Delivering Alpha recap: Bill Ackman on bonds and the biggest market calls from the annual CNBC investor summit

Bill
Ackman
doesn’t
think
it’s
worth
making
a
long-term
bet
on
the
U.S.
government,
at
least
not
on
its
debt.

The
head
of
Pershing
Square
Capital
Management
said
Thursday
at
CNBC’s
Delivering
Alpha
that
buying
the
30-year
Treasury
bond
isn’t
worth
it
with
inflation
—
and
uncertainty
surrounding
the
government
—running
high.

“We
have
an
economy
that
is
still
strong
and
inflation
at
3.5,
4%,
persistent,”
Ackman
said
during
the
conference’s
closing
panel.
“Our
view
is
basically
you’re
not
being
paid
enough
to
enter
into
a
30-year
contract
with
this
government
at
a
fixed
price
of
4.7%.”

The
long
bond’s
yield
has
been
soaring,
up
about
half
a
percentage
point
in
September
alone.
As
yields
and
prices
move
in
opposite
direction,
the
jump
reflects
fear
from
investors
about
going
long
in
duration.
Ackman
said
he
could
see
the
30-year
yield
hit
5%.

“People
reflexively
buy
it
because
they’ve
made
money
doing
it
in
advance
of
a
recession,”
Ackman
said.
“But
it’s
really
not
an
instrument
you
should
use
to
speculate
on
the
short-term
economy.”

—Jeff
Cox

Pershing
Square’s
Bill
Ackman
wouldn’t
be
surprised
to

see
the
10-year
treasury
yield
push
even
higher.

“I
would
not
be
shocked
to
see
30-year
rates
through
the
5%
barrier
and
you
could
see
the
10-year
approach
5,”
he
told
CNBC’s
Scott
Wapner
at
the
Delivering
Alpha
conference
Thursday.

These
movers,
he
added
could
happen
in
the
short-term,
or
within
weeks.

The
yield
on
the
10-year
Treasury
yield
last
traded
at
around
4.577%,
pulling
back
from
a
15-year
high
touched
as
markets
ponder
a
potential
higher-for-longer
rate
environment.

—
Samantha
Subin

Bill
Ackman
didn’t
sound
upbeat
about
the
economic
outlook
during
his
Delivering
Alpha
interview,
and
with
an
expectation
that
bond
yields
continue
to
rise,
it
would
be
easy
to
conclude
he
is
bearish
on
stocks.
But
Ackman
says
he
is
not.

“The
key
is
owning
businesses
that
have
pricing
power,
businesses
that
can
do
well,”
he
said,
“in
a
world
of
3%
inflation.”

One
of
the
companies
Ackman’s
Pershing
Square
Capital
Management
now
owns
a
lot
of
is
Alphabet.
Why
Ackman
got
into
Alphabet
is
a
classic
case
of
seeing
a
stock
beaten
up
for
knee-jerk
reasons
and
sensing
an
attractive
entry
point.

When
OpenAI
launched
ChatGPT
to
worldwide
excitement
and
Google
followed
with
the
fumbled
launch
of
its
Bard
AI,
Ackman
said
he
saw
an
opportunity
to
pounce
as
a
long-term
investor.

“AI
was
the
reason
why
the
stock
was
cheap,”
he
said.
“Google
really
fumbled
their
offering.
And
so
people
said
‘oh
my
god,
Google’s
way
behind
on
AI’
and
the
stock
sold
off
to
15
times
earnings
for
one
of
the
greatest
businesses
in
the
world.”

“We
did
a
fair
bit
of
work,”
he
said.
“It’s
a
company
known
for
hiring
great
engineers.
…
They
took
a
much
more
cautious
launch
approach.
And
I
think
then
kind
of
fumbled
an
early
demonstration,
made
people
think
they
were
behind
and
Microsoft
and
ChatGPT
would
…
eat
their
lunch.”

That
led
to
what
Ackman
described
as
a
“very
mispriced
stock.”

Alphabet
is
now
his
hedge
fund’s
second-largest
stock
holding.

—

Eric
Rosenbaum

Billionaire
hedge
fund
manager Bill
Ackman
called
himself
a
Warren
Buffett
devotee,
learning
from
the
legendary
investor’s
patient
and
disciplined
investing
philosophy.

The
Pershing
Square
Capital
Management CEO
revealed
that
he
decided
in
his
50s
that
he
would
focus
on
winning
bets
and
try
his
best
to
avoid
mistakes.
He
said
his
hedge
fund
has
had
the
best
five
years
in
history.

Buffett
has
been
“my
unofficial
mentor
for
many
years,”
Ackman
said.
“We’re
fortunate
the
way
that
we’re
structured.”

—
Yun
Li

Hedge
fund
billionaire
Bill
Ackman
is
known
for
his
stock
and
bond
bets,
but
at
Delivering
Alpha,
he
also
referenced
$24
million
in
investments
he
made
related
to
supporting
Ukraine
that
are
less
well
known:
one
going
to
drone
maker
Zipline.

Ackman
said
he
got
a
call
from
venture
capital
firm
Sequoia
which
was
looking
for
investments
to
help
Zipline
launch
in
Ukraine,
which
wasn’t
originally
in
the
company’s
business
plan.

Ackman,
who
recently
met
with
Ukrainian
President
Volodymyr
Zelenskyy,
described
his
investment
in
Zipline
and
other
initiatives
in
Ukraine
as
philanthropic
—
not
made
in
search
of
an
investment
return
—
and
said
his
connections
with
Ukraine’s
government,
including
its
top
logistics
official,
enabled
him
to
connect
Zipline
directly
with
top
Ukrainian
officials.

