Crash or Boom: Week 1 Wrap-Up

0:06Hi, everyone. Welcome to this extended Real Vision Daily Briefing. With me today is Real Vision co-founder and CEO, Raul Pau. Hey, Raul. Raul Pauw Hey, Maggie. How are you? Raul Pauw We made it to Friday. Raul Pauw I've got you playing somewhere. I don't know where you're playing. Raul Pauw This is an indication of, you probably have the platform open. Raul Pauw Yeah. Sorry, my fault. Raul Pauw That's okay. But this is, I think, the kind of week everyone's having, right? Everyone's so busy. You can't even keep all the sort of windows that you have open on your computer straight. Raul Pauw No, and you close the ones that you don't want to close.

0:39Raul Pauw Exactly. So just to remind reminder to everyone. This is an extended daily briefing. So the second half is going to be exclusively for members. So if you are not already part of our community, what are you waiting for? Hit the QR code and the links in the chat, jump on and take advantage of the terrific offer we have gone. We'll talk a little bit more about that later and our new platform. But let's dive in. So Raul, we are at the end of our first week of this special series we've been running, crash or boom, how to profit from where we're going. And if you look across the markets, it's been really interesting.

1:16We've had a really choppy week. US stocks have been up and down. Looks like they're selling off into the close here on Friday. Treasury yields creeping back up. Investors seem really nervous ahead of the Fed meeting next week. It's actually the perfect time to have these conversations that we're having because people are really confused. Before we talk about it, here are a couple of highlights from some of the interviews and dialogues that we've been having on the platform. Have a look. I think inflation will be more problematic than currently assumed by central banks, also because they're not at level of rates that are restrictive yet.

1:58I just see an environment of less inflation stability. We just had that massive move down in inflation, in interest rates for 30 years or so. And the math is such that, you know, you're not going to repeat that in the next 30 years. We are now in a peak cheap oil world where we're not running out of oil, but the cheap stuff's gone. And so oil prices need to rise secularly on average over time. And as a result, that guarantees that dollar FX reserves will run out. And I think what we will continue to hear from the Fed and for that matter from the ECB is that they will disagree with the discounting rate cuts next year.

2:45And basically sending the signal that 2024 we will be on hold. And so we need to see a lot more evidence of the recession and particularly the US recession before you can embrace a more bond friendly environment and a more normal cyclical bond rally. But the worst thing anybody can possibly do is to do what you did back in the first half of 07 and extrapolate the soft landing into the next stage of the business cycle, which is going to be a contraction. And we could argue that the lags are longer this time because of the fiscal stimulus. But we all know that the fiscal stimulus or the lags from that are going to term out by the end of this quarter.

3:25Right now, we're exactly at that spot where the Fed is having to issue debt. And the markets don't like it. So bond yields have completely disconnected from inflation, the business cycle and everything, because there's too much debt being issued and there's not enough liquidity around. And if that continues for this 13 trillion, you're going to blow up the bond market. But of course they won't do that because what they will do is they are hoping that they can get inflation to undershoot as fast as possible, which I think is baked in the cake, as I showed earlier. Unemployment start rising and then they can start monetizing the interest payments and they can start cutting rates.

4:11super interesting that just a little taste and you can see there are so many different opinions about what's happening different recommendations about the best course of action but one thing that was consistent throughout and it's something you mentioned just at the end there a lot of concern and frankly confusion about the treasury bond market it's been tough with bonds It has been tough with bonds. And it's because bonds decoupled from the business cycle. I talked a bit about this in my presentation that kicked off the series is normally bond yields year on year rate of change follows the ISM, which has gone all the way down to 46 or so, which is normally a recession, but bond yields didn't do it.

4:53So that left the market split between three opinions. One is David Rosenberg's view, which is it's just delayed and it will follow soon and bond yields will fall. I was certainly in that camp. Then there's the other camp is, well, the bond market's telling you inflation's sticky, although that's not really showing up in inflation forecast stuff. But that's what that side of the market. And then there's the other side that I've moved into the camp of and others have, which is that bond yields are currently being driven by the supply, the massive issuance that's going on not only for the deficit, but also to pay the interest on the debt.

5:36And with not much liquidity in the market, it's hard for the market to absorb it. So yields go higher, which I think is the main explainer of all of this. Yeah, which makes the timing really tricky. And the other thing that was really striking, well, there are two things. We talked about this in the macro incentives you just did with Julian, that a lot of people are trying to figure out the fiscal. So you never say what's different. Maybe nothing's different. Maybe it's just the lag. The fiscal, so that you've got the supply issue, but you have all this government spending in a way that you really haven't had for decades.

