Dear Reader,

We are halfway through Day 1 of the Strategic Investment Conference. I’m writing to give you a quick update on the highlights so far.

David Rosenberg

For the 10th year running, Gluskin Sheff Chief Economist and Strategist David Rosenberg was the leadoff hitter at the SIC—and he had a warning for investors.

Rosenberg believes that the US is in the very late stages of the business cycle and that investors should now be de-risking their portfolios. He suggested that investors should be focusing on companies with high earnings visibility and low debt ratios.

On the macroeconomic level, Rosenberg said that long-term deflationary trends such as adverse demographics and high debt levels are stronger than ever. Given these trends, he thinks that the current uptick in inflation is little more than a transitory spurt and will soon fade away.

Finally, Rosenberg said that Gluskin Sheff, which has $9 billion in assets under management, recently moved to 25% cash across all their portfolios.

Louis Gave

Up next was Louis Gave, CEO of Hong-Kong based Gavekal. Gave has consistently been one of the highest-rated speakers at the SIC, and he didn’t disappoint with some unique insights into what is happening in China.

Gave pointed out that China is currently going through a huge economic paradigm shift, one which has profound investment implications.

For the past few decades, the incentive in China has been to grow as quickly as possible. But going forward, China’s incentives will be based around what President Xi Jinping has called a “Beautiful China.”

This means a more sustainable growth model with less use of materials such as concrete and coal.

Gave believes that this shift plays into China’s imperial ambitions—and that’s a trend he is investing around. He went on to suggest that investors should be looking at Chinese financial and consumer stocks, plus countries that will benefit from the One Belt, One Road infrastructure build-out.

Global Investing Panel

The first panel of the SIC 2018 was a discussion around global financial trends with David Rosenberg, Grant Williams, and Louis Gave.

The first topic of discussion was the recent tariffs enacted by President Trump. Gave said he has opened a “Pandora’s box” for international relations and the tariffs could have a serious impact on the financial market.

The panel also discussed gold, with some split views on the yellow metal.

Gave said he doesn’t like gold as an investment but that he looks to it as a signal that emerging markets are growing. On the other side, Grant Williams suggested that with inflation picking up, now is an excellent time to own gold.

On the issue of international relations, when asked if they were worried about North Korea, all three panelists said no.

However, Gave and Rosenberg agreed that growing tensions between Saudi Arabia and Iran are reason for concern. Gave commented that if the tensions turn into a greater issue, oil prices could jump.

This evening I’ll send you another note, recapping the second half of the day.

By the way, you can have access to everything happening at the SIC with your Virtual Pass. Video recordings of each presentation and panel will be uploaded to the Virtual Pass website within 24 hours of the live event—so you can watch them whenever you want.

Even better, if you have some free time this week you can watch the rest of the conference live, with our new livestream service. That will be followed up by audio recordings (so you can listen to each speech while in your car) and full transcripts of every presentation and panel.

Check it out here.

Sincerely,

Ed D'Agostino
Publisher