Tuesday 17 April 2018 by Jonathan Sheridan Opinion

Jon Sheridan goes to the US Strategic Investment Conference

Last month, I was fortunate enough to attend the annual Mauldin Economics Strategic Investment Conference. There were many brilliant minds and many fantastic insights. Put your reading glasses on and get settled as I share my top takeaways and link to Steve Blumenthal’s excellent coverage of the event

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A couple of weeks ago, I spent three and a half fascinating days in San Diego at the annual Mauldin Economics Strategic Investment Conference.  The audience was a mix of institutional investors, advisors and private investors, much like our own client base.  The topics were wide and varied, but clustered around a core of general investing conditions peppered with deep insights into specialist fields.

Based on the speaker list, I was most looking forward to hearing Jeffrey Gundlach, who runs about $110bn at his firm DoubleLine Capital, and is known as “The New Bond King”.

However, all of the speakers were so engaging that I ended up being deeply impressed by the depth of knowledge.  In particular Neil Howe, who is a demographic economist (and actually coined the term “Millennials”) was a standout, just with the sheer weight of expertise he commanded, especially when replying to unprepared questions.

My key takeaways:

  1. We are likely to have a Fed-induced recession sometime in 2019. Currently, the leading indicators are far away from that but there is plenty of time for them to turn down. In the majority of the last 21 recessions, the Fed has overshot tightening (increasing cash rate) and caused the very thing they sought to avoid.
  2. In long term bull markets, you may well have short term cyclical corrections.This is looking likely in inflation and medium to long term US Treasury rates.
  3. The US budget deficit is going to be huge – truly huge.This may have unprecedented effects on the US dollar.
  4. The US dollar is the key to so many global markets and it is even more important to the US Treasury market rates (which act as the basis for so many other assets). The dollar typically moves in multi-year “super-cycles”, and we may be entering a weakening phase due to the budgetary deficits. (My view is that in the recession that is coming, we will still see dollar strength as a safe haven flow).
  5. The wind back of the unprecedented central bank monetary experiments will have unforeseen consequences, which introduce risk into investing that cannot be easily predicted.

I had initially planned to write a detailed summary of each speaker, complete with a pick of their best charts.  However, by the end of the first day, I had more than five pages of notes and had seen over 300 slides!!  The sheer volume of information was astounding, and it took me about two weeks when I returned just to start making some sense of it.

In the meantime of course, someone stole my thunder…

Steve Blumenthal, who actually presented some data-based projections about likely future returns on Day 2, has written his wraps of the sessions.  As a presenter, he had much better access to behind the scenes gossip, and as he runs his own investment firm, he also had access to much greater resources to summarise and present his reflections too!!

I have read his summaries and they are very good and full of more detail than I was proposing to put in. So I thought it would be better for everyone to simply link to his articles and then close with any conclusions I took from the relevant sessions that he did not draw. 

So, here we go:

SIC Introduction

Part 1 - Skunk at the Picnic

Part 2 - Economic theory matters, especially now

Part 3 - Inflation is inflationary

There is so much information in here that no doubt it will take a while to absorb, and I appreciate it is not with the accompanying speeches.

If you would like to ask any specific questions please email them to me at jonathan.sheridan@fiig.com.au, and I will do my best to go back to my notes and see if I can add some colour. I will also summarise the best questions and answers and share them so that everyone can benefit from other inquiring minds!

Next week we will complete the wrap up and I will put together my top five charts from the whole conference.

Happy reading!!


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