URGENT Market Update: Tariff Panic And Recession Fears — Raoul Pal & Julien Bittel

31:42And I think also, and that's a good point, I mean, because the thing to keep in mind here is that financial conditions are advanced by nine months. And so earlier in the year, we were asked, well, does the cycle end in Q4? Does it extend? But because this is already advanced by nine months, this pushes us into late Q4. And if we're in an environment where the Trump cycle is repeating, which is something I'll talk about in another section a little bit later, then all of a sudden, if we're in an environment where the dollar weakens or at least trends lower over the course of the next three to six months, that's all of a sudden going to push this T line out even further.

32:13So what I've always said is that the more financial conditions ease today, so the more the dollar drops today, rates go lower, so on and so forth, the more the business cycle can extend tomorrow. And tomorrow, I mean Q1 of next year. And then what I always like in lead indicators is when you take two separate approaches, two completely separate approaches, and they arrive at a similar conclusion. So if we just get back to the GMI Financial Conditions Index, it was pointing to something around 57.8. And then if we look at another one of our lead indicators, which is basically one of our internal growth scores coupled with the percentage of central banks who are cutting rates because it takes time for changes in interest rates to impact the real economy.

32:58So here we're also forward by nine months. This would suggest once again that we should be focused on the ISM moving higher from here as we progress through the year and not lower. But it's weird because the market narrative is tariffs are going to lead to recession. Can't you see these guys are morons? What we do not see is any evidence of that within our forward-looking data, which should be pricing this stuff in, but is not pricing in a recession. Yeah. But again, I think it's really – people are confused by – the market speculated on not quite recession, but the dollar rallied, which typically happens in kind of a risk-off environment.

33:42Bond yields tightened, so financial conditions were tightening on both ends. But this was all because we were pricing in the fact that inflation – or sorry, tariffs were inflationary in Q4 of last year, which is now – but it's driving growth lower. So we already kind of priced that in, if you see what I mean. Exactly. And then what we know is that it's really these periods. So currently the ISM is back below 50. But once we cross above 50, okay, and we trend into our late cycle peak, which is typically above or let's say around 60. And as I just pointed out before, our lead indicators are already suggesting that we're going to approach those levels.

34:22that this is typically where we see the big moves in Bitcoin and other risk assets more generally. But if we just look at the 2016, 2017 cycle, because we're going to zoom in on this in a second, you'll look at that white line in Bitcoin between those two, kind of the gray bar and the pink bar. So the ISM crosses 50 to the ISM peak and be like, wow, that looks like a straight line higher. Well, no. I mean, over that entire period, there was multiple 40 % corrections, multiple 30 % corrections, multiple 20 % corrections. So that's why in the beginning when Raul said, you know, these are the rules, these are our rules for engagement.

34:56They absolutely are. 35 % corrections are the norm. And you just have to get used to that. As we've kind of always been saying is that, you know, crazy volatility is the price you pay for crazy returns. So you just kind of got to let that sink in. And then as the business cycle accelerates, this is typically when we see um all season right so we see altcoins starting to gain market share uh versus bitcoin and this operates you know you can pretty much plot anything versus the ism which is something both ral and i have been doing for a number of years but you could take commodity prices you know like copper you know copper gold oil prices you can take credit spreads you could take small cap versus large cap emerging markets it's all the same thing the point being is that as the ISM rises, you get more earnings.

35:47It confidence starts to improve. As confidence starts to improve, that means that people reach further out the risk curve. And that applies to small cap versus large cap equities. You see, it applies to like value over growth. It's just that cyclicality, which is why - What's fun, sorry to interrupt, Julian, but that chat GPT conversation I had that you've seen - Yeah, it's very good. Goes through all of this, puts it all together. and we ask the AI for how it thinks about all of this stuff, what comes together. We get it to nail how it sees alt season, which is very similar to this. Again, those of you in Real Vision Pro and GMI guys, you'll get this incredible transcript from ChatGPT, which is like an independent third party stress testing our work.

36:31I think you'll all love it. And this is a core part of it. Yeah. So anyway, the point being is that this is, you know, for alt season to happen, you know, we need to see the ISM rise, which is what we're expecting. So people reaching further out what we call the crypto risk curve, much as they do, much as a credit spread behaves and much as like an equity risk premium. Okay. So it's all the same thing. And then if we look at, you know, crypto total market cap, excluding Bitcoin and ETH, all that's happened so far, although it's all that happened, all that's happened, it's, it's, it's felt, you know, brutal as we've come back to retest the breakout of what i think is a larger wedge pattern and so this just all feels and bitcoin by the way has just come back to retest an inverse a larger inverse head and shoulders pattern which is something that this is basically also the same as global m2 correct oh yeah if you which is a chart we can show i'll show later um but yeah you can take that same period and it's it's all percent chart right so and then let's talk about i had mentioned this.

37:34Let's talk about the Trump 2017 cycle is repeating. So this is a chart that we had shared in Q4 of last year. Raul and I had for some time, I've been noticing the similarities between Q4 2016 and the dollar strength that we saw, you know, obviously in Q4 of last year. And this chart, I mean, it's just been working so well. And then obviously we switched gears in our annual outlook, talking about an environment where the dollar would weaken. And not only we can, you know, because what's funny about the dollar is actually over the last two years, it hasn't really done anything. It's just done this.

38:11And that's directionally, that's quite bizarre for the dollar. And what that's meant, obviously, is that the business cycle really cannot pick up. And these are charts I didn't include in here. But if you look at the ISM over that same time period, you'll see that the ISM has done this. Liquidity has also done this. So if the dollar actually trends lower over the course of this year, very similar to as it did in 2017, then that creates an environment where all of a sudden financial conditions are easing so rapidly that growth can start to pick up. And as Raoul had mentioned, Scott Besson wants this.

38:40J.D. Vance has talked about this. You know, Trump has talked about this. You know, Trump understands the implication of a strong dollar, right? It suppresses exports. It hurts corporate earnings. And generally, as I just mentioned, it keeps the business cycle sluggish. That's a key thing I put in a tweet about this is, look, Scott Besson is a macro hedge fund manager. He understands how liquidity drives markets, what drives liquidity, and he understands his three pillars are the dollar, oil, and rates. What are the three pillars of our financial conditions index? The dollar, oil, and rates. That's right.