6:11And people knew it was there, but I think it was just they just didn't build it in or wasn't accurately built in or they had a hard time getting a handle on it for the modeling. because you don't know, I guess, the timeline between when it actually hits between once they pass something. And that seemed to throw a lot of people off. A lot of people brought that up as a big thing they're watching. Yeah, and I think they're looking for reasons why certain things have happened. But if I look at the general relationships for all of the forward-looking economic data, all of the subcomponents of ISM, they all did normal stuff.

6:44They all did normal stuff. GDP growth hasn't yet come through. but everything that real-time monitors GDP showed a recession. So that's the only weirdness. So if there was extra spending, we would have not seen new orders go down as much. We would have not seen, but we saw all of that. It all priced in a recession. So I'm not entirely convinced that that is the story here. Oh, that's interesting. I'm kind of, I was interested to see what David Rosenberg said about the 22-month lag. Now, what's happened in this cycle that's unusual to all other cycles, it happened like this, like super fast and super aggressive.

7:22Normally, it's flatter. It goes up, and that shape is this, but we've gone up. What David said is it takes a while for the economy to actually register all of this stuff, and there's not enough time has gone through. The speed has gone through, but the time hasn't gone through. And that made me stop and think about it and think, actually, that's an interesting perspective. Now, we could be wrong. And there's a big debate about soft landing, hard landing, delayed landing, no landing, whatever. It reminds me, and David Rosenberg said the same thing, and I knew David back then as well. It reminds me of 2000 and 2007.

8:02Now, that gets into the other debate, as well, is the market going to crash then? And I'm like, my view is that we did it last year. You know, growth end of tech was down 75%, and now that's down 35%. RAOUL PAL You are very contrary in this, based on what we've heard so far. We've got week two coming up, so there's still a lot of time. But I think you are not in the consensus, not that there is a consensus. I don't even think we can say that. But you think it's already been priced in. RONALD BOOTH Yes. Last year was a terrible year. It was the worst year in the history of the 60-40 portfolio. everybody's wealth went down at every level.

8:42Liquidity massively tightened. The equity markets all went down, but people didn't get their justice warrior 50 % crash. But they got a decent move. And I said from the beginning of this, this is going to look more like 1990 than it will do 2008. But everybody wanted their 2008 crash or their 2001 crash. And what they got was a 1990 recession, which was the market goes down 20%, 25%, and then moves on its way, and the economy goes through a mild recession, and off we go. I still think that's still in play. I showed in my talk at the beginning of the whole series how inflation is just acting exactly as it's done every single time.

9:25Everyone's imposing all these narratives on it. It's basically going up and going down exactly the same way it did over the last five major inflationary episodes. And even this kind of rebound in inflation we've had has happened almost in all examples. So I don't see anything different yet. So I just, and again, I could easily be wrong. But right now, outside of what happens to bond yields, which is explainable, everything seems to be doing the same thing. The other thing I note, and Julian Brigden and myself were talking about this, and you were on the call with us bickering about it like two old men.

10:02RAOUL PAL Well, you were accusing of being a boomer the whole time, I think. RAOUL PAL That's right.

10:09Is, okay, the bond market yields keep rising because of this issuance, and they know there's more issuance to come. But this year, bond yields have gone from 330 to 430, 100 basis points, and the NASDAQ's up 42%. Why? Okay, so it's about liquidity and liquidity expectations that I think is happening. It's the reason why the dollar has gone up, which is basically a tightening of financial conditions, but gold doesn't collapse. So what are these things seeing to the future? And this plays into what Luke Groman was talking about, where him and I will differ on bond yields. I see the issuance of yields, and I've been talking about this, and he thinks it just escalates and gets out of control.

11:00My argument is see Japan for details. You do yield curve control. Japan has always led the way. Now, if the bond market gets really bad, the Fed will stop it, and they'll do yield curve control. And then you can get what they want, which is financial repression, asset prices rise, and you do that whole game, which was the 1950s game that has been my best case. So I don't see a world where that doesn't happen. What, are they going to let bond deals go to 7 %? It's not going to let that happen, because then AT &T goes bust, and the regional banks go bust. Yeah, I think that another difference maybe is how much monetary authorities can control this.

