* What a spectacular and value-added experience

"Knowledge is good."
- Dr. Emil Faber,Animal House

It was a special pleasure to present at John Mauldin's breathtaking Strategic Investment Conference today.

SIC winds up this afternoon - it was by far the most value added conference I have attended or participated in.

I hope I didn't embarrass John and that the conference attendees enjoyed my talk.

I also hope John invites me back next year!

For flavor, here is how I started my hour long presentation: 

There is no more difficult task than following such pros as Rosie, Bremmer, Bianco, Howe, Yusko (who's performance I found especially captivating), Zelman, Friedman, my pal Coops and the many others at The Strategic Investment Conference over the last ten days.

This has been quite a lineup put on the field by our team manager, John Mauldin!

In the next hour or so you will learn that while I don't take myself that seriously ... I do take the subject of investing seriously.

Some of you know that my cousin is baseball Hall of Famer Sandy Koufax. In a baseball lineup the clean up hitter bats fourth, he is typically the most powerful hitter (think Niall Ferguson) but the guy that bats at the bottom of the order is the worst hitter. That is me, for in this conference I am surrounded by legends and world class hitters - so I sort of feel like catcher Jeff Torberg, a career 214 hitter, who batted last for the LA Dodgers and caught the perfect game in 1965 in which cousin Sandy retired 27 batters in a row. So, yup, I feel like Jeff Torberg today surrounded by John's extraordinary players - batting at the bottom of the order!

In listening to the conference's presentations it is clear and understandable that the dominant view is one of concern about our health, the US economy and our markets.

But I have to underscore how hard it is, not only during these uncertain days, but really every day to make predictions. The only certainty to me, is the lack of certainty.

I hope you enjoyed reading my summary of the SIC presentations throughout the day.

Maybe over the weekend I will write up my presentation and deliver the transcript in my Diary.

Tomorrow I will return to my regular broadcast - of trading and investing!

Thanks for reading my Diary today and enjoy the evening.

Be safe.

Catherine registered ARK Investment Management LLC ("ARK") as an investment adviser with the US Securities and Exchange Commission in January 2014. Focused solely on disruptive innovation, ARK aims to identify large-scale investment opportunities in the public markets resulting from technological innovations centered around genome sequencing, robotics, artificial intelligence, energy storage, and blockchain technology. Prior to ARK, Catherine spent 12 years at Alliance Bernstein as chief investment officer of Global Thematic Strategies where she managed over $5 billion.

- Wood: studied with Art Laffer at USC, inspired love of economics.
- Alliance Bernstein thematic fund manager.
- Learned from 2008 that Fed kindling didn't light inflation because velocity collapsed.
- No current worries about inflation.
- Productivity burst coming - companies had pulled back from capex.
- Consumer savings rate rising - so much despair - enormous pent-up demand.
- Crisis is accelerating innovation-deflationary impulses.
- Tug-of-war with central bank kindling.
- ARK analysts want to share research-radical transparency.
- Many companies now straddle sectors.
- Need to know if a technology is ready for prime time.
- Genetic sequencing was expensive, not investable. Now it's becoming so as costs fall.
- Wright's Law: costs fall as units rise - related to Moore's Law.
- Exponential growth technologies must cross sectors, like the internet.
- Nobody thought batteries could run cars.
- Thought process: GPUs needed for autonomous vehicles, led to NVDA investment.
- Innovation priced inefficiently.
- Still likes Tesla - $6800 target.
- Other auto makers pulling back from EVs, will add to Tesla market share.
- Traditional auto analysts can't understand Tesla.
- Adjust for "Elon time."
- Tesla has 14 billion miles of data - others can never catch up.
- Coronavirus making autonomous vehicles even more compelling.
- Expects Tesla ride-hailing service this year.
- Innovation gains traction in difficult times.
- Banks have been able to scale because of customer loyalty.
- No other industry has this but it's changing: Square, Venmo, etc.
- Fintechs launching viral networks - much lower costs than banks.
- Banks have huge customer acquisition cost - $350 up to $1500.
- Disruptive innovation will reduce inflation, flatten curve, cut bank profits.
- Bitcoin is insurance policy against wealth confiscation.
- Cars will become "stranded assets."
- ICE engines and infrastructure at risk - including fossil energy.
- Autonomous truck platooning will kill railroads - lower cost per mile.

Dr. Roizen is Cleveland Clinic's Chief Wellness Officer and Chief Medical Officer. He is a certified internist and anesthesiologist, he also served as founding chair of the Cleveland Clinic's Wellness Institute from 2007-2017, and sat on Food and Drug Administration advisory boards for 16 years.

Dr. Culver is director of the Interstitial Lung Disease Program in the Department of Pulmonary, Medicine at Cleveland Clinic's main campus. He holds joint appointments in the Department of Critical Care and Department of Pathobiology. His clinical interests include interstitial lung diseases, sarcoidosis, pulmonary alveolar proteinosis, and critical care.

Dr. Walensky is professor of medicine at Harvard Medical School and a practicing infectious disease physician at Massachusetts General Hospital and Brigham and Women's Hospital. Her research interests focus on model-based analyses of the cost-effectiveness of HIV testing, care, and prevention strategies to inform HIV/AIDS policy internationally and domestically.

Roizen

- FL, TX, and CA were more lax than NYC but had far fewer deaths.

- Hard to kill you if you're under 50.

- In OH, 78% of deaths are people over 70.

- Coronavirus is 2-3x as lethal as seasonal flu.

- Importance of lifestyle when protecting yourself: exercise, lower your blood pressure, etc.

- Big question is can we protect the elderly.

- If we lockdown again, the diseases of despair will take hold for those under 60, and potentially more devastating than the virus itself.

Culver

- Factors that make him optimistic

- Virus is easier to handle than expected.

- Hospital capacity ramping up.

- New social norms.

- Improvements in testing availability.

- Highly unlikely that a lot of people become reinfected.

- Antibody testing will be complementary. Just because you have antibodies doesn't mean you're immune to the virus. Won't be a vaccine in the next year. Covid-19 really affects minority populations, people who can't work from home, where density of living is high, along with co-morbidities.

Walensky

- A lot to learn in terms of the virus and its second order effects. 

- Need a high rate of herd immunity, 70% of the population with antibodies is the goal. We could open the economy quite safely if people practice social distancing and wear masks. We're in mitigation mode, not containment mode.

- People have higher immunity during the summer, as they naturally social distance since the weather is nice.

- Worried about the fall, when people start to huddle together again when the weather turns colder.

Mark gave my favorite presentation (so good that I have asked John Mauldin permission to show the video tomorrow).

Mark is the founder, CEO, and chief investment officer of Morgan Creek Capital Management. He is also the managing partner of Morgan Creek Digital Assets. Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets.

Prior to founding Morgan Creek, Yusko was CIO and founder of UNC Management Company (UNCMC), the endowment investment office for the University of North Carolina at Chapel Hill.

Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the endowment.

Mark spoke of life in a Post-Covid-19 world...

