Wise Words at Morningstar

… it regulates those products: “They’re an incredibly essential tool we all use to manage risk”; swaps, which “need to be centrally cleared; but that will mean more transparency”; and finally, “too big to fail.” McNabb said “one of the good steps in reform is some sort of Resolution Authority,” which would control “how you unwind a firm after it fails.”

Rob Arnott, PIMCO

PIMCO powerhouse Rob Arnott spoke to a standing-room-only crowd on June 24, asking “Is there a better way to allocate assets and construct portfolios?” He answered by saying “there are always interesting investments–the challenge is identifying opportunities wherever they might be.” One of those periods may be over the next 12 to 18 months when, he predicted, there will be a “generational opportunity to put inflation protection pieces in place when people aren’t worried about inflation.” The founder of Research Affiliates and manager of PIMCO All Asset and All Asset Authority funds, Arnott contended that in what he calls the “Noughties,” the “lost decade was only lost for [investors who were] equity-centric and anchored on cap weighting.”

Charles DeVaulx, International Value Advisors

Responding to a question from an audience member at a June 25 general session about investing opportunities in Japan, Charles DeVaulx said “We’ve been dealing in Japan since 1995 and made a lot of money; it’s been a wonderful experience.” DeVaulx, who came to prominence as the successor to Jean-Marie Eveillard at First Eagle SoGen Funds but then left First Eagle in 2007, said “the key to Japan is to know the intrinsic values” of Japanese companies, and to sell them before their stock prices have reached their full value.

As further evidence of the opportunity, DeValux cited Warren Buffett, who, he said, is “aware that there are some wonderful companies in Japan.” Moreover, DeVaulx pointed out that Japan now exports more to China than to the U.S., making Japanese companies “a sort of back door to China.”

Bill Miller, Legg Mason

The final session featured a panel including Legg Mason CIO Bill Miller, who runs the Value Trust and Opportunity Trust mutual funds. Miller said Value Trust holds about 10% large banks and that it has owned “financials in one form or another for 30 years,” adding, “it’s difficult to do well without financials.” He likes Citi, trading “below tangible book value,” and which he expects should move from earnings of $0.50 per share to $0.65 or $0.70 over the next two years. He also says he likes “Aflac, American Express, and Capital One.”