What's Driving Global Markets? Live AMA with Raoul Pal

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1:24And now to the top analysis of today's markets.

1:35Hi, everyone. Welcome to the Real Vision Daily Briefing. Today, we are doing an extended AMA with RV co-founder, Raul Powell himself. Hey, Raul. Hey, Maggie. How are you? I'm doing well. I'm doing well. It's good to see you. I love these. So does everyone else. We've got a ton of questions already. Just a couple of things. Just a reminder, right at the top, you need to be a member if you want to stay with us past the half hour. So if you're not, go ahead and scan the QR code, jump on one of the trials and sign up so you can participate in the conversation the whole time. And I'm selfishly going to take the first question because we have been inundated with questions from people who got wind of a video you put out about what's coming up on the platform and some of them wondering why they didn't get it, what's going on.

2:21So it is going to roll out to all members tomorrow, but you want to give us a little teaser on what the heck is going on? Yeah, you know, I think everybody knows by now that our mission has been to kind of help people in their financial journey through life, to democratize the kind of information that people need that didn't exist before Real Vision. And I've been thinking a lot about this over the last few years. And I thought we can do more. You know, I sit here with my Bloomberg open with all of the charts and all of the data and all of the stuff. And I just think that people don't get access, not only to stuff like Bloomberg terminals, but to each other, the network, the power of the Royal Vision network, or just the kind of information that's available, whether it's AI tools to help augment our learning, education, all of these things.

3:14And for a long time, I thought about, OK, what can we do about this? And I realized more and more that we needed to create an entirely new place for everybody to live their financial lives. something that we've been calling internally Real Vision 2.0. And people will get a video tomorrow that goes through it in more detail. Again, we won't be showing it because it's being built as we speak. But it's very exciting. It's a whole new way of living your financial life within Real Vision. And it will give you access to a lot of the tools that market professionals get and others get in a way that's quite disruptive and very different.

3:54So super excited about it all. Now, it's going to roll out slowly. So to some people, we'll see the first beta test. We want to build it with the community. This came from hundreds of hours of conversations with community members about what they needed. How can we give them more confidence in their investing lives? How can we get people to kind of realize the vision of their future self, where you want to go in life? And to do that, you need to make sense of this world we're in now. So we thought about how can we do that? So everything starts rolling out. Won't give the exact date, but sometime in June.

4:35And we'll do it in phases for both cohorts of people. So certain membership groups will get it first. And we want people to help us. Give us feedback. There'll be stuff that doesn't work. There'll be stuff that people don't understand or they want to give us more input. Great. We have a whole roadmap for the next year of features and stuff that's launching. Plus, we'll be working with our members to build this exactly how they want it as we go. So it's going to be an iterative process. What we launch is not where we're going. That's the start. It's the start of a journey that is going to be really quite extraordinary, I hope.

5:12Yeah. Yeah. And the thing that I think most of us have been super juiced about is this is something we talk about all the time, is that the community is at the center of it, right? So not only is it for them, but they're going to be guiding us on sort of refining it as we go, which I think is super cool. And we built it from their feedback as well. What were their pain points? What do people want out of their lives? We found that one of the things is people were just fed up with – everyone's trying to manage time, right? That's the hardest thing we've got. It's the currency we can never get more of, but it's the most powerful and most necessary currency of all is time.

5:48So we started thinking, how can we save people time to give them the ability to digest more information? Also, we looked at people's behavior. We're all spread across 10 different apps. You've got your brokerage app, your crypto brokerage app, your pricing, your charting, your news flow, your community tools, videos, podcasts, everything is everywhere. We're like, this is nonsense. We need to create one place where it can all come together. Awesome. So again, it's going to be kind of rolling out. If you don't see it or you don't have access to it, this isn't an exclusive issue. It's not we're leaving you out.

6:28It's just that it hasn't reached you yet. But reach out to us if you really want to be a part of it and participate. and sort of build with the community. And if you haven't seen it or you're not beta testing it, we're going to be providing an email. And especially, we know there's some regulars. There's some regulars in this chat every day. Ralph, Beau, Phil, John, Colin, we're talking to you. Just email us and we'll make sure that you participate in the journey. So it's going to be really exciting. So dot, dot, dot, dot, stay tuned. But the video will drop tomorrow. Yeah, look, it's the biggest thing to happen in the history of Real Vision since its launch.

7:02So this is not a small thing we're attempting here. We've, in the background, been hiring a lot of product and engineering talent, amazing people. Andy Batt, our chief experience officer and Canal Shire CTO, amazing people who've really, really done some special stuff here. But again, don't expect everything on day one. Yeah. And again, there are always bumps when you're beta testing, right? And when you're rolling out. So that's why we couldn't get to everybody because we couldn't have tens of thousands of members all coming on in one day. Yeah. Just we couldn't even process everybody's feedback at that point, which is why we need to throttle it so we can get feedback.