Top 10 Surprises (not predictions):

#1: Interest rates continue to fall, go negative globally, and defy the "rates must rise" crowd. Best trade: Chinese long bonds.
#2: Killer Ds: Demographics, Debt, and Deflation. Think they have been vanquished? Not. Central bank debt has portrayed the illusion of growth. Lower growth means lower earnings which means lower stock prices. We are in a recession, and likely a depression.
#3: Those in Passive Investments Will Get Slaughtered. The belief that value is dead is silly. Stocks are 90% overvalued, which means they need a 50% decline. Multiple expansion was responsible for all of 2019 stock gains. We are still 18 months from the economic bottom and bottom of the market.
#4: Make Volatility Great Again. 2019 was the longest streak of low volatility. Buy the VIX (VXX) to protect yourself.
#5: Wars Have No Winners. In a race to the bottom currency war, everyone loses. Best currency in the world is gold. We are at war, so swap paper for gold. The US dollar probably breaks down, as the Fed is actively trying to weaken the dollar.
#6: All's Shale That Ends Shale. Saudi's trying to put shale out of business. US oil production falls to ~9 million barrels per day. Like MLPs.
#7: Abesan Needs A Bigger Pump. Yen must devalue. Japan is the best money printer in the world, yet it suffers deflation and not inflation. Japan economic indicators are falling.
#8: Draghi Goes Out With A Bang. The ECB has tried everything, but things are still horrible. Short JP Morgan (JPM) , long Deutsche Bank (DB) is interesting trade.
#9: China Playing Go. China and EMs are where the growth is. Invest in China. Asian consumers will become half of global consumption. China is integrating with the world, and it will win the trade war. In China, you get twice the growth at half the price.
#10: Remember the Golden Rule. He who has the gold makes the rules. Real assets are better than paper assets over the long term. Paper assets will mean revert. Every currency throughout history has gone to zero. Gold will continue to surge. Gold in $CNY may be the trade of the century. Gold and silver miners are super cheap - juniors even cheaper. The new "FANG" are all gold stocks.
#11: Bonus. Bitcoin is the scarcest asset in the world. Buy Bitcoin. It is uncorrelated to all other assets. Put 5% into Bitcoin.

David is an economist, author, journalist, documentary-maker, and broadcaster. He is an adjunct professor of global economics at the School of Business Trinity College Dublin. David is ranked the 10th most influential economist in the world. He has devoted his entire professional life to the objective of making economics as widely available and easily understandable on as many platforms and to as many people as possible-and is having a laugh doing it. As a result, he co-founded the world's only economics and stand-up comedy festival Kilkenomics-described by the FT as "simply, the best economics conference in the world." He also founded Ireland's leading literary and ideas shindig, the Dalkey Book Festival. The WEF at Davos debased their currency profoundly by making him a Young Global Leader a few years back. As well as writing a weekly economics column in the Irish Times, he is active on social media and was named Ireland's "most influential Twitter user" in 2016. David uses new ways to explain our economic world through avenues such as Punk Economics and has a new venture with the FT, Punk FT, which deploys cartoons to make economics digestible for normal, non-nerdy, punters.

Niall is the Milbank Family Senior Fellow at the Hoover Institution, Stanford University, and a senior faculty fellow of the Belfer Center for Science and International Affairs at Harvard, where he served for 12 years as the Laurence A. Tisch Professor of History. He is also a visiting professor at Tsinghua University, Beijing. He is the author of 15 books, including The Pity of War, The House of Rothschild, Empire, Civilization, and Kissinger, 1923-1968: The Idealist, which won the Council on Foreign Relations Arthur Ross Prize. He is an award-making filmmaker too, having won an international Emmy for his PBS series, The Ascent of Money. His many other prizes include the Benjamin Franklin Prize for Public Service (2010), the Hayek Prize for Lifetime Achievement (2012), and the Ludwig Erhard Prize for Economic Journalism (2013).

- Niall Ferguson: There have been 60 or so pandemics throughout history, both big and small. When measured by the number of deaths, the coronavirus would not make the Top 10, would rank #36. Economically speaking, the impact of the coronavirus is up there with the 1929-1932 period of the Great Depression. Regarding unemployment, what took years to happen in 1929 only took two months to happen in 2020. The US response to the coronavirus has turned a medium pandemic into a catastrophe.

- David McWilliams: Where are we after the pandemic is over? What sounded radical before the pandemic now sounds reasonable. Expect more radical responses. Fiscal and monetary policy has merged, and it has been bad for the average person.

- Niall: Wars are inflationary, as they create huge demand-side stimulus. This problem does not arise with a pandemic as demand is suppressed. When the lockdown ends and the economy reopens, demand will be slow to return. We have a deflationary environment.

John Mauldin: Should the EU and the US run huge deficits?

- David: We are entering a period where the growth rate cannot sustain the debt. Big changes coming to deal with this.

- John: There's been talk of a debt jubilee. Is that even possible?

- Niall: We are not headed toward EU debt mutualization. At some point must we cancel debt? Look at Japan, its debt/GDP ratio is over 200%, but no debt cancellation. The US will turn Japanese, and manage the rate on the debt. The central banks are using excess reserves to buy assets, which is not inflationary. They are not printing money.

- David: Question is if the US can mimic Japan. US has very different societal structure than Japan, especially regarding cohesion. It's possible the US goes Japanese, but not likely.

- Niall: The problem in the US is political. The issue of inequality has polarized society in the US. Japan has social stability. If Democrats win fall election, business taxes will rise.

- David: In the US, there is a binary view of inequality: It's seen as either unfair, or the result of free markets. Inequality is not an economic issue, but an issue of cultural perceptions.

- Niall: There is a scenario developing that could impact the US election. The Democrats are seen as pro lockdowns and control. Democratic voters are reluctant for life to return to normal. Republican voters are eager for life to get back to normal. More people are drifting toward the "get back to work" opinion, and that could benefit the Republicans. The issue of inequality could take a back seat during the election.

- David: Fiscal policy in the US looks a lot like MMT-spend now, pay for it later.

John: Question from viewer: Is a world war coming?

- Niall: Cold War 2.0 with China is here. Does not see large scale kinetic war. China is too prepared in its region. Don't bet on conventional war, bet on cyber war.

- David: The issue of "trust" will seriously return. At the macro level, do business with those you trust.

- John: Question from viewer: Will the EU and the euro exist in five years? - Niall and David both responded "yes" without hesitation.

David has written four bestsellers and one of these, The Pope's Children, is the best-selling nonfiction book ever published in Ireland. His writing style is described by Bloomberg's head of economics Stephanie Flanders, as having "a great knack for bringing a complex economics story to life. He is also funny. In economics, that's a rare and persuasive combination."

Amy is the David M. Rubenstein senior fellow for energy and the environment, and director of the program on Energy Security and Climate Change at the Council on Foreign Relations. A leading expert on global energy policy, geopolitical risk, and energy and sustainability, she previously served as executive director for energy and sustainability at the University of California, Davis and senior advisor for energy and sustainability at Office of the Chief Investment Officer of the University of California, Regents. Amy was also formerly a global fellow at the Woodrow Wilson International Center for Scholars. Prior to joining the University of California, Davis, Jaffe served as founding director of the Energy Forum at Rice University's James A. Baker III Institute for Public Policy and its Wallace S. Wilson fellow for energy studies. She has taught energy policy, business, and sustainability courses at Rice University, University of California, Davis, and Yale University. She is widely published, including as co-author of Oil, Dollars, Debt and Crises: The Global Curse of Black Gold with Mahmoud El-Gamal and co-editor of Natural Gas and Geopolitics from 1970 to 2040. Amy is chair of the steering committee of the Women in Energy Initiative at Columbia University's Center for Global Energy Policy.

Mark is currently chief adviser for finance and investments at ADNOC, the national oil company. He originally joined in May 2018 as group chief financial officer from the Abu Dhabi Investment Council (ADIC). At ADIC (2008) he set up the de novo "Special Situations" unit and left with a documented 10-year track record. This group focuses on investing globally in idiosyncratic and one-off transactions across the capital structure with geographic and asset class flexibility.

Renè: Why has the oil market rebounded?

- Amy: Some companies have suspended part of their production. Also, some producing countries in the Middle East have announced voluntary cuts in production. I don't think we are out of the woods yet. It will depend on how the reopening goes.

- Mark: We expect demand to come back. The big question is, "Is it possible that we have seen the peak demand of oil"? I believe we have seen peak demand in 2019, and from now on, it will be a tougher market for oil companies.

- Amy: Even if we have peaked, models usually consider that flat post-peak oil demand would be at 1990 or 1995 levels.

Renè: What are the countries that will keep producing oil in a severe climate change scenario with much lower production?

