CHICAGO—The $787 billion in debt overhang that the federal government absorbed from the failed banking sector from the 2008 credit crisis will not come due until 2020, or perhaps later. But at that point in time, when the piper finally pays his dues, “We [the U.S.] are going to become an emerging market,” predicted Rudolph Riad-Younes, head of international equities at Artio Global Investors, New York.

“All we are doing is postponing a bad day for someone in the future,” agreed Steve Romick, partner, FPA, Los Angeles.

The two alternative investment managers spoke Wednesday at the opening general session of the Morningstar 2010 Investment Conference.

“The trade deficit that started in the mid 80s became much worse during the Greenspan era because low interest rates scared people into cash and real estate,” Riad-Younes said. “How can the U.S. get to a zero trade deficit? Obama has vowed to double the export rate within the next five years. I say: Good luck.”

With interest rates around the world at zero or near zero, or effectively in the United States at negative 2%, some experts have said, the economic problems of the past two decades will simply recur in a different format.

“We got dot-com, dot-home and dot-gov,” Riad-Younes said.

Where do we go from here? Certainly, there are opportunities, though they are “slim pickings,” Romick said. Portfolio managers will have to pick out opportunities very selectively and creatively, agreed the two panelists.

Asia ex-Japan continues to be the big story, particularly China and its population of 1.4 billion, but both panelsists said they like Latin America, and Romick is big on land, specifically farmland.

Fielding a question from the audience on what type of crops and commodities futures he likes, Romick, who runs the FPA Crescent Fund, among others, said  he isn’t wed to any particular type of agriculture since different states have different investment ownership rules. In North Dakota, for instance, only individuals may purchase farmland. It’s the general idea of the scarcity of land and different ways to produce crops that fascinates Romick. Grain used to feed cows, for instance, has different multiples than grain used to produce hops.

“Life is about risk and reward,” Riad-Younes said of his tactical timing strategy. “Sometimes it’s tough picking and it’s almost like hedging. There’s lots of selling pressure but no catalyst. Is Western Europe disappearing from Planet Earth over the next five years? Should you take your money out because you don’t know where the next ‘shooting’ is about to start?”

The answer to all of the doomsayers is, simply, no. There are opportunities, but you have to carefully find them.

‘Red Bull Economics’

“Right now, the economy is so jacked up on drugs [i.e. all of the automotive, mortgage and banking stimulus plans] you don’t know what is going on,” Romick said.

In the mid 2000s, people were using their home equity like an ATM, and pulling out all of that equity and “living large,” he said. “Now people are living large because their homes are in foreclosure. That give [fund managers and economists] no visibility.” Today, it’s all about the debt.

“My partner calls it ‘Red Bull Economics,’” Romick said, to peals of laughter from the 1,000-plus money management executives in the audience.

Even when reports from the Federal Reserve are issued, Romick said it’s very hard to actually see what is happening with the economy. “Looking at the numbers the government gives us … They’re going to report it the way they’re going to report it. The data is problematic, at best.”

These views — the lack of clarity on the U.S. economy and recovery, combined with a keen need to take an exacting view of all asset classes and investment opportunities — were echoed by the chief economist and chief investment officer of Northern Trust.

However, at Northern Trust, these goals are achieved largely through seven manager-of-managers funds which have more than doubled in assets under management from $3.5 billion as of May 31, 2009 to $7.3 billion today.

The two executives spoke at a media luncheon at company headquarters just before the Morningstar conference began. “When we talk about the global economy, we must start with the U.S.,” said Paul Kasriel, Northern Trust’s chief economist. “I believe the recession that started will continue. Growth will be subdued. The financial services industry is out of the intensive care unit, but not out of the hospital [although] it has the biggest headwinds.”

Like the “macroeconomic” panelist duo at Morningstar, Kasriel said that he likes real estate.

“Housing is facing the expiration of the purchasing tax credit, like the auto sector’s ‘Cash for Clunkers,’” he said. “But housing prices are quite low. Housing is a great buy. It’s the best buy it has been in 40 years. We have the lowest inventory of new homes for sale since 1968.”

Kasriel said employment continues to be a concern, particularly since the U.S. needs GDP growth to remain at 2.5%-3% just to absorb new entrants to the workforce.

Andrew Smith, a senior vice president and chief investment officer of Northern Trust Global Advisors, said that this is why “the risk management piece of this [manager-of-manager funds] has become very, very important. The risk management lexicon has expanded. It’s not just market risk.

“It’s a very important service element” among brokers and the RIA channel that Northern Trust has developed, Smith said. Retail and institutional clients are demanding thorough “research, due diligence and risk management. Advisers truly value client-facing activities.”