Ackman
said
while
he
wasn’t
familiar
with
the
company
when
first
approached
about
an
investment,
he
noted
that
Zipline
has
raised
over
$400
million
from
venture
investors.

Zipline
—
a
five-time
CNBC
Disruptor
50
company

that
ranked
No.
25 on
this
year’s
list
—
started
as
a
drone-based
medical
care
supplier
in
Rwanda
but
has
grown
to
serve
human
and
animal
medical
needs
in
geographies
across
the
U.S.,
especially
hard
to
reach
ones,
as
well
as
food
deliveries,
prescriptions,
agriculture
products,
and
retail
items,
with
partners
including
Walmart. It
recently

received
FAA
approval
to
fly
“beyond
the
visual
line
of
sight,”
a
key
milestone
for
the
development
of
the
domestic
drone
industry.

Ackman
said
the
Zipline
launch
in
Ukraine
is
similar
to
the
company’s
original
mission
in
Rwanda
—
with
a
focus
on
critical
medical
services
in
hard
to
reach
places.
He
gave
Zipline
a
vote
of
confidence
in
his
comments.

“You
have
to
have
a
lot
of
confidence
those
are
good
drones
to
launch
in
Ukraine,”
Ackman
said.

He
is
also
betting
on
Ukraine
long-term.
“I’m
very
bullish
on
Ukraine
post-war,”
he
said.

—

Eric
Rosenbaum

After
nearly
a
year-long
lull,
the
market
for
initial
public
offerings
got
a
boost
after
a
string
of
modestly
successful
debuts
from


Instacart,

Arm
Holdings
and


Klaviyo.

While
none
of
these
companies
saw
first-day
pops
sustained
in
trading
similar
to
IPOs
in
2020
or
2021,
Lydia
Jett,
SoftBank
Investment
Advisers managing
partner,
said
there
were
positive
signs
to
take
away
from
these
recent
public
debuts.

“I
would
argue
looking
at
the
performance
of
the
last
couple
of
weeks,
these
are
well
priced
IPOs,”
Jett
said,
who
focuses
on
the
U.S.
media
and
communications
industry
segments
for
Softbank’s
Vision
Fund.
“There’s
a
little
marginal
pop,
they
aren’t
trading
down
much,
and
you’re
not
seeing
a
lot
of
volatility
—
I
think
that
is
so
preferable
to
the
big
pops.”

Jett
said
in
the
private
markets
right
now
you
have
a
lot
of
companies
that
have
capital
funding
challenges
they
need
to
solve,
and
these
IPOs
show
“a
path
that
these
companies
should
be
pursuing.”

She
said
that
she
wouldn’t
describe
the
IPO
market
as
having
been
closed.
“I
think
there
was
just
sort
of
a
lack
of
confidence
about
the
ability
to
make
that
transition,”
she
said.

Jett
also
echoed
a
view
offered
by
tech
investor
Brad
Gerstner
at
the
summit
that
there
is
no
reason
innovative
companies
will
stop
innovating
once
they
are
public.
Companies
had
been
staying
private
much
longer
over
the
past
decade,
leading
to
valuations
that
were
much
higher
than
previous
generations
of
tech
companies
at
the
time
of
their
IPOs.
But
Gerstner
cited
Amazon,
Google,
Meta
and
other
dominant
companies
of
today
that
have
innovated
to
a
great
extent
after
their
IPOs,
and
Jett
said
that
will
continue
to
be
the
case.

“I
am
excited
to
get
this
period
of
over-capitalization
in
the
private
markets
in
the
rearview
mirror,”
she
added.

—
Ian
Thomas

The
market
currently
thinks
there
is
around
a
75%-80%
chance
that
the
Fed
holds
off
on
another
25
basis
point
rate
hike
in
November.
That’s
not
a
majority
view
that
includes
BlackRock
fixed
income
chief
Rick
Rieder.

Rieder
said
the
Fed
could
stop
raising
interest
rates,
but

it
probably
won’t.

“You’ve
got
to
take
them
at
their
word
that
they
want
to
get
another
25”
basis
points,
Rieder,
senior
managing
director,
chief
investment
officer
of
global
fixed
income
for
the
world’s
largest
money
manager,
said
at
Delivering
Alpha.

“I
don’t
agree
with
doing
it
because
the
data
would
suggest
you
can
start
pausing.
…
but
I
think
you’ve
got
to
assume
when
you
invest,
that
they
[do]
what
they’re
telling
you.”

—

Eric
Rosenbaum

The
energy
grid
is
going
to
need
a
lot
more
capacity
to
power
booming
demand
for
artificial
intelligence
and
supercomputing,
according
to
Lazard’s
president
Raymond
McGuire.

“The
amount
of
energy
that’s
needed
to
support
that
—
the
demand
on
the
grid
—
is
going
to
be
much
greater
than
the
supply
that
we
have
today,”
he
said.
“We
don’t
have
the
infrastructure
today
to
meet
that
demand.”

That’s
one
reason
when
he
was
asked
at
Delivering
Alpha
how
he
would
invest
$1
trillion,
McGuire
answered
this
way:
“A
third
each
into
energy
transition,
housing
and
education.”

