Raoul Pal: "Pro-To-Pro: A Macro Investing Masterclass" (Hedgeye Investing Summit)

[Music] i'm keith mccullough and welcome back this one's going to be good all right we've had some very good conversations over the years the one and only rob paul welcome thank you good to be here as ever yeah the the man uh on content this year man if i had an mvp award in terms of content that's helping educate and make people money save people money make people money uh you get that award for 2020. you guys have just crushed it congratulations on everything that you've built thanks so much keith it really means a lot it's um it's it's impressive so the the first question i was asking is like what the is up with these bitcoin people you are so stupid why did you shake the hornet's nest you think it's amusing it won't leave you for ages now i mean i never forget when i sold bitcoin in the ground i thought i was a hero right i bought it at 200 sold it at two and a half thousand i felt like a god it went up to twenty thousand and they relentlessly called me an idiot for about three years you didn't need to do that you see because what you're doing here and you know it's actually very a good investing lesson is is time horizons these guys are looking at long term time horizons which is why the holding thing so when anybody trades around it they don't get it because it's different mismatches of time horizons i i i i was just having uh like i think today i said i sold my draftkings i mean another day i said a shorted city group i just typed it man and all of a sudden i got this these people are not some of these people you gotta admit that right not not every one of these people these hodlers are normal no they're not but you know i had this i had an issue with how kind of aggressive that community is right and i spoke to somebody else about it and they said look it's a feature of the community itself is you know they're trying to strive for the adoption of something new so they're going to fight for it and you know good on them but yeah it's pretty tough i i like it like because i want to actually use it and what i've i i'm still trying to learn on the fly here and i wanted to get your help with it because i know that uh you like me or a go anywhere type of a person uh whether it be gold or bitcoin like i'm not married to these bloody positions i don't think that you feel like you're getting into any kind of promiscuous new relationship with something here like um i i just want to try to crest and there and there are and i have figured this out there are plenty of people that bought bitcoin when i did by the way i bought it and sold it multiple times in in my life uh this is the only time i ever made the proclamation of what i actually did with full transparency as i would um you know but but at the end of the day i mean is it is it truly and uniquely a one and only strategy with one duration and you don't have the open mind to buy anything else i mean look i actually just buy and hold it i don't do anything with it i store it on a device i don't trade it i don't do anything so i'm actually of the opinion my time horizon for this is you know i think it's a there's a five year event to play out here and i'll probably trade within 18 months so i might take some profits if i get some uh you know if i get the kind of profits that i think but i think the the opportunity is so big that i'm not interested in the wiggles um but again different people trade in different ways well i i've always to be clear i mean i i think that the opportunity and everything i do is tremendously huge right i mean let's just let's just uh assuming that we take a position in anything let's just go all trumpian on it i mean what i've always thought though is that like if i if i really if i use my process and gold goes from 1200 to 1700 i want to make not 500 i want to make 700 800 i want to use options i want to augment my you know my my big position with bigger returns than what i would have just bought and hold and made in it yeah um it's doable the problem is with bitcoin it's extremely volatile it's all skewed to the upside really you know the the downside spikes can be sharp and brutal they tend not to last very long and the upside spikes it almost gives you no chance to ever get back in again you know having been involved with bitcoin since 2011 uh it's bloody hard if you get out of a position it doesn't actually trade like most i mean darius talks this about it a lot it's like he can't get to grips with the fact you know on twitter of how this trade is a macro instrument as as you've pointed out there is a passing correlation to several other asset prices right now so you know you've been looking for the for the dollar to rally and obviously bitcoin should come off a bit and that kind of makes sense um but over a longer run it actually doesn't match almost anything else and it doesn't trade in the same way so it's it's not a straightforward instrument to trade i find other people love trading it i i tend not to see i i find that i mean and again i've used my process which is you know the bitcoin community whether and again we have a lot of i have a lot of subscribers to our process that own it as well and they're not as viscerally affected by my tweet but uh they yeah there is a an absolute overlay with quad four happening and me getting to buy a shitload of bitcoin at a lower price so even if you did believe that there there was no correlation but you didn't know what the quads were you know you've said this yourself i was looking at some of your tweets recently and you say well all but this one time which is november of 2018 this kind of evolv situation was you know something to be bought in bitcoin well that was actually one of the biggest calls that i've made against the crowd which was quad 4 and q4 of 2018 and that's where you could have bought a lot of bitcoin so i'm just trying to introduce like something to a community of people that if they truly are you know of the mindset that you are to hold this wouldn't you want to know the impact of quad 4 and what it can do to bitcoin it did it again in q2 of 2020. yeah and i i actually questioned