39:13And so you're telling him, say, you even heard him, he's even talked about financial conditions. He's mentioned that word. he's also talked about the everything code in the element of what they're trying to do is get rates below nominal gdp growth which is financial repression and the way to service the debts so he understands the big picture obviously i've known him for 20 years or so but um it is very interesting when you've got a macro hedge fund manager running the show because he understands these things. Yeah, totally. Totally. So again, we still stick to our guns that it won't be a straight line lower, very similar to what we saw in 2017, but the dollar should work lower over the course of this year.

39:56And as this is happening, because as Raoul had mentioned earlier, a lot of the moving global M2 is driven by the dollar. Global M2, of course, is also mirroring the Trump 2017 cycle perfectly. Okay. Now, when we look at our total measure, which Raoul had talked about earlier, which is both public and private sources of liquidity, we had said really all along that we were going to retest kind of the breakout zone here before pushing higher. Which is the same as that, the market cap minus Bitcoin and ETH. Correct. It's the same chart. It just leaves it a little bit. It's kind of all the same chart.

40:37It's all the same chart. It's all the same thing. It's all liquidity. It's all liquidity. And coming to that point of it's all liquidity, if this is right, okay, we know that our GMI total liquidity index versus Bitcoin has an R squared of around 89%. Okay. And then for the NASDAQ, it's 95%. So, of course, the business cycle and liquidity are the two most important driver of risk assets. And if we're right on the basis that China will stimulate, Europe will stimulate, and the Fed will stimulate this year, in 2017, as Raul mentioned earlier, we only really had China and the ECB. The Fed was actually withdrawing liquidity.

41:16Then this is an environment where you want to be invested. Now, the only other thing I'm going to say to the 2017 cycle is that tariffs are more aggressive this time around, and also Trump didn't put tariffs really into effect until 2018. but over his entire term, CPI averaged 1.9%. Core fell the entire time. And inflation break-even rates, if we talk about the one year, rallied in Q4 of 2016 and peaked in March of 2017, that same year. And what I had said in the MIT reports is that based on the fact that, you know, US truflation numbers had been collapsing, which I'm going to explain in a second why that's happened, that break-even rates would start to come lower.

42:05And once the VIX stabilizes, something we'll talk about in a second, so volatility starts to come down, falling one-year inflation break-even rates is a good sign because what it basically means is that there's less hedging going on in the real economy because there's less need for inflation protection. And as a result of that is that will unlock a pool of capital, which can then be invested, used for risk-taking, used for hiring, used for capex or whatever. So I said the next shoe to drop before inflation break-evens came down would be inflation break-evens coming lower, and there's still quite a considerable amount of room for that to drop.

42:40Now, on the basis of inflation coming lower, I can see a lot of people saying, oh, well, Trump broke the business cycle on this and that, and therefore inflation is going lower. No, true inflation numbers are lower because of what happened in Q4. Again, because rates were rising, the dollar was rising, commodity prices were rising, that tightened financial conditions. And as a result of that, that not only slowed growth, but of course, it slowed inflation, which is why we've seen these truflation numbers coming down so quickly. And here, our financial conditions index is advanced by four months.

43:16So what's the expectation here? Well, I mean, truflation numbers probably based around these levels, maybe one to two months from now, whatever that is. These numbers lead the CPI numbers by another one to two months. And so we had said that CPI heading into this year, that inflation metrics would fall further. And that if anything, the second half of the year would be where we would start to see signs of inflation. But only in the headline, right? Because the core is lagged because of rents. That's right. And as the Fed cut rates, mortgages come down, which affects owner equivalent rents. And so the whole cycling core lags.

43:52That's right. So core should continue lower for the entire year. The only reason that the true inflation numbers would start to rise would be particularly in kind of the core goods segment of inflation, which is a function of the business cycle and rising commodity prices. And what we're seeing right now is the opposite. But the point being is once the ISM rises to the mid 55s or so, that's when you start to take inflation seriously or the idea of that inflation will come back because the business cycle drives inflation and not the other way around. And so this is not something, really, the Fed that we should be worried about.

44:27When the Fed – the Fed's always late to cut and they're always late to hike. When you want to worry about the Fed and a more hawkish stance of starting a rate hiking cycle is typically when services inflation, which is what Raoul just talked about, starts to rise, which is a function of unit wage costs. So wages rising later in the cycle. And that's just nowhere to be seen in our lead indicators for the time being. So again, just wanted to point that out. So this is what we're seeing in inflation currently and Trump breaking the business cycle. Trump didn't break the business cycle. He's created the slowdown, but it has nothing to do with what's happened this year.

45:05It has everything to do with what happened last year. Even Scott Besson said, the things you're worried about now, you won't be worried about soon because he knows that financial conditions are easing so fast. Yeah. I mean, this is a dramatic easing in financial conditions and we haven't really got going yet. That's right. So that's why, again, this is why we wanted to put this out, because it's kind of all coming together and with so much noise. Julian, what does this start to mean for markets? Because markets are getting utterly terrified and are creating inflation narratives, recession narratives, broken business cycle narratives.

45:39What is the markets telling us right now? Sentiment and position. Maybe I've seen this deck before. Maybe I know. I think you have seen this deck before. Well, let me talk about that. So, if we talk, I mean, first of all, let's just go back to the chart I posted on X. I'm not going to skip all the way back up, but you guys will have access to this stack. But essentially, if we look at the three-month rate of change versus either the NASDAQ, the S &P 500, or Bitcoin prices against our financial conditions index, which is obviously advanced and inverted, we've priced in all of the Q4 tightening in financial conditions, and now financial conditions are easing.

46:17So the expectation here is that now that markets, if we look at this, are extremely oversold. So if we look at the S &P 500, the percentage of stocks trading with a 14-day RSI below 30 being oversold is at almost 50%. And by the way, the markets – well, I don't have my Bloomberg open, but at the time we were recording this, the market was rallying back. But this does not take into account today's move, whatever that is. This is yesterday, or this will be Friday's close. So we saw a move up to 50%, which is the most since Q4 of 2022 when Raul and I were writing that article, The Turn Is Near. And before that, COVID, like when the economy, the entire world economy shut down, hmm.

