In the past few years, nobody could have predicted that a pandemic would be the catalyst sending shock waves through the entire global economy, plunging us into a bear market in record time. Some voices though have been screaming from the rooftops about the macroeconomic and structural weaknesses that left markets vulnerable to any potential disruption. One of those voices was Steen Jakobsen, CIO of Saxo Bank. In this interview with Roger Hirst, Jakobsen examines the weaknesses of a buyback-driven and debt-ridden market that have been quickly exposed by coronavirus. They also look into the future at how the crisis will affect real assets, the dollar, the banking system, and why, when all is said and done, we could see both inflation and deflation.
Are stock market rallies a sign that the bear market might be over? To Julian Brigden of MI2 Partners and of Macro Insiders, the answer to this question is a resounding no. He argues that in such times of extreme volatility, melt-ups are to be expected – but these brief flashes of upward momentum offer nothing more than false hope. Surveying the latest macroeconomic data, Brigden concludes that a significant contraction in GDP growth is imminent and that a sustained recovery in stocks and bonds is unlikely because consumer spending is extremely vulnerable to social distancing. Brigden also comments on central banks’ responses to the ongoing crisis and notes that their liquidity injections reduce the risk-reward of shorting traditional assets. Filmed on March 18, 2020, over Skype.
Keith McCullough, founder and CEO of Hedgeye Risk Management, joins Raoul Pal, CEO and co-founder of Real Vision, to explore what happens when a biological crisis turns into a financial crisis. They explain why they both think this liquidity crisis is far from over and why, as the deleveraging continues, the dollar will continue to reign supreme. They also examine whether shorting equities is worth the risk, how much juice is left in the bond trade, and if it’s too early to go into gold. Filmed on March 20, 2020, over Skype.
What happens when leveraged companies that have little tolerance for risk encounter one of the greatest exogenous shocks in macroeconomic history? This is the question that Mike Green, chief strategist and portfolio manager at Logica Capital Advisors, and Srinivas Thiruvadanthai, director of research at the Jerome Levy Forecasting Center, attempt to answer in a wide-ranging conversation about the long-term consequences of the COVID-19 pandemic. They argue that the knock-on effects of this crisis are made worse by very high debt levels and that, while the coronavirus will sweep away thousands of overindebted entities, resilient market actors will nevertheless be able to emerge from this chaos stronger than ever. Filmed on March 11, 2020, in New York.
Coronavirus & Zombie Ideas: How Policymakers Respond to Crisis
Paul Krugman, Nobel laureate, PhD economist, and political commenter, joins Vincent Catalano of Stuyvesant Capital Management to discuss how coronavirus mayhem has plunged financial markets, global economies, and geopolitics into chaos. Through the lens of his new book, “Arguing with Zombies: Economics, Politics, and the Fight for a Better Future,” Krugman argues that in response to coronavirus’ economic impact, the Federal government should give financial aid to state governments, local governments, and even citizens directly. Krugman and Catalano examine the role that fiscal and monetary policy play together, the importance of leadership in crises, and the potential for the enaction of seemingly extreme policy responses to the COVID-19 outbreak. Filmed on March 17, 2020 in New York.
Real Vision CEO Raoul Pal reports from self-quarantine on Little Cayman to break down this jaw-dropping week of volatility, rate-cutting, and continued contagion. Using charts published today in his renowned research publication, Global Macro Investor, Raoul analyzes the ongoing spread of the COVID-19 virus. He examines the plumbing of the markets in what could be the beginnings of a full-fledged liquidity crisis. Raoul unpacks his macro outlook on stocks, bonds, credit, gold, and the dollar. Filming in real time, Raoul then adds a post-script about the astonishing rate cut by the Fed. Filmed on March 15, 2020, on Little Cayman. Find Raoul's latest GMI report on the coronavirus outbreak here: https://rvtv.io/2vv2h04
What’s the impact on the ground from coronavirus in Italy right now? Giovanni Pozzi, managing director at a family office in Italy, joins Real Vision’s Raoul Pal to discuss his first-hand experience during the national shutdown in Italy. Pozzi details the effect he’s witnessed on the health system, the economy, and people’s behavior during the ongoing crisis. Pozzi and Pal break down the knock-on effects that coronavirus and the government’s response will have on the economy, fiscal and monetary policy, and financial markets. Filmed on March 13, 2020 via Skype in the Cayman Islands and Italy.
