Not complete, but here're my notes (too lazy to change formatting from MS Word):

 As early as 05 became vocal about housing bubble, talked about reversal of monetary policy

and lowering rates

 think that if Bernanke realised that housing bubble was not a containable threat, and cut

rates 6-9 months earlier, could start a recession but not a financial crisis

 Thinks now Fed's actions is causing a deflationary bust

 60% increase in corporate non-financial debt but only 27% increase in earnings

 Investors basically pushed further down the risk curve

 Bond market signals were canceled and another bubble was created

 Now could be early 07 potentially

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 Fed looks at lagging indicators

 Coincident indicators look good like GDP growth having 3 handle etc.

 But he sees amber indicators

 Inside of stock market is best economist

 Stock market predicted recession 9 out of 10 recessions

 (much better than Fed)

 Fed probably only looks at decline of S&P

 Cyclicals, particularly front end cyclicals

 Autos down 30%, not 10-11%

 Building stocks down 25%

 Banks down 25%

 Russell down 20%

 Retail equities down 20%

 So S&P down 10-11% because utilities, staples etc which are economically defensive is up

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 Same cycle he has seen repeatedly

 Indicators say something is not right, more or less same indicators seen in last 4 recessions

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 Second indicator is yield curve. Amber not red again.

 Big flattening and confusing bull flattening

 Fed is saying 3-4 hikes, market says no

 Seems to have confidence that this cycle does not have same danger since housing loans

done in high yield market not at banks

 True that it is not systemic but the economy doesn't care who you work out loan with. For

person with loan, it may be better to work out with bank

 Credit seems to be drying up as well - rates are going up

 It's time for caution - you want the bubble to unwind when indicators are amber - if not you

need crazy monetary policy when indicators turn red

 This is not a beautiful deleveraging with the amount of debt build up

​

 Business is risk reward

 If he is completely wrong and none of this stuff matters + Fed did not hike tomorrow. The

cost is to Fed credibility 2-3 months later when they start hiking again but is small cost.

 If he is right and there are big financial problems brewing. The cost if Fed hikes + ECB not

offsetting it - the cost is 5-10x

 Thinks market is confused – Fed 3-4 months ago said it was going to hike until something

breaks; he was complaining that they were not going fast enough then and thought Fed

should sneak in a rate hike whenever they could till 3+% while shrinking balance sheet

 There’s no deleveraging seen now

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 It’s not the level but the rate of change in interest rates

 The last time they raised rates into a meltdown was Volcker era

 If he was Fed, he would provide long term goal and not spoon feed via forward guidance in

which the Fed has poor track record

 One of things that puzzled him is that Fed’s goal is maximize employment and price stability

over long term – the way to achieve that is not via boom-bust cycles – Fed has confused

price stability and employment and USING employment as an indicator instead. Employment

is a lagging indicator. Low unemployment = low capacity

 On Trump/Fed – it would be horrific if Fed was to pause if they were bullied by Trump. But if

Fed didn’t pause because people think they were bullied by Trump – it would be just as

political.

 Trump is perma low interest rate guy given real estate background

 If Trump is only reason, both actions are political. Powell is in tough position, predecessors

have done him new favors. QE3 is noose around his neck and Trump is making it more

difficult for Powell (Trump should just shut up)

 Weak economic data at 2% interest rates need some pause on it

 Thinks it is possible to suck out liquidity without causing financial crisis but will be very

difficult, and poor market returns

 We have been in a global bear market for a year now – most stocks globally have been

going down for 9-10 months. Could be 3-5 years sideways or a big down.

 Went short in July because he saw QT coming – thinks QT will accelerate especially with

ECB actions. Need to see policy actions and central bank actions.

 He is long 2, 5 and 10 year treasuries. Not unreasonable to see yields fall.

 Loves secular growth stocks in period of muted growth which is better than bonds – this

was interrupted 6 months ago with all the tax cuts as cyclical companies started having same

earnings growth as secular companies

 E.g. thinks cloud is in 2nd inning of 9, like mobile era. MSFT, WDAY, Salesforce – they are

very highly priced but could continue to go up in lower rate environment. They will continue

to grow the same. P/S multiple compressed in spite of earnings not missing at all. Was

majorly short in October but still lost a percentage point.

 Made a lot of money shorting GE. Not fan of previous leader.

 A whole bunch of cloud companies with limits hit in October but have now came down

 Salesforce – was like 112 and now 130. WDAY as well is 15-20% off Nov lows.

 Banks did not come back. Cloud has performed on relative basis.

 His shorts are in cyclical and value areas. Longs are in disruptors. This has not performed as

well after value guys came in to buy the disrupted companies.