Hidden Forces

Published on: June 26th, 2020

As the crisis ignited (though not caused) by CV-19 develops, Raoul examines how it breaks down into phases. The initial liquidity crisis has morphed into the hope phase. After hope comes insolvency. Insolvency is a much harder nut to crack. Businesses must struggle with the legacy of misallocation of capital, debt, outdated business models, excess staffing, supply chains and political uncertainty. Consumers will need to reassess consumption patterns as the cosy blanket of income support is tugged away. Debt deflation looms large. Central Banks are ill-equipped to help.


  • ip
    ivo p.
    28 June 2020 @ 13:07
    Thanks Raoul! Awesome again! I was hoping you would touch copper in this one... Why is it not aligning with your deflationary view (most of the other commodities are).
    • RP
      Raoul P. | Founder
      29 June 2020 @ 21:43
      Its a puzzle to me...
    • MC
      Mike C.
      30 June 2020 @ 01:12
      This links to my question to RP in his previous update as to why he uses CRB Raw index. His answer was that it filters out the influence of speculation in commodity prices which could give false inflation signals. Indeed the bond market is not buying the inflation story. I note Hedgeye are calling for stagflation but its an inflation call driven by a weak USD view. Note though that copper has remaind strong while the USD has regained some ground in the last week. There have been a lot of production cuts so maybe a talk with an SME to discuss supply side dynamics might reveal if this strength in base metals is a head fake or not. Note that Iron ore prices look like they have peaked for now too.
  • PC
    Peter C.
    28 June 2020 @ 11:19
    Raoul, it is a great piece and it looks like it will all play out as you describe it but I do wonder if the behavior of the fed and governement are fully assessed. Just playing devil's advocate here but what if the Cares act continues in some form and consumption remains artificially high? The 2nd wave may give the leverage needed to do so. And what if the fed starts increasing its balance sheet once more, absorbing the impacts of the treasury? As "social worker" Powell confirms, he doesn't care about inflating the asset bubble in the process. They have done it for a decade already and feel a lot of support in their actions (especially by congress). Also, if the big BBB's face solvency issues down the road, the governement could still bail them out and safe the equity holder in the process, even if they need to absorb a minority share for the governement. Who will stop them doing it? With a democrat in the house this socialization of society might even accelerate. As long as deflationary pressures continue and the dollar shows sufficient strength, monetary and fiscal spending may look like the perfect solution for the problem. MMT all the way! Of course, eventually the release valve will be the dollar and stagflation will be the end result. Do you think the scenario above is not realistic? Or do you believe that this scenario might play out but that the governement will be too slow to act so we need to deal with the insolvency crisis first in the short term?
    • HM
      Harry M. | Real Vision
      29 June 2020 @ 20:27
      Forgive me for answering in RPs absence. Im sure he will correct if I do not characterize his views correctly. So I think the scenario you paint is entirely plausible, and is remarkably close to Julian's scenario. I think RP believes the deflationary forces are simply too big to be reversed by Fed or UST action. Ultimately, if the private sector cant pay debt back, then we have reached the limit of monetary policy for sure. The broader question is whether we as a society are willing to do what it takes fiscally to prevent the deflationary outcome.
  • BS
    Brian S.
    27 June 2020 @ 02:59
    This is my visualization, we saw a massive tsunami approaching, as the tide went down we freaked out and built a wall, now the tide is coming in and the wall is only making the volume of water larger on the other side, if the wall breaks, the destruction will be even worse then if there was no wall at all. We better hope the Fed knows what they are doing, otherwise they would have only enhanced the economic chaos.
    • HM
      Harry M. | Real Vision
      29 June 2020 @ 20:11
      The Fed has protected most banks and a lot of those who had serious mismatches in liabilities relative to assets. However there have been losses. Who has lost the money and can they meet their obligations?
  • dg
    daniel g.
    27 June 2020 @ 00:59
    Can we think about effects of possible government (not fed) interventions? How about a $1T infrastructure building program, puts around 10m people back to work outdoors ?
    • BF
      Brad F.
      27 June 2020 @ 06:43
      Do you see enough “shovel ready” projects to get this number of people back into the workforce in time to stop the damage? I think it will take years.
    • HM
      Harry M. | Real Vision
      29 June 2020 @ 20:00
      I am hearing of these kind of proposals washing around DC. I think a lot of people understand the scenarios RP has outlined. But you need very specific political circumstances to overcome opposition to some policies. We will see post election where things are.
  • KS
    Karin S.
    26 June 2020 @ 23:36
    I'm scared
    • HM
      Harry M. | Real Vision
      29 June 2020 @ 19:57
      I have been scared since 2008. I do wonder what will be left standing at the end of this period. Regardless, life goes on and we do the best we can. Diversify and think through all your bets and all your risks.
  • JS
    Jim S.
    26 June 2020 @ 22:37
    I was saying that same thing to myself on may way to work. How do we get inflation with > 15% unemployment. I just don’t see it — maybe in a few years, but not in the next 12months. Great piece.
    • HM
      Harry M. | Real Vision
      29 June 2020 @ 19:56
      A fair point. I would note that the US has managed to have previous periods of stagflation, although it did not persist. I also agree that the next 12 months is probably not a period of rampant inflation, even if there will be supply chain disruption which can mean localized inflation.
  • HK