- Mark: The survivors will be the ones with the lowest-cost barrels. I would not be surprised if Europe imposed a carbon tax. So, it is the low-cost, low-carbon producers that will survive.

- Amy: The question is whether governments use geopolitical power to protect their producers. Will countries bomb other countries oil fields?

Renè: Can you tell us about the US framework for oil and national security?

- Amy: In a time of crisis, nobody will decimate a huge job creating industry. Also, you cannot kill shale, you can only change ownership. Shale can also get more automation, which would significantly reduce costs. We cannot count shale out yet.

- Mark: Shale is not going away. The industry will just have to adapt, as it always has.

Felix is an old friend. He has worked in the financial markets and asset management for more than 40 years. He started his investment career as a trader for a large Swiss bank, and received training in research and portfolio management thereafter with several leading investment banks in New York, Zurich, and Paris. Felix joined Union Bank of Switzerland (UBS), Zurich, in 1977, and held several positions over the years, including managing global mutual funds, heading the institutional portfolio management unit, and at the same time acting as the global strategist for the UBS Group. After two years as a member of the executive board with a medium-sized financial organization, he founded his wholly owned Zulauf Asset Management AG in 1990, allowing him to independently practice his own individual investment philosophy. He sold the firm several years ago to his partners, although he retained the firm's name to continue operating the company as his own Family Office.

Grant began his career in the Japanese equity market in the mid-1980s and a three-year posting to Tokyo ensured he had a ringside seat for the madness that occurred in Japan as equities and real estate bubbles burst simultaneously and spectacularly at the end of 1989. He has also held senior positions at a number of investment banks and brokers, including Robert Fleming, UBS, Bank of America, and Credit Suisse in locations as diverse as London, New York, Hong Kong, Sydney, and Singapore. From humble beginnings as a daily note to a few friends and colleagues in 2009, Things That Make You Go Hmmm... has grown to become one of the most popular and widely read financial publications in the world. Grant is portfolio and strategy advisor to Vulpes Investment Management in Singapore, which aims to replicate the prudence and capital growth of the most successful investors and partnerships of the 19th century, while deploying the sophisticated technology and investment management practices of the 21st century. He is also one of the founders of Real Vision Television - an online, on-demand finance channel featuring in-depth interviews with the brightest minds in finance.

Felix Zulauf:

- This will be a longer-than-normal recession.

- There was no social welfare in the 1930s. This is a growing industry. In some countries, welfare is 40% of GDP.

- Our GDP will not be cut in half like it was in the 1930s. However, governments were running much deeper deficits before this recession than at the bottom of the Great Depression.

- This is more like Japan. They have nationalized the bond market, and there has been no growth there for 30 years.

- Another difference is demographics. We have negative population growth.

- The government can step up and try to stimulate demand to increase employment, but we will end up with a less efficient economy.

Grant: Do we have to worry about inflation?

- Felix: In the first one or two years, the big problem is deflation. Deflation is hard because it causes wage cuts and is much more difficult politically.

- Inflation is problematic because it undermines the currency and makes people lose faith in it. People tend to run away from the system, and it collapses - especially if central banks start to finance governments directly.

- In a place like Argentina this is a serious threat, but in developed countries, we are not there yet.

Grant: Argentina has been in this situation many times before, and they keep finding people to fund them. What does that tell you about the pension funds, and risk in general?

- Felix: Bond markets are paying negative yields. Pension funds are often required to hold bonds. This is causing pension funds to pay out more than they earn. This means we are redistributing wealth from future generations to current retirees. This also means we will probably get poorer in real terms over time.

- Felix: The EU has embraced efforts for centralization. This reduces efficiency. The euro has become a dogma, you cannot discuss it.

- The euro is like a fixed exchange rate. This prevents macroeconomic adjustments, which hurts the weaker economies. In turn, the stronger economies are required to fund these hurt countries, and that creates resentment.

- Countries face rising bank risk, which might cause investors to exit the weaker countries, forcing them to implement capital controls which would basically end the common currency zone.

- The trade tensions go beyond Trump. The Chinese model is not profit oriented, and it is incompatible with the Western economy.

Grant: Tells us a little bit about your asset allocations. 

Felix: I still see a 30% or so decline in markets. There is still a bull market in tech, healthcare, and consumer staples. Cyclical stocks will take a heavier hit. I'm more trading than investing now. I still hold bonds, but I'm not bullish about them. I have a lot of gold, but I disagree with gold bugs. I think the peak will be in May or June. I believe gold is a good way to move outside of the system in a time of mistrust.

Tom is an author and senior analyst at Gavekal Research, an independent research firm based in Hong Kong. A former journalist, he has reported from 20 countries on four continents. His most recent book, China's Asian Dream: Empire Building Along the New Silk Road (2017) has been translated into five Asian languages. His first book, China's Urban Billion: The Story Behind the Biggest Migration in Human History (2012), was translated into Chinese. Tom has given talks at the US State Department, UK Department for International Development, World Bank, CSIS, and Chatham House. He has been quoted by the Financial Times, Economist, New York Times, Washington Post, Wall Street Journal, Reuters and Bloomberg, and appeared on the BBC, CNN, and CNBC. Tom studied English literature at Oxford, Chinese history and politics at the School of Oriental and African Studies in London.


Where does China now stand with Belt and Road Initiative (BRI)?

Miller says it's worse:

- Trying to build leadership in EM countries, but virus failure has undermined the effort.

- Targeting of foreigners within China-Africans banned, etc. - racist mistreatment.

- China has not suspended or forgiven BRI debt like G20 countries have. Miller sees likelihood that China will forgive some debt but not much.

- Vietnam, India, and Mexico as top EM investments.

- Vietnam is big, but small next to China in terms of capacity issues, and labor costs.

- India potentially a new China due to its lower labor costs

- Enormous potential but has had hard time building manufacturing

- US-China relations could reduce investment opportunities. Other countries don't want to be forced to choose between the US or China. - China embracing Africa, US neglecting it.

- US has far more soft power than China - music, culture, etc.

- BRI has become China's infrastructure diplomacy.

- US too expensive for most manufacturing, so some may go from China to Mexico.

- People should distinguish Chinese people from their government's policies.

Ian is president and founder of GZERO Media. He hosts the weekly digital and broadcast show, GZERO World, where he explains the key global stories of the moment, sits down for an in-depth conversation with the newsmakers and thought leaders shaping our world, and takes your questions.

Biggest crisis of our lifetimes - global scale, geopolitical and economic recession.

- Worse than GFC in scope, impact, time frame, until we get vaccine.

- GFC had international cooperation, this time everyone blaming each other.

- Far worse than recession, so fair to call it depression.

- Maybe this is the crisis we need - force response to structural issues (inequality, etc).

- Imagine if this had been a cyberattack of similar scale - stock market would be acting differently. Tech would be suffering instead of Main Street, like now.

- Changes economic superpowers.

- China has been able to make huge top-down bets - now can do even more. China will also be top patron/lender of the poorest, most unstable economies (Africa). - US has by far the best innovation and entrepreneurs, which will continue. But many Americans are being disrupted, jobs lost.

- Europe has great rule-setters and bureaucrats - will probably lose it

- Ability to set rules will disappear since we depend on tech - US will take the strong, China take the weak, Europe neither. - Much more fragmentation, less linkage.

- Expanded industrial policy - pharma becoming strategic.

- More unilateral policy approaches.

- Doesn't expect new global order, but existing trends will speed up.

- Good chance of cold war with China - soon, within 6 months.

- Trump needs to blame someone. China is it.

- Moving toward more tariffs, etc.

- China will hit back hard - punish US companies, etc.

- Sub-Sahara Africa is winner from virus-average age is young, so will have few deaths.

- Brazil, Mexico, Turkey in big trouble.

- Countries that handled virus well: South Korea, Germany, Vietnam, Singapore, Iceland, Taiwan.

