Even before COVID, global deficits had already expanded—but in the last year, they have exploded to levels that almost guarantee increases in taxes. We can already see the effects as high-net-worth individuals and businesses leave high tax areas like California for lower tax areas like Florida, Texas, and the Cayman Islands. Dominic Frisby, author of "Daylight Robbery: How Tax Shaped Our Past and Will Change Our Future," sits down with Real Vision CEO and co-founder Raoul Pal to discuss the history of taxes, sinister invisible taxes in the form of targeted inflation and monetary debasement, and the future of taxes considering the trends outlined above. Pal and Frisby also discuss the inevitability and virtues of some level of tax and cooperation and the potential for better tax structures to emerge from this crisis. Filmed on March 2, 2021. Key Learnings: Increased taxes, new taxes, and monetary debasement are almost an inevitability considering massive global deficits post-COVID. Immigration and migration patterns have already emerged, and geographies that recognize these trends and adjust their taxation and monetary system in a fair way will attract both human and traditional capital.
If Duration Is In A Bubble, Where Can Investors Hide?
As treasury yields continued their ascent today, big tech stocks such as Alphabet Inc ($GOOGL) and Apple Inc ($AAPL) joined growthy darlings such as Tesla, Zoom, and Peloton in today’s sell-off with the NASDAQ 100 closing today down 11% from its highs. Real Vision editor Jack Farley welcomes Tyler Neville, senior editor of Blockworks, to break down the ongoing rout from growth stocks. Neville shares how he thinks this “bubble in duration” will end, where he sees opportunity in going short GameStop puts, and why he remains extremely bullish on Bitcoin.
The "Right" Price for Bonds, Demographics and Inflation, and Cheap Bets on Volatility
With bonds selling off alongside equities and the volatility of both asset classes rising, there is perhaps no better time to hear from The Convexity Maven himself, Harley Bassman. In this interview with Logica Capital Advisors partner, chief strategist, and PM Mike Green, Bassman outlines his view that this move higher in rates is the bond market finally moving towards the "right" price after a decade of interest rate suppression. Green and Bassman discuss the positive and negative consequences of higher rates, a steeper yield curve, and monetary and fiscal policies like negative interest rates and stimulus checks. They also touch on the current opportunities that Bassman sees and his prediction of inflationary impulse due to demographics sometime between 2023 and 2025. Harley Bassman has provided a slide deck to accompany this interview which can be found here: https://rvtv.io/3cai4CR and his commentary on convexity can be found here: https://rvtv.io/38eiXZS. Filmed on March 3, 2021. Key Learnings: Bassman believes interest rates have been kept artificially low, and the current sell-off in bonds is the market moving towards the "right" price. He also advocates for investors to be long convexity and believes that OTM calls on equities and long-dated options on interest rates are extremely cheap.
Hidden Credit Risk, Jobs, and the Sudden "De-Frothing" Reversal
Real Vision senior editor Ash Bennington welcomes managing editor Ed Harrison and editor Jack Farley to make sense of today’s confounding price action. Growthy names plummeted alongside re-opening stocks like cruise lines and airlines, only for a sudden risk reversal to take place midday for all U.S. stock indexes to end the day deep in the green. Harrison and Bennington analyze today’s non-farm payroll numbers, which showed strength in the labor market concentrated in the beleaguered leisure and hospitality sector. After the three explore how rising bond yields impact credit spreads and credit risk, Harrison investigates whether the rotation away from growth and into value and re-opening stocks will be a lasting trend. Farley provides data concerning SPACs, showing that the number of special purpose acquisition vehicles trading below $10 has steadily rose and why this could be another sign of the fragility of growth stocks.
Everyone agrees that data is the oil of the 21st century. But how to invest? Charles Li, recently retired chief executive of the Hong Kong Exchanges and Clearing (HKEX) and the creator of the brilliant but very complex Hong Kong - Shanghai Stock Connect, and later the Hong Kong Shenzhen Stock Connect, explains the investment opportunities in this sector. Due to its population and less stringent views on privacy, China could well become the world's largest exporter of data—health data and financial data among others. Li also discusses why Hong Kong is crucial to China and why it will continue to prosper. Li also explains the magnitude and speed of the digitalization of the Chinese economy and the investment implications. Finally, he talks about his latest, incredibly innovative project in China—to provide financing for small and medium-sized enterprises, which have been starved of capital for years. His vehicle is what he calls revenue participation swaps, where the lender participates directly in the revenues of the business. Li was born in China, went to journalism school at the University of Alabama, and obtained a doctorate at Columbia Law School, later becoming a Trustee of Columbia University. Before HKEX, Li worked at Davis Polk & Wardwell and Brown & Wood, and he was Chairman of JP Morgan China. Filmed on February 20, 2021.
Bonds Bite Back: How and When Will the Fed Respond?
Peter Boockvar, CIO of Bleakley Advisory Group and editor of The Boock Report, joins Real Vision managing editor Ed Harrison to break down today’s volatile price action in bonds and high beta stocks. Boockvar explains that Fed Chairman Powell’s dovish comments earlier in the day triggered another sell-off in bonds as the market, emphasizing their fear of inflationary pressures to come in 2021, pushed back on the Fed for staying the course. Harrison and Boockvar explore a few different scenarios where the Fed could begin to move against the rise in rates including ramping up their bond buying programs and implementing yield curve control. They also examine the consequences of these actions and the possibility that the Fed will refrain from intervening until markets begin to break. Finally, Boockvar discusses equities, considering the potential winners and losers in this environment.