    Hendrik K.
    26 June 2020 @ 21:20
    Thanks for Detailed Update, but on the Closing you reference Druckenmillers bearish view ... didnt he changed his view couple of weeks later after the NY interview (and made me feel worse staying in mostly cash): Druck May: https://www.bloomberg.com/news/articles/2020-05-12/druckenmiller-says-v-shaped-recovery-for-u-s-is-a-fantasy Druck June: https://www.cnbc.com/2020/06/08/stanley-druckenmiller-said-hes-been-humbled-by-market-comeback-underestimated-the-fed.html
    • HM
      Harry M. | Real Vision
      29 June 2020 @ 19:54
      So I have very little risk on too, although I did ride some small proportion of the rally. For what little its worth, Mr. Druckenmiller noted that it was the steps the Fed took, particularly in backstopping the corporate bond market which have been critical in preventing a wider sell off/collapse. His points on where the vulnerabilities lie in the system are well made (and also made by RP). The Fed has definitely prevented some very bad situations becoming worse. The question is whether they will have to act again, and whether they will be prepared to do what it takes again, should it become necessary again. I think there is a lot of value in seeing why someone like Stan D got it wrong this time. And also how humble he is when he gets it wrong.
  • BF
    Brad F.
    26 June 2020 @ 21:02
    Join 209 other RV Pro subscribers and two RV Co-Founders in the free, unofficial RV Fans Slack channel to discuss this and all things finance. https://bit.ly/slack-rv-fans Thumbs up if you are on Slack already!
    • DR
      Derrick R.
      27 June 2020 @ 03:16
      Yes, the RV Slack is amazing!
    • HK
      Hendrik K.
      28 June 2020 @ 16:33
      is this real or Spam / Phishing? Thanks
    • HM
      Harry M. | Real Vision
      28 June 2020 @ 20:38
      Its a great question Hendrik.
    • HM
      Harry M. | Real Vision
      29 June 2020 @ 19:37
      So I spoke to the Realvision guys and they told me its fine. RV is working on a more permanent solution but a number of RV guys are on the (unofficial) Slack channel.
  • ds
    david s.
    26 June 2020 @ 20:46
    What bond trade are you considering?
    • DT
      DEVON T.
      29 June 2020 @ 12:13
      I'd love to know as well.
  • DF
    David F.
    28 June 2020 @ 11:01
    Salutary warning Raoul, thanks.
  • JC
    Justin C.
    27 June 2020 @ 05:15
    It will be interesting to see how this next deflationary push affects gold and gold equities. I think the latter are likely to be sold off for liquidity, but not sure gold itself will sell off due to what should be the apparent clear and present systemic instability. As always, incredibly well organized data, interpretations and conclusions are summarized here. Cheers to you and your team for the EXCELLENT work you do! Have a great weekend.
    • ML
      Michael L.
      28 June 2020 @ 07:41
      Agreed on all points and absolutely echo the second comment!
  • DB
    Dan B.
    28 June 2020 @ 01:33
    You mention the Stimulus measures being temporary except loans and that this won’t help in a solvency crisis / only helps in a liquidity crisis, can you explain this a bit more please ?
  • JL
    James L.
    27 June 2020 @ 18:05
    Raoul, I stuggle with the dollar UP for a very long period given Julian and Hedgeye see it as a short. I lean in your direction! Given that I avoid futures, what are your thoughts about buying the ETF-EUO (2x short Euro)? Your report is excellent particularly the BBB Credit and Bank Index comparisons. Ed Harrison's Daily Briefing from last night totally supports your banking risk analysis and points out that the FED is seriouly concerned, as well. Would you short the bank index XLF or KBE at this point?
  • JW
    J W.
    27 June 2020 @ 07:55
    Just finished reading the report - I feel like I ran a mile at speed ! It is fascinating to see you expose the underlying dynamics of an exuberant equity market vs a real economy problem. Continue discussion on the RV Fans Slack channel...
  • VR
    Vince R.
    27 June 2020 @ 02:03
    Congratulations on finding your own created index, BBBGMI index that is correlated to a number of things. As you know much better than I, correlation does not equal causation. It is interesting, true. Bears watching, true. I agree with you and believe you that the bond market is what to watch. Like what 2 yr, 5 yr, 10 yr all did today. Starting to see movement in the right direction on the /ZT August 110.5 calls you recommended we take a small position in a few weeks ago. But have a hard time buying into the arguement on the dollar rise just because of a correlation to a new index you created. I know it's just supporting evidence to your already existing thesis. All in all I am very thankful for all the work you, and Julian and the RV team do for us. Thank you!!!
    • BF
      Brad F.
      27 June 2020 @ 06:41
      In this case I don’t think we need to see a causal relationship to the index for the trade setup to be valid. We would need to see a breakdown in those correlations to invalidate the trade. It would be helpful to understand what really drives the correlation, but we can say for sure that the data puts the probability of the expected outcome far higher than the risk/reward on the trade, and that’s all we need for a positive expected value.
  • RD
    Raj D.
    27 June 2020 @ 03:54
    much appreciated Raoul, I will be interested to hear you commentary on what has transpired since the report was published ie changes to banking / Volcker rule / company buybacks etc bonds etc dramatic drop yesterday, nearing critical support levels escalating Covid negative news it seems the markets have been left with 2 days to dwell on this data and build up panic for a big sell off Monday Your comment "The liquidity firehose is about to reverse. Yes, the Fed will step back in eventually, but not with the SPX at 3000. They will come back when there is more pain" has me thinking we won't see an immediate stimulus reaction, which would lead to further panic selling
  • BR
    Brian R.
    26 June 2020 @ 21:43
    thanks Raoul, very compelling - if it wasn't already, it certainly is now. Battle stations manned and ready, thanks for early release.

