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New York Stock Exchange, September 18, 2012: the day FedEx shares fell far harder than the rest of the market, tumbling 3.1 per cent.


With the euro zone barely trudging along, Japan joining the intervention parade and China cooling, U.S. investors have good reason to be confident about their ranking in the hierarchy of economic powerhouses.

But at what point does confidence turn into blind optimism? And have they crossed it?

Alain Bokobza, the Paris-based head strategist for Société Générale, just spent a week meeting with big name U.S. money managers at both hedge funds and traditional wealth management shops. His takeaway: Americans have very rosy expectations.

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"In general we found that U.S. asset managers have a high degree of confidence in their U.S. holdings and that U.S. assets aren't anywhere near being in danger," he wrote in a new research note. "They seem largely unaware that many, if not all, foreigner observers do not expect either Obama or Romney to be able to deliver a 'quick fix' of profound U.S. imbalances."

After hearing so much optimism, he resorted to asking, 'Are you sure?' Not only are the deep structural issues quickly dismissed, but Mr. Bokobza also found that U.S. money managers are watching equity valuations through blurred lenses. Many of them were "somewhat surprised" to see that U.S. stocks now trade at 40-year highs relative to all other non-U.S. equities.

Mr. Bokobza is particularly wary of the Nasdaq because the index has been on a tear, but he found that most people he met with did not share the same view. A difference of opinion is healthy, of course. But there was such widespread confidence, even though the long/short ratio of Nasdaq to the banks is now at the same level it was in early 2000.

Another key takeaway from his meetings: U.S. investors are finally coming to grips with China's slowdown. Whether or not they're right, many money managers believe that "China is on the verge of a hard landing," a much harder stance than what they felt just a few quarters ago. Although this view has yet to permeate to become the dominant theme in the mainstream media, it is now talked about quite often on trading desks and in boardrooms.

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About the Author
Reporter and Streetwise columnist

Tim Kiladze is a business reporter with The Globe and Mail. Before crossing over to journalism, he worked in equity capital markets at National Bank Financial and in fixed-income sales and trading at RBC Dominion Securities. Tim graduated from Columbia University's Graduate School of Journalism and also earned a Bachelor in Commerce in finance from McGill University. More


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