October 2025: Raoul Pal The Journey Man's Monthly Recap

0:18Hey everyone, as you know, on this podcast I bring the best guests in the world at that nexus of understanding of macro, crypto, and the exponential age of technology. If you're enjoying the show, a quick five-star rating goes a long way. It helps us grow and keep these conversations coming with the best guests in the world. Thanks a lot. Join me, Raoul Powell, as I go on a journey of discovery through the macro, crypto, and exponential age landscapes. In The Journeyman, I talk to the smartest people in the world so we can all become smarter together.

0:55I think it's a mistake to talk about crypto anymore, separate from normal assets, because we're going to a world where everything is getting tokenized, so it doesn't really matter. What I think has happened in the last year, since the new administration and the new regulation coming around the world, is that you have given a stamp of approval to the layer ones that are building true infrastructure for the world, like Ethereum or Solana, and you talk about Sui and others. And so now I don't think of them as crypto, actually. They're just networks. That's right. And now they happen to be priced through a token that's raised 24-7 on chain.

1:35But they're just now networks. So now it's much easier to think about them as what's the price of the network? How do you price it? What scale they need? What volume? What revenue streams? What business modes? So I think we're past. I think Bitcoin is the begging from everything else. because they're becoming truly two different categories of assets. And you've seen it in the price action of the last six months. They have different price actions, more or less. So I believe that that is the best example that this is just, there was a time when you had to have a token-only vehicle because of SEC and regulations and how to think about it.

2:14But now it's all the same, because in the next few years, as we tokenize every single stock in the world, and it trades 24-7, an Ethereum or a Solana token, it will be the same as buying a Robinhood stock token. So we think the difference between equity and token just collapses over time. I think it does. For the bigger projects and the bigger things, I think it does. And I think we're still in early stage experimenting everything around meme coins and what are they and agentic coins and what are they. And that's the whole new, new thing. But everything on top of that is just, they're just tokens.

2:49And what is... Yeah, one of my thesis has been, and I just wanted to bounce this off you, is that I think of mean coins as just a speed test, a stress test of instant capital formation. And before you'd have to build a business, go to a bunch of VCs or angel investors, beg them and everything else. And now it's like, if it captures attention, you can coalesce capital in seconds globally through a distributed network. How are you thinking about how disruptive that all is to the VC industry or the investment industry overall? I think it's super disruptive. I think most VCs don't understand what's coming, even for us.

3:32We are not 100 % clear. We know exactly what it means. But I am shocked on the velocity of capital formation and attention that you can get. It's never been faster.

3:48you and I have met people that are doing this full time and what they're building is insane and how they get attention so I will say we're not there yet because we're not at scale it's there's not a great the early projects have not been great communicators on what they're doing they've been a lot more of grabbing attention but not knowing what to do with it I think we're going to start to see a generation of founders who are 22, 23, that actually are so crypto native and so AI native that they will take it to a whole new level. So I'm very bullish on what's coming there. Extremely bullish. Liquidity explains what between 90 and 97 % of pretty much everything.

4:32You have one macro factor. I've always said that it's the greatest and easiest macro risk-taking environment of all time because you have one macro variable that matters and nothing else really counts. Yeah. But I think to add a bit of spice to that mix, what happened roughly two years ago as well was that the credit creation moved from the central bank balance sheet to the broader economy. Yeah. And a lot of people completely missed that. Because if you look at the Fed balance sheet, it's basically flatlining, right? We know the reason why we have quantitative tightening running in the background.

5:10Then you have a couple of countering factors. But the balance sheet is flat. Well, the Fed net liquidity measures. Yes, exactly. And therefore, the money created since 2023, all of that credit creation has happened in the private sector. and in the treasury deficit, basically. So, of course, if you run a huge deficit and private banks create money by lending out to households, corporates, you're going to see an explosion in liquidity just from another source. So, essentially, three agents in an economy can create a dollar. The Federal Reserve can create a dollar. That's what we've been used to being the key driver.