Mark Yusko

Morgan Creek Capital Management, Co- Founder, CEO, & CIO

Mark Yusko is the Founder, CEO and Chief Investment Officer of Morgan Creek Capital Management. He is also the Managing Partner of Morgan Creek Digital Assets.

Morgan Creek Capital Management was founded in 2004 and currently manages close to $2 billion in discretionary and non-discretionary assets. Prior to founding Morgan Creek, Mr. Yusko was CIO and Founder of UNC Management Company (UNCMC), the Endowment investment office for the University of North Carolina at Chapel Hill. Before that, he was Senior Investment Director for the University of Notre Dame Investment Office. Mr. Yusko has been at the forefront of institutional investing throughout his career. An early investor in alternative asset classes at Notre Dame, he brought the Endowment Model of investing to UNC, which contributed to significant performance gains for the Endowment. The Endowment Model is the cornerstone philosophy of Morgan Creek, as is the mandate to Invest in Innovation.

Mr. Yusko is again at the forefront of investing through Morgan Creek Digital Assets, which was formed in 2018. Morgan Creek Digital is an early stage investor in blockchain technology, digital currency and digital assets through the firm’s Venture Capital and Digital Asset Index Fund.

Mr. Yusko received a BA with Honors from the University of Notre Dame and an MBA in Accounting and Finance from the University of Chicago.

