Harbor Financial Group – News and Views

Every year, the Harbor staff takes time to visit at least one financial conference to expand professional knowledge, meet continuing education requirements, and network with colleagues. This year, I had the opportunity to attend the 65th CFA Institute Annual Conference in downtown Chicago.

Due to the global reach of the CFA charter, there was a melting pot of languages and accents to go along with the wide diversity of finance roles. Equity managers rubbed shoulders with credit analysts, private client advisors chatted with sovereign wealth portfolio managers. There were also two major food-industry conferences in the convention center, which led to the unusual juxtaposition of a converted VW Beetle in the shape of a marshmallow Peep against a sea of suits and ties on their way to the next session!

Real estate magnate Sam Zell took time in his colorful keynote session to dive into his approach to investing and areas he considers appealing (or not). Among his criteria, “Go where capital is needed and in demand”. He emphasized that China was not in need of extra capital. Other emerging and frontier markets were addressed as well. India was not and had not been a target country for investment and Zell opined that sub-Saharan Africa faces problems with scale. His company looks for “what is there today, not what could be in the future”.

A lively panel session on financial innovation with Duncan Niederauer, CEO of NYSE Euronext, Harold Bradley from the Kauffman Foundation, and Bill Hambrecht from W.R. Hambrecht covered the flash crash, the JOBS Act, dark pools, and transparency and opaqueness in the market. Looking forward, they agreed that it will be difficult to “out-technology” competitors and the focus for investors will return to the quality of research and content. The panelists also noted the rise of microfinance and crowdfunding. Future risks to the market in their minds include leverage, increasing market opacity, frontrunning of standard trading algorithms, and the size of notional derivative amounts.

An insightful talk by Daniel Kahneman, professor emeritus of psychology and public affairs at Princeton, on his studies in psychology and behavioral economics was one of the highlights of the conference. While not deviating much from his recent excellent book, Thinking, Fast and Slow, it was a great synopsis of his significant research findings over the years, his insights into how our minds seem to split into two vastly different modes based on the task at hand, and how one can use this knowledge advantageously.

A wide variety of other topics were addressed throughout the conference, including tax changes for 2013, a retrospective with Eugene Fama, and insight into institutional investing from the CIO of CALSTRS.  This certainly wasn’t a “thin-crust” conference, to slightly stretch a food metaphor.  If there was any doubt, my post-conference stop at Lou Malnati’s was delicious.