- This could be Goldilocks crisis - force needed institutional change.

- Geopolitics changes, institutions don't, even when they need to-UNSC, NATO.

- World less economically coupled, so asset prices will diverge more

Jared Dillian is the editor of The Daily Dirtnap, a daily market newsletter for investment professionals, continuously published since 2008.

• $8 trillion in stimulus coming. Thought no way the bond market could handle it, but both auctions went off smoothly. In the developed world, we have the only bonds with positive nominal rates. We are already doing MMT by proxy, but we might go full MMT soon if the Fed goes into Treasury auctions. Fed is buying everything but stocks. The amount of LQD and HYG purchased by the Fed is pretty small. This program will likely be with us for 5-10 years. It is an explicit put on credit. Where to invest? Doesn't get any better for gold, and energy will outperform. You want to get exposure to the "super upside," not that interested in the downside.
  
  • Preferreds: 6% yields in a 0% world
  
  • Not sure if negative rates will happen in light of Powell's forceful claims against the policy. Hasn't worked well in Europe and Japan (only destroyed the banking system). Fed will be forced to implement policy tools if we retest the lows, but will probably peg the yield curve before negative rates. For bank stocks, it's a profitability issue, not a solvency issue. Regional banks are going to have real problems, lots of consolidation. Big banks are an okay place to hang out and collect big dividends.

Karen is the managing director of Bain & Company's Macro Trends Group, out of the New York office. The Bain Macro Trends Group (MTG) is the capability group for developing Bain's insights about global macroeconomics, macro social trends, and geopolitics as they impact the results of Bain clients.

- When boomers hit 46-60, their savings and capital generation peaked. Now they are moving into retirement.

- Capital superabundance. Big expansion in financial capital that has inflated the price of assets (stocks, real estate, etc.). We have seen a steady march down in interest rates since Volcker but are near the end of that cycle.

- Pre-Covid trends. Global labor becomes scarce, boosting capital investment into automation. Globalization has been called into question this decade and will be put into retirement next decade. In advanced economies, growth of cities as a confluence of technology trends decrease the cost of distance. Decades-long downward march of interest rates reverses next decade.

- Coronavirus will accelerate shifts that were already underway (re: automation, deterioration of US-China relations). The crisis is creating a laboratory for testing the elimination of human labor.

- Affluent people are fleeing big cities causing a rise in spatial (distance) economics.

- Where could we land? Global trade will be based around basic commodities. This makes sense, as commodities are geographically concentrated. So changes in geopolitics is making it more difficult to trade.

- Rise of automation shifts the balance from variable costs towards fixed costs. Production will move closer to end markets, and labor costs lose their importance for defining competitiveness

- Customer targeting becomes more important as income polarization increases. Rising inequality increases the role of government in markets.

- Cities are a technology developed for the industrial revolution. We have different needs now, so the concept of cities is less important. Cities will become less dense, more livable, etc. This is especially true for white collar workers.

- Specific sectors stand to benefit. Robotics and automation are the infrastructure of the next decade. That's in addition to the digital backbone.

Neil is the managing director of demography at Hedgeye Risk Management, an independent financial research firm. As a historian and generational researcher, he co-authored the 1997 cult classic, The Fourth Turning, which listed a global pandemic as a possible trigger for a chain of events culminating in a major crisis.
John Mauldin: How did you come to the idea of generational turnings?
Neil: I discovered cycles, patterns, and rhythms in history by accident. As generations age, you see changes in their values. History shows there has always been differences between the generations, and there are regular cycles in these differences. The mood of a generation changes, or turns, from one to the next. Fourth turnings - what we are in now - are crisis eras. It started with the global financial crisis, and now we have Covid-19, another crisis. The 2020s will be a climactic decade.
John: Fourth turnings usually include wars. Can a pandemic substitute for a war?
Neil: I don't know, and we can't know that with any certainty. The problems we face could be resolved in some kind of kinetic way (war). Fourth turnings are not all doom and gloom. They spur great thinking about creative ways to solve problems. Societies often make the great long-term decisions during the darkest times. The leaders of the global trend toward populism and nationalism are most popular with the young. Europe is in the same turning cycle as the US because their prior generations experienced the same depression and WWII.
John: Do you get a larger, more intrusive government after a fourth turning?
Neil: Absolutely. Crises in a fourth turning always end with bigger government. But not necessarily big in terms of size, it can be seen as big in terms of the contracts the government makes - i.e., Social Security, Medicare, pensions, etc.
John: People are living longer. Does that play into the turning cycle?
Neil: A social generation is ~22 years, so longer life spans could extend the cycles. But that does not change the outlook for the 2020 decade.

Michael Pettis is a nonresident senior fellow in the Carnegie-Tsinghua Center for Global Policy. An expert on China's economy, Pettis is a professor of finance at Peking University's Guanghua School of Management, where he specializes in Chinese financial markets. From 2002 to 2004, he also taught at Tsinghua University's School of Economics and Management and, from 1992 to 2001, at Columbia University's Graduate School of Business. He is a member of the Institute of Latin American Studies Advisory Board at Columbia University as well as the Dean's Advisory Board at the School of Public and International Affairs. Pettis has worked on Wall Street in trading, capital markets, and corporate finance since 1987, when he joined the sovereign debt trading team at Manufacturers Hanover (now JPMorgan). Most recently, from 1996 to 2001, Pettis worked at Bear Stearns, where he was managing director principal heading the Latin American capital markets and the liability management groups. He has also worked as a partner in a merchant-banking boutique that specialized in securitizing Latin American assets and at Credit Suisse First Boston, where he headed the emerging markets trading team.

Mark Yusko: How is the coronavirus situation, do you feel safe in China right now?

Michael: Yes, the sense of dread here is gone. It is hard to say how many died, because it was hard to count those things at first, just like in the US. But the idea that there is a major conspiracy to hide thousands of cases is absurd. China is really wired, people share everything on WeChat, you can't hide something that massive. Countries are rolling back globalization, and the coronavirus is only acceleration a preexisting trend. With less international trade and capital flows, tensions will only rise. You will see economies slow down in many countries, and people will blame foreigners. The whole issue about companies going abroad would not be a problem if we had a functioning trade system (Michael summarizes income, exchange, and trade balance equilibrium). The problem is that China saves instead of consuming, and there is too much capital in the world. A transfer of income from US to China leads to a net reduction in demand.

Mark: Some people claim that the debt problem in China is not as serious as it seems, because about 40% of it is various government entities owing money to each other. Is there any validity to this?

Michael: In part, there is. The debt problem in China, however, is that GDP is overstated, because the government creates projects that are not profitable. Yet, because the assets belong to government agencies that can't go bankrupt, assets are never written off. So, GDP gets inflated over time.

Mark: What direction will China's power take, stronger or weaker?

Renè: Covid-19 will allow Xi to crack down on the reformers. China losing legitimacy, as they are partially responsible for the Covid-19 pandemic.

Mark: Does China think it has some responsibility for pandemic crisis?

Michael: China has mishandled the crisis, yes, but the US has done worse.

Mark: Renè, talk about your "falling of the gods" idea during rolling set of crises.

Renè: International relations changed after 1989. The US military industrial complex god failed in 2003 with false WMD claim to justify Iraq War. The tech gods failed with the fall of Lehman Brothers. As the gods fall, we begin to question all institutions. Mark: Talk about China's vision of becoming a superpower.

Michael: Skeptical of some of China's claims about its innovations. Some are just not economically viable.

Renè: China's technological innovations do not guarantee its prosperity.

Mark: China has a lead in AI and 5G. Is that a concern?

Renè: If these technologies are necessary resources in the 21st century, then it puts the West at a disadvantage. The US is still the leader in software and semi-conductors. To the earlier question about China as a superpower, the world is shifting into regional competing blocks, which raises the potential for conflicts.

Mark: Is global debt a problem?