Anthony Scaramucci

SkyBridge Capital, Founder & Co-Managing Partner

Prior to founding SkyBridge in 2005, Scaramucci co-founded investment partnership Oscar Capital Management, which was sold to Neuberger Berman, LLC in 2001. Earlier, he was a vice president in Private Wealth Management at Goldman Sachs & Co. In 2016, Scaramucci was ranked #85 in Worth Magazine’sPower 100: The 100 Most Powerful People in Global Finance. In 2011, he received Ernst & Young’s “Entrepreneur of the Year –New York” Award in the Financial Services category. Anthony is amember of the Council on Foreign Relations (CFR), vice chair of the Kennedy Center Corporate Fund Board, a board member of both The Brain Tumor Foundation and Business Executives for National Security (BENS), and a Trustee of the United States Olympic & Paralympic Foundation. He was a member of the New York City Financial Services Advisory Committee from 2007 to 2012. In November 2016, he was named to President-Elect Trump’s 16-person Presidential Transition Team Executive Committee. In June 2017, he wasnamed the Chief Strategy Officer of the EXIM Bank. He served as the White House Communications Director for a period in July 2017. Scaramucci, a native of Long Island, New York, holds a Bachelor of Arts degree in Economics from Tufts University and a Juris Doctor from Harvard Law School.

Michael Saylor

MicroStrategy, Co-Founder

Mr. Saylor is a technologist, entrepreneur, business executive, philanthropist, and best-selling author. He currently serves as Chairman of the Board of Directors and Chief Executive Office of MicroStrategy, Inc. (MSTR). Since co-founding the company at the age of 24, Mr. Saylor has built MicroStrategy into a global leader in business intelligence, mobile software, and cloud-based services. In 2012, he authored The Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot on The New York Times Best Sellers list.

Mr. Saylor attended the Massachusetts Institute of Technology, receiving an S.B. in Aeronautics and Astronautics and an S.B. in Science, Technology, and Society.

Alex Saunders

Nugget's News, Founder & CEO

Alex Saunders is the founder and CEO of Nugget’s News, a digital media company focused on all things crypto. Alex has been captivated by cryptocurrency since 2012 and in 2017 he began educating globally on the benefits of cryptocurrency and how to safely acquireit. Nugget’s News has been listed as a top-20 podcast by Business Insider, ShapeShift and Lifehacker and has over 120k YouTube subscribers with 9 million total views.Alex is also heavily focused on his cryptocurrency education platform Collective Shift which currently serves over 4,500 members. provides his unique perspectives by utilising his expertise in fundamental analysis, technical analysis and market sentiment. He is working towards his mission of making it easier for everyone to understand the financial world.

James Putra

TradeStation Crypto, Inc., Sr. Director of Product Strategy

James helped launch TradeStation Crypto’s offering which utilizes a true online brokerage model that self-directed investors and traders have come to expect for equities, futures, and foreign currency markets. He is a reputed crypto asset specialist and blockchain thought leader focused on helping people find innovative ways to participate in this space. He is active in the blockchain community with speaking engagements, TV appearances and mentoring. James has over 15 years of experience in the Fintech industry.

Raoul Pal

Real Vision, Co-Founder & CEO

Raoul Pal is the Co-Founder and CEO of Real Vision, the world’s pre-eminent financial media platform, which helps members understand the complex world of finance, business, and the global economy.

Real Vision members also have access to Real Vision Crypto, a cryptocurrency and digital assets video channel watched by over 80,000 people. In addition, Raoul has been publishing Global Macro Investor since January 2005 to provide original, high quality, quantifiable and easily readable research for the global macro investment community hedge funds, family offices, pension funds and sovereign wealth funds. It draws on his considerable 31 years of experience in advising hedge funds and managing a global macro hedge fund. Global Macro Investor has one of the very best, proven track records of any newsletter in the industry, producing extremely positive returns in eight out of the last twelve years.

He retired from managing client money at the age of 36 in 2004 and now lives in the tiny Caribbean island of Little Cayman in the Cayman Islands. Previously he co-managed the GLG Global Macro Fund in London for GLG Partners, one of the largest hedge fund groups in the world. Raoul moved to GLG from Goldman Sachs where he co-managed the hedge fund sales business in Equities and Equity Derivatives in Europe. In this role, Raoul established strong relationships with many of the world’s pre-eminent hedge funds, learning from their styles and experiences.

