Jon Corzine was a speaker at the 2017 Prime Quadrant Conference in Toronto, at the Carlu. The Prime Quadrant Conference is an annual conference for family offices and ultra-high-net-worth investors. http://pqconference.com/ Below is the video and informal transcript of the segment where he discusses MF Global
Odey Discusses Howard Marks’ Astute Observation On Why Hedge Fund Alpha Is Increasingly Rare [January Letter]
According to a copy of the firm's January investor update which ValueWalk has been able to review, the Odey Asset Management Odey Special Situations Fund returned 7.7% in January, outperforming its benchmark, the MSCI World USD Index, by 8.7%. Q4 2020 hedge fund letters, conferences and more The $60 million fund, which Adrian Courtenay manages, Read More
Timeframe. So before we shift gears to current affairs and what you're doing now let's just talk a little bit about MF Global. MF Global was a commodity trading firm and you were asked to come in and try and rescue.
[00:28:36] And they've been losing significant amounts of money for I think three or four years when you arrive. You tried to turn it around.
[00:28:45] It didn't work certainly didn't. Yes it is. This is one of those things that is a rough a spot in my life as I've experienced. When you're the CEO you're responsible I take responsibility. We we had a huge deferred tax asset. Loss. That got confused witha risk position that we had in Euro sovereigns. And when people lose confidence in depository institutions. Because of changes of rating agencies there can be a run on the bank. I could go into a lot of detail. It's not a not a pleasant issue. It's fundamentally an issue of how you we're secure or didn't clear securities. And. I think I've learned a lot about transparency. And.
[00:29:45] The need for it in dialogue with investors. When youre in those kinds of risk situations but. It was.
[00:29:56] Not the risk that got us it was the operations. So let's talk about your current assessment of the global economy and policy issues that made it fine a short and intermediate term.
[00:30:16] In conjunction with global central banks starting to tighten credit conditions or at least become less accommodating.
[00:30:25] How do you think this plays out. Well first of all the global economy is in good shape as it's been since. The mid 2000s. Early 2000s. And I think it's on a more balanced. Footprint. Than. Some would like to accuse at least. Critique. Of policy. Given. How aggressive central banks have been in providing. Reserves liquidity money to the system. That it's it's not without its risks because. I think Mark Glazzard talked about. The difference between what. Irish banks. Can do and how they can lend money. And. Last time I checked Austria sold a 100 year bond at. Two point one percent. Due to the suppression of risk and volatility that exists in the marketplace today. Is the biggest unknown because as you back away from that not just in the U.S.. But in Europe and in Japan over the next three to five years. I think is one of the most. Interesting.
[00:31:55] And challenging issues for investors. And I happen to think one of the reasons that I actually believe this is a great time to start. This is going to change. Relative valuations of. Almost every instrument currency.
[00:32:14] As this begins to happen. Now it's not going to happen. A flash of a pen. It's going to happen. In steps. The U.S. gets started. But. Japan and Europe are still at it. By the way when Draghi is. Steps down in 2019 you more than likely have a whole different regime come in in the euro European Central Bank that will be a lot less user friendly to quantitative easing or. Balance sheet exposure that they have and at some point Japan will stop putting in trillions of dollars. As that occurs. Then. Assets are going to have to find their own level based on. Something other than excess liquidity in the system that is now chasing. Yield. And I think it's going to be one of the great opportunities long term. I talked about interest rates at 20 percent when I got started in the business. You didn't you'd have to be a genius just get along and watch the rates come down over the cycle. We may very well be at a turning point that if we look back 10 years from now that you see particularly in the U.S. but. Interest rates go up. I don't think it's feasible for.
[00:33:40] European sovereigns like Italy to be able to have two year yields at negative rates. If anybody's looking at the fundamental values of it but the fact is that the European Central Bank is buying so many of their. Bonds that it has created an environment the unwind of that is going to create enormous investment opportunities for people going forward.
[00:34:04] And you're starting your own fund now to try and capture those opportunities. Absolutely. So it's a little bit about how you how you plan to do that. Well since I have both. A public policy background. And. Public service you know I think that there are many choke points that are extraordinarily interesting and are going to change values.
[00:34:27] In the weeks and months and years ahead. One of them I just talked about. The second is we're going to have a major tax change in the United States as opposed to media speculation about it today when he was interviewing. His guest. I think you're going to get a tax cut. Of substantial proportion of corporate tax rate change to 20 percent repatriation of dollars in exchange asset values enormously. The most simple one is what it does for financial institutions. Not because of the shape of the curve but because they don't shelter as much income. As do others have as many. Opportunities to do that. Goldman Sachs is the effective tax rate is about 30 percent goes to 20 percent the value looks to me to be more valuable. I could give you. Many many many trades were.
[00:35:31] Opportunities that will take advantage of that repatriation is going to spur the merger and acquisition market in a way that as it exists today. So. All of the judgments about where that money's going to flow and how the antitrust policy at FCC that's the world. But I want to be involved as we go forward. So we are going to have a macro fund slash risk arbitrage activity that I think takes advantage of what I hope is a little bit of insight about how this progress works. And the second advantage damages as opposed to having 180 billion. We're going to be one of those little guys looking for niches. Not. Big spreads that will be good for big spreads but not big.
[00:36:20] Total amounts of dollars.
[00:36:22] Yeah so. So help me understand how. We seem to be in sort of an elevated geopolitical risk. Environment yet volatility is so low in equity valuations seem to be pretty elevated as well. I go back to what I said. The. Unbelievable amount of reserves that have been added. To the system over the last.
[00:36:47] Post 2008 period. Even before from Japan. Have created an environment where people have to put money to work. And they are looking for yield. And they're. Looking for growth. I think that continues in. In general for the next year or two years but then things are going to have to stand on their own as they start. Pulling that money back. Just like that young lady wants us to get the help.
[00:37:17] I know we're not exactly zero sacking right now so I guess that's hard to take. Right. Wrap it up so thank you very much anyway.