Admiral James Bond Stockdale was the highest-ranking United States military officer in the “Hanoi Hilton” POW camp during the Vietnam War. His jet was shot down in 1965, and after parachuting into a small village, he was taken as a prisoner of war.

I attended an advisor summit in Chicago this past week. On stage was a good friend from S&P Dow Jones Indices. He referenced an article S&P published last fall about poor quality in the popular “leveraged loan” segment of the corporate bond market. Dull, I know, but hang in with me for a short few paragraphs, I promise this week’s missive gets better.

Asset price inflation (check). Financed by debt growth (check). We’ve spent the last three weeks reviewing Ray Dalio’s A Template for Understanding Big Debt Crises. I hope you found the insights as helpful as I did.

Let me begin by saying our equity market trend model signals remain moderately bullish and our bond market trend model signals remain bearish. With that caveat, I do see us speeding down the road with limited visibility to the problem that exists just around the next turn.

One of my big risk concerns is the unknown amount of money in the risk parity trade. Essentially, volatility drives the weighting decisions. If equity market vol is low, then equities get a weighting. If equity market vol picks up, then, by rule, the risk parity strategies rebalance their exposures… in this case, reduce equity market exposure. They are mathematically-driven strategies and all essentially use very similar volatility measurements.

Conferences can be great fun and the final evening usually ends with a gathering at the hotel bar. This year’s Inside ETFs Conference ended with a bang for me. Sitting outside on a couch, 72 degrees, clear sky and comfortably positioned between the hotel bar, pool and ocean, daughter, Brianna, snuck up on me and grabbed the wine from my hand.

Whatever business you might be in, you’ll probably agree with me that a critical key to your success is sales. Of course, you need great product, great team members and grit. But with great product and no sales… No success.

Last week I shared a personal story with you that, frankly, I very much enjoyed writing. It is a story about two good friends and years of hard work that has resulted in something that I believe may someday win a Nobel Prize. For my friend’s sake, I sure hope so. 

When Mark Finn speaks, you listen. Commanding, sharp, brilliant. He’s a maverick in the investment business. He’s also a mentor, incredibly humble and frankly one of the nicest human beings you could meet. He continued, “I need your help on something. I’ve got something big and I’m not sure how it should best be packaged.

All buying and selling meets at a point of price. More buyers than sellers, prices move up. More sellers than buyers, prices decline. The dynamics of supply and demand we learned in Econ 101. True for all things. Current conditions? Liquidity, leverage, more buyers than sellers. The bull market advances on.

When I was young, my mother bought me a book written by Grantland Rice. Rice was one of the all-time great sports writers and I was crazy about sports. It was the type of book you could pick up and read a quick story, put down and pick up again… a new story. She later framed the above quote and hung it on my bedroom wall.

I met Philippa Dunne, co-editor of The Liscio Report, at the Camp Kotok fishing trip last August. She dials into state tax receipts and has many deep contacts. What I like is how she tracks the data on the lookout for recession risks. I found the most recent report excellent.

Happy Thanksgiving to you and your wonderful family. Today’s post is holiday short because by the time it hits your in box I’ll hopefully be home with IPA in hand celebrating a hard-fought Black Friday golf tournament victory. Daughter, Brianna; son, Matthew and good friend, Stevie Oh, rounds out our foursome. If you are familiar with golf, it’s a scramble format where each player tees off.

My daughter, Brianna, and I were recently listening to a Charlie Rose interview on Bloomberg Radio. I love the way he asks direct questions. The interview featured Jeremiah Tower, a little-known chef who pioneered a restaurant revolution in the 1970s that gave rise to the culinary style known as “California Cuisine.”

This week’s On My Radar is an investment outlook piece. While current trend evidence remains bullish, you’ll see valuation data below that tells us the coming 7-, 10- and 12-year equity market returns are not so good. Your and my clients are expecting 10% forward returns; however, due to extremely high valuations they are likely get 0% to 2%. Trouble spots? There are many.