the premise of how big the effect will be on quad in in quad 4 because the deflationary bias that that comes in that period of time is i think in the end actually much more bullish for bitcoin and gold yep than it is bearish so i understand that the liquidation that comes from this kind of move comes and this can be meaningful but the reality is is we know the answer to a deflationary bias within the markets is going to be more qe and once the once bitcoin and gold start looking through i think they start going up regardless of what the dollar's doing for example regardless of what bond yields are doing yeah well i mean as you know the you know for people that don't know what the quads are quad 4 is the only quad that's when you have deflation to rile's point you have both the rate of change of real growth and of inflation falling at the same time it's the only economic quadrant where the dollar goes up you know so that's why it currently has a trending correlation of 0.88 inverse correlation to bitcoin in as much as it has a 0.92 of uh against gold now what do you think about that like a lot of the feedback i've gotten is well if i go to 26 weeks that doesn't exist i mean for me i don't get up in the morning for 26 weeks you do on this position which is totally different holding period really it really depends on again it's just time horizons right i have no issue with you trading around it because i have a longer term time horizon and i'm just happy you know i'll just buy more if it sells off and i'm not particularly worried by that because my time horizon is about 18 months to two years let's say so you know i think it's good if i i think you'll probably be right probably comes lower i don't think it goes as low as people expect but if it does um then i think there's an opportunity for people to buy it and i think putting it within some sort of framework will help people understand it again i'm not entirely sure that if let's say this quad 4 plays out for an extended period of time i've got it six months nine months that bitcoin continues to fall within it because i think it looks through you know fiscal stimulus and uh monetary expansion so i don't know let's wait and see but you know for me it's just a buying opportunity i mean i i think longer term particularly guys if you show i think it's slide 96 the long-term chart of the us dollar you know abroad uh you can see that if this is the moment in time where the u.s government is finally just not even trying to hide it anymore combining the weaponry of the treasury with with with of course the fed print it and spend it as far as the eye can see and it's like 2000 2001 the beginning of a broad global decline in dollars against everything else bitcoin bulls should be absolutely like electro like hair on fire electrified excited about that and i don't think that there is a dollar decline coming yet i mean i still think there's another spike to come in the dollar i think we did note uh in the past that both gold and bitcoin rallied when the dollar strengthened not through the whole period but it did overall um but i think that i'm very interested in in the fact that i think the dollar can go higher as you do and then maybe the dollar turns if it dollar does turn well then you're going to get a faster accumulation of returns in in gold and bitcoin so i think that that's one of the reasons why i think this is a kind of 18-month play or so let's wait and see how do you um how debatable is the because i've i totally appreciate and understand the the difference i always call it duration mismatch that's what all it is i'm making a short-term decision versus my intermediate to long-term setup um but again i have a lot of things that i can buy um i'm not wed i'm wet to to one to one wife uh and no macro position so you know when when i think about this longer term view and how you came up with a longer term price that's that's that's a pretty pretty high price but other people have much higher prices like how is that debate because i'm really and as the bitcoin community would uh would rightly acknowledge i'm clueless like i have no idea like i'm i'm the dumbest macro person on the earth so i i couldn't dare come up with like the price that this thing could actually go to i actually don't know what any price can go no but see your framework is very different to that kind of theoretical macro forecasting that some of us do you know my job is to live in the future your job is to analyze what's going on right now and how that might affect let's say the next three month period so when it comes to something that's new and powerful and different and has a unique set of dynamics it gets a lot of macro people very interested you know it's like when you get given the chinese economy in in the mid 90s or the rise of india these big huge macro trends they become something where you can kind of live in the future a bit now none of us know where the price is going but you know just simple kind of analysis of whether it's price action you know regression charts or a whole number of different ways you can look at this stock to flow ratios all point to something really gigantically big and that's what interests me if it was you know a 10 rally here and there i'm not interested you know as you say there's tons of ways i can make that money if i can if i get things right but for me it's a 25 50 x opportunity and that's why i don't trade it well on that so how would um i think you've talked about it in terms of the pipes and the flow like anything i mean if you want to have something more broadly adopted and gold you know let's not forget it's taken five thousand years for it to get to one percent of total global asset allocation so it's a tough fight uh but to get bitcoin to a quarter of a percent or a half a percent or where gold is currently you know what do you think um is happening or needs to continue to have look keith you know the community that you and i know almost every single hedge fund manager i know has it pa right you're a classic example you're somebody you've had it in your own portfolio right so you're comfortable with the idea of owning it we don't know what