Michael Lewitt At The Value Investing Congress

Michael Lewitt spoke at the Value Investing Congress and said to go long gold, shorting bonds, and buying bank loans are the best ways to profit in this market. He recommended using TBT to short bonds, and KKR Financial Holdings LLC KFN as a way to play bank loans. Lewitt went on to say that the key fiscal policies have not changed since financial crisis, which creates new imbalances. This favors speculation over production. Lewitt said that the central banks are trashing currencies, and the end will not be good. He suggested that naked CDS should not exist, highlighting the example in BP BP. Lewitt wants to limit algorithmic trading, and said that SEC started, but ultimately did nothing about it. Lewitt said that the world is more leveraged now than it was in 2007 and 2008, and is more prone to financial accidents. Lewitt continued to discuss the Federal Reserve, and in particular, QE2. Lewitt doesn't think QE2 will help. He said that money needs to be targeted to productive areas, not across the board. Lewitt said the institutional investment model is broken, as too much money is in underperforming assets. He believes fees are too high, and returns are too low. He likes junk bonds, but investing in this sector you have to be careful because it's highly cyclical. He mentioned bonds rated BB and BBB, but gave no specific names. He also went on to say that gold will continue to rise, as a hedge against central banks trashing their own currencies.