Its Over

Originally posted by 1ronnie ↑

Bringing you excerpts from Day 2 of Strategic Investment Conference (SIC) which is currently held in San Diego
https://www.mauldineconomics.com/sic-2018

Events began this morning with an investor’s dream duo of Steve Blumenthal and JPMorgan’s **riela Santos.
Steve kicked-off proceedings with a discussion around valuations and why they paint a negative picture for returns going forward.
Throughout history, when valuations have been as high as they are today, returns have been in the low single digits or negative over the next decade. Thus, Blumenthal said investors should now be focusing on risk management and went through specific ways to do just that.
JPMorgan Asset Management’s **riela Santos picked up where Steve left off, talking about asset allocation. She said investors should be focused on emerging market equities, specifically Latin America.
Jared Dillian and I
Up next was my one-on-one discussion with Jared Dillian. Jared walked out to the Bee Gees “Staying Alive.” Why?
During the recent stock market correction, Jared quipped to me that investors need to be focused on “staying alive” because we are now entering a regime change in the markets.
To highlight just how important avoiding losses are, Jared read the audience a letter he received in response to a Bloomberg article he penned. In the letter, the individual investor said they had lost over $400,000 in just a few hours during the recent correction.
Always the contrarian, Jared left attendees with, “You want to do the trade that gets you laughed off CNBC.”

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SIC (Strategic Investment Conference) Evening Session

Jeffrey Gundlach
First up was DoubleLine Capital CEO, Jeffrey Gundlach who said that financial markets and the economy are facing a “moment of truth.”
Gundlach delved into several reasons why he believes the secular bond bull market is likely over. He points to the explosion in the US government budget deficit, the Fed’s balance sheet roll-off, and rising inflation as the reasons why.
Gundlach believes that rising bond yields, coupled with sky-high valuations, are a toxic mix for US equities.
But the “Bond King” wasn’t bearish on all equities, saying that certain sectors in emerging markets look attractive.
Grant Williams
Next up was crowd favorite Grant Williams, founder of Real Vision TV and author of Things That Make You Go Hmmm…, who dissected monetary policy and its long-term implications.
While quantitative easing (QE) has suppressed volatility and was very good for financial assets like stock and bonds, that trend is about to reverse.
With the Fed expected to hike interest rates four times this year, plus reduction of their $4.4 trillion balance sheet, rates are rising—fast! In less than 12 months, short-year Treasury yields have more than doubled.
Williams then discussed how investors should be allocating capital in this environment and offered some specific trade ideas for the audience.
Cryptocurrency Panel
The cryptocurrency panel followed with founder and CIO of Passport Capital, John Burbank, best-selling author and co-founder of the Discovery Institute, George Gilder, CEO and CIO of US Global Investors, Frank Holmes, and co-founder and CEO of Genesis Mining, Marco Streng, moderated by our own Jared Dillian.
The panel delved into several aspects of cryptocurrencies and blockchain technology—including the “business” side of mining Bitcoin, and how institutional investors are thinking about trading it.
Holmes, who recently made a multi-million-dollar investment in the world’s first publicly listed blockchain infrastructure company, went on to discuss how the transition to “immediate” and “digital” assets by Millennial and younger generations is changing the paradigm for markets.
George Gilder and John Mauldin
John Mauldin started with one of his favorite George Gilder observations, “The source of all wealth is information.” Gilder added that capitalism is not a scheme of rewards, it’s an information system. That takes us to the axiom: Wealth is knowledge.
Gilder gave us the sweeping example that the difference between our age and the stone age is entirely the gathering of information.
Mauldin asked about equilibrium. Gilder equates it to information theory. Expect surprises from outside the database—that is the genesis of the surprise. Information is disorder—the surprise—it is not equilibrium.
Mauldin added that economists assume equilibrium as part of their models. When in reality, the markets exist in a state of chaos.
George Gilder is an immensely deep thinker, and capsulating his thoughts on these pages is immensely difficult. You really have to be part of the discussion to get its full impact.
ETF Panel: Steven Bregman, Stephen Cucchiaro, Jan van Eck, Jared Dillian moderator.
Asked if explosive asset growth can continue, van Eck, president and CEO of Van Eck Associates, thinks it can, given the pressure to keep costs low. ETFs have invaded the financial system and are here to stay. Cucchiaro, president and CIO of 3EDGE Asset Management, added that ETFs and passive strategies grew together, but won’t necessarily remain so.
The ETF panel discussed risks embedded in leveraged ETFs and volatility ETFs/ETNs. All agreed they are complex and widely misunderstood. Van Eck pointed out that it’s dangerous to expect regulators to stop such products. Brokers have a suitability requirement and it is their role to prevent investors from taking excessive risk.