While
AI
wasn’t
name-checked
in
that
answer,
he
explained
that
the
two
big
tech
investing
themes
he
sees,
AI
and
cybersecurity,
“are
all
governed
by
human
capital,”
and
without
education,
we
won’t
succeed
in
these
areas.

—
Samantha
Subin

Three
years
ago,
the
first
peace
deal
in
the
Middle
East
in
25
years
was
signed
between
Israel
and
several
Mideast
and
African
nations
including
United
Arab
Emirates
and
Bahrain.
It
was
a
critical
step
to
long-term
security
in
the
MENA
region,
but
if
Israel
and
Saudi
Arabia
reach
a
peace
deal,
it
will
be
several
magnitudes
greater
in
importance,
says
Dina
Powell
McCormick,
BDT
&
MSD
Partners
vice
chairman
&
president
of
global
client
services,
and
a
former
Deputy
National
Security
Advisor
of
the
United
States.

“It’s
a
hugely
seismic
opportunity,”
she
said
at
Delivering
Alpha.

The
economic
opportunities
from
the
Abraham
Accords
added
up
to
$2
billion
in
trade
and
investment
between
Emirates
and
Israel
in
just
three
years.
“That
does
not
compare
to
what
it
will
be
like
if
you
see
a
peace
deal
between
Saudi
Arabia
and
Israel,
and
the
message
it
will
send
to
billions
of
Muslim
people
around
the
world
is
significant,”
she
said.

“We
can’t
overstate
the
importance
of
this
alliance,
geopolitically
and
geoeconomically,”
said
Raymond
McGuire,
Lazard
president.
“It’s
a
$4
trillion
economy
in
MENA
and
the
sovereign
wealth
funds,
it’s
$2
trillion
of
assets
that
will
be
deployed
across
the
globe.
…
Highly
sophisticated
investors
looking
to
make
an
impact
on
five
macro
themes,”
he
said,
referring
to
generative
AI,
energy
transition,
deglobalization
—
“in
brackets,”
he
said
—
demographics
in
an
aging
North
America
and
rising
emerging
market
younger
generations,
and
cybersecurity.

Powell
McCormick
said
the
reason
the
Biden
administration
is
pressing
for
the
deal
despite
criticism
of
Saudi
Arabia’s
record
on
human
rights
and
national
freedoms
is
simple:
“We’d
much
rather
work
with
Saudi
Arabia
than
push
them
to
Russia,
Iran
or
China.”

—

Eric
Rosenbaum

While
inflation
may
be
under
control
and
the
Fed
at,
or
at
least
near,
the
end
of
its
rate-hiking
cycle,
Rick
Rieder,
BlackRock senior
managing
director
and
chief
investment
officer
of
global
fixed
income,
isn’t
ready
to
take
much
duration
risk
in
the
bond
market.

“I
think
we’ve
got
some
time
…
but
there’ll
be
a
point
in
time
you
want
to
get
some
more
duration,”
he
said
at
Delivering
Alpha.

It’s
just
that
the
time
is
not
now,
not
yet.

Rieder
thinks
that
the
Fed
does
want
to
“get
another
’25’
in,”
referring
to
one
more
rate
hike
of
25
basis
points
—
the
market
is
currently
rating
that
outcome
at
odds
of
only
roughly
25%.

In
the
current
market,
the
BlackRock
bond
trading
guru
is
instead
focusing
more
on
the
“boring”
world
of
commercial
paper.

“I
love
commercial
paper
at
6.5%
for
one
year,”
Rieder
said,
noting
that
he
started
his
trading
career
in
commercial
paper
decades
ago
and
is
now
surprisingly
back
to
a
focus
on
it.
“I
know
what
my
return
is
gonna
be
for
single
A
issuers,
big
high-profile
issuers
and
I
can
just
lock
in
that
rate.”

Better
yet,
if
he
locks
in
that
rate
in
Australian
issues,
he
can
then
convert
it
back
into
dollars
at
6.5%-plus,
he
said.

That’s
during
a
period
of
time
when
treasuries
have
been
extremely
volatile,
moving
by
as
much
as
800
basis
points,
Rieder
noted.

“We’ve
got
some
time
and
the
fulcrum
point
on
the
yield
curve
is
the
five
year.
There
will
be
point
in
time
to
get
some
duration
in
but
not
yet,”
he
said. 

—

Eric
Rosenbaum

Altimeter
Capital
Chair
and
CEO
Brad
Gerstner
says

the
artificial
intelligence
boom
is
a
“supercycle”
like
the
rise
of
internet
in
the
late
1990s
where
there
could
be
conflicting
sentiments
and
uncertainties.

“We
like
to
describe
these
moments
as
super
cycles,
right?
The
Internet,
mobile,
cloud
computing
and
now
AI,”
Gerstner
said.
“You
have
to
get
comfortable
with
two
simultaneous
but
competing
truths.
On
the
one
hand,
we
probably
overestimate
in
the
very
short
term
which
leads
to
price
inflation.”

AI
has
been
dominating
headlines
this
year,
creating
a
buying
frenzy
on
Wall
Street
that
pushed
major
enabler Nvidia over
a
$1
trillion
market
cap.
Buzzy
chatbot
ChatGPT,
capable
of
taking
written
inputs
from
users
and
producing
a
human-like
response,
was
an
instant
phenomenon
globally,
becoming
the
fastest-growing
software
in
history.

“But
much
like
the
internet
in
’98
and
’99
where
there
was
overpricing
in
the
short
run,
we
dramatically
underestimated
the
impact
it
was
going
to
have
over
the
preceding
decade,”
Gerstner
said.