President Donald J. Trump nominated Jerome Powell to be chairman of the Federal Reserve Board. If confirmed, Governor Powell will replace Janet Yellen in February. Powell is smart, well-liked and respected by Republicans and Democrats alike.

“Don’t Fight the Tape or the Fed!” It is one of investing’s “golden” rules and is perhaps never more true than it is today. The Fed, ECB and BoJ own one-third of the global bond market. One-third! Pause, put finger to chin and wrap your mind around that one.

It remains a decidedly risk-on environment. Interest rates are higher, the dollar is higher and the stock market is higher. The positives for higher equity prices are the liquidity coming from global central bankers, the potential for the repatriation of offshore corporate cash...

Long-time readers know I’m an avid Ned Davis Research fan. I’ve been a loyal client since the 1990s. Ned Davis built a fact-based, technology-driven research organization. Some years ago, Ned wrote a book titled, Being Right or Making Money and I believe that title sums up NDR’s investment research culture.

Yet this is not the mood in which bull markets typically end. Central banks around the world have purchased approximately $15 trillion of financial assets since the great crisis. Outside of the U.S., the BOJ and ECB are still buying.

I’d like to take you to two places today. One is life and the pursuit of dreams. “I was born with a silver spoon in my mouth,” legendary Coach Lou Holtz begins. “You have to have something to hope for and something to dream about.” It is a six-minute happy pill. I watched it with my kids and they loved it. You’ll love it too, I promise.

Bottom line: Those foreign central bank purchases translate to a vast sea of liquidity supporting stocks. Hartnett calls it the “supernova of liquidity” and “the flow that conquers all.” My motivation and title for today’s piece.

Last week, investors were lamenting the lack of inflation. This week, they’re fixated on its rise. On Thursday, data showed consumer prices climbed 0.4% in August from a month earlier and 1.9% from a year earlier, a sign that inflation is once again on the upswing after months of soft readings.

I’m writing to you from Chicago where I am attending the Morningstar ETF Conference. Vanguard’s global chief economist, Joe Davis, kicked off the event Wednesday evening advising investors to expect lower returns and rocky markets for the next two to three years.

The car is loaded with clean clothes and dog food. I’m heading out mid-morning to help load a support truck headed for Houston. Thankfully, my kid’s school has organized the donation drive. It has been heartwarming to watch the countless random acts of kindness in the wake of the current challenges. Much more will be needed in the days ahead.

This week the Federal Reserve Bank of Kansas City is hosting its annual Economic Policy Symposium in Jackson Hole, Wyoming and a number of Fed officials have commented on “inflation.” Why is targeting inflation so important? Because rising inflationary pressures will cause the Federal Reserve to raise interest rates and such periods tend to prove challenging for the stock and bond markets.

My thinking is impatient and mostly critical as I sift through research each week. I’m sure my “get to the point” personality frustrates my co-workers and I’m sure at times my beautiful wife. It’s a personality flaw, I know; but hey, I’m just not sure any amount of therapy can help.

Atop the “what matters most” list is debt. Specifically, global sovereign debt: U.S., Europe, Japan and China. We are at the end of a long-term debt cycle. Borrow, spend and grow is good for the economy. Credit is money. It is a multiplier that enables you to spend more than you have.

Howard Marks’ “Memos” are a must-read. Years ago, I was invested in Marks’ hedge fund. We exited our fund of funds business in 2007, though it would have served me well to have stayed in his fund. Like most great investment managers, he keeps risk front of mind.

In 1965, Gordon Moore, co-founder of Intel, predicted that the number of transistors on integrated circuits would double every two years. This is the basis of “Moore’s law,” and it’s why we currently have pocket-sized devices that are more powerful than 1980s supercomputers that took up entire rooms.

At a conference in Chicago this week, following up on last week’s letter, Keep Dancing but with a Sharp Eye on the Tea Leaves, an advisor client asked me what my favorite “tea leaf” might be. When one of the greatest investors of our time, Ray Dalio, tells us to keep an eye on the exit door we should take note. But how? And when?

