Notes from Grant’s Conference

Preliminary thoughts after a day with Jeff Gundlach, Seth Klarman and Julian Robertson

By Travis Johnson, Stock Gumshoe, October 5, 2016

I spent a day and a half in Manhattan to attend the conference run by Grant’s Interest Rate Observer and Jim Grant, and I’ll probably write some additional things about my take on the various presenters and the ideas they might inspire as my thoughts percolate… but these are my initial reactions.

First, investment conferences are still overwhelmingly full of dudes who are white of skin and hair, wearing Wall Street-issue blue suits. I never feel like I “belong” in these confabs, despite the fact that my hair is becoming snowier by the minute, but this was one of the more intellectually stimulating and least self-congratulatory conferences I’ve been to — I don’t think one of the presenters mentioned his firm’s performance record (and yes, they were all “hims”).

Unlike some more individual-equity focused conferences, this was not a “newsletter” crowd, Chris Mayer was the only newsletter guy I saw there or on the attendee list… but it was a smart and thoughtful crowd, interested in investment ideas as well as macroeconomic issues and trends.

And while I was in New York, of course, I had to put in a little “boots on the ground” research. And I was hungry. So I can confirm that Shake Shack (SHAK) is still not particularly special… and who would buy a stock whose product is not particularly special and is trying to build in an extremely competitive and oversaturated national market for fast food? Maybe that will become an interesting investment someday if they keep growing, but not at 50 times 2018 earnings estimate.

But I digress.

The headliners for the conference were certainly Jeffrey Gundlach of DoubleLine, who has taken the “Bond God” title from Bill Gross in recent years and whose comments about bonds and interest rates routinely move markets, and Seth Klarman of Baupost, who is arguably the most successful hedge fund manager in the world over the last 30 years. With perhaps a co-top-billing from Julian Robertson, who seems to be more of an avuncular presence than a market-mover these days.

Gundlach’s primary argument is that rates are going up, he called the bottom in July after famously (and correctly) saying in 2014 that rates would continue to fall and that you should buy Treasuries. That argument is based on several trends and truths that he sees, but primarily he sees rates rising because US federal spending ...

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