it's going to be yet but you're comfortable right everybody i know owns a bit of it now their hedge funds couldn't own it yet right but the us just changed regulation so basically they've said that u.s banks can custody it which is code word for prime broking so prime broking's coming for bitcoin that makes a big difference that allows everybody to get access to it then we know that the etf is coming so the etf will come whenever it comes next six months next 12 months whatever it is when it does the raa community is now free to buy it and that's a game changer as well because as you know everybody acts like sheep if the price starts rising and the market cap of bitcoin goes up more people will be forced in we're also seeing the same thing with endowments and pension funds it's currently a 200 billion dollar asset so really it's kind of a speck of dust in terms of asset classes as you rightly point out but once it gets to about a trillion dollars it starts to become interesting to more and more people now once you start attracting that institutional capital it just goes up more i think the market is structurally short upside in bitcoin the more it goes up the more people need to own it and i like that reflexive nature of this particular setup i think it's it's unique to see something like this the last time i saw anything like this was when goldman brought out the gsci commodity index back in the late 90s nobody had an allocation and they went around basically and taught people how to have an allocation and what it does to their portfolios in commodities and over time you know commodities went from zero allocation to hundreds of billions and then trillions of dollars i think that whole process is playing out here i just don't think the bitcoin community yet speak the language of the pension funds for example you know those barra risk models and all of that stuff it's a different language so they don't really understand the kind of frothing at the mouth bullish this is the future they just want to know the portfolio diversif diversification effects over the long run what it does to their volatility what it does all that kind of stuff and until the bitcoin can not speak in that language um it won't get fully adopted but it's coming yeah i think people like me and certainly like you i mean you you definitely have have thought this through i mean we we can help with that i mean um but again to get to get the big the big price the big flow wouldn't it be great to be able to you know actively short you know short bitcoin but that's to me one major problem like i mean that's something that can create more upside right because you get people that are too bearish on assets that can go up so don't get confused by what you see on the there's a bunch of tribes in this space the bitcoin maximalists are these holders who won't do anything else right everything else is sacrilegious i love those guys there is a whole lot of trading that goes on in this space yeah there are derivatives there's tons of people who trade so you need to filter the noise out between which tribe you've upset that day because there's a lot of them yeah you know if you ever mentioned ethereum then the bitcoin maximalists hate you you know it all becomes very complicated so the best thing to do is that and just do what you do yeah i i think i mean i also like the commodity analogy that you gave with the you know the goldman index and the broadening of that as an asset class i mean because i and here's a question for you i mean i i call i think of bitcoin as a commodity on a lot of different for a lot of different reasons one of the main reasons uh that i first started to trade it is because i could trade you could trade options so now i could measure map it within the lens of price volume volatility not just the surface area the price you know how i roll but is it or is it not a commodity and why what's interesting about it keith it trades like a commodity as you rightly say it has the volatility structure of a commodity but it's a commodity with an application we've never had anything like this before right you know copper has some application silver has some application but this has a potential future application which is much larger so i always think of it as i think of it as a reserve asset i really like it as a how it's constructed what it does what it represents but i also think of it as a call option on the future and that's when it gets really interesting to me because i don't need to know what that future is what the future financial system looks like how blockchain can help this how bitcoin fits into this but i know that that option is probably priced at zero and that's interesting yeah i mean the the the optionality here is is very clear i and i think that like people quibble um you know whether or not that sounds a little bit more like how you would have said um or how you would have defined or characterized gold correct i mean um as a result no gold doesn't have a future upside in terms of it's not a technological application layer on top right so bitcoin is a platform um as well as a reserve asset it's i've never seen anything like it goals you can't do much more with you know it's been around as you point out for thousands of years there's no financial system architecture that's going to come around it that's based around technology and the ability to to do different things that we haven't imagined you know we know that there's large parts of the financial system that are structurally broken as the debt bubble gets bigger and bigger and bigger we've got problems with custody and rehypothecation and um who owns what and the recorded ownership and the transfer of assets and all of this stuff so bitcoin offers you potential solutions for all of that i mean if you note that the central bank digital coins are coming now that's an interesting conversation in itself and what what's that's representing and what they're going to be able to do with that like they'll be able to give you and i different interest rates stuff like that it's going to be quite different and they're going to reinvent how monetary policy works and maybe even get