Morgan Stanley CEO: 'Let's Be Honest, Davos Is An Echo Chamber'

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by Tyler Durden
Friday, Jan 20, 2023 - 09:15 AM

Morgan Stanley CEO James Gorman said on Thursday that the World Economic Forum at Davos is an "echo chamber," telling Bloomberg "...this echo chamber we live in here in Davos where everybody's basically repeating back to each other what they've heard from the last person. Let's be honest."

Gorman echoed Tuesday comments by Semafor's Liz Hoffman, who in an article titled "Don't bet on the Davos consensus," writes that the annual meeting of the elites was "the world’s most expensive echo chamber, where nobody makes friends by being a bummer."

The Davos consensus is shaped and refined as the weeklong conference goes on, passed among attendees alongside the plates of toothpicked olives and Gruyère cubes. By Friday it approaches canon.

And it is almost always wrong. An investor could do well boiling it down to a few investment theses and building a basket of assets to match — then wagering against it.

I’m hardly the first person to have pointed this out. Glenn Hutchins, the veteran investor who delights in needling his peers, says it nearly every year he’s there. -Semafor

"There’s nothing wrong with consensus views, but the key is to ask yourselves, where might we be wrong? Where are the blinders? And Davos isn’t conducive to that. You’re in an intense environment with very little time and very thin air," said veteran investor Glenn Hutchins, who added that the right people are being asked the wrong question.

"What a potash CEO in Canada can tell me about his next 12 months of production and what that might mean for agricultural production is way more valuable than asking for his views on globalization."

The WEF itself in 2017 actually asked two psychology professors why Davos Man is always wrong. One of them replied: "That’s actually not true…Whether the Davos Man is more accurate than the dart-throwing chimpanzee is another question."

Gorman opines on inflation, Twitter

Giving some time to CNBC, Gorman said "Clearly inflation peaked. That's no longer a question, it's a fact," adding, "The question is can they get to 2% and how hard will they try to get to 2% versus stabilizing around 3-4."

He also spoke to China's "major, major pivot."

Gorman, 64, also said he isn't worried about the debt ceiling impasse in Washington.

"I’m confident that politics will finally get to the right place," he said. "The other option is not an option."

And just today, the Treasury announced extraordinary measures to grapple with the $31.4 trillion debt ceiling.

He also decried the "echo chamber" at Davos, saying "..this echo chamber we live in here in Davos where everybody's basically repeating back to each other what they've heard from the last person. Let's be honest."

When asked if Morgan Stanley might end up owning Twitter - given that roughly $3.4 billion of its balance sheet is tied up with loans it made as part of Elon Musk's acquisition, Gorman said it "could not."

"Twitter’s a great company," said Gorman, adding "Elon Musk is one of the greatest entrepreneurs and business people in the last century."

On Tuesday Gorman expressed optimism over the markets - saying on an earnings call, "I’m highly confident that when the Fed pauses, deal activity and underwriting activity will go up. I would bet the year on that, in fact," adding "We’re not of the view that we’re heading into a dark period. Whatever negativity in the world is out there. That’s not our house view."

"There’s a lot of money sitting around waiting to be put to work. Our job is to be the flow of capital between those who have it and those who need it. So I’m pretty confident actually about the outlook."