Michael: The issue is where does the money go. Not an issue of good or bad debt, but what the debt is used for. If it is used to build infrastructure or other improvements, then it's not an issue.

Mark: Thoughts on China as world reserve currency?

Michael: In the era of fiat currency, a reserve currency is not a relevant idea. And China as a reserve currency is a silly idea.

Renè: I wonder if we are moving toward a fixed exchange rate regime. The US is now realizing that it needs a strong dollar, not a weak dollar. The strength of the dollar comes from the legitimacy of its rule of law and its institution, not from its military or economic strength.

Mark: China is not buying as much US Treasuries as it once was. There is now talk of cancelling China's US bond holdings? Your thoughts?

Michael: This is an idiotic idea. How would you implement that?

Marin Katusa is the author of TheNew York Times bestseller, The Colder War. Over the last two decades, Marin has become one of the largest financiers of publicly listed Canadian companies by raising over $2 billion in financings, debentures, and debt.

Ross Beaty is a geologist and resource company entrepreneur with over 46 years of experience in the international minerals and renewable energy industries. He is the founder and chairman of Pan American Silver Corp. (PAAS) , one of the world's leading silver producers, and Equinox Gold Corp. (EQX) , a major gold producer.

- Q: What's the most exciting segment of the industry?

- Ross: The best macro fundamentals for gold and silver in years.

- Marin: Agree. Gold is the place to be.

- Q: Gold is up 30% so far this year. Is gold in a bubble?

- Ross: It's not in a bubble now. We'll see more upside for years to come.

- Marin: We are still in the early days of a gold bull market.

- Q: What are the most exciting companies today?

- Marin: Production stage companies, depending on your risk tolerance.

- Q: Jurisdiction/political risk considerations are paramount. What's your take on that?

- Ross: Things change quickly in any given country, so we can't be too focused on that. The solution is to diversify among many jurisdictions. However, there are some places I won't go to, like Russia. The current global virus crisis could put pressure on governments to grab money from companies. But governments know they cannot get too greedy, or they kill companies.

- Q: At this point, do you like green energy?

- Ross: It's still a good sector for the long term with low risk. I'm long this sector.

- Q: In your personal portfolio, what's one company to own with potential?

- Ross: Can't name just one, but here's some to consider. Pan American Silver Corp., great company to own when silver goes higher; on the gold side, Equinox Gold Corp.  The big caps always get bought first, yet small caps offer the best upside. Best small cap performers, Lumina Gold Corp. (LMGDF) and Luminex Resources Corp. (LUMIF) , both are great opportunities, but come with higher risk.

- Q: What other companies-outside of your businesses-would you look at? -

Ross: I'm apprehensive to name just one, that's too risky. Here's a few: GT Gold Corp. (GTGTF); K92 Mining Inc. (KNTNF) ; Auryn Resources Inc. (AUMC) ; Calibre Mining Corp. (CXBMF) . The tide is coming in for gold, it should raise all gold boats.

- Q: Are royalty companies-gold and precious metals-still investable?

- Marin: They're too expensive, priced for perfection. Risk to reward isn't there.

- Ross: Royalty businesses have been hugely successful. But I've stayed away, too boring. It's still a great business model.

- Q: What's your take on nuclear power and uranium?

- Ross: The problem is that, versus alternative energy, it's too expensive. Costs have dropped dramatically for alternative energy.

- Q: Will the current pricing in the energy sector change?

- Ross: It's a supply-demand issue, and demand is down. The trend toward green energy/renewables is intact.

- Marin: There is no shortage of oil, contrary to all the peak oil claims. The Covid-19 crisis has put growth in the green energy sector on fast forward.

- Q: In a 3-5 year time window, what areas of commodities would you look at?

- Ross: If the outlook for global growth is bearish, that is bearish for the long-term outlook on industrial metals. I would look at battery metals, like lithium.

- Marin: Copper is the ultimate winner from the electric revolution.

- Q: Will silver catch up to gold?

- Ross: The industrial use component of silver has hindered its price. Its price depends on the pace of recovery in global growth.

- Q: If we get deflation, what will be the impact on gold?

- Marin: The US dollar and gold are the two places to be if we get deflation.

- Q: Is there an optimal monetary and/or fiscal policy?

- Woody: Fed is using a new tool where it sets the interest rate between banks. It is doing what it can to lower rates.

- Q: Controlling the yield curve: Should the Fed do it? Can it be done?

- Lacy: The Fed will do it and should do it. There are no negative consequences, and modest benefits. We are going into a deflationary period. The yield curve will be pressed into, and stuck at, the zero bound.

- Q: So far, is the Fed policy sufficient?

- James: If the goal is to slow the adjustment process in the pre- and post-virus world, then the policy is sufficient. The Fed will not sit still if US GDP shrinks 30% in Q2. The Fed will act to help transition into a new era.

- Q: Should the Fed use negative rates?

- Samuel: The Fed should not use negative rates. They have not been proven to achieve the desired outcome, which is to stimulate the economy.

- Q: Should the Fed focus on the US dollar exchange rate?

- Lacy: That would be a mistake and provoke a race to the bottom from other countries. On negative rates, my understanding is the Fed has no clear mandate to go negative. Negative rates will impale financial institutions. We are in conditions where monetary policy has asymmetric outcomes-good for some things, bad for others.

- Q: Is a debt jubilee a solution? Will the US keep its reserve currency status?

- Lacy: There cannot be a debt jubilee. The debt is owned by individuals and pension funds. The US will not lose its reserve currency status.

- Q: Will shifting demographics change some dynamics?

- Woody: There will be fewer young people to pay for the programs of the elderly.

- James: There are 300+ million people in the developed world that are 65 years old and older. That demographic is overwhelmingly on fixed income, looking for safety vs. return. So, interest rates will impact this group.

- Q: Best investment thesis?

- Samuel: Over next 3-5 years, watch for inflation and be prepared.

- James: Stay at home companies. If the economy stays slower for longer, it will be bad for things like autos and real estate. Most people are assuming a return to normal.

- Woody: Sell out of stocks, wait for markets to fall, then reenter. A future buying opportunity is coming.

- Lacy: Use duration management for Treasuries. This is still the right approach. 

Jim is president and macro strategist at Bianco Research, LLC. Since 1990, Jim's commentaries have offered a unique perspective on the global economy and financial markets. Unencumbered by the biases of traditional Wall Street research, Jim has built a decades-long reputation for objective, incisive commentary that challenges consensus thinking. In nearly 20 years at Bianco Research, Jim's wide-ranging commentaries have addressed monetary policy, the intersection of markets and politics, the role of government in the economy, fund flows, and positioning in financial markets.
- The game is relative, not absolute.
- 90% economic recovery is bad. Even a 4% recovery was bad in the last recession.
- China's experience suggests 90% recovery is the best case.
- GFC was the worst recession since WW2-showed 96% of previous output.
- That was enough to cause 10% unemployment and cut stock market in half.
- Current estimates show 2Q with a 8-9% contraction-twice as bad as 2008. - Unlike anything we have ever seen. - Anything less than a full recovery will leave lasting problems.
- Open table data-the best city is still down 61%, even after re-opening.
- Some recovery but not enough to let the industry survive.
- Location data, TSA checkpoints show movement recovering slowly.
- NYC subway running at 10% of a year ago.
- Surveys show ~75-85% expect old jobs back. That's still a disaster.
- Chinese factories are reopening under pressure but have no orders.
- This creates the appearance of normality to inflate numbers.
- Full recovery requires getting the virus behind us.
- Virus not slowing outside US-will cap economic activity.
- US [ex-NY/NJ] shows continuing case growth.
- 10-year Treasury yield has gone to sleep in the last month around 61 bps.
- Far less volatile than stocks, FX, or gold.
- Fed's QE bond purchases are controlling bond yields-$2.18T in two months.
- Everyone liquidated, Fed bought.
- Heavy issuance still coming-April deficit $738 billion.
- The Fed now has de facto yield curve control-similar to Japan.
- Fixed prices chase out private demand-not a market anymore.
- Social distancing killing CRE (elevators).
- Solution: Everyone learns how to social distance, get things reopened safely.