—
Yun
Li

The
stock
market’s
recent
weakness
shouldn’t
be
ignored
by
investors
looking
at
how
much
the
market
is
still
up
year-to-date.
More
pain
is
coming
for
stocks,
says
tech
investor
Brad
Gerstner.

His
firm
has
reduced
its
exposure
to
long
equities’
bets
by
at
least
50%,
he
told
CNBC’s
Scott
Wapner
at
Delivering
Alpha.

“I
think
the
risk
has
increased
that
the
Fed
has
overshot,”
he
said.

Gerstner
pointed
to
consumer
data
points
that
show
the
lag
effects
that
occur
throughout
the
economy
amid
higher
rates
are
increasing,
from
travel
demand
to
housing
demand
and
purchases
of
big-ticket
items
like
RVs.

“I
mean,
think
about
this.
We’ve
gone
from
effectively
a
0%
interest
rate
environment,
where
corporations
borrowed
for
free
and
consumers
borrowed
for
free,
to
now
we
have
8%
mortgages;
we
have
10%
car
loans;
we
have
20%
credit
cards,
student
loans
are
about
to
kick
in,
the
huge
bulge
of
corporate
borrowing
that
occurred
at
next
to
nothing,
April
to
December
2020,
now
has
to
get
‘re-fied’
[refinanced]
at
rates
a
lot
of
these
companies
can’t
afford.
So
this
is
the
definition
of
lag
effect.”

While
Gerstner
didn’t
say
whether
he’s
confident
there
will
be
a
hard
landing
for
the
economy,
he
thinks
the
market
is
underestimating
the
risk
of
one
more
Fed
rate
hike
and
he
said
he
is
confident
that
“we’re
going
to
have
meaningful
slowing
in
2024.”

That’s
why
“dollars
at
risk
on
the
long
side
relative
to
dollars
at
risk
on
the
short
side
are
down
by
at
least
50%,”
he
said. 

—

Eric
Rosenbaum

Markets
work
according
to
supply
and
demand,
and
one
under-supplied
market
where
there
is
still
huge
opportunity
is
in
real
estate,

especially
niches
like
student
housing,
according
to
Kathleen
McCarthy,
global
co-head
of
real
estate
at
Blackstone, the
world’s
largest
commercial
property
owner.

“We
have
seen
insufficient
new
supply
of
housing
for
the
demand
for
it
in
the
markets
where
you’ve
seen
job
population
or
student
growth,”
she
said
at
the
conference.

Even
after
a
period
of
rapid
rent
growth
that
has
cooled,
economics
remains
strong
for
landlords.

“In
all
the
different
markets
where
we
invest,
major
cities
in
Europe,
major
cities
across
Asia,
U.S.
certainly,
I
think
what
is
supporting
demand
for
rental
housing
is
the
overall,
I’d
say,
high
cost
of
housing.”

Particularly
in
a
higher
rate
environment,
she
said,
there
need
to
be
more
options.

“I
do
think
that’s
attractive
in
a
world
where
purchasing
a
home
is
50%
more
expensive
on
a
monthly
cost
basis
than
renting
a
home
or
renting
an
apartment,”
she
said.

“When
you
have
over
a
decade
of
not
delivering
enough
supply
for
the
household
formation,
the
path
out
is
to
have
more
supply
of
housing,”
she
added.

—

Eric
Rosenbaum

How
to
play
the
decarbonization
trend
was
a
big
part
of
the
discussion
between
international
investing
executives,
but
they
looked
to
the
U.S.
as
a
major
opportunity
despite
the
partisan
political
divide
on
the
issue.

While
you
can
make
the
case
that
an
investment
boom
related
to
the
Inflation
Reduction
Act
already
is
a
major
story
in
the
U.S.,
Suni
Harford,
UBS
Asset
Management
president,
said
she
thinks
the
opportunities
are
still
mostly
being
overlooked.

“It’s
a
huge
amount
of
investment,” she
said.
“There’s
a
tremendous
amount
of
opportunity
here
in
the
U.S.,
in
energy
storage,
and
that’s
not
a
political
story.”

She
pointed
to
Texas,
a
state
where
the
politics
can
be
big
and
loud,
but
where
she
said
in
her
own
experience
traveling
through
the
state
she
saw
oil
rigs
on
one
side
of
the
road
and
wind
farms
on
the
other.
“They
get
it,”
she
said.

While
ESG
has
become
a
controversial
word,
she
advised
investors
to
focus
on
the
“tremendous
trends
in
the
ESG
space
that
are
wide
open
for
investment.”

Even
if
the
2024
elections
lead
to
a
threat
to
the
IRA,
Harford
said
that
the
provisions
in
the
act
that
promote
investment
and
growth
will
work
on
both
sides
of
the
aisle.

“We
believe
the
vast
majority
will
stay
in
place,”
she
said.

—

Eric
Rosenbaum

Mark
Delaney,
AustralianSuper
chief
investment
officer
&
deputy
CEO,
noted
at
the
conference
some
of
the
things
he
saw
on
a
recent
trip
to
China
that
have
big
implications
for
the
global
economy,
like
a
lack
of
construction
cranes
in
Beijing.
But
he
also
spoke
about
an
experience
he
had:
being
driven
by
an
autonomous
EV
on
a
Chinese
highway.