46:58Then you look at the NASDAQ and you're like, oh, right, highest since COVID, hmm, okay. Very different environment, obviously. And then if we just look at a series of other measures, if we look at the percentage of stocks trading above the 50-day moving average, oversold, 200-day moving average oversold. This is the NASDAQ. We look at the S &P 500, the percentages of members with new 50-week lows at nearly 30%, Q4 of 2022. Same thing with the NASDAQ. And then when we talk about investor sentiment, back in early March, the AAII survey showed a surge to 60 % of investors surveying that they were bearish.

47:40And that's only happened five other times looking back to survey inception back in 1987 or so. And then if we just look at what happened last week on prices moving lower again, we saw a spike to 62%, which means that investors, according to this survey, are as bearish as they were in March of 2009, or that was the last time we saw a push above or to 62%. And by the way, so that was the global financial crisis, excuse me, and March 2009 was the low for the market. And then if we look at the conference board survey, so 44.5 % of consumers currently expect the stock prices to decline over the next 12 months.

48:24And that's the highest since July of 2022 and before that October 2011. So the point here, and I'm going to show you a couple more of these, if you don't think that we're heading for a 2008-style entrenched global recession, which is not our view. These are incredible data points to take a more contributing view. In 2008, what was different is that was a collateral crisis. That was before QE was used to stop collateral falling in value. So that was a full-on debt deflation that was stopped by the printing of money, the debasement of currency, which lowers the value of the denominator and optically makes assets rise.

49:02Once you do that, you stop the risk of a collateral crisis, which stops the debt crisis. You pay for it via debasement of currency, but it's a slower mechanism than losing 75 % of the value of stocks. Correct. So again, this is a very different environment to back then. And if we look at some of the other surveys I've just pulled together, if you look at the Bank of America fund manager survey. So that's at the top left. You know, we saw the largest drop in U.S. equity allocation on record in March. According to the Allianz survey, you know, what is it? 51 % of respondents are expecting another big market crash on the horizon.

49:44And then if we look at the fear greed index, which unbelievable, and again, this is yesterday, this will have been for Friday, I believe. It's an extreme reading of four. And then the Renaissance macro long short exposure chart just in the middle there at the bottom shows the largest short position in over a decade. So again, gives you an idea of where the market is sentiment-wise. And then when we look at Bitcoin, so I think this is a great chart. This is Bitcoin and then it's 14-day RSI. And what I had been saying in MIT from really, I don't know, when did this trigger? What was that? Last month?

50:25Two months ago? No, a month ago, when we fell below 30, is that it's not unusual, if you look back at the previous three times Bitcoin triggered an oversold reading to base, and this base can take time. And in both the 2022 instance and the 2023 instance and the 2024 instance, we made lower lows. And if we look at intraday pricing overnight, we made a slight lower low versus the lower low which occurred – or sorry, the low which occurred last month. But again, this is – I believe we're in the process of the spacing, so kind of this accumulation phase. And then if we look at the last three times, so that would be the teal line, so the average price trajectory following the last three Bitcoin RSI oversold readings.

51:19And again, oversold means below 30. This is the current trajectory versus the future trajectory. trajectory so what you can see is i'm here i'm looking back two months and then forward four months if we just look at when things start to pick up it's really a month and a half after the original uh oversold reading is triggered so these bases take time and so and then that we're seeing is very strong that's right and so when people what's been frustrating over this this phase is the chop and i can see all over twitter and we've talked about this before people more like, oh, well, Bitcoin's down another 2%.

51:53No, it's, or it's down another, whatever, it's not. It's just been doing this. And so, you know, it's been going up, whatever, 10%, then down 10%. But we haven't really, we made a new low intra day last night, which we've already recovered. And it's normal for alts to bleed in that environment, generally because A, there's more issuance of alts. And generally as people pull in from the risk curve, alts come lower, but they come back faster, which is that alt season chart we talked about before. I know nobody believes in it now. There's too many altcoins. It's all fucked. It's only Bitcoin. Bitcoin dominance forever.

52:28It will most likely, probabilistically speaking, play out like it's always played out, which is as the ISM rallies through 50, this recovers. What happens is alts outperform. That's right. Right. And the only other thing I'm just going to say on the business cycle, and then we can get to technicals, is really with break-evens now falling and the dollar lower and rates lower, plus city economic surprises, if we talk about the US basing and moving higher, really that's an environment of what Raul and I classify as macro spring. So people are looking at the ISM report and saying it's stagflation.

53:06The report was stagflation driven by what happened in Q4. Again, so it's backward looking. Whereas if you look at financial conditions and that being paving the way for better growth, better economic surprises, you know, going forward into the next several months. Plus, as I say, market implied inflation expectations dropping. Once the market settles, which is what we're going to talk about now with technicals, this is actually more conducive of macro springs. So a disinflationary boom than stagflation or macro fall. Okay. So let's talk about the technicals. This is what's getting me very excited is when you go from the very big picture, which is where we started, you then zoom in on the business cycle and the liquidity cycle and market sentiment, and it matches the technicals.

53:59it makes you and i get very very interested in the opportunity going forwards and the risk return and that's the key thing of this whole presentation is the fear is overextended versus the potential opportunity set that looks like it's set up so anyway let's go through this because these are great okay and yeah raul you and i talk about this all the time but another reason we wanted to put this presentation together and show you how many angles we're coming at this from it's not just macro. It's not just the Trump 2017 cycle and our conviction for a weaker dollar. It's the technicals. It's the sentiment.

54:36We're trying to put it all together because what I've always tried to do as an investor is, and the best you can do, is reduce as much uncertainty as possible before making an investment decision. That's what we're trying to do here, coming at it from all the different angles. So, yep, the chart's up. So the first chart is just Bitcoin within its log regression channel. And if we look at, again, that moment in time in Q4 of 2022, when Raul and I turned bullish, we're now two standard deviations oversold within the log trend. So pretty much an opposite signal to what we saw in kind of Feb-March of last year.