5:55The US Treasury can create a dollar by running a deficit. and a commercial bank can create a dollar by lending out and increasing their leverage and it's only two out of three aliens that have added liquidity for the past couple of years and the fed is not one of those two and that i think that has caught a lot of people offside we looked at this and wrote a lot about in gmi and real vision pro is it seems that they're trying to move the game when people understand what the game is so at first it was the balance sheet from 2008 until 2012, 13, 14. Then it became FedNet liquidity, which is all of those measures.

6:32And now they've gone to total liquidity, which is really right now being entirely driven by the private sector. But it's still liquidity. And I love the way you put it. There's three ways you can create a dollar. You need to keep your eye on all three ways. And there's also a certain amount of liquidity that comes from issuing short-end bills as opposed to long-end. It seems like that's a liquidity provider. Yeah, indeed. You know, and at first, the current administration, you know, tried to at least rhetorically lament the bill issuance of the Janet Yellen treasury, but they ended up doing the exact same thing, right?

7:11So they've utilized that as a liquidity instrument without any doubt. And we've, by the way, also seen that in global yield curves. And I actually think this is an overlooked mechanism. If you look at Japan and Europe right now, we're also seeing a large credit creation in those economies without the central banks really helping that trend, actually. And interestingly, if you look at the Japanese case, you know, we've seen this massive steepening of the Japanese yield curve where long-term bond yields have been allowed to rise for the first time in a long, long while. and while it seems counterintuitive on the surface that when you know bank of japan has basically pulled back from intervening against long-term bond yields going on it has ultimately released the animal spirits of the japanese commercial banking system again because they've they were stuck in one or two decades of no carry so they basically have a business one where they borrow short and lend out longer out the curve and when the curve is flat as a pancake they can't really make any money doing that so they don't lend out and as soon as this shift happened very aggressively they started lending out in a way that we haven't seen a very long while it's always been my impression that the global central banks completely understand what they're doing japan is always the leader in this for some reason because it's got its population's older i guess you know There's just, and there's signal in what they're doing, which is saying they've all seem to have gone away from using traditional methods to just going straight to the private sector and using the banking system.

8:58And Japan is doing the same thing by readjusting its yield curve. Yeah, it is. And at the same time, we're obviously seeing this global trend towards removing red tape, removing capital restrictions, et cetera, for private banks, again, incentivizing them to do the heavy lifting on this liquidity creation. And I think that's essentially what a lot of people have missed over the past couple of years, that we've seen a move from central banks doing the heavy lifting themselves to instead incentivizing the private system to do it instead. Why did they do it? At least my initial thesis was that, you know, they were scared in the aftermath of that inflation spike in 2022 into asking someone else to do the dirty job.

9:45They can't be hung for it. So it's like, well, we're not doing it. therefore they've incentivized the private system to do it instead and i think that makes as for as long as we're running inflation above their target range that's probably how they're going to to maneuver this oh so their messaging looks consistent it's like we're not adding liquidity because we understand inflation meanwhile they're like hey you guys over there buy as many of these bonds as possible and create more credit on the back of it yes exactly uh so ultimately i think it's a result of what happened in late 21 early 22 with that inflation spike um and they're not willing to once again take the blame for inflation running a little bit above target as we are right now so they're they're asking uh the private system to do it and that just tells you they know what they're doing yeah everybody calls the fed idiots but i'm i've always figured that if you actually take the framework of they know what they're doing look at it through that eyes it's much clearer well i'll never forget your trade in eth in 2017 it was that last quarter was wild i remember i sold out my bitcoin at like 2000 i bought it at 200 yeah i sold that in 2000 i thought i was doing well i sold that in april by december it was 20 000 10x we went 10 to 20 in about six weeks yeah and you you have the eath trade on then i remember i did um i should ask i don't have an eath tattoo i'm getting no more tattoos of cryptos no no don't but man i should have got an eath tattoo because it bailed my psychology out so much i had left fortress and i made so much on eath that year and that's when i sold someone bought my plane and i started my philanthropy and you know i should at least sketched eath into my plane but it was that and let me tell you that ETH I sold at$330 to buy my plane, right?