“It
went
out
on
the
highway,
changing
lanes
…
no
one
in
the
front
seat,
and
it
was
quite
a
unique
experience
on
a
three-lane
highway.
…
It
almost
ran
into
a
bus.”

Even
with
that
near-collision,
Delaney
came
away
from
the
experience
with
a
reinforced
view
of
China’s
EV
lead.
“They
are
heading
down
the
EV
path
and
it’s
the
biggest
car
market
in
the
world
and
they
are
going
to
be
very
dominant.”

“This
is
China,”
added
Suni
Harford,
UBS
Asset
Management
president.
“If
they
want
everyone
to
drive
an
EV,
they
will
drive
an
EV.”

—

Eric
Rosenbaum

Despite
concerns
about
a
recession
and
a
softening
of
the
consumer,
companies
are
still
spending.
S&P
500
companies
have
ramped
up
capital
expenditures
for
the
ninth
straight
quarter,
which
follows
years
of
underinvestment,
according
to
a

recent
report
from
Bank
of
America.

That
has
presented
several
investment
opportunities,
said
Tina
Byles
Williams, Xponance founder,
CEO,
&
chief
investment
officer.

“The
capex
recovery
is
a
global
story,”
Williams
said.
“The
offshoring,
inshoring,
enemy
shoring
with
China,
trying
to
subvert
potential
sanctions
in
Vietnam
or
Mexico,
the
green
transition
making
up
for
under-investments
in
ESG,
all
of
that
leads
to
an
interesting
capex
story
that
I
think
that
has
a
lot
of
legs
and
opportunities
for
long-term
investors.”

Edwin
Cass,
CPP
Investments chief
investment
officer,
said
that
even
with
corporate
leadership
sentiment
falling,
capex
has
held
up
as
CEOs
continue
to
reinvest
in
their
businesses.

“In
some
sense
they
need
to,
because
they
need
to
reshore
or
energy
transition,”
Cass
said.
“The
thing
about
capex
is
that
it
builds
on
itself;
one
company’s
capex
is
going
to
another
company
and
that
company
uses
capex.”

But
Cass
also
warned
that
he
is
actively
monitoring
to
see
if
capex
holds,
or
if
it
could
be
a
lagging
indicator
at
this
point.

“We
talk
about
the
very,
very
resilient
U.S.
consumer
that
has
certainly
been
buoying
the
entire
world,”
Cass
said.
“If
the
consumer
begins
to
stumble,
how
does
it
make
it
through
the
chain
and
eventually
hit
some
of
the
capex?”

— Ian
Thomas

AustralianSuper Chief
Investment
Officer
Mark
Delaney
believes
this
year’s
rally
has
been
a
bear
market
bounce
and
he
thinks
it’s
important
to
be
selective.

Given
the
tremendous
rise
in
interest
rates,
Delaney
said
he
finds
floating-rate
securities
attractive.
The
fixed
payments
on
floating
rates
go
up
as
rates
rise,
which
helps
preserve
their
value.

“I’m
in
the
bear
market
rally
camp,”
Delaney
said
at
the
conference.
Anything
with
a
floating
rate
nature
“must
be
a
pretty
compelling
opportunity.”

—
Yun
Li

TCW
Group
CEO
Katie
Koch

sees
a
recession
coming
for
the
U.S.
economy
and
is
encouraging
investors
to
play
it
safe.

“We
are
going
to
have
a
recession,
because
that’s
the
way
the
world
works,”
Koch
said
during
the
opening
Delivering
Alpha
panel.
“We
haven’t
had
a
real
one
for
over
a
decade
and
a
half.”

To
combat
the
slowdown,
she
recommends
a
variety
of
conservative
investments,
ranging
from
Treasurys
to
mortgage-backed
securities
to
cash.
“We
haven’t
seen
the
pain
of
higher
rates,
but
it’s
coming.”

—Jeff
Cox

The
U.S.
press
doesn’t
miss
a
day
playing
up
the
geopolitical
rivalry
with
China,
with
the
business
press
specifically
focusing
on
the
risks
to
companies
relying
on
Chinese
consumers
and
suppliers.
But
two
top
international
investing
executives
say
that
you
shouldn’t
believe
everything
you
read.

Mark
Delaney,
AustralianSuper
chief
investment
officer
&
deputy
CEO,
said
he
just
returned
from
a
trip
to
China
and
saw
several
notable
things
in
Beijing.
One,
there
were
very
few
construction
cranes.
Second,
there
were
very
few
foreigners.
Third,
he
saw
a
lot
of
retired
people
who
looked
like
they
were
having
a
great
time.
“They
were
healthy
and
they’ve
got
singing
competitions
and
line
dancing.”

While
the
lack
of
construction
illustrates
the
economic
trouble
in
the
country,
he
said
the
lack
of
foreigners
should
highlight
the
risk
of
trusting
what
you
hear
from
Western
media.
“China
is
just
China.
It’s
just
different
and
they
are
managing
their
way
through
like
they’ve
always
done.
So
I
didn’t
think
it
was
anywhere
near
as
bad
as
people
thought
it
was,”
Delaney
said.

He
added
that
many
China
experts
have
said
over
the
past
two
decades
that
the
government
in
the
country
is
“very
practical.”

“That’s
something
you
don’t
pick
up
from
the
Western
press,”
he
said.

