One of the fringe benefits of being asked to speak at professional conferences is that you get to hear the excellent keynote speakers. NorCal was no disappointment in that regard as two of their keynotes were Neel Kashkari, who famously helped Hank Paulson design and run the TARP program, and Michael Lewis, the famous author of The Big Short, as well as other best sellers like Liar’s Poker, The Blind Side, Moneyball, and others. I was far from being a disinterested spectator since Kashkari is now a managing director at Pimco and we are always interested in hearing the latest views of the largest bond manager on the Street. Michael Lewis is also well networked inside Wall Street and his views on the current state of sovereign debt and the banks were of interest to me as well.
Kashkari gave a somewhat positive view of the current global financial picture. He said he was just back from Pimco’s annual secular conference where they gather experts from around the world and reconsider their firm’s investment strategy. Interestingly, he commented that Pimco is surprised at the resiliency of the global economy and even though they are well known as the authors of the phrase, “the new normal,” meaning that growth in the future will slow from historical norms, they are willing to concede that growth may remain above their forecasts in the near term. I got to ask Neel the very important question of whether or not he has seen HBO’s “Too Big to Fail” and what he thought of it. I was stunned to find out he had only TiVo’d the program and hadn’t watched it yet. I didn’t – and still don’t – believe him. I would categorize Neel’s comments as generally positive. He thinks the U.S. political system is capable of resolving our issues without another financial riot.
Michael Lewis was about as bearish as you could be regarding the global economy. He is firmly in the camp of folks who believe that in the years since the Lehman bankruptcy, all we have accomplished is to transfer bad debt from the private sector (the banks) to the public sector (governments). He feels the result will inevitably be a restructuring (default) of Greek debt that will result in another contagion in the financial sector that will shut down credit just like the last crisis, only this time governments will not have the wherewithal to come to the rescue without completely debasing global currency. We would describe him as a buy gold, shotguns, bottled water, canned goods, and easily defensible shelter, kind of investor. Aside from being one of my heroes for being able to write about the trickiest subjects in an easily understandable way, and for being hilarious as he spins his yarns, he is one of the more convincing pessimists you would want to listen to. So…two great speakers…one thinks the world is ending and the other thinks all will work out just fine.