On My Radar: The Great Reset – Notes from the 2017 Strategic Investment Conference (Part 1)

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“If you make an investment and feel good about it, you’ll lose money.
If you make an investment and you don’t feel good about it, you’ll make money.
Go shopping when things are on sale.”

– Mark Yusko, Morgan Creek Capital Management
2017 Strategic Investment Conference

“Forget Trump! What is the Fed’s reaction function?
The Fed is the elephant in the room and they are always the elephant in the room.”

– David Rosenberg, Gluskin Sheff
2017 Strategic Investment Conference

Mark Yusko is founder and CEO of Morgan Creek Capital Management and former chief investment officer of the University of North Carolina’s endowment. He set the stage for an outstanding last day at the 2017 Strategic Investment Conference in Orlando. I’ve quoted him often in past letters. He’s sharp, quick and a seasoned (smart) investor.

Over the next two to three weeks, I’m going to share with you my high level notes of the conference and some investment ideas (e.g., India looks great). There was bullish discussion on China and emerging markets, but the developed markets are a different story. The Fed and central bankers must remain on our radars.

Here are our three main takeaways from the SIC 2017:

  1. Economic Power Shifts from West to East: India and China’s share of world GDP has increased six-fold since 1970. Meanwhile, the G7 nations’ share of global trade has declined from 50% to 30%. This shift in economic power presents one of the greatest investment opportunities in history… and also carries many risks.
  2. Demographics are Destiny: Populations in the West are aging rapidly. In the US alone, 10,000 people turn 65 every day… and will do so for the next dozen years. An aging population means less economic activity, which has profound implications for your portfolio.
  3. The Coming Technological Revolution will Change the World: Over one-third of US jobs are expected to be automated over the next decade. But automation and advances in technology aren’t just affecting manufacturing workers—they will impact your future investment success.

There was consensus around what John Mauldin is calling “The Great Reset.” Those nagging bubbles: debt and entitlement promises. The demographic needs simply don’t square with the promises made. The math won’t work.

Ideas were shared as to possible solutions. And there are solutions. So it doesn’t mean we have to face another crisis; however, it’s my view that it will likely take a crisis to bring political leadership together. Just saying.

David Zervos, Ph.D. from Jefferies spoke of a debt jubilee, saying “People don’t understand that when you have big slugs of debt that sit over an economy, it suffocates the economy.” Mauldin believes we (the developed countries) will all hold hands and jump together. Essentially monetizing our debts (print buy and burn it). Essentially a debt jubilee with each country keeping tight bands around their currency. Referencing the enormous fire that destroyed the House of Parliament in 1834, Yusko said we will “burn the tally sticks.”

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