7:40Hey, look at this. What do you think? Hey, you've got a problem here. This isn't quite working. And then we can keep fixing going so then we can roll it out to more and more people. So it will be it will be phased, but everybody will get it. It's been it's been stressful, but now everyone's getting super jazzed about it. I think one of our users said, so exciting, go slow, do it right. And so we're going to try to do that. It's hard when we're excited about it. We're going to try to do that. All right, great stuff. So now, a lot going on. We have so many questions about different things. But before we dive in, just sort of give, you and I haven't talked in a couple weeks.

8:15You've been traveling around. You've been meeting with all sorts of people. You had a roundtable yourself. Give us an idea of what you're thinking in terms of what we've seen, what we're seeing on the global, on the macro front and with these markets. 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.

8:40Really interesting because I had the Global Macro Investor Roundtable. So that's my super exclusive research service. And that was in a beautiful hotel in Mallorca. We all got there to talk macro and drink some wine. I knew the drink some Spanish wine was going to come up in that. Yeah. We had the Club de Van guys doing wine tasting for us, which was amazing. What's interesting is we ask everybody for their trade ideas. And yes, there's a few. There was a few around that were kind of in line with where a lot of people thinking. But what was interesting is there was very few big macro calls. A lot of people were looking at specific sectors like shipping or whatever.

9:22And that tells you that people, even that group, which is there's some pretty well-known hedge fund managers and big family offices and asset managers, aren't exactly sure what to think. Now, I've had a very strong view for a while, which was that liquidity was everything. And I wrote all of this up in that everything code that I've talked a bit about that interview with Nathaniel Whittingmore. I went through quite a lot of what the everything code is, but that's still kind of exclusive to GMI. But liquidity is everything. All of my forward-looking indicators have been suggesting that liquidity is going to keep rising and that it would drive crypto and tech more than anything else.

10:04And that's basically been the story of the year so far. And I think that that continues. And that's confused a lot of people. The one trade that's confused me is the bond trade. And that's confused a lot of people. Bond yields should have fallen by now, and they still haven't. But I think this is to do with the debt ceiling issue, which is the other confusing thing. Because the debt ceiling issue has some real risks around it. And we don't really know how to price them. All we do know is people are pretty bearish around it. And I think that's reasonable, too, to have hedged around it, because we don't know what can happen.

10:41But the chances are that anything that causes a paralysis of financial markets will lead to that expression I always use, more cowbell, more stimulus to come. So I'm going to run through a couple of charts very quickly, just to show some of the things that are on my radar screen so people can think about. So I'm going to start with my liquidity index. So this is the Global Macro Investor Weekly Liquidity Index. That's basically around the G5 central bank balance sheets. That we have our Financial Conditions Index, which is based around the dollar rates and a whole bunch of other stuff, which leads this, as does ISM.

11:25And it suggests that liquidity is going to keep rising all the way through this year. And the everything code suggests it actually keeps rising all the way through to the end of 2025. So yes, we might have some stumbling blocks. Yes, we might have some hurdles. But liquidity going forwards as the economy slows down and the central banks start increasing their activity, that will drive asset prices higher. So that's the first chart I wanted to show you. So that's the liquidity chart. Why liquidity matters is this chart. This is the chart of the NASDAQ against that same liquidity index. That's the tightest correlation I've ever seen.

12:15And it explains 97.5 % of all the movements in the NASDAQ is liquidity. And this is around this currency debasement idea. The more the central banks print, the more you're changing the denominator, not the actual value of the asset themselves. So again, the only assets that have really gone up in balance sheet terms are technology, the NASDAQ, and other like the exponential age stocks, and crypto. Also, actually interesting enough, so is luxury goods. There's a reason Bernard Arnault is the richest man in the world. It's because what does he sell? He sells scarcity, right? In a world where you're devaluing the denominator, scarce things go up more in price.

12:58So Bernard Arnault's balance sheet, his bank account goes up every week. So that's another chart for you to show. And then we can look at this, which is the chart of speculative positioning. Let me change that one and change to this one now. This is speculative positioning in the S &P 500. I have literally never seen anything like it. So the market is insanely bearish, which is why the Nasdaq is up 1.8 % today, because people just don't want to believe it. They're angry. They want the market to go down. They want their bear market, and they want their justice. And it's not happening. And the reason being is everybody's ridiculously, ludicrously short.