11:40I mean, there is, I think the folks who think that - Just buy all the bonds, Maggie. If you've got the biggest pockets in the world, which is the Federal Reserve, there's literally nothing anybody can do. No speculator, no foreign government can move bond yields past what the Fed can buy. And Japan has proven it. Japan now owns what the Bank of Japan now owns, what, 68 % of the Japanese JGB market? They don't care. It's print money. Hey, everyone. We're going to take a quick break right now to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

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13:22We have so many questions coming in. I see them. We're going to get to them, but we are going to get to them a little bit closer to that half hour turn. So keep them coming. We're keeping track. So we're going to continue on this because a lot of people are asking questions. But one of the things that we try to do with this series, and I think we're talking about this right now, is bring up a range of voices, right? Not just people who agree with you or agree with it, but really intentionally diverse set of voices so that we can hear the real logic. And they're in depth, right? So it's not a soundbite.

13:57We just showed the highlight, but the interviews are quite in depth so that you can really understand what their thinking is. And some of them are live. Most of them are live. So you can ask questions in real time to really dig in on what they're thinking. But Darren had a really interesting comment. So Darren Kay wrote, so for those who aren't members on our platform, everyone writes in the comments section their feedback, their comments their thoughts about the interview trade ideas, they ask questions that we answer and Darren Kay wrote this is compelling it's hard to figure out between your views and others making the opposite compelling arguments like Rosenberg and Demartello Booth who use similar logic like the coming student debt repayment and the ending finally of COVID business relief money and mortgage moratoriums for forecasting economic catastrophe.

14:46I guess you're saying that it's all priced in and will be the reasons that the Fed will eventually print again. Thank you for explaining it clearly. So the reason I wanted to highlight that is that when you hear these differing views, it can sometimes sound like noise if you don't have a context. I think this is why we organize the platform to take people on the journey. And you were really specific about this from information to knowledge to wisdom. And I think this is a perfect example of that. And this series is an example of that. It really is because information comes at you fast. And for most people, it's overwhelming.

15:24And you start just attaching to one view because that feels like it's your view and it should be your view. And then you don't hear the other view. But if you watch what I do in The Journeyman or, in fact, any of my interviews, I don't care what their view is in relation to mine. What I want to interview is somebody who I respect and get their opinion. Because that makes me understand the weaknesses in my own view or gives me confidence in my own view. I can even change my view. I learned new things. Like David Rosemarck taught me something new. Other people have different perspectives. And that's good.

16:02And so I'm passionate about this at Real Vision. is that ability, that journey from information to knowledge is the ability to put together divergent views and make them actionable to you for your views. And wisdom is how do you really put that into play? And that's the kind of levels that we have going through Real Vision. So level one is the essential tier. That's all the information coming at you. Then level two is plus, which is the knowledge level. That's where education comes in to give you the more in-depth understanding to process these views. And level three is wisdom where the pros reside.

16:43That's pro-macro, pro-crypto, pro-all access. That gives you a much deeper look into what's going on so you can really understand yourself and be part of that. Yeah. Yeah. In fact, I think you pushed back on Julian at one point today and said, like, OK, I understand what you're saying, but what's the trade? How do you trade that? That's right, because he was coming with a doom prophecy. And when I was pushing him for like, okay, what does that mean? Is that the equity market's going down? And how did the Fed not print if that happened? You need to push views around a bit to stress test them. And that format with Julian in macro insiders, insider talks, is fun for that because we've both been around a while and we'll just push each other a little bit further about, okay, well, yes, fine.

17:31You think world's going to end. What is the trade here? Am I just buying silver because I can stack under my bed or what is it? And that's good. Understanding those bits are really where when you know you've got into the more kind of wisdom level of things. Yeah. Yeah. And it's a journey, right? You don't necessarily have to get there straight off the bat, but it's sort of designed to help you. that's where you want to be headed. Well, don't forget, we've just created a huge hack for everybody. We've got AI now. So you can go straight to knowledge and it's built into the Real Vision platform. Well, it's going to get you there faster.

18:11That's for sure. Well, it gives you confidence. So you can ask like the Luke Gromman interview. You can firstly get it to explain to you simply, like explain like I'm five, but then you can also dig in and ask questions about it. And then you can look up terms. So to that point, Marty, so in the Luke, for those who haven't seen it, they throw around a lot of terms. So the other thing we'd love to do is peer to peer. Right. And so you did some of these. You sat down with Juliette de Klerk. Andreas did it. We had Larry McDonald interview Lou Groman. So these are two, in many cases, professionals interviewing each other.

18:47And so we do that so that we can get the most out of those and really have the other person push for the best information and challenge ideas. But Marty wrote in the comment section, a very good information with discussions that contain a lot of detail. I just wish I understood more than 10 percent of it. They both have a way of explaining things without using too much information where there is a lot of institutional finance language. Now, they explained it well, but he's like, I got to go back and watch it. I wrote back to him in the comments. Try the AI. Use the AI if you have questions about something.