Suni
Harford,
UBS
Asset
Management
president,
agreed.
“We
rely
on
the
media,
with
all
due
respect,
to
tell
us
these
stories.
There
are
no
foreigners
there,
people
don’t
know,
they’re
not
on
the
ground,”
she
said,
referring
to
the
fact
that
most
readers
of
news
in
the
U.S.
do
not
have
real-life
experience
visiting
China
—
her
firm
has
staff
on
the
ground
in
China.
The
headlines
about
an
invasion
of
Taiwan
aren’t
something
you
hear
about
nearly
as
frequently
in
Europe,
or
when
you
travel
in
the
Asian
region,
she
said.
“If
you’re
in
Europe,
you
have
a
very
different
perspective
on
U.S.-China
relations
and
how
danger[ous]
it
is.
…
You
go
to
Asia
or
Europe
and
it’s
not
the
same
issue
that’s
the
first
of
mind
that
everybody
has.
It’s
not
about
the
[South]
China
Sea
and
it’s
not
about
Taiwan.
..
How
much
of
the
news
we
get
has
a
political
bent
to
it?”

“We’ve
been
there
for
a
very
long
time,
and
we
will
be
there
for
a
very
long
time.
…
we
actually
believe
in
China,”
she
said.
And
she
added
that
at
a
time
of
increasing
talk
of
de-globalization
or
de-coupling
from
China,
she
said,
“I’m
a
long-term
believer
we’re
going
to
be
global
again.”

—

Eric
Rosenbaum

One
reason
the
Federal
Reserve
won’t
raise
interest
rates
in
2024
is
because
it
won’t
want
to
become
a
story
during
an
election
year,
according
to
Tina
Byles
Williams,
CIO
at
multi-strategy
investment
firm
Xponance.

“The
Fed
is
going
to
stay
behind
the
curve
because
it
doesn’t
want
to
be
part
of
the
election
narrative,”
Williams
said
at
CNBC’s

Delivering
Alpha
conference
Thursday.

She
noted
that
the
Fed
historically
hasn’t
raised
rates
within
six
months
of
an
election.

Fed
officials
already
have
indicated
that
they
expect
to
cut
rates
by
half
a
percentage
point
next
year.
Well-anchored
inflation
expectations
and
the
presidential
race
give
them
further
ammunition,
said
Williams,
who
thinks
the
U.S.
could
enter
recession
but
probably
not
until
“way
at
the
end”
of
next
year.

—Jeff
Cox

Many
investors
were
burned
in
the
years
leading
up
to
Covid
during
the
rise
of
ESG
and
the
bear
market
in
oil,
thinking
the
energy
sector
was
in
“terminal”
decline.
Buying
energy
amid
all
that
negativity
paid
off
in
a
major
way
for
investors,
and
as
oil
comes
off
its
most
recent
bull
run,
energy
remains
a
big
part
of
the
equation
for
the
Teacher
Retirement
System
of
Texas.

“We
like
that
investment,”
said
Jase
Auby,
the
chief
investment
officer
for
the
pension
system,
which
has
a
6%
allocation
to
energy
and
energy
infrastructure.

Even
after
energy’s
big
comeback,
there
is
still
a
lot
of
pressure
on
many
institutions
to
stay
out,
or
get
out,
of
fossil
fuel
investments,
and
Auby
said
it
helps
when
other
pools
of
capital
are
exiting
an
asset
class.
He
said
investing
in
energy
becomes
a
strategic
advantage
when
others
are
backing
away
from
the
sector
and
in
a
market
dominated
by
passive
beta,
strategic
advantages
are
rare.

“We
like
that
from
a
flows
perspective,”
he
said.
But
he
added
that
new
investors
are
coming
in,
especially
family
offices
around
the
country
“stepping
in
where
there
might
be
a
dearth
of
capital.”

It’s
a
risky
asset
class
and
oil
prices
can
go
down
as
quickly
as
they
go
up,
especially
if
the
economy
weakens.
Auby
said
his
pension
system
stress
tests
for
oil
prices
because
it
is
very
volatile.
While
he
hesitated
to
put
a
number
on
where
energy
investments
“break”
because
it
is
different
for
every
exploration
and
production
company
and
opportunity,
he
did
say
that
if
you
take
the
fracking
industry
as
an
example,
a
breakeven
number
that’s
fair
to
use
is
$50
a
barrel.

The
Texas
pension
system
is
a
long-term
investor
and
looks
at
energy
that
way,
as
it
does
the
broader
commodities
complex.
But
Auby
said
it’s
important
to
make
a
distinction
between
long-term
and
infinite,
and
to
evaluate
energy
and
commodities
holdings
based
on
business
risk.
“I
get
the
hedge
in
the
inflation
scenario,”
he
said,
adding
that
the
pension
system
holds
commodities
in
its
risk
parity
portfolio
for
inflation
reasons.
But
he
added,
just
holding
commodities
for
the
long-term
the
expected
rate
of
return
“goes
to
zero.”

—

Eric
Rosenbaum

Returns
on
private
credit
look
appealing
in
today’s
market,
according
to
Oaktree’s
Armen
Panossian.

“There’s
clearly
a
need
for
a
replacement
source
of
capital
from
pension
plans,
insurance
clients,
institutions
and
even
retail
entering
that
market,”
with
the
departure
of
incumbent
lenders,
said
the
incoming
co-CEO
and
head
of
performing
credit.
“I
think
the
need
is
quite
apparent
and
the
returns
are
very
attractive
given
the
risk.”

