| Dear Reader, Greetings from Dallas, where we’re in Day 2 of the Strategic Investment Conference. I’m Patrick Watson with some highlights from the last 24 hours. After five SIC experiences, I thought I had seen it all. Nope, this is the best yet. It’s been a whirlwind of amazing speakers, informative panels, and fascinating sideline conversations. Gavekal’s Louis Gave took the stage after Tuesday’s lunch—a challenge at most conferences because people get sleepy. He made everyone sit bolt upright, though. Most investors see inflation risk as pretty low right now. Louis isn’t so sure. We all know the typical family’s living costs are nothing like the official stats. Louis connected it with the rising political instability and populism around the world. Is disposable income falling in ways the data isn’t reflecting? If so, that’s effectively the same as inflation. This has a lot to do with energy prices and government spending. Worse, Louis also pointed out that China is a massive deflationary force for the whole world. Like all good Marxists, its leadership knows inflation threatens social order and tries hard to keep it under control. Louis Gave’s bottom line: the deflationary forces we’ve grown familiar with in the last two decades are gradually disappearing. That doesn’t mean inflation is coming, but it’s a risk we shouldn’t ignore. Grant Williams jarred everyone awake today with one of his epic, entertaining slide presentations. This year’s topic: Australia. Australia’s natural resources and proximity to China have helped it go almost 30 years without a recession. But the country also has something deadly: a staggering amount of mortgage debt. The amount of leverage in Australian housing is just plain silly. Grant explained why it is unraveling quickly. Some 31% of Australian households are experiencing mortgage stress already, even without a recession. A recession, which will come at some point and probably soon, will threaten Australian housing, employment, banks, politics, and more. Grant thinks the country has grown complacent after its long winning streak and will soon learn a hard lesson. Yet it will bring investment opportunities, too. He described how to take advantage of them. This morning we also heard from Felix Zulauf on gold’s surprising prospects, George Friedman on rapid and enormous geopolitical changes, and Woody Brock on the threat that tech monopolies are creating for the future of capitalism itself. Then we had a fascinating real estate investing panel before breaking for lunch. A lot more is coming, and you can hear and see it all—either now or at your leisure later—with our SIC Virtual Pass. Some valuable knowledge is floating around this event, and you don’t want to miss it. I’ll be back tomorrow with more highlights but don’t wait. Get your Virtual Pass now. See you at the top, Patrick Watson
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