Hello, Ed D’Agostino here, writing to share with you a few highlights from the Strategic Investment Conference.

Our conference began Monday evening, when I had the pleasure to interview our first speaker, Liz Ann Sonders.   

Liz Ann is the senior vice president and chief investment strategist at Charles Schwab. She’s also one of the most well-spoken, knowledgeable, and insightful economists I’ve met. And she’s a staunch advocate for the individual investor. 

She said that a recession is getting closer and that the escalating trade war between the US and China is having a big impact on the economy, causing a “dampening of animal spirits” in the corporate world. This suppresses corporate investment.

She shares my concern regarding the high level of debt in the US and is fearful there is no one in Washington willing to tackle the issue. 

Not only are politicians not dealing with the debt problem, she noted that many don’t even know the difference between the deficit and the debt! 

US debt levels are concerning. When combined, all segments of US debt—federal, state, local, corporate, and household—are at 350% of GDP.

Liz Ann and I spoke about the leading economic indicators she monitors and what they are telling her, investor sentiment, and the fallacies of modern monetary theory (MMT). She also shared recommendations for asset allocation.

Tuesday morning began with David Rosenberg, chief economist at Gluskin Sheff.

David, who is celebrating his 10^th anniversary as an SIC speaker, named his speech, “The Year of the Pig—Lipstick Won’t Help.” I guess that tells you all you need to know about his outlook.

Despite his bearish outlook and meticulous data to prove his points, he kept us entertained with a few laugh lines. Among others:

• “There’s not a snowball’s chance in hell that we went through eight years of free money and didn’t create a bubble.”
• “Looks like the front end of the yield curve had a coronary.”
• On the majority of pundits who don’t expect the next recession to arrive before the second half of 2020 (27%) or even 2021 (32%): “When all the experts and forecasts agree, something else is going to happen.”

He said we have another debt bubble, but it’s not the same as the last time. It’s not about the banks or household debt, it’s about corporate debt.

“We have the most overextended corporate balance sheet in this country. Half of investment-grade bonds are rated BBB. We’ve never had a junkier corporate bond market.”

On the US economy, Rosie says we’re 92% of the way into this cycle. And the Fed will have very little leeway in the next downturn: “In the last crisis, the Fed cut interest rates by 460 basis points, so we got a problem here. We’re going into the next recession with a debt-to-GDP ratio of 5%—that has never happened before.”

He shared his highest-conviction investment idea with attendees (hint—it wasn’t equities).   

We also heard from Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, who debunked the notion that the business cycle is dead. Far from it. 

My friend Peter Boockvar warned that the failure of Uber’s IPO has massive implications for the tech sector and the valuation of private tech companies. 

SIC veteran Lacy Hunt of Hoisington Investment Management Company opened attendees’ eyes as to why interest rates are so low, the end of the road for the Fed, and how increasing levels of government debt will have less and less positive impact on the economy.

I can’t possibly explain in an email everything that’s been discussed on the SIC stage so far, but one attendee said to me, “I’ve already learned more about the economy and investing in less than a day than I have all year.” And we’re just getting started.

If you want to get all the videos, audio, and transcripts of this amazing conference, may I suggest you order a Virtual Pass (still heavily discounted) today?

You’ll be able to watch the remaining presentations in real time with our live stream feed, and soon after the show ends, we’ll load up videos, audio files, presentation slides, and transcripts of each presentation. They’ll be yours to keep, replay, and refer back to for months to come.

I’ll be back with more later today, including notes from our China panel, Marin Katusa’s thoughts on energy, and the best places to invest in real estate. 

Until then,

Ed D'Agostino
Publisher

P.S. Here’s a link to order your Virtual Pass today.