—
Samantha
Subin

Even
with
the
recent
decline
in
stocks,
the
market
has
been
resilient
this
year,
but
two
top
investing
officials
say
investors
should
not
be
complacent
when
looking
at
U.S.
stock
market
returns
year-to-date.
Things
are
likely
to
get
worse
before
they
get
better,
and
with
cash
in
the
bank
able
to
earn
5%,
aggressively
betting
on
stocks
in
the
short-term
is
a
mistake.

“We’re
more
bearish
than
most
people
about
what
lies
ahead,”
said
Katie
Koch, TCW President
&
CEO.
“Things
break
when
you
reprice
aggressively,”
she
said.

With
the
Fed
raising
rates
from
zero
to
above
5%,
the
lag
effects
of
monetary
policy
on
the
economy
haven’t
fully
hit
yet
and
the
longer
it
takes
for
them
to
hit,
the
more
things
that
will
break,
Koch
said.

“You’re
getting
paid
to
be
patient
right
now,”
Koch
said.
“Cash
has
a
good
return.”

Dawn
Fitzpatrick, Soros
Fund
Management CEO
&
chief
investment
officer,
noted
that
the
hundreds
of
billions
that
banks
are
holding
in
to-maturity
bond
portfolios
are
still
holding
a
lot
of
pain
under
the
surface
that’s
being
exacerbated
by
the
recent
spike
in
bond
rates.

Meanwhile,
U.S.
consumers
have
$2
trillion
in
mortgages
that
are
fixed
rate
and
that
means
the
pain
of
the
interest
rate
rise
isn’t
felt
as
acutely,
in
real-time,
in
the
U.S.
as
it
is
in
other
markets,
where
more
mortgages
are
floating
rate.

“Everything
gets
harder
from
here,”
she
said.

—
Eric
Rosenbaum

The
U.S.
dollar
has
defied
a
lot
of
market
pundit
calls
in
the
recent
past,
but
with
$33
trillion
in
national
debt,
and
a
government
debt
load
that
is
rising,
don’t
bet
on
the
currency’s
continued
strength.

That’s
the
view
of
Tina
Byles
Williams, Xponance founder,
CEO,
&
chief
investment
officer.

Answering
an
audience
question
at
Delivering
Alpha
about
the
market
and
economic
impact
of
the
rising
national
debt,
she
said,
“The
first
victim
is
the
U.S.
dollar.”

“People
have
been
saying
that
and
lost
money
for
a
while,
but
it
is
21%
above
purchasing
power
parity
levels,”
she
said.

“That
is
the
first
to
me,
and
most
direct
asset
class
victim
…
and
that
then
has
implications
on
U.S.
equities
vs
non-U.S.
equities.”

“I
think
it’s
the
primary
victim.
I
can
think
of
others,
but
that’s
the
one
at
the
center
of
the
bullseye.”
—

Eric
Rosenbaum

Remember
what
happened
in
retail
a
decade
ago
as
large
swaths
of
retail
properties
starting
disappearing?
That’s
going
to
happen
in
the
office
market
next.

About
a
third
of
the
existing
supply
of
office
square
footage
will
need
to
get
taken
out
of
the
market,
led
by
office
properties
that
aren’t
the
top
tier,
TCW
CEO
and
president
Katie
Koch
said.

“We
have
to
give
people
a
reason
to
come
to
work
and
that
has
to
be
nice
property,”
she
added.

The
debt
load
in
the
market
will
remain
under
stress
as
well.

“A
trillion
and
a
half
dollars
of
the
CMBS
market
is
going
to
need
to
be
extended
in
the
next
about
year
and
a
half
at
four
point
higher,”
Koch
said.

Koch,
who
noted
that
TCW
is
both
a
tenant
and
investor
in
downtown
Los
Angeles,
said
that
it
is
a
“really
tough
real
estate
market”
for
big
cites
across
America,
which
will
lead
to
that
supply
getting
taken
out
of
the
market.

“We’ve
had
a
few
people
start
to
walk
away
from
buildings
in
Los
Angeles,
San
Francisco,
other
cities,”
she
said.
“It
is
a
long
tailed
event.”

— Ian
Thomas

Even
after
this
year’s
run
up,
artificial
intelligence
still
has
more
room
to
run,
according
to
TCW
CEO
and
president
Katie
Koch.

“We’ve
got
a
long
way
to
go
for
the
story
to
play
out,”
Koch
said,
noting
that
while
all
technologies
go
through
hype
cycles,
AI
hasn’t
hit
its
peak
just
yet.

She
called
AI
a
“transformational
technology”
likening
it
to
mobile
phones
and
one
that
will
determine
the
winners
and
losers
across
sectors.

—
Samantha
Subin

The
13th
annual
CNBC Delivering
Alpha Investor
Summit
is
taking
place
at
a
crucial
time
for
markets
as
investors
grow
concerned
about
a
further
pullback
in
stocks.

A
majority
of
Wall
Street
investors
haven’t
taken
solace
in
stocks’
2023
gains,
thinking
the
market
could
retreat
further
as
risk
of
a
recession
creeps
up,
according
to
the
new CNBC
Delivering
Alpha investor
survey. 

We
polled
about
300
chief
investment
officers,
equity
strategists,
portfolio
managers
and
CNBC
contributors
who
manage
money
about
where
they
stood
on
the
markets
for
the
rest
of
2023
and
beyond.
The
survey
was
conducted
this
week.

More
than
60%
of
respondents
believe
the
stock
market’s
gain
this
year
has
just
been
a
bear
market
bounce,
seeing
more
trouble
ahead.
A
total
of
39%
of
investors
believe
we
are
already
in
a
new
bull
market.