rid of that bridge between you know the banks the central bank the banks and then the public bitcoin fits within all of that too because it becomes seamless it becomes a payments layer for the whole internet as well so again i think the market price is almost all of that at zero probabilities uh ethereum is almost entirely just that but i think that is where the potential future value is outside of the gold star value now gold is an 11 trillion dollar asset no reason but why bitcoin couldn't be that so that's quite a long way from here but if it really is a future system too well it could be a much bigger asset it could be a proper asset which is you know 100 you know 50 trillion et cetera but yeah again i'm not talking about next week i'm talking about 10 15 years time and at that point it's crystal ball gazing we don't know but all i'm saying as the next derivative guy is i think that options price too cheap yeah i mean and and for those of us that want to own it in any quad but quad four you know it's i still think it's quad four today but it's down today i could buy some there's no rule against that right you can you can be exposed yeah i mean also what's interesting is you said there's options right and these options traded huge i mean that there it's a highly volatile asset people can sell puts into this who acquire bitcoin lower because you're you know you're selling you know high volatility options 80 vol or whatever they are now i mean that's a great opportunity if you're really bullish yeah and you believe as you say that the market can pull back sell puts exactly i mean there's i mean that's that's why i can't wait for you to be right on not only you know prime brokering um availability on that but the etf because etf trading options would be really good for me too because that's what i do you know so i would love nothing more than to be in any other quad and buying bitcoin options call options i mean i wanted like diego just walked us through a lot of people you know are uncomfortable with that i'm absolutely comfortable with that so that that to me would be a really good one too it actually happened to me raw when i went bullish on commodities in in may and june i started buying these bloody um commodity like corn and soy and the things that the volume i i didn't know hedging nation you know was as bad crazy as some of the the hodlers but we're all nuts you know so the volume like quintuples the minute that we hit the button on these bloody things because commodities were shot for dead they're on five year lows um so there really is an impactful flow to the trade when you have people with process that can help have you conviction risk managing the trade and to me that was a totally different thing like i had the founders of these bloody etfs calling me i'm like dude i don't know and don't get married to me because i'm going to short you at some point too i tell you what i i started a agricultural commodity hedge fund back in when was it 2007 in that commodity run as ags were taking off and i thought it was a macro trade and it was tradable and then suddenly weather happens and then credit events happen and and you forget how difficult these things people need to be careful in some of these commodities because you can be trapped in a limit down market we've seen it in lumber recently you can get trapped in a limit down market for days on end and never get a stop loss out i mean they're terrifying to trade yeah that's why i love it i mean it's like i love volatility i love uncertainty i'm just i mean i even had we've been talking about the etfs i had i had an etn in the uk um listed um on ags i can't remember it i think it was a weak one and there's a corn one and a soy one so i had these back in 2007 lehman went bust in 2008 and what i thought was an equity you know an etf yeah it wasn't it was a swap owned by lehman and it was all worth zero yeah so they defaulted on it yeah doing the due diligence on these etfs that's that's terrifying not knowing what's inside the etf i don't transact in etfs unless we obviously do the work but um i do again i i think that for people that really want to get into real vision or hedge for that matter yeah it's a go anywhere there are a lot of other things that we pay attention to you know growth and inflation in particular and there's a lot of you know we have a hundred and i think it's a uh raw i think we have 174 i have to check with darius on it 174 etfs in our model that we could at any given time buy or sell and those would be ones that we would say you know we we think that the volatility and price characteristics reflect what we think we're trading it is what we thought it was now of course that's not always 100 true because we don't know until we know but but you're broadening the landscape you're democratizing the base you're taking that's so important that's a super important i mean that's so important keith because people don't a lot of people approach investing as discrete individual trades yeah and both you and i spent a long time trying to teach a framework and then portfolio construction because all of these things it's really important to get these things together because if not you're trading discreet things and you don't really understand what you're doing but to be a professional in this market or just be just to be to give yourself a better probability of being right over time is as you say is understand a framework for investing understand with time horizons and you know it's it and think about portfolio effects once you get those things the game becomes significantly easier yeah i mean there are so many components to the game again as diego and you just reminded the audience i mean this is a hard game it's really hard and that's why you know i personally have a hard time just buying holding a macro exposure um and i have i've always had that problem i got problems i mean everybody can see that i got more problems in time magazine probably at this point in the content front but i mean it's like um what i want to go back to uh just a separate topic but it's it's all interconnected and you've been making these points and this is at least