55:19And then when we look at the DMARC counts, okay, just today, uh we triggered a 13 daily buy and if you look back in time uh both into 2024 and also let's say december of last year these 13s work pretty well but where d mark gets a little d mark indicators become even more powerful um is when you have the daily and the weekly stuff um you know stacking up and so now we've also got a nine daily sorry a nine weekly buy setup where again the nines have worked well in the past and with solana we've got this cluster of 13s uh at the low here very similar to what we had um in q4 kind of of last year and i don't know what is this raul a nine nine nine 13 13 13 9 or something stupid so it again looks very similar uh to what we saw last year and here again it also look if you're sorry go back julian look at the top it had a similar kind of cluster of nines and thirteens that's what i just said yeah and then the bottom is the same and then we also have the um the nine uh weekly buy setup okay and then when we look at the nasdaq now i'm not sure this was taken before the or was this taken no this is after the open but Currently, we're on seven, day seven of nine lower.

56:43So, Ron and I were talking about this today. If the market does kind of nothing here and muddles around over the next couple of days, we'll still be able to trigger a nine buy. What we don't really want is a sharp rebound here that then removes the count. We would really like this to count down to a nine. And then if we look at the weekly setup on the NASDAQ, it's on week eight of nine lower. And so it's always impossible. That won't be a weekly nine next week. Yeah, I think that's, that's right. And then the other thing I wanted to address is I can see a lot of people are like quoting, and I'm not sure who said this originally, but nothing good happens below the 200 day moving average.

57:25Like really? I mean, if you are of the view that we're not at the end of the cycle, okay. Then if we look at post 2008 period, there was, you know, five, I have no call it six. You can see one I didn't even highlight there moves below the 200 day moving average, which created fantastic, you know, buying opportunities to add. And so once again, we're just not of view that the cycle's over. And so we're seeing this more as a buying opportunity. And then when we look at the VIX, very similar counts, right? And this is pretty remarkable, the spike that we've seen in the VIX, because it's as high as we saw during the yen carry trade on one on August 5th of last year.

58:05And before that, once again, when the world shut down during COVID. So here we're on day, as I say, seven of nine higher. And then the weekly, once again, counting up into a nine where the last time we saw a nine cell on the VIX came during COVID. So the question you're all here for, is the banana zone canceled? The answer is, in our view, no. First of all, just to piggyback on what Raul said in the beginning within the don't fuck this up checklist, we have seen over the last two and a half years, seven 20 to 30 % pullbacks in Bitcoin. And while you're feeling this current one, because we're still in it at the moment, you probably don't remember any of the other ones that we saw because off a low point, Bitcoin even with prices coming forward the other 30 one which was that september one which that final flush yeah people remember that like they'll remember this but the rest i can't fucking remember any of them yeah i don't either and you just remember it being what we were calling at the time the boring zone just waiting it felt so long but again even with prices coming down um you know over the course of q1 we're still up 400 off the low so you just you don't remember these things once once they kind of pass and also what's interesting about that chart is okay so the correction is in line with expectations then again you've got the big picture macro the business cycle the liquidity analysis the sentiment analysis and the technical analysis all telling you that maybe everybody is over fearing and that the upside projections are much.

59:57The probabilities are for upside as opposed to downside. Well, and as I had pointed out, within the business cycle section, Bitcoin's already priced in an ISM of around 47. And if that's right, based on the move that we've just seen, but as we've been highlighting, financial conditions are now easing, which means that over the next three months, the data should start to improve. So it's fairly unlikely that we get to 47. So anything that comes out next month, as I showed you that kind of new orders chart should start to move higher over the next one to two months. That's not at all in the price right now, given what we're seeing.

1:00:34And then when we look at the 2017 cycle. So the cycle that Raul and I feel based on our use around the dollar and liquidity turning higher, we saw two 30 % corrections, one 35 % correction, and two 40 % corrections over the course of that year. And also with that is the cycle didn't get going because we had the same tightening of financial conditions in Q4 2016. The cycle didn't actually get going till the end of April, and then it accelerated. And again, it's very similar to us is where we are today. Well, kind of more the kind of the end of March, right? Yeah, more where we are now, actually.

1:01:14Yeah, true. So it didn't really pick up until the end of March, which again, looks a lot like today. But then if you just zoom out once again, you know, over the course of that year, so Trump, you know, Trump victory in November, in January, on the 4th of January, we saw that sharp, harsh, what was it? I was going to skip up. Was it 35 %? 35%, I think. Yeah, 35 % drawdown. But then off that low coin, over the course of that year, despite the five or so corrections I just mentioned, two of which were 40%, you know, Bitcoin went on to 23x that year. And no, I say this all the time, we're not expecting 23x.

1:01:49I'm just trying to set for you is the framework for understanding, you know, where we are and why we still think the best is to come. And speaking of that, again, one of the charts that Raul and I originally published, which now is all over everywhere. We've pretty much closed the gap with Global M2 using the more correct 12-week lead time. I think the 10 weeks looks just as good. Either way, it's basically a wall of upside to come. Yeah. And so what this would suggest, I mean, if we're right here and everything that we just outlined, is that Bitcoin should be putting in new all-time highs or at least hovering around all-time highs by the end of June.

1:02:34And the same is true for the NASDAQ, which has grossly undershot Global M2. And what did you call this? Excess fear? Yeah. It's like, this is the market pricing excess fear. This is the VIX going to 60. We didn't have the same in crypto. This has been driven by equities because obviously you don't tariff cryptocurrencies, but you tariff equities and the market is struggling to price this in. But again, once China's deal is agreed and the ugliness of the negotiation, let's see how that goes. But once that is agreed, there is a big gap versus what liquidity is doing. And we will have a very fast snapback, I think.

1:03:17Yeah, I totally agree. I think it'll be, you know, once we get the the demarc count stacking up i mean i think it's going to be a pretty v-shaped move yeah and and that comes next week uh sorry by wednesday if it continues to count as it does and then next week should confirm a weekly nine as well so again it is opportunistically speaking incredible time which is why you and i are putting together a trade list later on this week for yeah for pro So Macro and GMI will have a list of what we think the best opportunities in the world are going to be. Yeah. And then just a few more charts to get through, skipping back to, of course, to Bitcoin.