Other stop-off points on the way were NatWest Markets and HSBC, although he began his career by training traders in technical analysis.

Peter McCormack

What Bitcoin Did, Journalist

Peter McCormack is a full time journalist/podcaster covering topics such as Freedom, Human Rights, Censorship and Bitcoin. Peter created and hosts the What Bitcoin Did Podcast, a twice-weekly Bitcoin podcast where he interviews experts in the world of Bitcoin development, privacy, investment and adoption. Launched in November of 2017, the podcast has grown to over 100 episodes with a guest list that is a testament to the diversity of knowledge and opinions that represent the broader Bitcoin community. Expanding his growing list of human interest recordings, documentaries and films Peter has recently launched the Defiance podcast and DefianceTV.

Caitlin Long

Avanti Financial Group, Founder & CEO

22-year Wall Street veteran who has been active in bitcoin and blockchain since 2012. In 2018-20 she led the charge to make her native state of Wyoming an oasis for blockchain companies in the US, where she helped Wyoming enact 20 blockchain-enabling laws. From 2016-18 she jointly spearheaded a blockchain project for delivering market index data to Vanguard as chairman and president of Symbiont, an enterprise blockchain start-up. Caitlin ran Morgan Stanley’s pension solutions business (2007-2016), heldsenior roles at Credit Suisse (1997-2007) and began her career at Salomon Brothers (1994-1997). She is a graduate of Harvard Law School (JD, 1994), the Kennedy School of Government (MPP, 1994) and the University of Wyoming (BA, 1990).

Hunter Horsley

Bitwise Asset Management, CEO

Hunter Horsley is Chief Executive Officer of Bitwise Asset Management. Prior to Bitwise, he was a product manager at Facebook, working on advertiser products including the multibillion-dollar sponsored content ecosystem and ad breaks in videos. Before Facebook, Horlsey was a product manager at Instagram, responsible for multiple advertising products generating several hundred million dollars of revenue. He is a graduate of the Wharton School at the University of Pennsylvania, with a B.S. in economics. Recently, Horsley was named a member of Forbes’ 2019 “30 Under 30” list.

Luke Gromen

Forest For The Trees, Founder & President

Luke Gromen has 25 years of experience in equity research, equity research sales, and as a macro/thematic analyst. He is the founder and president of macro/thematic research firm FFTT, LLC, which he founded in early 2014 to address and leverage the opportunity he saw created by applying what clients and former colleagues consistently described as a “unique ability to connect the dots” during a time when he saw an increasing “silo-ing” of perspectives occurring on Wall Street and in corporate America.

FFTT caters to institutions and sophisticated individuals by aggregating a wide variety of macroeconomic, thematic and sector trends in an unconventional manner to identify investable developing economic bottlenecks for his clients. Prior to founding FFTT, Luke was a founding partner of Cleveland Research Company, where he worked from 2006-14. At CRC, Luke worked in sales and edited CRC’s flagship weekly thematic research summary piece (“Straight from the Source”) for the firm’s clients. Prior to that, Luke was a partner at Midwest Research, where he worked in equity research and sales from 1996-2006. While in sales, Luke was a founding editor of Midwest’s widely-read weekly thematic summary (“Heard in the Midwest”) for the firm’s clients, in which he aggregated and combined proprietary research from Midwest with inputs from other sources.

Luke Gromen holds a BBA in Finance and Accounting from the University of Cincinnati and received his MBA from Case Western Reserve University. He earned the CFA designation in 2003.

Meltem Demirors

CoinShares, Chief Strategy Officer

Meltem Demirors is Chief Strategy Officer of CoinShares, an investment firm that manages billions in assets on behalf of a global investor base, and is a trusted partner to investors and entrepreneurs navigating the digital asset ecosystem. Meltem oversees the firm’s managed strategies group and its New York office and leads corporate development.

Previously, she was part of the founding team of Digital Currency Group. As a veteran investor in the digital currency space, she has invested in over 250 companies in the ecosystem.

Meltem is passionate about education and advocacy, and teaches the Oxford Blockchain Strategy Programme and co-chairs the WEF Cryptocurrency Council.