Woody is President of Strategic Economic Decisions.

- GDP falls for two reasons: lower sales quantity and consumption reductions.
- Results from an initial shock.
- This time, we will see a shock to the usually stable service sector.
- The economy will follow the behavior of the virus.
- We will see improvement, then more waves, and the economy will fall again.
- No V-shaped recovery.
- Risk aversion puts downward pressure on interest rates.
- QE won't work because other factors are controlling rates.
- Central bank is powerless unless coordinated with fiscal policy.

Dr. George Friedman is founder and chairman of Geopolitical Futures, a company dedicated to forecasting the course of the international system (www.geopoliticalfutures.com). He is an internationally recognized strategist on global affairs who has been called "the creator of the field of geopolitical forecasting." Friedman's most recent book, The Storm Before the Calm: America's Discord, the Coming Crisis of the 2020s, and the Triumph Beyond, focuses on the United States, predicting how the 2020s will bring dramatic upheaval and a reshaping of American government, foreign policy, economics, and culture. His other bestselling books include: The Next 100 Years: A Forecast for the 21st Century; Flashpoints: The Emerging Crisis in Europe; The Next Decade; America's Secret War; The Future of War, and The Intelligence Edge.

- The U.S. became prosperous the same way as China: exporting to Europe. In the lead up to the Great Depression, this relationship was disrupted... it didn't get fixed until WWII.
- People love/hate Trump the same way people loved/hated Nixon. Nixon supporters would harp on how the media was unfair to him in the 1960s/1970s.
- After the Civil War, the Federal Government decided they had power over the states. After WWII, the Federal Government decided it had power over the states and the economy.
- These days, "exotic" political candidates are regularly elected... but they don't know how to govern/run the system. As a result, we need institutional change... Covid is going to add jet fuel to this push.
- Universities have become strange places. The Federal Government will loan unlimited money to students, which drives up costs of universities. This makes universities a haven for people who think a certain way.
- The GI Bill built the professional middle class. Vets of Iraq and Afghanistan have not been as lucky. Universities need to be re-tooled, as they exclude socially unstable people (they're not integrated). There's social tension in how to pay for universities, how to get into universities... and now the white working class is being blocked from upward mobility. We're seeing this bleed into the political space. Notice how in the last election, Clinton only won a few states in middle America.
- Coovid takes all these institutional problems and accelerates them.
- China is built on exports, but how will they survive if they can't export (re: Covid)?
- The analogy for the Mueller investigation/Flynn situation is McCarthyism. No surprise the FBI was so hostile to Trump.

- Felix: We knew from the beginning the euro was a misconstruction.
- Louis: It's impossible to have a monetary union without a fiscal union.
- Anatole: There will be a trillion euro redistribution.
- George: Much of what is happening in Europe since 2008 has to do with immigration. Europe's future will not be decided on financial issues, it's political issues. There is no unifying European interest.
- Charles: Hard Brexit is now almost a certainty (re: Covid-19). The big winner in the entire crisis in the UK.
- Anatole: Euro and EU breaking up would be the best thing to happen for Britain. This is now a policy goal of UK leaders (re: Boris). If German nationalist parties gain over 10% of electorate, the euro will fall apart.
- Felix: Switzerland is a heathen associate member of the EU. We have deglobalization, declining world trade... these are antithetical to the reasons the EU was created. Expect "national capital controls" in Europe in the next few months, which will undermine trust in the euro. This will be followed by nationalization of EU banks. It will take five years to retake the economic growth we saw pre-Covid.

- John: Will government confiscate gold?
- Louis: They have no reason to. It's not a currency and they don't care about its price. Instead, they may try to end the use of cash, because you can hide it. They might say it is not hygienic for example.
- Charles: No, but there will be capital controls and forex controls. That comes hand-in-hand with inflation. The U.S. will start fighting for people's savings.
- John: Where does it make sense to hold cash.
- Charles: Gold is a reserve of value and might come back. Central banks are trying to destroy their currencies as a reserve of value, for whatever reason, except in Asia.
* Only three country currencies in Europe, and sterling will become the most important. The euro is not a country currency and will crash and burn.
- Anatole: Asia and the periphery of Europe. In a five-year period, I would agree on sterling. But the next 12 months will be trouble for sterling. The UK was hit hard by Covid-19 while dealing with Brexit.
- Louis: Inflation will come a lot sooner than people think. China was one of the biggest deflationary forces in the world, but they are being pushed away. The Tea Party held U.S. spending in check for six years during Obama. That is gone. Fiscal policy is going bananas. Energy prices have bottomed and can only go up.
- John: Charles, what about the yen?
- Charles: Japanese companies are "pissing cash." If you are looking for companies that can withstand long periods without revenue, it is the Japanese. If you are looking for a place to wait for the end of the world, it is Japan

Charles Gave is the founding partner of Gavekal Research. He has been researching tactical asset allocation for four decades. He cofounded a $10 billion money management company, Cusitor-Eaton Asset Management, where he was chief investment officer - which he sold to Alliance Capital.

Anatole Kaletsky is the chairman of Gavekal Research. He is also a columnist for Reuters and the International Herald Tribune, and chairman of the Institute for New Economic Thinking, a US$150 million foundation created to reform academic economics after the 2008 crisis. His recent book, Capitalism 4.0, on the post-crisis transformation of the global economy, was nominated for the 2011 Samuel Johnson Prize.

Before founding Gavekal, he worked for 30 years as an economic journalist and commentator at the Financial Times, The Economist, and the London Times.

Louis Gave is CEO of Gavekal Research. Louis has written six books, the latest being Clash of Empires: Currencies and Power in a Multipolar World, which discusses the consequences of a world which seems to be breaking up into three distinct monetary zones, each with its own reserve currency, its own fiscal policy, its own imperial ambitions and perhaps even its own supply chains.

Anatole:

- We face two unprecedented events: the collapse of worldwide markets and the massive waves of monetary policy. No historical precedents to evaluate what will happen, nor the consequences of a government-mandated halt of businesses 
- The status of markets depends on your investment horizon 
- Short term outlook (1-3 months): Remain cautious, even bearish. The latest market rebound is a bear market rally. Sentiment is not bearish enough to mark the bottom. Investors are focused on positive healthcare news, not on worsening economic activity 
- Medium term (1-3 years): Reasons to be bullish are not due to expectations of a strong recovery, but of improving earnings. And monetary and fiscal policy almost guarantees 0% interest rates in the near future. Stock valuations will go higher 
- Long term (this decade and beyond): Policy will produce a recovery, but we will face a change in the inflationary environment. Fading globalization, tech companies becoming monopolies, and stronger organized labor is inflationary 
- High inflation but not higher interest rates, as monetary policy has to fund government deficits. Repeat of the inflation process of the 1960s, '70s, and '80s. The good news is that process took 20 years to build up 

Charles:

- The euro under negative rates is a worthless store of value. Europeans should be 100% invested in equities and assets. Anything guaranteed by the European government is worthless, and European contracts are useless.
- The U.S. has the world's best payment system and a good unit of value. U.S. assets are advantaged by the rule of law protection, innovation, and a highly adaptive economy.
- China wants the yuan to become the local currency of Asia. Asian demand must rise to offset lower U.S. and European demand, so their currencies must rise in value 
- The only place that makes sense owning bonds is Asia
- U.S. and European consumption have been subsidized by undervalued Asian currencies. That will now reverse, so have your consumer plays in Asia and producer plays in U.S. and Europe. Most people are doing the opposite 

Louis:

- Post-lockdown growth will be slow. Government propaganda is so effective that people are afraid to go to work or outside. Many companies have gone bust, so high unemployment will last for a while 
- Using the same policies as in previous crises - it didn't work then and won't work now. People think the world has changed, but they are still buying the same assets 
- It's possible we see another period of forced confinement, a bad scenario for the economy. It's also possible growth comes roaring back and brings high inflation with it, a scenario markets have not priced in 
- Past use of QE was coupled with tight fiscal policy - not so today. The money printing, high deficits, and the end of globalization will have a huge impact, so don't have the same portfolios.
- Amazon (AMZN) and Walmart (WMT) are up for the year, so people think that U.S. consumption will end the crisis. I'll be surprised if this actually happens.