what i think that you and i are both seeing in terms of this non-v shaped recovery uh you made the point the other day i think you tweeted about the court you know the interrelationship between crude bank stocks etc uh the bond market which you call the truth teller i think that's what you call it you know what is it about that that today all of a sudden it matters again you know it's not you know this is a narrative business as you know and it's difficult to know why that narrative shifts but what what made it a very interesting market to me is there was one narrative which was nasdaq up every day there was another narrative which was banks um and a whole bunch of other things bonds were telling you the opposite at the same time so that's very interesting to me because it rarely happens i mean we've never seen i don't think gold miners outperformed banks by 85 percent in six months i mean that's stunning that was fantastic and when i look at it when i step back and construct my macro framework i look at it and think okay this is something to do with debt it's to do with insolvency because if you look at anything like general electric ford ht anything with old economy debts or whether it's emerging market fx looks the same oil oil there's a lot of debt laden stuff there they all look like that and that actually looks like the real-time economic data which was it fell it rallied it flattened out and it started to roll a bit as you know the covered lockdowns and the lack of stimulus and all the other things go on so they're all they seem pretty truthy to me and the bond market just kind of stuck its fingers up and said we're no interested in your narrative we don't think this is going anywhere and i always take the bond market seriously it's very rare there's big dislocations in the bond market the last time i ever saw that was really 1994 it's very rare there's a big narrative mismatch so the bond market to me tells me something which is listen growth and inflation are not coming back sure you might get phasing passing phases where the narrative shifts but the underlying structure the bond market's shouting to us that that is not the case and i still think that rates are going to go negative don't forget we've just seen the uk go negative everyone said oh that's impossible well that wasn't impossible because the two-year guilt went negative first and the bank of england will follow and we will see i think two-year us treasuries go negative and the fed will follow we saw that with ecb german shats went negative 18 months before um the ecb went negative um you know quite a few years ago yeah so i think this is still coming i think that bond market trend is still in place well i think a lot of um macro tourists have that issue they're naval gazing and now naval gazing with a political view don't forget that a lot of people this whole new blue wave narrative of it used to be if biden wins we're going to get taxed and we're screwed but now it's a blue wave is beautiful and buy stocks i mean it's amazing how the narratives change this morning in my early look actually rattled off the six different reasons why stocks were up yesterday and not one of them had a number in them they were all just narratives you know so um narratives and and participation how about that bro i mean you and i are you know we are the recipients of this let's be clear you know more people participating in markets is good for rowell and it's good for crazy km here who's the bitcoin wrong tweet okay but all these people participating have a lot of um a lot of emotion to what they're doing and on the edges of the volume are really having impact 15 to 20 are by our numbers citadel's numbers that's the daily flow that they affect when it was pretty much like inside of five percent or less prior to that what do you think about that and and how it's actually you know we just did in the bond market we just for like three days had one of these episodic non-trending sell-offs and treasuries to buy there have been three of them since the beginning of the year march june and this one um i have to believe that the retail community participating there um on you know wrongly making the wrong decision at the wrong time had to have a huge impact too um you know i'm kind of interested in this is people coming into financial markets new i think that's a good thing it got pretty stale a couple of years ago yeah because there was almost no participation now obviously we all have to learn the hard way so it makes you look like a hero for a while everyone had calls on the upside in tesla everyone looks like a god and then the market turns against you you look like a fool but usually what happens is you then step back and go well why did that go wrong and then you start to do the work and once you start doing the work and understanding your process and what you do and how markets work and how economies work then i think that it's a good thing i think it's a good thing to see more participation it's a bad thing that it's so narrative driven and that's i think a function of stuff like twitter where narratives catch headlines much faster than doing homework does but i think over time hopefully people will do more homework on what they're doing and that's only a good thing oh it's a very good thing in particular like i said for you i mean i mean you're the educator you're the disrupter you have the content that people can look at objectively and say well whether i agree or disagree with that person they're at least getting the air time without a commercial to explain what it is that they do and why i mean that's a hugely valuable asset i can't believe that 50 to 70 million new retail quote unquote accounts aren't willing to be educated particularly if they're being forced to through loss of capital well right now they don't know that they need to be educated yeah right because let's be absolutely brutally honest i mean retail outperformed every hedge fund management in the last six months so yeah you know retail did well um but again i think the process of winning then losing is a good process for everybody you've gone through it i've gone through it our careers