Teddy Vallee, founder and CIO of Pervalle Global, returns to Real Vision to share his latest views on economic growth, interest rates, commodities, and tech stocks. Citing everything from soaring retail sales figures to elevated levels of personal savings, Vallee projects that economic growth for U.S. GDP could be as high as 12%. In this reflationary environment, Vallee expects that bonds will continue to sell-off and that energy stocks will thrive while technology stocks will fare poorly. Filmed on March 1, 2021. Key learnings: Due to his lofty projections for economic growth (around 12%), Vallee estimates that U.S. nominal and real 10 year Treasury yields are likely to rise 100-150 basis points over the following 12-14 months. Accordingly, he expects tech multiples compression 20-30%, and energy equities, particularly those in Latin America, performing well. Because energy comprises a small percentage of the S&P 500 relative to tech, this period of reflationary growth could actually result in negative returns for the broad index.
In the first segment, Lyn Alden of Lyn Alden Investment Strategy shares with Real Vision editor Jack Farley her thoughts on how the ongoing rout in U.S. Treasurys will amplify the rotation away from growth stocks and into cyclical stocks. Alden opines on how the Federal Reserve could aim to reassert control over the bond market, whether it be “Operation Twist” or yield curve control. In the second and final segment, Farley welcomes Howard Klein, founder and partner at RK Equity, to give a strategic update of key parts of the mining sector such as graphite, nickel, and, most notably, lithium. Klein shares news on lithium miners such as Albemarle Corp ($ALB), Livent Corp ($LTHM), and Piedmont Lithium ($PLL), to which Klein is an advisor and is also up over 1000% since September 1, 2020. Klein explains why he thinks we are at the beginning of a commodity bull market and shares his views on MP Materials ($MP) and Nouveau Monde Graphite ($NMGRF).
Generational Wealth: How to Preserve and Grow Your Money
The greatest generational wealth transfer in history is currently taking place. In the upcoming years, trillions of dollars and assets will be passed from baby boomers to later generations. Real Vision's Haley Draznin is joined by Mike Boyd, an Australian expat living in Singapore who specializes in the world of multi-generational wealth creation, family enterprise, and family office investing. Generational wealth typically doesn't surpass the third generation, but Boyd discusses how to set up a value system of wealth that focuses on making decisions for long-term success. Filmed February 22, 2020. Key Learnings: 80% of generationally wealthy families are experiencing wealth for the first time. Investing in things like a family constitution, having intentional family meetings, developing stewardship, and establishing a family governance system will help create more sustainable means for future generations.
A New Yield Regime: Commodity-Led Rally in the Making
Real Vision senior editor Ash Bennington welcomes back Tony Greer of TG Macro where he declares that the five sigma sell-off in Treasuries last week marks the beginning of a new yield regime that will support a resources-led rally in earnest. Greer points to the dramatic move in rates being a response to visible commodity inflation, which is indicative of its strength. Because Greer sees a resources-led rally emerging, he explains why this is bad news for the tech sector over the next few months. After walking through the signals that are telling Greer that “this time is different,” he discusses how he’s positioning himself and what he’s eyeing in light of these changing market dynamics that continue to escalate.
M. Taylor Fravel, Arthur and Ruth Sloan Professor of Political Science and director of the MIT Security Studies Program, sits down with his long-time friend Mike Green of Logica Capital Advisors to discuss a multitude of factors affecting China's strategic objectives. Although they examine certain aspects like demographics and the trajectory of growth for China's military, the focus of the interview is on geography and how China’s large number of land borders and their perception of being blocked off from the Pacific Ocean by U.S. military presence in South Korea, Japan, Taiwan, and the Philippines makes the "first island chain" a potential flashpoint for conflict. Green and Fravel also discuss Green's hypothesis that Vladimir Putin and the Russians are the deftest participants in the triangular relationship between the U.S., China, and Russia. Filmed on February 25, 2021. Key Learnings: It wasn't too long ago that trade deal headlines were whipsawing markets back and forth. The outcome for U.S.-China relations is not set in stone, and investors need to be aware of the risks and opportunities presented by this conflict.
Bond Vigilantes Grumble as Bitcoin and Equities Recover
Real Vision managing editor Ed Harrison is hosted by editor Jack Farley to break down the continued breakout in Treasury bonds as the S&P 500 posts its best day since June. Ed and Jack investigate last week’s carnage at the “belly” of the yield curve, the interest rate risk that long-duration bonds are exposed to, and the Reserve Bank of Australia’s ramping up of its QE bond purchases in order to appease the “bond vigilantes” and keep rates pinned. Later, Real Vision CEO and co-founder Raoul Pal joins the show, and he shares his outlook on the risks that rising yields pose to markets as well as the dramatic rebound in the crypto markets. Raoul updates his views on commodities and emerging markets, sharing his key learnings from his interview with Jim Rogers, which aired today on Real Vision.