This Elite Investor Thinks The U.S Is Still The Best Place To Invest In Equities

With the downturn in the commodity markets raising the risk of emerging-market companies defaulting on dollar-denominated debt, Lasry said that he does not expect a repeat of the market rout in 2008 as financial institutions are very liquid and have robust capital reserves. There will, however, be companies in trouble, he said.

Erik Schatzker then discussed with Lasry reports that insurers, according to documents released in Europe, will be facing higher capital requirements. He said the development means that insurance companies will be pushed to buying riskier investments to deliver expected returns and meet all obligations. This means that in order to hold more equity capital and buy safe treasuries, the rest of insurer’s capital will have to be substantially more risky.

In the interview, Lasry also touched on Nelson Peltz’s Trian Partners disclosing a $2.51 billion stake in General Electric Company (NYSE:GE). Trian Partners may have just recently won another battle with E I Du Pont De Nemours And Co (NYSE:DD) as its CEO and chairwoman Ellen Kullman will be stepping down on October 16. Given that Peltz is an activist, it is expected that he will pressure General Electric into unlocking value, cutting costs, being more cautious in acquisitions and returning more shareholder money. In fact, Trian says that it wants GE to take on about $20 billion in additional debt to buy back shares. Lasry, however, says that companies like GE should be appreciative of new investors but be less fearful of activists and less receptive to their demands. At the end of the day, the Avenue Capital co-founder said that activists need to convince other large shareholders that they are right. In the case of Trian, though it is one of the top ten shareholders of GE, it still holds just 1% of the company’s shares.

At the end of the second quarter, Avenue Capital’s top three stock picks were Houghton Mifflin Harcourt Co (NASDAQ:HMHC), Gener8 Maritime Inc (NYSE:GNRT) and Meritor Inc (NYSE:MTOR). Avenue Capital owned 4.74 million shares of Houghton Mifflin Harcourt by the end of June, while it owned 7.21 million shares each of Gener8 Maritime and Meritor.

Disclosure: None