Asked
about
the
probability
of
a
recession,
41%
of
survey
respondents
said
they
expect
one
in
the
middle
of
2024,
and
23%
said
a
downturn
will
arrive
later
than
12
months
from
now.
Only
14%
said
they
don’t
expect
a
recession.

—
Yun
Li

With
yields
of
6%
available
in
the
bond
market,
stocks
have
to
do
a
lot
to
deliver
on
a
risk-adjusted
basis
for
investors.

They
can,
according
to
Ashish
Shah,
Goldman
Sachs
Asset
Management
CIO
of
public
investing,
but
only
for
investors
willing
to
look
beyond
the
U.S.
market.

Shah
sees
the
setup
in
the
markets
as
an
“interesting
buying
opportunity”
for
equities
in
India
and
Japan,
among
other
global
markets.
“Lots
of
good
things
are
going
on
across
the
globe
in
equities
and
one
of
most
important
things
is
looking
globally,”
Shah
said
in
an
interview
ahead
of
Delivering
Alpha
on
CNBC’s
“Squawk
Box.”

How
much
should
investors
who
buy
overseas
stocks
expect?

“I
think
you
can
get
10%
in
equities,
but
you
have
to
look
internationally,”
he
said.

The
U.S.
dollar
trend
line
and
the
tightness
of
U.S.
balance
sheets,
combined
with
bond
yields,
mean
that
in
the
near-term
there
are
headwinds
for
U.S.
dollar-based
assets.
“It’s
a
nice
setup
for
cheap
assets
abroad,”
Shah
said,
point
to
reflation
trades
in
India,
where
there
considerable
investments
related
to
secular
trends
taking
place,
and
Japan,
where
diversification
of
the
supply
chain
is
a
tailwind.

And
where,
he
said,
“valuations
are
a
lot
better
than
in
the
U.S.”

—

Eric
Rosenbaum

Kyle Bass,
Hayman
Capital
Management
founder
and
CIO,
said
investors
and
companies
that
are
looking
to
deepen
ties
with
China
as
opposed
to
severing
them
are
making
“the
wrong
bet.”

“China’s
hooks
on
Wall
Street
are
so
deep
into
us,
all
of
the
big
players
keep
saying
we
need
more
integration,
not
less,”
Bass
said
on
“Squawk
Box”
in
an
interview
on
the
sidelines
of
Delivering
Alpha.
“They’re
not
interested
in
our
national
security,
they’re
interested
in
making
another
dollar,
and
one
day
we’re
going
to
wake
up
and
realize
that
was
the
wrong
bet.”

Bass
said
that
the
desire
to
forge
business
relationships
with
China
stems
from
“looking
for
the
cheapest
labor,
and
we’re
looking
for
the
cheapest
labor
with
counterparties
that
are
adversarial
to
our
way
of
life
and
our
values
system.”

He
called
the
situation
with
China
a
cold
war,
and
said
that
“we’re
not
doing
a
great
job
but
we’re
starting
to
protect
ourselves.”

One
way
Bass
says
the
U.S.
should
be
protecting
itself
is
through
an
FTC
review
of
TikTok.
“TikTok
broadcasts
straight
into
our
kids’
bedrooms
and
has
never
had
to
obtain
an
FTC
license,”
he
said.

— Ian
Thomas

Les
Brun,
Ariel
Alternatives
CEO,
says
private
equity
valuations
will
decline
as
more
companies
“run
out
of
cash”
and
need
to
complete
transactions
to
fund
their
growth.

In
an
interview
with
CNBC’s
“Squawk
Box”
ahead
of
the
Delivering
Alpha
summit,
Brun
said
the
current
situation
reminds
him
of
the
2008-2009
period
when
those
in
private
equity
with
money
were
able
to
make
a
lot
more
money,
but
those
holding
onto
assets
that
had
seen
their
values
drop
during
the
crisis
were
going
to
see
valuations
drop
even
more
because
there
wasn’t
a
sufficient
pool
of
buyers. 

The
current
interest
rate
environment
will
add
more
pressure
on
valuations.

He
said
traditional
companies
are
having
trouble
finding
financing
at
rates
that
are
attractive
and
transactions
have
to
be
completed
with
either
greater
amounts
of
equity
or
lower
valuations.
“It
has
to
be
one
or
the
other,”
he
said.

“They
will
have
to
find
ways
to
do
transactions
at
valuations
that
are
lower
than
they
expected,”
Brun
added.

—

Eric
Rosenbaum

Treasury
yields
have
hit
multi-year
highs
and
major
stock
market
averages
look
poised
to
cap
off
a
losing
September
and
down
quarter.
The
S&P
500
closed
below
the
4,300
level
for
the
first
time
since
June
earlier
this
week,
while
the
Dow
Jones
Industrial
Average
posted
it
largest
one-day
loss
since
March.
Technology
stocks
have
also
come
under
pressure
in
recent
weeks
from
the
threat
of
rising
rates

Comments
from
Pershing
Square’s
Bill
Ackman
later
today
could
play
a
pivotal
role
in
market
sentiment.
The
renowned
billionaire
hedge
fund
manager
who’s
been
a

vocal
commentator
on
inflation,
the
Federal
Reserve
and
the
state
of
the
market
is
slated
to
speak
with
CNBC’s
Scott
Wapner
at
4:15
p.m.
ET.

—
Samantha
Subin