Ray Dalio, chairman of Bridgewater Associates, wrote last week that the global economy is heading toward a new stage where markets won’t get the same level of support from the global monetary policy makers. “The directions of policy are reversing,” he noted.

To a large extent, the U.S. financial crisis was actually made by the Fed… It was ultra-low rates that fueled the search for higher yield that enabled creatively engineered mortgage products (CDOs, CDOs of CDOs, adjustable rate and no-doc mortgages and AAA-rated garbage).

I listened to Bob Farrell several times a week. Bob was the chief stock market analyst at Merrill Lynch. Do you remember those old “squawk boxes?” On my desk sat a small speaker box. It was the firm’s way of communicating to the thousands of brokers.

This week, I’d like to draw to a conclusion my series of notes from Mauldin’s 2017 Strategic Investment Conference. The topics ranged from geopolitical to global macro to specific investment ideas. One of my all-time favorite economists is David Rosenberg. Today I offer my high-level bullet point notes from his presentation.

As I listened to a number of the presentations at last month’s Strategic Investment Conference, silver and gold kept coming up. As did the industrial metal, copper. Make new friends but keep the old… today’s On My Radar continues the sharing of my high level conference notes with you. I walked away with some actionable ideas. Gold and silver were high on the list. The new friend is copper.

Today, you’ll find my high level notes from Mark Yusko’s presentation at the Mauldin Economics 2017 Strategic Investment Conference.

The initial conditions or the starting point conditions, mean to me that a small degree of monetary restraint has a very quick and strong impact on economic activity.

Over the next two to three weeks, I’m going to share with you my high level notes of the 2017 Strategic Investment 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.

This is one of the more important pieces I’m sharing with you. It’s a candid look at where we are in the economic cycle and what that likely means for the global markets.

When Ronald Reagan entered office in 1981, forward return expectations were a high 18.91% (see chart below: green line, left-hand side). Equally important was that risk of loss was a low -4.29% (red line, left-hand side). The prior bear market reached its end, yet few knew it. Scream as one might, clients weren’t buying.

I presented at a recent advisor conference alongside a famous economist. He told a story about an investment manager who told him, “You know… it is easy to pick out the investment amateur in any room.” He said, “He’s the person who says, ‘it’s different this time’.”

I enjoy reading 720 Global’s research blog. Quick, crisp and to the point. The message in their most recent piece is about human behavioral tendencies and ego. Ultimately, it’s about how to weave behavior and ego into our investment thinking.

“As I was waiting to be introduced, I got the latest headline from the North Korean government saying ‘a super preemptive strike will reduce the United States to ashes.’ So we have that to look forward to.” Ian Bremmer said as he began his presentation yesterday afternoon at the iShares Multi-Asset Summit in New York City."

Many years ago I created an economic investment dashboard of sorts to help me do my best to keep my head screwed on straight. If you subscribe to a handful of research services, you know what I mean. For every 10 bulls, there are 10 bears.

So should we sing or weep? Warren Buffett has a brilliant way of making the complicated simple. Let’s think about valuations like we think about the price of hamburgers and see if we are going to get more or less for our money. Today, I share with you my favorite valuation charts and story them in a way I hope your clients might better understand.

I’m going to try to tie two related themes together today. The first, and I have to admit I was surprised when I saw the research, is the incredible shrinking universe of stocks. Think corporate share buybacks, mergers and acquisitions and fewer companies going public. The second is the popularity of index investment products...

We touched down late last night in Salt Lake City. Susan, the boys, Brianna and me along with a dozen bags. It’s a long-standing family tradition and let’s just say everyone is really excited. A snowstorm just ended and my Snowbird app says 11” of fresh new snow.

One of the realities we will face is recession. The good news is that we are in the eighth year of a growth phase (the last recession was in 2009) and as you’ll see in my favorite indicator charts below, there are no current signs of recession.