No matter what the outcome of the November elections is, hedge fund managers agree they need a bigger presence in the nation’s capital.
Unsurprisingly, Washington D.C. is dominating conversations among hedge fund managers and their investors.
Political risk was a consistent theme throughout this week’s Value Investing Congress, a confab for money managers whose investing gurus include Warren Buffett and Benjamin Graham. Nearly half of the panelists addressed the midterm elections directly, and the ballroom at the Marriott Marquis in New York City buzzed with talk of whether a Republican win in November would actually change the landscape for investors.
“Several hedge fund managers and investors have recently started visiting Washington on a regular basis in order to better assess the political situation there,” said Ori Eyal, founder of Emerging Value Capital Management, a value investing firm that looks for opportunities worldwide. “In the past, such political analysis was usually reserved for the emerging markets, which were viewed as far more politically risky than the USA.”
John Burbank, founder of $3 billion global investment firm Passport Capital, told the audience that in investing, it’s important to be where other people are not, and right now the investing community really doesn’t have the active presence it should in D.C. He said you could buy time with the nation’s political elite for about $2,400 a head, which he believes is a relative bargain. “They remember your name, they call you, and they want another $2,400.”
Since the financial meltdown, investors have been putting money into areas of the markets propped up the all-too visible hand of Uncle Sam, but Burbank told the crowd that his political concerns go far beyond which sectors Congress will keep on life support. Unless politicians take radical measures to change course on entitlements, he said that the US faces the prospect of becoming another Argentina.
He added that he studies the US just as he does any emerging market, by examining the investment landscape in two-year increments and spending the majority of his time researching the government. Unsurprisingly, he is long gold, and blue chips like Kraft
, Exxon Mobil
, and Microsoft
While the midterm elections may create shifts in tax policies that will impact investors in the short term, the always outspoken Michael Lewitt, of Harch Capital Management, has little hope that much will change come November. “We will just replace one broken and corrupt party with another in Congress,” he told Fortune. During the conference he cited the final version of the financial regulation bill as proof that Capitol Hill is prisoner to crony capitalism, and that we’re stuck with a government whose policies serve special interest groups and exacerbate our cycle of booms and busts.
“We are too locked in intellectually, morally — immorally, actually — and financially to the forces driving these phenomena to see changes without a political revolution far more dramatic than what the Tea Party is offering,” Lewitt said. “We need to fire Bernanke, Geithner, Schapiro and most of our political class and start over.”
His remarks were seriously mulled over during this week’s two-day event that also included dire analysis of the nation’s seemingly never-ending need to create more dollars and more debt. While Lewitt may sound like a radical to those who frequent Washington’s halls of power, he and more like him are hopping the Acela to D.C., hoping to change that perception one $2,400 contribution at a time.
More from the conference:
Why GM is a buy
Betting on a Japanese default
View from the hedge fund seat looks good