Ben is the chief investment officer of Second Foundation Partners and the author or Epsilon Theory (which I have quoted extensively in my Diary over the years). Over 100k professional investors and allocators across 200 countries read Epsilon Theory for a fresh perspective and novel insights into the market's dynamics. Ben has a Ph.D from Harvard University where he was a tenured political science professor. He has co-founded three tech companies.

- Wall Street is narrative: investment themes, stories, and strategies
- Create narratives get you to agree with them
- Central banks use narratives as "forward guidance"
- Tell you how to think about policies, what language to use
- Narrative tells you how to think about facts: Wilbur Ross & soup can
- Not fake news but fiat news: presentation of opinion as fact
- Virus and its politicized narrative both began in China
- Numbers clearly designed to show it was under control
- Others picked up China narrative (WHO)
- Narratives are bad because the narrative tail always wags the policy dog
- Vietnam body counts led to disaster
- Politicized narrative works until real world takes over
- Not a left/right thing, but a power thing
- Model Narrative #1: What about the flu?
- We don't count flu deaths, we model them
- Flu deaths would be much lower if counted like Covid-19
- #2: Herd immunity: seeks to preserve economic status quo over individual rights
- #3: Flatten the curve: tries to pretend threat can be stamped out
- Non-politicized narrative would recognize freedom, go to wartime footing to fight virus
- Ubiquitous testing everywhere + PPE for healthcare workers, public safety personnel

Rene is the managing partner of Corbu LLC , a research intelligence and advisory platform at the intersection of trade, monetary policy, and markets. Prior to founding CORBU, Renè was a managing director at Evercore ISI, where he served as the firm's macro specialist, advising clients in the financial and official sectors. Before joining Evercore ISI, Renè was a director of global markets at Eurasia Group, a geopolitical advisory firm. Prior to that, he spent seven years as a director at Macroeconomic Advisers, working closely with former Federal Reserve Board Governor Larry Meyer.

- Macro: gods that failed
- "Culture is upstream from politics"
- Borders are a self-imposed constraint on men's actions
- Guarantor of order
- Post-wall 1989 was key: Tiananmen Square, Berlin Wall
- First time a wall fell without bloodshed
- Human nature had changed/progressed
- Man of Reason replaced with algorithm
- Post-wall gods: military, finance, technology, medicine
- All four gods failed: Iraq War, Lehman bankruptcy, Trump election, coronavirus
- Backlash against lack of place: homeless objects
- Societies seek a protector of place
- Non-delegation: repatriate sovereignty, profits, production - 2020-2049: The Great Rebalancing
- Sovereignty vs. digital borderlessness
- Demarcation of public vs. private
- Relationship of individual vs. the state
- End of central banking independence
- Return of fiscal dominance
- Golden age of national security
- Security over efficiency = reflationary
- Domestic hinterlands are the new emerging markets
- Forced capex
- Costs of 9/11 and global financial crisis are now being paid
- Biological warfare, digital threat

The panel: David Bahnsen, Bruce Bartlett, Ben Hunt, Bruce Mehlman, and moderated by Rob Arnott.

How will the election play out? What will be the aftermath?

- Mehlman: election is 50/50, and the focus will be:
* Pandemic - Trump will lose votes on this
* Economy - Trump has an advantage as lots of people believe he can revive economy, because he did it before 
* Personality - Trump must convince voters that Biden is old and too deep in the establishment. Biden must convince voters that Trump is too unstable

- Bartlett: Trump has no chance of being reelected.
* Biden's biggest problem is Biden. He is a gaffe machine. He is not exciting, and has been on both sides of every issue. He has to go through the campaign without being seen, as Trump will make a punching bag out of him in the debates
* Democrats will try to pin the recession on Trump

- Bahnsen: If Democrats keep saying that economic freedom and reopening are bad for Covid-19, they will lose popularity in battleground states.

- Mehlman: Similarities: both candidates will bring big tech under anti-trust scrutiny. Differences: environmental policy, multilateral institutions, immigration.

- Bartlett: Biden more likely to give in to China on trade, while maintaining the appearance of resisting them.

- Hunt: No matter who wins, the union between the Treasury and the Fed, and the disassociation between spending and tax, will accelerate 

- Bahnsen: biggest problem for post-Covid-19 world will be investment. Consumers will go back to their lives quickly, while capex may not return to previous levels.

- Bartlett: To reduce deficits, you have to promise people something meaningful. We have very low interest rates and low inflation. So, there is no political pressure against deficits. This will change fast when the problems with deficits become more visible. The great reset for the federal government will come when interest payments become so high that the government has trouble funding itself. This requires high nominal interest rates, which requires rising inflation

- Hunt: That could take too long. Japan has twice the U.S. debt rate and still has lower inflation. The reset will probably come from entitlements, which will need massive amounts of funding.

- Arnott: There is a correlation between deficits and corporate profits. The interesting implication is that the government initiatives to reduce inequality in times of crises tend to backfire and generate even more unrest

Matt Ridley's books have sold over a million copies, been translated into 31 languages, and won several awards. His books include The Red Queen, Genome, The Rational Optimist, and The Evolution of Everything. His book on "How Innovation Works" will be published in 2020. He joined the House of Lords in 2013 and has served on the science and technology select committee, and the artificial intelligence select committee.

He was founding chairman of the International Centre for Life in Newcastle. He created the "Mind and Matter" column in The Wall Street Journal in 2010, and was a columnist for the London Times 2013-2018. He is a fellow of the Royal Society of Literature and of the Academy of Medical Sciences, and a foreign honorary member of the American Academy of Arts and Sciences.

Matt's presentation focused on the nature of innovation:
- Innovation is "recombinant," which echoes his theory of "ideas having sex." One example is the pill cam, which was developed by a gastroenterologist and a missile designer
- Innovation flourishes under smaller institutions while large governments are often stodgy and stifle innovation. This extends to the private sector as well. Formerly large corporations like Kodak (KODK) and Nokia (NOK) failed to innovate and were taken over by smaller, more agile players.
- Ridley offered some "rationally optimistic" statistics:
* People living in extreme poverty has fallen 50% in last 20 years
* Real world average GDP per capita has not stopped growing exponentially since the 1950s
* Famine deaths are nearly extinct (except in rare cases like North Korea)
* Lots of environmental data shows we have not sacrificed Mother Nature to realize other goals

Bruce is the founder and CEO of Mehlman, Castagnetti Rosen & Thomas. With over two decades experience in public policy, business, and the law, Bruce helps leaders and organizations understand, anticipate, and navigate political risk. He previously served as Assistant Secretary of Commerce for Technology Policy under President George W. Bush. He also worked as a senior leadership aide in the House of Representatives, general counsel to a national political party committee, and policy counsel to Cisco Systems (CSCO) .