will always have it in it there's no way of ever avoiding it it's part of the business but if it does get you to do homework then places like real vision or hedge eye you know it people come to it and realize okay there is a different way and i think that's super important and you know that makes me incredibly bullish on this whole space i think financial market education i think is a is a really big factor that's going to be driving us forwards and i think even the rise of cryptocurrencies which got retail investors much earlier than everybody else is a very good thing because it's getting people to understand all of this stuff a hundred percent i mean and having a live debate a live wire again we we you beat the bitcoin thing to dead pulp here but i mean i loved that you know that was fun you know i'm not like you know i get in fights all the time on twitter been doing it for years a decade more than a decade that's that's good i mean we do that well none of us has and none of us and none of us has a monopoly on the truth i mean however strongly your opinion may come across you have to be humble because anybody's lasted this long in financial markets learns humility because i always say if you think your smells of roses you're about to get your nose rubbed in it well if you want to see you can look at all my shitty trades since 2008 because every single one of them's timestamp uh yeah it's they're there and that's actually why i did it because i want it to be less shitty raw i really always oh that's really always my i do the same i mean global macro investors time stepped stamped every trade since 2005. yeah um same so it's all there because you get you listen you solicit an opinion when you're wrong or when they think you're wrong and then an objective person i think you and i are both you're going to sit there and weigh that against what your pr your your prior i mean it's not that it's not that complicated a lot of people people is i see this however and i see a lot of people get paralyzed by counter narratives so i can see it in the dollar you know people don't want to take a view because they hear a seductive narrative from the dollar bulls and a seductive narrative from the dollar bears and they get paralyzed they want to hear endless debate in the end our job is that as you say weigh it up and take the view the price will then price will then tell you if you're right or wrong yeah and that's right people keep saying the dollar you know i'm like i don't care anymore i've debated this i've made my case if i get stopped out i'm wrong if i make money i'm right in the end the market will tell me yeah i love that and and having communication and content platforms like ours is certainly going to help perpetuate the the discussion and the learning process that's this is you couldn't have done this 20 years ago you know so like you said the retail community kind of went away they were here 20 years ago now they're back and they're empowered with the bloody information that is super powerful right it's not calling up um motleyfool.com and saying hey they got an internet connection with the 200-day moving monkey on it i mean that's that used to be considered edge right because because human beings can't calculate the bloody 200 day on their own in their own head uh now my my four-year-old can do that yeah i mean you and i know what we've essentially done is give people access to the kind of research and information that only the most elite people in the world had right this is a huge change people never got this information it only came to hedge fund managers or you know sovereign wealth funds and these big players who paid huge amounts of money for it and now it's changed you know this world used to be run by shitty newsletters written by people who've never actually operated in financial markets and charged people made them terrified and then sold newsletters and churned them i mean but this is changing this is real meaningful information we're trying to give people now and i'm really proud of what we've both done yeah it's empowering i mean and it's and it in the community our communities like to be clear you know you said i we i kicked the wrong bees nest i mean uh god god help those who kick the hedger real vision bees nest especially if it's ralph paul i mean people that's what happens right it's like otto they just go after the poor guy the old wall guy i mean i feel bad for the old wall guys tweeting there from like somewhere in palm beach after coming out of raymond james having a big lunch it's like oh my god you just got crushed okay all right we're gonna get uh you have a big audience obviously and there are a lot of good questions in here my last question though on that on the just to finish on this topic ralph is you know just if you will and this is obviously totally up to you but if you give people a sneak into what you know the future of bitcoin i have no bloody idea obviously but i think you have a pretty good idea of the future of real vision and when what it is the future state could look like look what are some of the most exciting things you're working on that people may not see yet so we're transitioning from just being a content provider you know we we create the world's best financial video content it's fantastic what we've managed to achieve i agree but that's really just part of the mission yeah we just launched a community called the exchange and that's got tens of thousands of people already interacting meaningfully so it's not short form twitter so this is long-form stuff where people are posting videos analysis research all of this stuff so we're building that out uh we're also layering education so we've got lots of education offerings coming and then there's a whole bunch of other communities we're going to be building onto this along with a broader b2b offering as well so there's a huge amount to come out of real vision probably over the next three to six months um people understand the scale of the ambitions that we have to help as many people in the financial world as possible from the investment banks through to the beginner and everybody in the middle that's