A Focus on Fixed Income

On a more serious note, Gundlach argues that despite the recent spike in bond yields, “I do not believe that we can say the trend to higher interest rates is upon us,” citing a number of reasons for the spike, including vast amounts of sub–prime debt being sold in the past several days as well as a “tiny dip in China’s Treasury holdings.” But he also says that bond markets are at a crossroads. He warns that the sub-prime issue is a “total unmitigated disaster,” and that sub-prime debt and LBO junk bonds “belong together.” He says some sub-prime debt that is trading at yields of up to 35% has investment grade ratings.

The keynote was followed by general sessions on mutual finds and stocks with Morningstar analysts reporting in their typically intelligent fashion.

Day two opened with Morningstar founder Joe Manuseto giving a corporate overview of his publicly-held company, followed by a lively debate about the differences between cap-weighted and fundamentally-weighted index investing, between Gus Sauter, CIO and managing director at Vanguard, a proponent of cap-weighted index funds, and Dr. Jeremy Siegel, author, the Russell E. Palmer Professor at The Wharton School of Business at The University of Pennsylvania, and senior investment strategy advisor to Wisdom Tree Investments, which has created fundamentally-weighted indexes and ETFs.