- Covid-19 is less of a radical change, and more an acceleration of change that was already underway
- Technology disruptors are leading the world, with 7 of 7 of the most valuable companies in tech
- Increased globalization and trade exploded. Those at the top of the U.S. pyramid were winning, and the bottom of the world was improving, but middle-class Americans felt left behind. This created the nationalistic political trends
- Changing demographics, working women, minorities becoming prominent, and more people in college left many Americans feeling like strangers in their own country
- All of these things will now accelerate 
- Tech companies doing well and digital businesses remain productive, even during the lockdown
- Multilateral institutions were already falling before Coovid-19. The accusations that WHO is in China's pocket will speed this trend. The U.S.-China conflict is deepening. Nationalist politics are stronger than ever 
- After the 2008 crisis, the $500 billion bailouts led to a lot of social unrest, both on the right and left. The bailouts are 5 times bigger this time, and so will be the backlash. Expect far larger versions of the Tea Party and Occupy Wall Street 
- The political divide will widen, pressure against big tech will rise, suspicion of China will intensify, populism will grow, and we'll see a stronger push for policy change.
- Culture will change as well. The focus will shift from efficiency to resilience. We are all preppers now - businesses, government, and individuals. We will see more vertical integration, larger inventories, more resistance to immigration, more self-sufficiency from consumers (cooking at home, home schooling, etc.), and more security nets 
- The mentality will change from abundance to austerity. Government will need to find more revenue and reduce deficits

Bruce Bartlett is a longtime observer and commentator on economic and political affairs in Washington, DC. He has written for virtually every major national publication in this area, including The New York Times, The Washington Post, The Wall Street Journal, USA Today, Politico, and many others. His work is informed by many years in government, including service on the staffs of Congressmen Ron Paul, Jack Kemp, and Senator Roger Jepsen, as executive director of the Joint Economic Committee of Congress, senior policy analyst in the Reagan White House, and deputy assistant secretary for economic policy at the Treasury Department during the George H.W. Bush administration.

- Thinks there is virtually no chance Trump will be reelected
- Authorities have done more than expected during the Covid-19 pandemic. This included both the monetary and fiscal policy responses 
- However, these policies will not likely put the economy on stable footing 
- Prior to World War II, the U.S. used massive deficit spending to combat the impact of the Great Depression. This did not produce consistent growth. Only World War II seemed to bring the U.S. completely out of its economic rut 
- Expects the post-Covid-19 economy to have behavioral changes. People will have a more "live for today" attitude, similar to the Roaring Twenties 
- This will be massively bullish for the U.S. economy

Dr. Hunt is the executive vice president and chief economist of Hoisington Investment Management Company, a firm that manages $5.2 billion for pension funds, endowments, insurance companies, and others.

Lacy is the author of two books and numerous articles in leading magazines, periodicals, and scholarly journals. Included among the publishers of his articles are Barron's, The Wall Street Journal, The New York Times, The Christian Science Monitor, the Journal of Finance, the Financial Analysts Journal, and the Journal of Portfolio Management. The Board of Governors of the Federal Reserve System and the Dallas Federal Reserve Bank (where he was senior economist) both published his research.

- Initial U.S. recovery will look impressive due to the low level we are starting from
- Risk is deflation, not inflation. The fall in oil prices suggests we will get deflation. Probably a couple hundred basis points of deflation
- US debt-to-GDP ratio is the most serious threat we face. A high ratio drains growth
- Net negative savings weakens investment and impacts growth
- As U.S. takes on more debt it becomes less productive. We get less GDP growth for each new dollar of debt. We cannot solve a debt problem with more debt - does not work
- Poor demographics will stagger economic growth well into the future
- U.S. dollar will hold its relative value
- Fed does not control the velocity of money (VoM). VoM will decline further as new debt is for survival and not for productive uses 
- Corporate profits will be disappointing for 8 years. The result will be decelerating capital spending, and that will hold back economic growth

Sam is Director and Chief Economist at Avalon Investment & Advisory. His role entails investment strategy, global macro and asset allocation. His daily letter, Macro Note, is free and an important and value added product. His book, After Normal: Making Sense ofthe Global Economy, is a good read and was published three years ago:

- Must admit that we don't know what the economy will look like post-virus
- Will we see an L-, U-, or V-shaped recovery? The shape will be different for different regions of the U.S. and staggered, not evenly spread across the U.S.
- Airline recovery will take at least 3 years
- Gasoline sales are rising, shows a fast recovery in our driving habits. Related to that, recreational vehicle (RV) sales are up, particularly for trade-ins. We are willing to venture outside, but not necessarily to crowded places. So, the "at home" behavior trend has legs
- Fed takes rates negative at some point. Other regions of the world that are already negative stay negative. Fed is not out of options, as there are always things for it to buy, and it loves to buy stuff
- The U.S. will have higher federal outlays, but that will not turn us into Greece
- More concerned with deflation near term, inflation in 5 or more years
- U.S. fiscal deficit rises, but we maintain the ability to pay the debt

My good pal, Rosie (David Rosenberg), gave the first presentation at John Mauldin's SIC.

Here's a summary of what he said:

- Fade asset classes that are certain of anything
- Q2 GDP will plunge. We are in a depression, a prolonged period of weak economic growth. Long-term risk is to the downside. History of bear markets shows a pattern of market plunge, rally, then grinding decline.
- Not FDR's stimulus, this time it's only government providing life support
- Surreal diversion between Wall Street and Main St.
- Fed has stock market on its mind all the time - 20% of job losses will be permanent
- Half of small businesses will not reopen
- Recovery out through 2023. Best case is for L- or reverse J-shaped recovery.
- Corporate earnings will not normalize quickly
- End of recession only happens when vaccine and treatment are available. This will give consumers confidence to re-engage with physical retail businesses. Demand is key, not just reopening the economy.
- Rise in saving rate is new normal. Shifting consumer behavior patterns as people focus on what they need, not what they want.
- Does not rule out negative nominal bond yields
- Work from home trend is bad for commercial REITs
- Stagflation emerges over next 3-5 years
- Want exposure to healthcare
- U.S. dollar stays relatively strong as long as U.S. maintains its military might
- Still bullish on bonds, but closer to end of bond trade
- Unsure of cryptocurrencies - volatility is too high
- Highest conviction call is physical gold. Best buy/hold strategy for long haul

As mentioned in my last post Wednesday, today I have a treat.

Throughout the day I will be providing a summary of each speaker's presentations at John Mauldin's Strategic Investment Conference.

John is a long time pal of mine and I am flattered to be included with such big hitters as Ferguson, Rosenberg, Cooperman, Bremmer, Zelman, Arnott, Bianco, Yusko and so many others.

I will be bringing up the rear (as a speaker) as the conference concludes this afternoon! I will be talking about the appeal of bank stocks and debating my good friend (and bull), "Jazzy" Jeff Saut.

Before I begin to deliver the synopses, I want to briefly provide a brief update on the markets.

The S&P has now moved to the high end of my projected trading range - and I have moved back to net short exposure.

The stock market has been celebrating almost daily while small businesses and the average American are suffering.

Why not buy stocks if the Fed promises that yields will stay near zero for the foreseeable future and alternative fixed income yields are almost nonexistent? (In other words, TINA - "there is no alternative").

Though most think lunch will continue to be delivered because of low interest rates there is never a free lunch. There are numerous problems in the accumulation of record amounts of debt even when coupled with low rates.

Growth suffers under a pile of debt.

Further, as I have written, low interest rates have led to a massive underfunding of pension and endowment programs including those benefiting the less well off like social security and medical and retirement plans. 

If one was concerned about the growing inequality in the U.S., this contrast is a prescription for civil unrest in the near future. 

If stocks are supposed to reflect future earnings discounted to the present, the market's price seems extreme because President Trump's policies (and behavior) are likely leading to a greater likelihood of a Democratic victory in November. Corporate taxes will almost certainly be raised to help address the yawning deficit.

The argument that the market is not high relative to interest rates fails to recognize that present interest rates are totally artificial and much lower than they would be without massive Fed support. Such support reflects economic weakness, not strength.

Yesterday the S&P closed slightly above the top end of my projected trading range of 2950. I am using this overshoot to add to my net short exposure.

As the market grows more overvalued, future risks expand and prospective reward declines.