A VeltmanThis two-day, near Davos-quality Forum finally drew curtains late Friday. A rare opportunity, indeed, to pick brains of such present-day luminaries as Geithner, Summers, S*r*s, Ross, Scholes, Niederauer, et al; here are a few vivid highlights (and surprises!) of the gathering.

As a Dailyspec reader I was profoundly stricken by Wall Street, DC, CT and MA dignitaries' complete oblivion in regard to this web site's leading dogma: that strategies that did not work last year … will prove odds-on favorites this year! Just hear a few of the VIP's assertions:

1. The opener from Wilbur L. Ross: the problem lies in over-reliance of today's financial industry on quantitative methods, promising that tomorrow is likely to follow patterns borne out  yesterday. The crash occurs precisely when tomorrow is nothing like anything seen yesterday!

2. On future dependability of capital markets (of all things!): survey placed China tops, followed by India, Canada, Australia. Off the bottom, survey featured Russia, UK, Japan and the US capital markets!

3. Economic expectations are largely unchanged going forward (that's following 6-month median doubling of stock indexes in markets world-wide!)

4. The most outrageous Oxford-style Debate upset, all by itself worth the $3,500 venue ticket: the NAY-sayer duo Richard Bookstaber/Jeremy Grantham reversed the pre-debate 20/80 lag into a post-debate 80/20 victory over financial PRO-innovation duo Robert Reynolds/Myron Scholes! Phillip Coggan presided.

5. Stephen Roach's belching critique of the Fed and call for White House's intervention fell on deaf ear of Lawrence Summers, who reparteed: gosh, Steven, everyone is really confused as to where you really stand!

6. George S*r*s dubbed "short US Dollar" an over-crowded trade. Palindrome briefly touched on "inverted square root" recovery theory.

7. Timothy Ryan's debate produced an interesting argument in defense of Goldman Sachs compensation pattern: just like Walmart purchases its inventory at certain prices in China or wherever they decide - so does GS (who provides financial services) pays for its brain inventory whatever they deem necessary to win customer business and ultimately sustain profitability!

8. Harvard's Niall Ferguson thoroughly warned on China's reserve diversification plan: yes, it's very much away from the dollar - but no, it is in no way toward any other currency on the planet. Rather, China will concentrate on hoarding industrial commodities - and no paper currencies whatsoever.

9. Roger Altman assured that there is no currency in the world that will be ready to assume the Dollar's role in near decades, for simple practical reasons. He then excused himself (having to leave his seat at the overtime panel). Coincidentally, Jeremy Grantham stumbled-in from back-stage, fell into Altman's chair and gave Columbia's Jeffrey Sachs quite a history course, as to why China and Japan will never get in bed together - as opposed to Sachs' argument that Germany and France eventually did. Moderator Matthew Bishop jokingly invited "any random audience member" to feel free and grab a seat at the stage!

10. Other lighter notes included Larry Summers' advice, that all of history's bubbles and crashes were the easiest events to forecast: just never stop calling them! In his Harvard years, they "attempted to arrive at second/third best solutions - and ended up with fifth/sixth best." He just hoped that the White House doesn't end end up with thirteenth/fourteenth best… After all, per John Micklethwait's introduction: "It's better to be imperfectly right than exactly wrong!"

11. Myron Scholes had to do plenty of explaining: All higher achievements in civil engineering led to safety improvements - why did new highs in financial engineering result in increased risk?

12. Philip Coggan's debate introduction: what creates higher fees flow is information abridgment, distance from execution facility, cheat-execution, i.e. license to steal - arguably enjoyed by financial industry equally in the past, present and, alas, the future.

13. Yale's Robert Shiller noted: if modern-day and upon-coming financial instruments were less arcane, then how would you be able to charge ever higher fees?

14. Elizabeth Warren agreed: many a financial institution pride themselves of questionable innovation heights: if checks were to bounce - then they will bounce in the order of maximized over-draft fees!

15. Richard Edelman pointed out: "It wasn't just time per se - that brought hi-tech industry and its products back to their current supreme status - in the after-math of 2002-2003 annihilation. It was innovation and cutting-edge achievements."

16. Devin Wenig's over-riding concern was: during an overnight inter-continental transfer - who owns (defaulting) assets?

17. Brilliant working session moderator Zanny Minton Beddows had to defuse another explosive query: "1980's S&L crisis misdeeds resulted in nearly 3000 convictions - and the latest banking debacle produced 2 jail terms to-date??"

Well, near the Conference's tired end, it appeared to me that everyone seemed to agree with Winston Churchill: "Democracy is the worst form of government, except all those other forms that have been tried from time to time…"





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3 Comments so far

  1. Shane Merritt on October 19, 2009 9:25 pm

    Thank you for the commentary, it was well received. Churchill's quote was quite right, but it may be important to remind the readers that in spite of what our government has trained us to believe, America is not a democracy, but rather a Constitutional Republic, guided by a document that we must protect dearly.

  2. Philip Coggan on October 20, 2009 5:14 am

    On point 4, I was chairing the debate rather than speaking for the pro side. Myron Scholes was in fact accompanied by Robert Reynolds of Putnam.

  3. Pythagoras on October 20, 2009 9:49 am

    interesting use of the word ‘dogma’….


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