1:04:00We're just nowhere near the conditions for kind of a late cycle peak, as we've seen historically, if we're looking at our GMI cycle top finder. And then zooming out, another famous sort of originally GMI chart, we don't think that the banana zone is canceled. The banana zone – and some people have asked me, were you too early on that? Well, no, because in Q4 of last year when Bitcoin was at 56 ,000, we said, here we go. We're going. We're still – what are we trading at right now? 80? I mean, you can't get returns like that. But the most important point here is that we're still within this upcycle.

1:04:41It's just that these corrective phases are just part of that journey. And look how similar, again, go back, how similar that 2017 cycle was, that kind of weird double correction it had. It's very similar in price time structure. and the next phase is the next phase of the banana zone which nobody believes you get trolled on twitter all day banana zone cancelled look at the fucking chart does this look like banana zones cancelled or are you just impatient and i just think people are just goddamn impatient well it it's but it's it has been hard to be patient when it just does it does it's done this right just like oh my it's like the classic that boring zone just but you gotta be you gotta be patient you gotta So hopefully, everybody, that has helped you understand the framework by which we are looking at markets, how we understand it, how we look at we build from the very big picture down to the very short term.

1:05:39We're getting to an incredibly interesting by the fucking dip moment. We will update ProMacro GMI as we go. but hopefully you can understand that nothing happening here is out of the ordinary apart from the peak fear narrative sentiment is wildly um overdone here and don't forget coming out of we're going to tariff everybody a gazillion percent will be the walk back the discussions the negotiations the agreements and all of that will take uncertainty out of the market So on a forward-looking basis, ignore all the work that we've just done. Is there likely to be less uncertainty or more uncertainty in a month's time?

1:06:25It is almost 100 % likely to be less uncertainty. Markets hate uncertainty more than anything else. They overshoot when they're trying to price uncertainty, and then they'll price in the outcomes. so it is usually by the room um sell the rumor by the fact when it comes to negative news this is where we are we're in a time that is almost as peak fear as covid was it's similar to 2018 when the fed pivoted these kind of things even 2008 these things don't come often but when they come they're a goddamn fucking gift so anyway we're going to move across to the real vision platform now for those of you watching this outside and we will answer questions i have a whole list of questions from um from plus and pro members so anybody who wants to come across to real vision you'll hear us answer the questions you just can't answer ask questions unless you're in that tier so realvision.com forward slash join we'll just pause for a minute for you to just come and join you just need to pop in your email and join and then you can get the answers to the questions because I'm sure you guys in your heads have got lots of questions so we'll just wait for a sec for you guys to catch up realvision.com forward slash join

1:07:48yeah you can scan the qr code on screen as well if that makes it easier I have no idea how the fuck to do that if you're watching it on or whatever but you know whatever I'm a boomer But just come across realvision.com forward slash join. Also, those of you who are Plus and Pro members, you'll get this full deck. You've seen many of the charts before. They're all updated. They're all good. And the Pro members and those of you who are GMI members who are watching this, you'll also get my chat with ChatGPT, which really blew me away. And everybody I've shown it to has gone, okay, wow, this is incredible.

1:08:24because we got to stress test our entire thesis with AI, talking about everything from tariffs to liquidity to alt-season to everything and tie it all together. It was fascinating. So you guys will get that. And hopefully it'll show you how to use AI to further supplement your thing. Obviously, if you're on the Real Vision platform, there's the Raoul bot as well. You can ask. Just click on the left, that picture of me. You can ask it to me. You can have a voice chat. You can talk about your stresses and fears. And, you know, is everything going to, are we all going to die? all of those things and hopefully Raoul will settle you down with a glass of wine and give you some answers okay so now we're all on real vision so welcome everybody who's come across to real vision and um welcome all of you on real vision to the questions these are plus and pro members i'm going to start asking them i'm just going to start reading through get through as many as we can we've got a bit of spare time for you guys to make sure we get as much answered uh But Duncan Paul Mitchell, your forecast seemed way too optimistic when compared to the current reaction of markets in the last seven days.

1:09:27Are all market participants so badly mistaken or missing something then? Julian. I mean, again, we're forecasting much better data going forward. And as a result of the market having to price out negative data through Q1, inflation fears, tariffs are inflationary, spreads are widening. you know all of that um and now that's now all reversing with financial vision so we're just looking out because if you're looking at the latest ism report for example which a lot of people are that's actually backward looking because it's not you're not looking into the future using financial conditions global m2 and all that so the market right now was already pretty much oversold last week but then of course the tariffs came out that scared markets even more so now we have a fairly gross as i as i've said overreaction to things like global m2 everything's oversold so yeah we're i i haven't seen anybody optimistic have you right anybody like i haven't spoken to anybody who's giving this view so we're really sticking our neck out right and you know this that's our our base case is that um okay we're remolish cornelis owl or Or, oh, well, appreciate your adaptions as always.

1:10:46Understand your views on liquidity and being close to a turnaround. Is there a scenario where liquidity doesn't come, the economy is artificially flatlined and only revived next year for the US midterms, and we have a completely different cycle? The answer to this, Connelly, is no, because it's already happened. Right. Remember this, right? This is nine months forward we get to look out on liquidity and its impact on markets. Nine months. And so it's already in the price. So it is almost impossible. The chat GPT conversation says, unless there is a massive and unexpected tightening of financial conditions that sideswipes everything, then it's really hard for any of this to be reversed.

1:11:32And even then, a tightening of financial conditions outside of a massive exogenous shock would happen in nine months time because of how markets work so i think not uh francois mometz is trump ready to put the us into recession to change the structure of international trade that would also lower bond yields which allow the us to refinance their debt at cheaper levels then revive qe even besant doesn't look to disagree again this is the pervasive narrative recession we understand that they want bond yields lower and slower growth is already baked in the cake. They will get that. Nobody is forecasting recession out of the government.

1:12:16Now, they would lie to you anyway, but we don't see the evidence of recession. We think that is narrative. Could we get a negative quarter? For sure. We've seen the GDP now stuff, but we've seen those in the past. Because it's a front-end loading of tariffs skewing those things. But we don't see any evidence of that. Okay, Dorota Wilkos, what must change in politics and economic news to change your mind about 2025? Again, same question. This is all about the narrative. The narrative, everybody's telling it's recession and Raoul and Julian are wrong. I think we've gone through in detail the structure of why that is almost impossible to change.

