Some notes/highlights below (for personal reference only, any mistakes are my own):

His framework for the markets – buckle up. He has been investing as some kind of CIO since 1978 and this is about the wildest cocktail he has ever seen in terms of trying to figure out a roadmap. For context, the economic downturn we had last year was ~5x the average recession since WWII but in 25% of the time. More bizarrely, in a year where ~11m more people were unemployed, we had the largest increase in personal income in 20 years, because of the massive policy response we got. The CARES Act added trillions of dollars in fiscal stimulus. All this stimulus has flowed into markets, commodities etc. In just 3 months, we increased the deficit more than the last 5 recessions combined (1973-75, 1982, early 90s, dotcom bust and the great financial crisis). In 6 weeks, the Fed bought more treasuries than they did in 10 years under Bernanke and Yellen, when people like him were screaming about how excessive QE was during that period. Corporate borrowing, which almost always goes down in a recession as corporates re-liquify, and had already gone from US$6tn to US$10tn because of free money going into the period, actually went up by US$400bn. For reference, it went down US$500bn during the great financial crisis. This is the background of the markets today. 

US vs. Asia – the juxtaposition of the various policy responses is somewhat breathtaking. Since 2018, M2 in the US has grown by 25% more than nominal GDP. In China, M2 to nominal GDP is roughly where it was 3 years ago. They haven’t borrowed anything from their future, while the US has had a massive liquidity input and very low investment – primarily transfer payments and Fed stimulus. US has done a horrific job with the virus, while Asia in general have done much better and also haven’t borrowed from their future. Vaccines – possible, probable that all this stimulus is still going to be in place or increasing just when we unleash biggest increase in pent-up demand globally that we’ve had since the 1920s, could make the world look extremely different than it does today. Could not be more exciting as a macro investor.

Which one asset class does he think offers the best opportunity set – not really the way he plays the game, likes to use more than one arrow if it’s appropriate. Overriding theme is inflation relative to what the policymakers think. But because of the policymaker response, which could be very varied based on the vaccine and how they respond to various metrics, finds it better to have a matrix. Play for potential inflation – short treasury position, primarily at the long end. Because the Fed could drive him crazy and not really let that come to fruition, he has a large position in commodities. The longer the Fed tries to keep rates suppressed so they’ll have stimulus in pipeline, the more he wins on his commodities. Quicker they respond, quicker he might have a problem with his commodities. And then because of the juxtaposition of the US policy response vs. Asia, he has a very short dollar position.

Outlook for tech stocks – if we get 4-5% inflation a few years out in the US and bond yields rise precipitously, that is very negative historically for growth stocks relative to other stocks. He thinks the comparisons to 2000 are ridiculous. Back then, you had a double whammy – overvaluation, and earnings about to end from companies then that were all about building the internet, when the internet had already been built. Like companies selling railroad ties just as the Union Pacific had crossed the US and was done. Combination of valuation and challenged bond market could certainly make for a difficult environment for growth stocks over the next 5 years. On the cloud mega-theme, thinks it is the 3rd or 4th inning, but we are not in the 9th inning. Many companies are speeding up their transition or will die if they stay behind in digital transformation. Don’t see them going back. Within tech, FAANGs have actually been a big underperformer the last 2-3 months; the market has rotated into 40x sales tech companies or radioactive reopening stocks. FAANGs not overvalued, they are GARP names out of favor. If the Fed pushes the envelope in terms of friendliness, would think they can keep going somewhat.

Outlook for other regional equity markets – when he looks at how much the US has borrowed from the future, thinks Asia is the big winner coming out of Covid-19. Even in tech. Intel has thrown in the towel, so Asia owns foundry, memory, also ahead in robotics. Next 5 years, Asia looks a lot better than the US. Some point the US has got to pay back in terms of productivity, lower dollar, higher rates for the transfer payments they have made in the last 9 months and will likely continue to make. He is constructive on names in Taiwan, Korea, China. Like the rest of the world, he owns SEA Limited. No idea what happens in the next few weeks, but long-term he is right with the consensus, thinks Asian equity markets and currencies will outperform vs. the US. As an example, China has done virtually no QE the last 2 years, real yields are higher, current account surplus, net investment in China passed US for the first time this year. This is the beginning, not the end of the trend.

Investment philosophy – it is true he has had no down years, but a lot of that is luck. He has been deep in the hole 3 or 4 years, but something always came along, just a coincidence of the calendar (Dec 31 to Dec 31) that he happened to be up. If you measured May to May, he would have had some down years. Fact can travel 5 or 6 asset classes is an advantage, allows you not to play in an area that’s dangerous. If you are an equity investor, your job is to be in equities, whereas he has the latitude to say this is too complicated, I’m not going to play the game. One example is credit. He has never lost big money in credit because the only time he is in credit is once every 8 years when there is a debacle in credit. If he was a credit-only investor, he would have had 3-4 down 30% years. Another thing he believes is put all your eggs in one basket and watch the basket very carefully. Every investor has 3-4 big winners a year; usually know what they are, but you can get in trouble from the things you’re not that focused on. He has never really used risk models or VAR, prefers to watch his P&L everyday instead. Risk models are great until complete chaos happens and all correlations breakdown, can suck you into a false security. He has been watching the P&L for 30-40 years, much better warning system if things start acting in a strange manner.

Thoughts on bitcoin – might be both genuine and lasting as well as the mother of all bubbles. Doesn’t think it would be doing what it has if we didn’t have central bank behavior we have. He was skeptical 3-4 years ago, wondered why would anyone buy it. Has done an unbelievable marketing job, now been around 13 years, millennials probably look at it the way he has looked at gold. He has his doubts whether bitcoin will be anything other than store of value, has all sorts of problem as a currency. Owns some of it, went up a lot. Doesn’t really believe or not believe in it. Answer is he doesn’t know.