13:49On the flip side of the equation, we're going into this, and that's obviously driven by the debt ceiling. The other side of the debt ceiling is this chart, which is the speculative positioning in bonds. Now, bonds, as I mentioned before, have not been playing ball. I thought yield should be falling, but they haven't yet. But look what's going on here. This is the largest speculative short positioning in the history of the bond market. So if anything changes at the margin here, we're going to see a gigantic rally in bonds, which I'm still expecting, but this whole debt-sailing dynamic is getting in the way.

14:30Inflation dynamics, on the other hand, are falling very fast. Things like the Truflation Index, which is a real-time calculation on chain of millions of prices suggest that US CPI as of today is 3.2%. I think it still goes to zero by June or July, which Alex Gurevich has been talking about both on Real Vision and also on Twitter as well. We're very in a small camp of that. We're also seeing wage growth coming down. We're seeing rents and wages are the most lagging of all. So they're all still to come down. So generally speaking, economy slowing. We've got this whole debt ceiling stuff that's getting people very nervous.

15:16The resolution of that one way or the other ends up being ongoing liquidity as the economy slows. The banking issues have slowed down for the time being, but it doesn't mean it's gone away. These things tend to come in phases. And so technology and crypto tend to outperform. Crypto has been consolidating for a while, but it's still up 50%, 60 % on the year, still the best performing asset. But again, it's likely to pick up as liquidity comes forward, as shown by our forward-looking liquidity indicators. And we've probably got 20 or 30 different things we could show you to say that liquidity is going up.

15:53So I remain massively bullish. There will be a correction at some point in all of this. as people start throwing in the towel on the short positions, then we might get a correction before we continue to move higher later on in the summer. So overall, super bullish. The only one that's puzzling me is the bond market still hasn't played ball. But I think we need to get through this debt ceiling thing. And then a lot of hedges get unwound. Because the bond market hasn't played ball, it's a funny timing issue, isn't it? Could you see stocks and bonds both rallying, or are they going to move in inverse?

16:26I think stocks and bonds will both rally eventually. That's what the big call is. That's what I think happens. So I think stocks and bonds rally, as I said, technology, crypto rally the most. If I just look down my Bloomberg right now, the S &P's up 8%, the Nasdaq's up 25%. I've been saying this since last year, and everyone thought it was crazy. The exponential age basket that I talked about in Real Vision that everyone thought was a complete idiot for, that's up about 40 % this year. And crypto, which everybody thought was completely dead, is up 50%, 60%, 70%, depending on what you're looking at.

17:06Stuff like Solana is up 120%. So it's this most hated value. I'm going to totally let you get away with that brag because you took an enormous amount of shit. So I will let you have your brag moment, Raoul. But it is true. It's puzzled people. And, you know, it's funny because I think the last time you did a macro update, somebody, to your point about the NASDAQ, and there is some sort of emotion in this, somebody said it's so hard to pull the trigger on the NASDAQ at these prices. I mean, this was even a month ago. So this is percentages back. Those who didn't do it four to six months ago missed the boat.

17:43Have they missed the boat? It's that sentiment. Like, I just can't believe it could go up from here. That's really – and the pushback you're getting, but also it's held people back from exposure, right? I've been in that trap basically since 2012. It's like valuations keep going up. The market goes up. You don't really understand it. You don't want to get involved. So you stay out of it. You start to look for smaller opportunities, and you miss the big thing. And it's only until I started to understand what was driving it, that it was driven by, A, this massive technological revolution going on, but also the Fed balance sheets and the global central bank balance sheets.

18:21Once I understood it, it became much easier to just buy it. And also, I also did a lot of work in the everything codes to figure out that P ratios and being driven actually by the balance sheet and global M2. It's all monetary phenomena. And it's not about earnings anymore. Everything is driven by one thing. And is this in the post-GFC environment? Is that why it's so hard for people? Just because the models that everyone was brought up on using are just not, they just don't function in that world where central banks are influencing. I was just reading the FT just before we came on, and Carl Icahn is talking about how he lost 9 billion hedging since 2012.

19:06since later than that, because he's been expecting the crash. But I keep saying this 50 % correction in equities can't happen, because simply, they just expand the balance sheet, and the denominator takes care of the fall, and they rise. So it just simply can't happen. The only way that it could happen is if we see massive quantitative tightening. But then the economy goes down the toilet. And they've got the unemployment side of the equation, the inflation side. So it just can't happen right now. Now, that's not mean this will stay forever. But it's a situation that quantitative easing is used as a way to pay the debts, and particularly the interest payments on the government debt.

19:50And that was, again, part of this everything code that everybody reset their interest rates to zero in 2009. Everybody, every country. It was like a global reset. I only realized it recently that that was the global reset. And so everybody's now in this debt cycle of every three to five years of having to roll the debt. The interest payments get monetized, and that is the increase in the balance sheets. It almost exactly works out for the US, the UK, Japan, Europe, et cetera. They're all just the monetization of the interest payments. Yeah. We sat together in New York when you did that sort of master class for some of our members on that with Julian and Andreas.