19:20Just quickly, while I go over the questions and see what's happening, can you show us what that means? Can you show us how people can do that right now? So I'm going to share my screen for the platform. So those of you who haven't got the platform yet, I promise you it's coming for you. But there's a thousand people or so who are already on the new platform. So here I am at the Knowledge Center, right? This is where we go for knowledge. So as opposed to now just being a video, it is transcript-driven at the middle. And there's the conversations bottom left. So I can converse with members, but then I can go through the video.

19:53I can obviously highlight anything. But the magic comes is if I'm going through this and I'm like, well, I don't know what hard assets are. So I just go and ask me a question about the video. I'm in the Real Vision bot now. So let's ask it a general question. I like the dollar wrecking ball because you talked about the dollar wrecking ball. And for those who are frequent viewers on Real Vision. We talk about it all the time, but Brent Johnson. So I'm asking it what is the dollar wrecking ball. Let's see what it comes up with. By the way, Ralph is trolling us in the chat and saying we have a discussion on the exchange about a trade no one's talking about.

20:37I guess we should be talking about it, Ralph, but I don't know what the trade is. I don't know why they are slow today. I hope I haven't reached my limit. wait uh i will do it while you're doing that so yeah we have a limit on it now because we are um yeah i think i've hit my limit it's because you're too busy using it i know i use it all the time for everything so does everybody else have it all right well i will try it when we're doing a question um but yeah for me that's like you know it's a big barrier that's a big like just summarizing what's going on so i summarize the video what's luke's view on the bomb market So it'll answer that.

21:16What's his view on the dollar? It'll answer all of that. It'll answer any other questions. Yeah, I don't know why that's not working. I think I've hit my limit. Okay, well, I did it, and it pulls up the explanation of the dollar wrecking ball. It gives you a very nice explanation of what that theory is, which is amazing, because if you miss that part, then you're really missing the important stuff that Luke's talking about. And by the way, I know it's Friday. A lot of people are really busy. So if you haven't had a chance to watch some of these, I hope we're giving you a pretty good idea of some of the juicy stuff in there.

21:47And someone joked that maybe Luke may have lit on fire when he was giving his discussion because he was so passionate about it. We're going to take another quick break to hear a word from our partners. We'll be right back with more of the day's top analysis on the Real Vision Daily Briefing.

22:09so let's see let's let's get to one of these questions so someone asking are you um rick asking when are you looking to add to exponential age basket um there's a lot of things on my list that i want to add and i just think let's see what september october brings their volatile months, and maybe it'll give us a nice entry to get in lower. Maybe we can get the NASDAQ below 15 ,000. Maybe we don't if we buy on a breakup. So I'm just waiting to see. But I'm pretty loaded with technology stuff. So I also would love to see liquidity rising. I mean, we've seen the liquidity index stable, slightly rising.

22:53That's the Fed net liquidity. Our global liquidity index is roughly the same as well. So once I see that, that's the next signal that things are going to start happening. So a bit of a macro shift, weaker economic data will be another one. So I'm kind of watching it, but we've got it in a tremendously good level. So we can just sit and wait it out for a bit. Juliet seemed like she was very much in wait and see mode when you talked to her. Did that surprise you? I think a lot of people in wait and see mode. I mean, if you remember with Julian, And Brigden as well, he was kind of in wait and see mode.

23:28And my conversation with Beth Kindig that comes out next week, the technology investor, she was in wait and see mode. So I think a lot of people are because things ran a lot. So the bulls saw that the markets run a lot and expect a bit of an unwinding of the overboughtness, which is what's been going over the last month or so. and the bears want to see their crash, which I don't think they're going to get. Mr. Wright asking on the YouTube chat, so it's a resource like Investopedia. I think it's a little bit more than that, the AI. Oh, the AI is a full AI model trained on finance that can answer any finance question in the world about any complexity as well.

24:16So it's a full chat GPT built on open AI. There's two bots. That's the finance AI. The content AI is trained solely on the piece of content. So you can interact with a piece of content, ask any questions about it. What does it mean? Summarize it for me. Make me bullet points. You then clip that, turn it into your notes section, all of this stuff. So it's really clever. Yeah, which is the part I like. You can stick it. So you don't just read it. You can stick it and have it put there. I'm going to show that as well. Let me just bring my thing up. Well, you're not going to be able to pull anything from it because you've tapped out of your...

24:51So while we're on that, so right now, because we're migrating people on, there are limits, but that will increase, I believe. Well, because AI is bloody expensive. So I'm going to go to that video. Right, let me show you.