| Dear Reader, It’s been an enthralling afternoon here at the SIC, with one heavy hitter after another taking the stage… Jeffrey Gundlach First up was DoubleLine Capital CEO, Jeffrey Gundlach who said that financial markets and the economy are facing a “moment of truth.” Gundlach delved into several reasons why he believes the secular bond bull market is likely over. He points to the explosion in the US government budget deficit, the Fed’s balance sheet roll-off, and rising inflation as the reasons why. Gundlach believes that rising bond yields, coupled with sky-high valuations, are a toxic mix for US equities. But the “Bond King” wasn’t bearish on all equities, saying that certain sectors in emerging markets look attractive. Grant Williams Next up was crowd favorite Grant Williams, founder of Real Vision TV and author of Things That Make You Go Hmmm…, who dissected monetary policy and its long-term implications. While quantitative easing (QE) has suppressed volatility and was very good for financial assets like stock and bonds, that trend is about to reverse. With the Fed expected to hike interest rates four times this year, plus reduction of their $4.4 trillion balance sheet, rates are rising—fast! In less than 12 months, short-year Treasury yields have more than doubled. Williams then discussed how investors should be allocating capital in this environment and offered some specific trade ideas for the audience. Cryptocurrency Panel The cryptocurrency panel followed with founder and CIO of Passport Capital, John Burbank, best-selling author and co-founder of the Discovery Institute, George Gilder, CEO and CIO of US Global Investors, Frank Holmes, and co-founder and CEO of Genesis Mining, Marco Streng, moderated by our own Jared Dillian. The panel delved into several aspects of cryptocurrencies and blockchain technology—including the “business” side of mining Bitcoin, and how institutional investors are thinking about trading it. Holmes, who recently made a multi-million-dollar investment in the world’s first publicly listed blockchain infrastructure company, went on to discuss how the transition to “immediate” and “digital” assets by Millennial and younger generations is changing the paradigm for markets. George Gilder and John Mauldin John Mauldin started with one of his favorite George Gilder observations, “The source of all wealth is information.” Gilder added that capitalism is not a scheme of rewards, it’s an information system. That takes us to the axiom: Wealth is knowledge. Gilder gave us the sweeping example that the difference between our age and the stone age is entirely the gathering of information. Mauldin asked about equilibrium. Gilder equates it to information theory. Expect surprises from outside the database—that is the genesis of the surprise. Information is disorder—the surprise—it is not equilibrium. Mauldin added that economists assume equilibrium as part of their models. When in reality, the markets exist in a state of chaos. George Gilder is an immensely deep thinker, and capsulating his thoughts on these pages is immensely difficult. You really have to be part of the discussion to get its full impact. ETF Panel: Steven Bregman, Stephen Cucchiaro, Jan van Eck, Jared Dillian moderator. Asked if explosive asset growth can continue, van Eck, president and CEO of Van Eck Associates, thinks it can, given the pressure to keep costs low. ETFs have invaded the financial system and are here to stay. Cucchiaro, president and CIO of 3EDGE Asset Management, added that ETFs and passive strategies grew together, but won’t necessarily remain so. The ETF panel discussed risks embedded in leveraged ETFs and volatility ETFs/ETNs. All agreed they are complex and widely misunderstood. Van Eck pointed out that it’s dangerous to expect regulators to stop such products. Brokers have a suitability requirement and it is their role to prevent investors from taking excessive risk. It’s been a brilliant day of action here in San Diego. And we still have another high-point ahead of us with the panel featuring Patrick Caddell, Neil Howe, and John Mauldin tonight. If you want to watch it live, you can do so with your Virtual Pass. Of course, if you can’t tune in live but still want to access the video recording of the panel (and all the others from the conference), the Virtual Pass has you covered. Sincerely, Ed D'Agostino
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