1:12:59Sure, kinetic war, something so escalatory that it changes the outcome is very different because then you have to price in further uncertainty and fear and panic. But out of the situation we've got today, tell me something that's going to be worse than we're going to tariff countries like the Marshall Islands 100 % because they once bought something from Amazon and it skewed our trade belt. Tell me something worse. It's very difficult to come up with an outcome in this that's worse than what came. Well, not only that, but just to think also to what's already in the price. I mean, the VIX is at levels back to August 5th and before that, when the entire world economy shut down.

1:13:41That's pretty much in the price if you look at the VIX and all the sentiment surveys. I mean, investors are as bearish as they were from back then. So it's in the price as well. Dave Murphy, what have each of you learned respect to the market over the last six months or so as crypto investors? Do you have any previous held core market crypto beliefs that now perhaps evolved into a different perspective looking forward from here? I don't think so. We've been using pretty much the same framework. I think if I was honest with myself, having the same outcome in terms of the tightening of liquidity conditions in the back end of 2016.

1:14:21That gave a short, sharp correction. Then it corrected again, went back to the high, corrected, and then went. We were expecting more of a sideways-y correction. We expected it to come down. We expected it to come down well below 100, but it actually perfectly priced it in. I didn't expect it perfectly priced in the M2. Other than that, no. We've talked about the risk curve. We talked about how alts behave. We've talked about all of this. So I don't think there's anything surprising, which is why Julian and I aren't losing our shit. It's because it's pretty much as we expected. Anything from you?

1:15:01I mean, just on that same point, I think, you know, we had said in heading into Q4 that we would go from 56 to 100 to 110. Then in the mid-90s, when Bitcoin started to come down pretty aggressively, people were like, that's it. And we were like, no, this is going to be a cheeky correction bracket trend. And then we would go to 110. We did that. And then as we approached, as we got into Jan, as you say, we were sort of thinking, well, does this really need to reconverge with global M2 on the basis of the dollar's weakening so fast? So we were expecting more sideways drop and didn't, you know, if we're honest with ourselves, expect it to fully close the gap.

1:15:39But then in, I can't remember what it was. was it feb or so in chrome macro we were like is there to do we need to mentally prepare for a move down to 80 and that's what's happening yeah it's why 75 and 80 was where we said you know it gets to the the top of the previous congestion all of that kind of stuff which is why when when we're revisiting this stuff because i mean ral and i talk every day but with mit you know obviously we're doing weekly reports and so looking at the data and the expectation that we might come back down to around 80 or so. As you say, it's not us losing our shit, especially because everything that has driven price action over the last three months was a result of what happened in Q4, tightening of financial conditions, which is now reversing and very evidently so.

1:16:25So I think the most important chart, or at least one of them, is not only the global M2 chart versus both NASDAQ and Bitcoin, but also the three-month rate of change in Bitcoin versus financial conditions, which shows that it's priced in and that if anything, over the next three months, we should be a lot higher. And the one thing that we said earlier, and Julian and I were talking about today, is the one thing we didn't expect was how sharp the NASDAQ correction was. Kind of expected 15 % out of the global M2 number, but we got 23 % because of the trade fears. So that's one thing we didn't expect as much, but it feels like it's a big opportunity.

1:17:00Okay, moving forwards. How do you define the Bitcoin super cycle? Is Bitcoin outperforming every year of the four-year cycle? Is it less than 40 % drawdown in a bear market? Neither of us believe in a Bitcoin super cycle. We just think it's the normal everything code cycle. uh we do believe that potentially there is a lower drawdown this time around uh so this would be 20 26 7 whatever that is that you know it may not go down 60 70 percent it may go down 40 50 we don't know we'll have to wait and see but um but that would be fairly typical of like a normal adoption curve right the volatility on the downside would start to taper which also means that volatility on the upside begins to taper as well right so uh jp are you in agreement 10-year yields have come down enough that an emergency fed cut isn't needed since yields front run cuts anyway i get the two-year force in the hands eventually but not sure that just suppose a cup before the main meeting thoughts um in gmi we actually put some rate bets on to hedge the portfolio um we do both think that rates come lower anyway and the Fed will cut because of the slowness of economic growth.

1:18:16Neither of us believes that emergency cuts are needed. We think the liquidity conditions are supportive, but we do think that over time, because of the inflation backdrop and the growth backdrop, if we think that growth bottoms or remain sluggish into April, May, the next Fed meetings in May, inflation continues to fall. There's a decent chance of quite a few rate cuts still to come in the back end of the year, particularly with the core CPI falling. Okay, next. Lorena, the Treasury needs to refinance a large chunk of Treasuries in June. This could mean June they need rates to be as low as possible.

1:18:52Do you think they could create more volatility or continue this uncertainty until June to target US dollar demand? I don't think they're trying to specifically create turbulence to refinance debt. I think they're trying to get this rate cuts done and then saying that it's also going to be positive for the rates market. We just believe rates come down independently of all of this anyway. That's just our general belief. Well, and that also goes back to China, right? The idea that a trade agreement would benefit both the US and China because their dollar starves, something that Raoul had mentioned earlier.

1:19:28And that means so that they can service their dollar-denominated debt, which then means that these dollars then recirculate back into the U.S. economy to bid down the long end of the yield curve. So think 30-year bond yields lower. So that's the deal, because that's what Scott Besson wants. Lawson, in reference to the Banana Zone chart, why should history repeat for a fourth time? If that's the case, there should be infinite repeats. Lawson, we've talked about this a lot in GMI. is this is driven by the everything code cycle, which is the debt refinancing cycle, which is not going away until GDP growth picks up enough that it doesn't matter or debt to GDP goes down.

1:20:10And that we don't believe is at least for another cycle or so. So that is the everything code. It's the core thing. Point two, GMI missed a huge trick in the jaw divergence between BTC and liquidity drop-off. So what confidence do you have now? We didn't miss it. We explained that it was there. We just don't trade short term around this stuff. So we knew that there was the risk there of a further downside. We knew that there was definitely going to be a corrective period. It's played out perfectly, which is why we produced that chart. We didn't imagine that the alligator jaws would completely close.