awesome i mean more collaboration more interaction means more education faster faster faster you're either going to get educated by loss of capital or by just paying attention or both um yeah also keith the old world keith the old world was bloomberg you paid for a bloomberg terminal you paid 25 grand a year and i'm looking at my bloomberg now you pay 25 grand a year for it and everybody else doesn't get access right well we're trying to do that the opposite way around now we're trying to say okay fine whatever you can afford we'll find something for you we'll bring you communities we'll give you free content but we're going to help give you the power of understanding to understand what's going on by getting somebody like you on the platform and you give your whole um philosophy and thesis and how you see things that just adds so much value to people so yeah there's a lot to come on this yeah it's the the old tower and the square the people in the square are starting to be able to see it's amazing what happens when that happens and i and and i have actually i have a feeling that those who were had privileged inside information or not that ran hedge funds over the years are going to be replaced by the people in the square and replaced by good process so that's what i've thought for a long long time i call it i mean i call it the hive mind as you know from your subscribers and our subscribers we've got some of the smartest people in the world they just do different things so there may not be a financial market professional exactly but they know something and when you create conversation ask them hey what do you think's going on the airline industry you'll have 30 people go well i do this in the airline industry and this is how i see it playing out that's amazing that's the kind of information the best hedge funds in the world paid tens of thousands of dollars for it's free now it's our audience i love that all right uh let's get some questions here um let's see um what asset classes uh actually this is uh this is from the prior so we have some questions that have to do with the prior uh discussion um here's one for ralph uh ralph do you see bitcoin as a commodity like lakita's or more like a real store value and potential medium of exchange like gold thanks for interview thanks for the interview guys i think you've pretty much answered that and then unless there's something else you'd like to add raw it's got a lot of votes no i think it trades like a commodity i think it trades like a commodity is becoming a true store of value i think it's it's opportunity is to become the world's most pristine asset it's not there yet because its volatility looks too much like a commodity yeah um mike from toronto thanks for telling us where you're from mike hey the leafs by the way man they've upgraded uh some good signings uh that's been a a very bad situation to be a fan of that team uh what what what would make your what would make you change your view on the us dollar ralph this is the question i get the price it's the first time you've been asked it i know you might feel a little uncomfortable go for it price yeah if you know i i've got my view i've got a structural view i've got a framework i've developed over years i've been in the dollar on and off in and out for a long time i remain long dollars and i still think that it goes much further than people expect but if i'm wrong price will tell me i got pretty close to getting out recently um but i didn't and it's a long-term trade and you know i don't trade around it as much as as as you would do keith maybe i should have done i would have had some better returns in it but hey ho it is what it is yeah that's that's one where i um i know i often get characterized as a shorter term because i'm here every day uh and i tweet every day but you know my intermediate full investing cycle i think people can appreciate that i you know those can last two in the case of the dollar i went bullish uh in the middle of 2018 and i got out of it in may of 2020. that's not like a trade that's i traded up with a bullish buys for the whole time but um what i was really doing was just you know preparing for what we call quad three um and now back to quad four it's it's back to long the dollar the other thing there raleigh i don't know if you have any thoughts on that on the dollar but um i definitely do i mean the the cross when you look at cross asset class volatility and you look at fx fall in particular i mean it has spiked meaningfully here in the last month and that is not a sell signal on the dollar because of course it's the vol of all the other currencies that are that is rising yes also as you know i take it very seriously with either bond vol picks up or currency vol because they're infectious if you get currency vol it tends to infect other asset prices other asset classes so you know really monitor it and i know you look at the vola volume it's a good way to see the kickoff of of what's happening but take take it seriously yeah slide 61 guys you can see the what we call the angst on display and they do you know it's fx vol and currency ball um that are effects flying rates fall rather that are that are you know spiking uh and that's that's what happened in september and that's really you know september was a very interesting month i mean what if you're a hodler of the nasdaq you would be quite upset about what happened in september um yeah that was a 13 drawdown in a new york minute do you have any thoughts about that the bubbliness of it all or not i have my views on the bubble look it reminds me a lot of you know when i was running a hedge fund back in 2001 it reminds me a lot of that rising vol rising markets that's usually a warning sign that something's going on rising vol rising markets you tend to start eking out top patterns that are very difficult to trade uh it's really not a market for widows and orphans so once i start seeing stuff like that i tend to be cautious i won't short it and i won't be longer either it's something that you start to observe i like you know i think that if the market breaks then you know there's some easier trades to be done than shorting