11:49We're at$3 ,600 right now, right? Expensive plane. But when you bought it at$1 and you sold it at$330, it felt, but that really restuffed my coffers and my psychology that, and you know, listen, there was a lot of luck involved in that. The one thing that's interesting is the hardest part about great wealth, creating great wealth is riding a trend. And lots of all the great fortunes are in trend. There's not one great fortune. All those great CEOs who are so wealthy, they rode the trend. But when you're liquid and it's not your business, oh, you want to you want to. You want to just hit the cash register all the time.

12:30And so it was a little easier because I was already wealthy and it was easier because ETH moves so fast. Yeah, it moves so fast that you it wasn't like I didn't sell any. I sold a little. I sold a little. and it just kept gapping up the whole, you know, I think what was the high there was 1 ,100 that year. To think about it, I sold 330 and felt like a genius and then I went to 1 ,100. But I kept selling the whole way up. Yeah, the back end of a crypto bull market is wild. Yeah, and it doesn't feel like we've had that. No. You know, and so that's why we all hold our hope for that one last. The famous banana zone, the one.

13:11The secret to being a great investor is seeing the world six months ahead. The macro investing tool at Real Vision helps you understand the macro seasons and allocate your assets accordingly. It's like having a crystal ball, pure alpha from myself and Julian Battelle. You can try it out by signing up for Real Vision, Real Vision Alpha for 30 days. The link's below. the business cycle. The business cycle is the daddy that drives earnings in the economy and is the kind of arbiter of economic growth. The business cycle has been lackluster. As you know, the ISM survey has been slow. The ISM survey is actually driven by liquidity, which leads by six months.

13:56Liquidity has been relatively choppy on a year-on-year basis, on a global basis, but ahead, we should start to see ISM grow. Note the little hook down in liquidity that's currently happening. Oh, that seems to correspond with other things that are going on right now, but that's a forward-looking thing. So liquidity has been pulling back somewhat, but we expect the business cycle to start to grow. Obviously, we've got this government shutdown. I'll come on to that in a sec. That may still cause another month or two of weaker ISM because of the government sector. Maybe not. We'll have to wait and see.

14:39I'm indifferent to it because we know where it's going. Behind this indicator is probably 50 to show a lead on this. What's important here is the GMI dominoes. This is the liquidity cascade. out in the future in this lovely, attractive purple color is the GMI Financial Conditions Index. That lives nine months ahead of the ISM. That is what leads it all. That's driven by interest rates. It's driven by commodity prices. It's driven by the dollar. And that has started weakening after a period of consolidation. So weakening here is this going up because it's inverted. So what we've got is easier financial conditions are going on.

15:28And we've seen that as rates have started to fall. So that is going on. That leads total liquidity by about six months. Now, there's a bit of a shifting lead lag here. But either way, we're expecting global liquidity to now follow GMI financial conditions. Does global liquidity have another a down month? Probably, possibly, maybe two months. No, I think it's a month. And then what happens is it hooks up with financial conditions as we go into the end of the year. So October would print as a weaker month, obviously because of what is happening with the US government shutdown, where there's less liquidity being pumped in the system.

16:08But I've come to that. And then the ISM follows suit. The ISM is where, when we get above 50 and start expanding, is where alt season is. It's where the Russell 2000 breaks out. It's where the small caps start going. It's where the riskier credit starts moving. That's the real game in town. You need a booming economy and lots of liquidity to drive the money shot, the way you can make money by just throwing a dart on your screen and whatever it hits will go up. That's to come. Those are the banana zone points when things really accelerate. It's all coming. It's a matter of patience. Don't forget, the ISM has one data point a month, and you think you're trading it with your tick charts on your screen.

16:57You are sadly deluded. That's not how this works. So hence why you just kind of do nothing and let this play out. We've got the game here. The game here is that. The game here allows the asset prices to move because total liquidity is the thing that drives Bitcoin and the Nasdaq, which are the things we really care about. Where's the world? How are you reading it right now? Oh, I think monetary policy is fascinating. You know, we have full employment. Inflation is debasing our assets by 3 % a year. Over your lifetime, that's 90 % of your purchasing power gone. And they're cutting rates. Like, it's crazy.