1:20:45But again, it's not something we would hedge. It's just not what we do in terms of our long term structure. We think the long-term advantage is to buy dips like this and not to try and trade around them. And so that's a key thing. Easy Pat. Which factor truly reigns supreme in shaping the markets? The disruptive trade narrative currently wreaking havoc or the enduring force of liquidity in the business cycle that often outmaneuver such narratives? My concern is the tariff situation might persist far longer than expected. I think we've addressed this easy, Pat. The tariff situation, the announcement was always going to be the worst.

1:21:30And then it only gets better. We're already seeing, what, 50 nations going back to the US to negotiate. We're seeing Japan sending over delegates. The EU opens a negotiation. So first price is in the worst, then it gets better. Ian Blake, isn't acceleration in growth very dependent upon sentiment? The tariff situation appears to have destroyed short-term sentiment. So how can we expect a rising ISM in such an environment? But sentiment is a function of the economic data, right? So the reason sentiment blew out over this first quarter is because of, again, of what happened in Q4, which drove CESI higher, inflation break-evens went higher, the dollar went higher, all that went higher, which tightened financial conditions, which slowed economic growth.

1:22:14As economic growth started coming in below because there's the consensus expectations, the market then had to price in that data coming in weaker, which is why now markets are down and oversold and sentiment so bearish. Now, over the next, what we're saying is that based on the basis that financial conditions have eased as much as they have this year, now we'll see better data coming in over the next, let's say, two to three months. As a result, much as markets did on the way down, but nothing changes sentiment like price, had to price in weaker data. Now markets will be forced to price in data coming in better than expected at a time when everyone's short and everyone's bearish.

1:22:54So it's really just all about financial conditions. Financial conditions change your sentiment. Sentiment doesn't change financial conditions. Chris, soft Pfeiffer, any comments about high beta debt such as Deep Book, Sui, and Robinhood calls? if you're a pro subscriber we will do something in pro about this and the opportunity set so wait and see Meridian, how would the framework be affected if the US decides to default on a portion of its debts and not roll them over because they were brought on by China and Europe very unfair, a US default on its debt is the end of the entire fucking global financial system it ain't never going to happen it is not about, oh, hey, we just won't pay you guys back.

1:23:39It is the end of all pricing of all financial markets because it is the risk-free rate of the world. So that simply can't happen. T5, Phil, China is central to your thesis. Does your view require China to capitulate on a trade deal? They won't capitulate they will reach a trade deal. They have to because the US is going to impose one on them. It just depends what the trade-offs are. We don't need China to stimulate either. They didn't stimulate as much in COVID. We just need general global total liquidity to increase. But we think China is going to be the larger one. Iron the pie. What do you think of stablecoin regulation as a risk to the existence of altcoins?

1:24:20I don't see anything for that. Fred L. Do Raoul and Julian see a dislocation from what their data is showing them in this sentiment-driven market? They seem to be holding the contrarian view, as a lot of others,

1:24:40who view this as the start of a big change and an unwind of the status quo, a focus on Main Street and Wall Street. So this is, you know, is there a secular change going on here that the global structure has changed? We don't believe so because the debt refi cycle trumps everything. And really, if you go back, what are the tariffs about? The tariffs are about the US collecting more taxes. whether it's from their citizens or from others to pay for the debts. And Trump says that all the time. Sim, what relationship do bond yields have with liquidity? And what effect do you see the current precipitous fall in bond yields having on liquidity?

1:25:17So it affects financial market conditions that leads liquidity. I think we went through that in the presentation. Alex, if the business cycle goes lower because of the tariffs and liquidity is going up, what does that mean for risk assets at the end of the year? I think we've gone through that, Alex. We don't see the business cycle going lower. The forward-looking indicator says it goes higher. Terry Harmer, there's a lot of chatter on X about Chinese dumping treasuries. That has any implication or just more noise? It's more noise, I believe, because in the end, they need access to dollars. They can sell treasuries for dollars, but in which case, they will have less access to dollars going forwards, and then the Chinese property sector defaults.

1:25:56um jacobo botto will the ism reach mid 50s by the end of the year despite the tariffs yep we've covered that elron despite the boring zone correction we've seen the last few months what are some upcoming projects be it within crypto ai robotics they're on your radar that have a potential for network adoption effects in the space kind of out of scope for this more of a question for um those of you who ask us questions in pro um okay more tariffs definitely tariffs are going to ruin the cycle blah blah blah blah blah Bond yields. Jason, bond yields are ripping now. What's your reaction to this? Jason, it's a one-day move.

1:26:34Bond yields have been falling and falling and falling. So don't read into one-day news. Like yesterday, everyone's like, see, Bitcoin's decoupled from NASDAQ, and then it didn't. So please don't read into one-day moves. Jason Alberti, if many more countries are trying to reshore industry, could that set the ISM on fire since everybody's spending on redundant infrastructure? yeah i think i think we will see more expenditure in domestic countries from the reshoring of manufacturing the thing of the note i want to say about the reshoring of manufacturing it is not going to employ many jobs apart from the construction sector because in the end every factory is going to be built as robots and ai and anybody not doing that is a fucking moron so basically yes there's construction boom to come so yes it's probably good for the business cycle over time, but we've been slowly doing this over time anyway.

1:27:28So this is, even though it's accelerated again under Trump, we have been unsure him because even Biden didn't like the China thing. Mr. G, hey, Raoul and Julian, Bob Lucas just announced today he seems that Seoul could have topped for the cycle of double top like most of the altcoins. What's your take on that? I like Bob. Great. Don't agree because it doesn't have a macro picture to do that. Can we be wrong? for sure, but we don't feel uncomfortable in our view. Edmund, all this assumes the US does not default on debt. Okay, we've covered that one. Seema, do you think it's a good time to start buying into tech equities, particular Tesla and Coinbase?

1:28:09Over what time frame do you dollar cost average in? We'll cover all of that in Real Vision Pro and GMI. Okay. Oleg, what if you're wrong and we hit the recession? Okay, we've gone through that. Sorry, I'm going through these fast. There's a lot of questions. Everybody is the same. Everybody is peak fear. I can just tell it by the questions. Why happens if you're wrong? Recession, tariffs, all of that stuff. All that will happen is a further easing of financial conditions. And that just pushes the cycle out further. Gabriel, hello, gentlemen. My question is, would this be different? The ISM won't do its normal cycle.

