Last week I attended the Strategic Investment Conference hosted by Mauldin Economics and Altegris. Each year they feature some of the most highly sought-after names in the world of economics and finance to give their outlook on the investment landscape. For those that weren’t able to attend, make sure you put it on your calendar for next year. It is hard to find a better line-up of speakers all in one place (aside from our own show of course!).
Here’s what many of the first day’s speakers had to say (click here to see the full list of speakers and their bios).
David Rosenberg
This economic cycle has been the weakest on record and has led to a very bearish narrative among investors. Believes we will have a lower than average growth environment going forward but that it will last much longer than anticipated. May even rival the longest economic expansion we’ve ever seen previously of slightly less than 11 years. With banks now highly regulated, this will lead to lower amplitudes of growth but a long drawn out cycle with less booms and busts. Says there are lots of things to worry about but the Fed is not one of them. No economic cycle ended after the first, second, or third rate hike. It’s the last rate hike that matters and we are still pretty far from getting to that point. He also doesn’t buy that we are in a profit recession since it is limited to energy and says that dollar and oil-induced profit recessions don’t trigger bear markets. On stock market valuations, says must be looked at relative to interest rates. In doing so, stock market relatively inexpensive and says equities will be best returning asset class. Central banks will ultimately get what they want, which is more inflation.
David Rosenberg described his long-term outlook on our show last year, which you can listen to by clicking here. We hope to speak with him again in the next couple months.
Peter Briger
Introduced as one of the brightest men in the credit space. Manages around 80 billion in assets. Fortress is a credit hedge fund operating since 2002 in distressed assets. Peter describes himself as a financial services garbage collector and sees a higher default environment over next 3 to 4 years on the corporate side. Doesn’t think the financial system will blow up anytime soon since banks have become highly over-regulated (echoing Rosenberg), which is constraining large amounts of risk taking. Says when interest rates are this low it’s much easier to service your debt, but that does distort the credit picture to look more positive than it really is.
Dr. Lacy Hunt
Explains the six characteristics of extremely over-indebted economies: 1) transitory spurts of economic activity cannot be sustained; 2) downturns can take place without typical cyclical pressures such as rising interest rates, inflation and exhaustion of pent up demand; 3) productivity deteriorates but is not inflationary; 4) monetary policy is ineffectual if not negative; 5) inflation falls dramatically, increasing risk of deflation; and 6) treasury bond yields fall to extremely low levels. Given the above and the high indebtedness of most developed economies, Lacy believes growth will be very slow for many years to come and that the long-term trend of interest rates is still downward. On the wealth effect, he says this has been one of the most fraudulent ideas in economics—a theoretical possibility with little empirical justification.
Dr. Lacy Hunt’s last interview with Financial Sense Newshour can be listened to by clicking here and we just recently invited him on to discuss his presentation for our audience.
Paul McCulley
Paul McCulley coined the phrase “Minsky moment” in 1998 while at PIMCO to describe the effect of the ’98 Russian financial crisis and was introduced as being the most consistently accurate of all the speakers. Says US economy will see an exceedingly long expansion and that monetary policy is not the best tool to combat a liquidity trap on the back of a Minsky moment. The right prescription for restoring aggregate demand in the economy was/is fiscal policy that is purposeful, sustained, and large, being financed with money creation. The recovery has been feeble because we didn’t do this. Instead, most efforts have been undertaken by monetary policy to reflate asset prices and boost the price of collateral, which they’ve done quite successfully. From a societal standpoint, there is collateral damage from this but the good news is that we are getting out of a liquidity trap. His biggest forecast is that over the next 5-10 years we will actually see an increase in public investment.
Louis-Vincent Gave
Very bullish on China. November IMF meeting extremely important and China will do all that it can keep its currency stable, bond market stable, and equities markets rising. Says Chinese markets are rising and will likely continue to do so because massive underexposure to China is now reversing. If IMF includes Chinese renminbi to basket of global reserve currencies, you will see a massive reallocation of reserves among global central banks into China. Says, “In the 21st Century, all roads lead to Beijing.”
Louis-Vincent Gave’s last interview with Financial Sense Newshour can be listened to by clicking here and he is scheduled to be on again later this month.
In addition to the above, we also heard from Kyle Bass, Jim Bianco, Ian Bremmer, Peter Diamandis (who blew the audience away!), George Friedman, Michael Pettis, Jeffrey Gundlach, and more. I will try to provide a few more excerpts on some of the views expressed next week.
Although I highly encourage our readers to attend next year’s Strategic Investment Conference (it really was quite a blast!), remember that you can also hear many of these same speakers and more on our premium podcast, which airs 4 days a week. Listen at home, while driving, or anytime you want. Simply click here for more information.