17:42It really is crazy. So I think, unfortunately, I think on the macro side, there's some bad outcomes coming. And again, these things take five or 10 years. So it's kind of a boil the frog type thing. Like, you know, your viewers probably won't see it happen next week and they won't go, you know, the Dan was right or whatever. But I think, you know, the macro stuff is just out of balance that that we have two trillion dollar deficits in the United States. literally in the best of times. Like what else could be better? Like stock market record high, real estate record high, everything, unemployment record low.

18:13And if you ran a 2 trillion deficit in the good times, you know, it's scary to think of what could happen in the bad times. So that's my main thing. I think the Fed really made a couple huge policy mistakes in 2020 and 2021. There was a time where inflation was 8 % and the Fed funds rate was zero. That's called a policy error, right? And decreasing rates right now when everything's booming, record everything, record fiscal deficits, the monetary system is supposed to be the check and balance, right? It should be the thing that's balancing excessive fiscal spending. And I just don't see that. And it really is wild that the Fed is currently cutting.

18:58They're forecasting much more cuts. If anything, they should be hiking. Yeah, I mean, how I look at it is, yes, there's 3 % inflation, but there's 8 % debasement. So they're printing fiat currency at the rate of 8 % a year globally. So you kind of add that to the 3%. I think of it as like an 11 % hurdle rate right now. So your money's getting evaporated, which is why this rush into gold, crypto, everything else keeps going. But then when you listen to Scott Besant, who's one of our macro brethren that we've all known for years, is Scott is saying he wants a weaker dollar and he needs to refinance the debt and he needs to get rates down to refinance the debt or the deficit gets even bigger.

19:37So it's like, OK, you can see the trap now. There's nothing they can do except keep debasing until they get through the debt refi cycle. Sure. You know, we've seen some people try that, the Argentines and others, right? Like, we know where that ends. And look at countries like Switzerland that don't do that. Their currency keeps appreciating inflation is low right so that's why i think it's scary scott beston's obviously an incredibly smart guy to be advocating those policies is is scary right and so once if they didn't i mean that's the other thing i play through in my head it's like okay fine it's all well and good i was criticizing the fed and the treasury if they didn't do it then interest payments just keep ballooning and it just gets even worse i mean there's no way of cutting the deficit even elon went in and elon can basically do anything but he can't do this yeah so the thing you have to start with is debasing your fiat currency against everybody else's fiat currency is a race to the bottom we can't all debase against each other right like that is the problem and i think that's why anything with a fixed quantity surging up in price relative to the value of paper money because every country well not every country i just mentioned switzerland is not.

20:49But, you know, most countries are accepting things that, you know, back in the day when you and I were talking macro in the 90s, people would faint if you'd said, oh, you know, Europe's going to have these massive deficits. The United States is going to be cutting at 3 % inflation. People would say a billion to one against that. And now everyone's like, oh, it's all cool. You know, well, let's do that. So I think that's why everything's at record prices, right, except for paper money. And that's a graphic we put on our Twitter feed a long time ago, and it's probably on our website, is the price of the U.S.

21:21dollar in bushels of corn, ounces of gold, you know, shares of the S &P 500. It's the same story, right? Everyone's like, oh, it's really wild. Gold's at a record and the S &P's at a record. No, they're all kind of the same in a relativistic sense. They're not doing anything. It's the price of paper money that's plummeting. And that's why I think that the US's policy of let's just debase our currency until we decide to make iPhones in Georgia or something, I don't know if that's going to work, right? There are reasons iPhones are not made in Georgia. That's their bet, is that they can get productivity up, but you've got an aging population, which makes it immensely difficult without massive amounts of AI and robots.

22:02Maybe it happens in the future. I think it probably does, but there's a very clear debasement trend between now and then, whenever then is. You obviously enjoyed the episode because you're here with me at the end. But listen, don't forget to go to realvision.com forward slash join and grab a free membership. It's an incredible community packed with alpha, great investment ideas, and the research that you need to help you unfuck your future. So get started now. Go to realvision.com forward slash join.