1:28:51the Fed won't do QE or the Fed have to add to finance debt or cutting interest rate. Basically, will there be no liquidity from the US? I don't see any reason why that would be the case. I don't believe necessarily we will have QE. We didn't in 2017. And we don't need QE. It's global liquidity that matters.

1:29:15Okay, more about cutting rates, tariffs.

1:29:22Stuart, what about when macro technical analysis confronts a flock of black swans? A lot of the time it's in the price. I mean, we actually wrote in GMI on the monthly. It's like, we think there's a two-week air pocket because of the technicals, and we got it two weeks later of the air pocket. So it feels like that's that. Juliet, what would invalidate your H1? if, well, I think H1 is already pretty clear in my mind, given what's happened with the dollar and rates and given that financial conditions are easing, I would say what would invalidate our year, because now we're looking out a couple of months based on the exact opposite of what happened in Q4 and advanced, right?

1:30:08So financial conditions are easing, which pushes us out a number of months here, at least into the end of June. If from June onwards, if all of a sudden we see a large spike in bond yields and a big rise in the dollar, then all of a sudden that will tighten financial conditions again and we'll do more of this. So I don't think it's so much about invalidating H1 to me, or at least Q2, that's pretty clear to me it's the second half of the year but even then i'm you know based on the long leads that we're looking at it still seems fine but we shouldn't see the dollar basically if the dollar moves a lot higher we said i said all along you know we expect it to trend lower we're not talking about one day moves we're not talking about one week moves in rates we're talking about a trend lower over the course of the year if that changes then then we're wrong um dave fuller i noticed you didn't mention eth in your portfolio maybe Sol, Sui and BTC.

1:31:07That's a question again for pro macro discussion. So look forward to seeing you over there.

1:31:17Sam, US government debt is private industry credit. How do flows moving outside of the US impact your thesis? It's all part of the same total global liquidity. So it all flows through into the numbers. Vishwanda, how do I adjust my portfolio if I'm beginning to accumulate now to mitigate risk and capitalize on the opportunities arising current market volatility. Non-specifically, you either dollar cost average or use technical analysis to try and time it. Julian and I are timing it because we're both allocating capital ourselves and putting out some trade ideas. Mark, okay, guys, I get the charts and everything is the dollar and liquidity.

1:31:55However, if one looks at history of the effects of tariffs, Smoot-Hawley resulted in the collapse of trade with europe by 40 is that possible in this scenario don't forget smoot hawley was also had the fed tightening rates there was a rate problem uh again in the pro macro my discussions with chap gpt go through this in detail um so i don't think that is the case um you know most of the world has tariffs europe has tariffs all the time everybody has tariffs it doesn't it's not necessarily the end of the world it's just one player is kind of elbowing its way into saying hey we want to reset tariffs edward hardaway would a hostile reaction by china towards taiwan this year improve crypto btc prospects at first it would fucking puke and then the answer would be a lot more cowbell and again julian and i've talked at length about this we think it is in nobody's interest to try and nuke taiwan semi and ruin everybody's opportunity with agi and eventually the ASI, Taiwan Semi is too important, and the US plants will be built.

1:32:57Whether the German plant goes ahead, the Japanese plant will go ahead, and China will get Taiwan in that equation, is how we think of it. Okay, final two questions. Ben, you mentioned the financial conditions are easing, but tariffs are not a form of tightening financial conditions and extreme tightening of financial conditions at that. Again, we've answered the tariff questions as many times as possible. it will have an impact later in the cycle on people but first we've got to see as firstly if prices are disinflationary and scott bestens particularly talked about trying to get wages higher is you've got to go through that cycle first and eventually you kind of get issues where rates start going up but i don't see how tariffs are a mass tightening of financial conditions because if so you'd see the dollar going up the dollar's going down that tells you a lot um final question mike smith will the business cycle change at the fourth turning we think we're in the middle of the fourth turning the fourth turning will be the restructuring of the global economy at bringing in a new super creature which is agi and asi and that is the the economic singularity event that we expect from kind of 2030 onwards or around then um that is the That is the new system that the fourth turning comes to.

1:34:35Okay, everybody, I think we've given you everything we can. We've given you top to bottom. I can see everybody's still nervous that recession, we don't believe that to be the case. Tariffs are only going to get worse. We don't see that to be the case. There will be some news flow. It'll be choppy. It'll be nervous. We've given you everything we can of the framework to say, look, relax. Stop listening to all the narratives on X. we can show where we're right where we're wrong we have a robust framework to test against and hopefully it's helped you so my only advice is buy the fucking dip because you don't get these opportunities often and if we're right on the forward-looking indicators of global liquidity these prices are a gift and they will compound your returns if you can add anything into lower prices you will just compound returns in the back end of the cycle we're trying to help you we're trying to keep you in the game you know all of those don't fuck this up things in fact i'm just going to go back to those and just share that chart so um guys i'm just going to share this

1:35:50because it's too important and it makes you able to sleep at night not worry about it if you don't have leverage i don't think most of you do i think i hammered that into you fomo is fear on both sides oh my god panic if you've got tokens in your wallet and they're in a hardware wallet nothing's going to happen to them they'll go up and down but you just need to get used to that. Don't be too far out the risk curve because you will bleed too far, but soon will be the time that you can go a little bit further out the risk curve. Julian and I are comfortable where we are out in the risk curve, which is further away than Bitcoin, but we're professional money managers.

1:36:31So you don't need to do all of that. Hold over a longer term time horizon, zoom out, remove the noise, expect 35 % pullbacks frequently. And when they happen, by the fucking Deb. All right, everyone, good luck out there. I know it feels grim. I know it feels awful. This too shall pass. Take care. If you like this episode, I'd love for you to head over to realvision.com forward slash join for a free membership. Start your journey today to unfuck your future. Just one click away. Have you ever wanted to trade Bitcoin but haven't dared try? With Plus500 Futures, you can trade crypto without the hassle of opening a wallet.

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