equities um overall particularly something like the nasdaq but you know we also saw the amount of speculative activity that i've not seen since that 99 2000 2001 period um you know it's it was spectacular to see both with softbank and their billions of dollars of call buying and retail as well buying from that happens you pay attention buying for stock splits i that was a new one for me uh here's a question from from nate um and i'm not apologies i'm not familiar with um with this conversation that you had so assuming you had it how much did your conversation roll with jeff booth change your projection on immediate deflation versus immediate term inflation i've been a deflationist for a long time you know i think we're structurally deflating we'll continue to do so as you know as you point out the the narrative can shift to inflationary periods that's okay but structurally the the chart goes top left bottom right and it hasn't changed so jeff booth's developed my thinking about deflationary wages which um i'm doing some work on for global macro investor now which i think will be a new perspective on it and that came out of the conversation i had with jeff but other than that i've always been a deflationist i don't think this trend is over i think demographics technology and debt just keep inflation lower well this look at slide 74 guys this is um high yield debt to cash flow or domestic corporate debt to gdp these charts i'm just gonna laugh i mean can you see these charts yeah i think you know these charts obviously but i mean these are funny charts that yeah i mean these are go for it it's madness right but what's interesting is high yield well bonds um corporate bonds don't price any uh economic risk any longer because of the fed so it's a weird old world where you've got you know insolvency issues but the bonds actually don't trade that way but the equity does and i've noticed that in the past in the european banking sector you know the european banks their bonds don't price anything like the risk that the equities price because the ecb is there buying the bonds and it's the same now with the fed buying corporate bonds but equities price in a very different risk indeed you know i i think the equity of general electric is going to go pretty close to zero the bonds probably won't show that risk now you might have a jump to default risk eventually but it's all coming out in the equity market first yeah this is um this is clear and present danger to many um this last last question here we could i could ask all the questions there's a lot of votes you have you're the top vote getter so far today uh ralph for your questions um and uh this one does not have to do with bitcoin uh with the amount of debt held business from emma in the uk so with the amount of debt held by central banks can real yields be allowed to rise if yes what are the implications if no how do they prevent it uh a i don't think the central bank has any ability to control these things they think they do but they don't if not we wouldn't have had the business cycles we wouldn't have business cycles we wouldn't have falling inflation we don't have any of the things that people think that the central banks can stop i worry about rising real yields caused by deflation i think this next quarter i think you're probably on the same page we might see headline inflation go negative i think real yields may go up which is the big horror right real yields go up because of deflation when interest rates are at zero you're pretty screwed that's been the big fear from central banks all along is this situation the ecb's in this mess now um you know rates um inflation has gone negative rates are already negative whatever what the hell do they do this is a really really difficult situation the thing the central banks always feared the most i mean that's that's it's interesting and we'll we'll end on that but your major risk is the same risks that peria outlined and he said specifically he says we went from risk-free interest to interest-free risk at the zero bound and it's a really i don't know i think their answer though i think it's this book i think that's the i mean obviously that is the answer the next play of course it is but the question is keith is does it actually generate inflation imagine if it doesn't if mmd does not right you mean if mmt doesn't create inflation yeah then you've got a gigantic debt default because you've got all this debt and as everybody needs to understand is debt plus deflation is a ticket to bankruptcy because your real debt goes up every year and this is the big issue when you're this much in debt what that really means is you don't have enough cash flow to service your debts so if mmt does not generate inflation then we've got a really big problem major major huge tremendously huge i can't even i can't even exaggerate how big that problem would be i'm indebted to you but now the market the market will trade the narrative of inflation from mmt but let's wait and see i'm not entirely convinced and that'll be a story for another day obviously this is not a story for this year or probably even next year but after that let's see yeah let's see i mean let's see i was going to say and i'm still i'm still going to say it again i mean it's i'm indebted to you i mean you make me think about things that i don't think about all the time and this conversation did not disappoint we started with a topic that you know i think i think i'm obviously totally confused i need some help so i got some help and um we're going to see what i do with that we'll see right raul i guess that's the story of for both of us we'll see what happens next thanks thanks for spending the time man just just don't be too cute with your bitcoin [Laughter] i'm not cute not you i don't even think my mom's cute anymore all right we'll be back with the next neil howe and john malden we got two of them at the same time [Music] you

Channel: Hedgeye

Views: 25,314

Keywords: finance, wall street, markets, stocks, trading, macroeconomics, hedgeye, keith mccullough, bloomberg, options, day

Id: 7bL25p1Lv1I

Length: 48min 36sec (2916 seconds)

Published: Thu Oct 29 2020