20:30Interesting question. It's somewhere on one of our tiers. And if not, we will sort of get it back on there because that is the defining sort of framework that you're working from right now. We have a couple of questions about this issue of deflation, but just sticking on the liquidity issue for a moment, a couple of different people are saying, do you think that we'll see a decrease? The markets will fall after the debt ceiling gets resolved because liquidity will fall. I think having to do with some of the mechanics. TGA stuff, that's right. Yeah, and Andreas has been covering this really closely in Steno signals.

21:09There is a possibility, and we saw this in 2011. The S &P fell 20%. Now, what it did was correct 76 % of the rally that it had. could we see a similar move here as the shenanigans around the debt ceiling mean that the TGA gets rebuilt? Yes. Which is why I said, listen, there's got to be a correction here at some point, but it may be from higher than here because the market's in this short squeeze because everybody's hedged for this thing. And so it just squeezes everybody up. And then, yes, I think that there's a very decent likelihood of that. And in fact, I put out a trade recommendation for ProMacro around the ideas of this, which is that, listen, there's a risk of this causing a sharp pullback, but the outcome will be more liquidity.

21:59So there's actually two ways of playing this in the end. So yes, I think it's a potential issue. And I think there is a potential correction, but probably not yet. 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.

22:21Yeah. And thank you for that question, because that's a short-term question. And a lot of times when you're talking, Raoul, on your framework, you're a little bit longer term. You're not talking day trading this or even the next month. You're talking, your framework is always longer. So that is a very short-term issue that you should be aware of, any of you who have a short-term framework. That's going to be important. It's very important. We don't really know. 2011 is the only historical pattern that we can use. It did shake up markets. Bonds rallied like crazy. Equities sold off sharply, then rebounded really hard.

22:57And then we went into the European crisis and QE coming out of our eyeballs. Yeah. Yeah. OK, so I want to get this question in from Twitter because, believe it or not, we're already getting to the bottom of the half hour. But because Grist got it on there very early, is it possible that we are approaching a deflationary cliff with AI at the same time we're filled with inflation fears. Isn't the fear of deflation more powerful to a central bank than inflation? They aim at for 2 % inflation, a little bit of inflation, okay, not so with deflation. So it's a two-part question. Again, I'm very out of consensus on this.

23:34I think inflation headline CPI gets to zero or even negative by the summer. It then picks up again. And what we will then see is the slow effects of owner's equivalent rents, services inflation, which is mainly owner's equivalent rents, and wages. That usually lags on for 18 months. So that keeps inflation low coming out of a recession. And I think the AI thing, as I've talked about, is a deflationary nuclear bomb in all of this. So I think the probability is that unemployment is sticky coming out of this, sticky than expected, and inflation is not as rampant. So even if commodity prices, and I understand there's some tightness in commodity markets, but everybody's tried to take that trade has been taken out and shot right now by the markets.

24:25And Dwight Anderson warned us about this on Real Vision. He's like, yep, they're tight, but there's no demand. And if you keep looking at the supply side of the equation, you'll get carried out because the demand equation will kill it. He said, the next time we come into the upside of the business cycle, we are going to get some commodity inflation, but that can be easily offset by deflation of AI, much like we saw in the mid 2000s with China coming in. They caused a massive spike in commodity prices, but inflation was relatively sanguine because of the effects of China in the WTO meant that goods were coming out cheaper, globalization.

25:03This side, we've got AI, which is hugely disruptive, balancing against the commodity inflation that can come. So I think inflation is slower than the market expects. So that is a contrarian view. And I love the fact that we have loads of people on the platform that will give their other view a different one from you. And that's why we do it. We want you all to hear all sides of the argument so that you can figure out what makes more sense to you and use some of the tools that we have in the academy session so you can plug it in. And we just did daily briefings with like three people this week, Raoul, who said commodities, inflation is sticky and structural and commodities coming back.

25:43But that's why I love this. That is the biggest narrative I think I've ever heard in markets outside of the narrative from about 2012 to 2019, which is the markets are going to crash. Those two narratives have been that market was going to crash narrative when none of us understood the printing of money was incredibly pervasive. I was wrapped up in it. Everybody has been wrapped up in it. The other one is now this sticky inflation. I've never seen people so vociferously believing in something. And when I ask them to show where they get that from, it's just a hunch because i think commodity prices go up or you know there's i'm finding very little evidence of it yeah well the evidence is different some of them think deglobalization is good you know they have a sort of litany of theories about what is going to drive it but it's it kind of fits into that you know um it's more forward forecasting and it's not clear it's so hard because of all the cross currents to know whether that's going to stick or not and it's very not numbers led.