grand fiscal bargain we can get multiple expansion.