Konstantin Boehmer, portfolio manager of global fixed income at McKinsey Investments, joins Ed Harrison to present his long-term macro thesis, based on emerging trends in ESG investing. Boehmer explains that his investment thesis is not about the ESG movement within the investment industry specifically, but rather it is about generational changes and lifestyle choices people are already making. Identifying patterns in business and technology cycles over the last 250 to 300 years, he argues that mankind is on the brink of another technological golden age. Along with the evolution in technology adoption he predicts, he also foresees cultural changes that will lead to actionable investment opportunities based on new priorities in how people choose to live their lives. Filmed on February 13, 2020 in Toronto.
Rashique Rahman is a global macro specialist on the front lines of emerging market investing. He speaks to Real Vision’s Ed Harrison about the structural obstacles that emerging market economies face. Rahman discusses the compounding trade deficits that could trigger a liquidity crisis in countries like Argentina and Turkey, the enormous commodity risks that lumbering giants like Russia must overcome, and how stagnating income-per-capita is pushing countries like South Africa and Chile to the brink of societal collapse. Overhanging all of that is the U.S. dollar, which has appreciated greatly over the past half-decade and is a chain around the neck of all countries with liabilities denominated in dollars. Rahman argues that at the end of the day, emerging markets are not just a sector to which investors can allocate capital, but rather a world in and of itself. He reveals why investing in winners and avoiding losers will provide returns that taking secular bets will not. Filmed on January 28, 2020.
Praying for a Miracle: Coronavirus' Black Swan Risk
Will the coronavirus cause the everything bubble to pop, trigger a global economic depression, and be the impetus for major systemic changes? Raoul Pal of Global Macro Investor argues that the current coronavirus outbreak could be the “biggest economic event of our lifetimes.” He reveals his analysis of the real risks presented by the coronavirus outbreak and the ensuing response for people, markets, and institutions. He compares the COVID-19 outbreak to the Spanish Flu from a century ago – pointing out the important similarities and differences. He connects his doom loop thesis to the Black Swan risk that coronavirus represents to the indexification of markets, the coming retirement crisis, and the everything bubble. Finally, he shares his thoughts on the impact a global event could have on gold and cryptocurrencies and shares his hope for a better future born of the COVID-19 chaos. Filmed on March 4, 2020 in New York.
Even before Ben Bernanke made the official declaration that the Fed is in fact targeting inflation, economists and governments around the world have counted on it to manage ever increasing debts. Jeff Booth, author of “The Price of Tomorrow,” argues that they are fighting an inevitably losing battle. In this interview with Max Wiethe, Booth makes the case that secular deflationary trends will be the ultimate undoing of monetary policy and technology is driving this deflation at an increasing rate. He touches on several of the most culpable technologies, the potential issues society will face as a result, and the asset classes and businesses in the best position to take advantage of this trend. Filmed on February 25, 2020 in New York.
In the book of Ecclesiastes it says that, “there is nothing new under the sun,” and in economic and financial terms that translates to the adage, “this time is not different.” Dan Oliver, Jr. of Myrmikan Captial LLC joins Real Vision to put the impact of coronavirus into the perspective of supply chain reorganization and the current credit bubble. Oliver outlines the history of how and why credit bubbles form, how the current credit bubble came about, and the mechanisms through which this bubble could pop. Oliver breaks down bubbles from Athens in 594BC to the 2008 financial crisis and what the response from governments has been and might be in the future. Finally, he breaks down his essay called, “Gold Past $10,000,” and provides investors with a roadmap to avoid the worst of the end of this credit cycle if coronavirus triggers a meltdown. Filmed on February 26, 2020 in New York.