Hi Raoul and Julian. Really interested in your thoughts on all the following: The markets have essentially turned into one giant game of chicken built off CB interventions and manipulations. US Market Volatility at lows not seen since 1994/95 and 2006/07 period. Market is not being allowed to correct due to blind deployment of $ inflows into index ETF's and Funds which increasingly drives allocation to the top tier index stocks which simply creates a self fulfilling cycle of perpetual inflows into those leading stocks which pulls the indexes ever upwards and smashes volatility anew and the opportunity to have even a "normal" correction of any kind. There is a bubble in indexing and passive in my view. And I am also concerned with the entire ETF complex. There are actually more ETF's out there than actual underlying stocks in the US. Also many ETF's and ETN's that are leveraged and derivatives based. I wonder what will happen in a world where we have essentially mainstreamed derivative and leveraged based trading access to the "common" participant when whatever sparks even a minimal run for the market exists. Given this and how used to extreme low volatility participants have become accustomed to, perhaps even the start of a garden variety market correction could quickly morph into something more severe. Not predicting it but just food for thought. My best guess is that market will reach some sort of correction sooner than later now ( finally ) which will create enough uncertainty and head fake before yet another ramp higher. Market's job is to fool most of the people most of the time and extract $ from most for the benefit of the few. Plus with amazing manipulation and intervention, both mechanically and verbally, by CB and CB officials .. what's to stop them from simply doing whatever it takes to save the market form any major decline? I know eventually it will no longer work but it seems to have worked thus far. Even with the demographics shifts and the risk parity risks ... again has there ever been a time when the markets have been so highly engaged with and hanging off CB's before? Astonishing QA and negative interest rates forcing everyone to take higher risks to gain a return. Just remember that markets can stay irrational longer than most can remain solvent. Shorts have been absolutely slaughtered by the market and it's low vol steady, unending rise. Also I see since the DXY is now under pressure and approaching/on the last line of supposed bull market support areas .... there is a lot of bearish $ talk out there. Also talk of trade wars and fact that the Trump agenda ( health care reform, tax reform, economic infrastructure etc... ) is being stalled out by those working against him in the Congress is supposedly all removing some of the impetus for USD strength. Also talk of the relative rate rise potential in EU area from their NIRP zone supposedly overshadowing the US FED rate rise regime ( which already seems to be on hold based on Yellen's latest comments and FED inaction at their last meeting ) buttressing the EUR against the USD ( of course it's already moved strongly higher thus far recently so perhaps it's all "priced in" ). But no matter what, if markets correct USD will be the liquidity beneficiary even if for only some period of time. Queston is to what degree markets correct and when .. which would breath more life into the USD bull case in my view in that it would turn sentiment from very negative to very positive and help fuel a next potential leg up in keeping with Raoul's thesis that we have not seen a top in this USD bull run yet. But right now we are on shaky technical ground. In my view and based on my comments posted previously in Raoul's In Focus piece on the USD, the actual final line in the sand is the horizontal support form 88 to 90 in the DXY. Raoul's is a bit higher than that at 91 to 92 and that is being threatened right now. So far it's holding. But even if it breaks below it could lead to a false break down to get everyone to give up the goose and panic out of the USD only to reverse. Also I notice on the daily and weekly time frame charts for the DXY there is yet to be any positive divergence on the technicals. I'd really like to see some positive divergence appear ultimately here where we get a lower low in price but a higher high on the technicals like MACD / PPO and/or RSI. Not sure what everyone else sees. But in my view the USD is not yet done in it's bull run for no other reason perhaps than during the forthcoming market correction - even a "normal one" which we have not seen for ( I know it never seems to come but it will eventually and I think the window here is opening up for one to occur based on the internals of the market ) the USD will benefit in risk off environment and there will be a mad dash for $ cash. Especially since sentiment on the USD is very negative right now that will only add to the snap back retracement move in the USD. Also I notice that the Dow Jones Transports index in the US is not confirming the new high in the Dow Jones Industrials index. Just my thoughts currently. We shall see Thanks

I just wanted to say great comments everyone. As valuable as the core content of not more. Has anyone considered any other specific trades that would be able to take advantage of the insights Raoul and Julian provided? Also always interested in hearing how everyone manages risk as Julian so wisely advised. Obviously that is a broad category and I'd love to hear specific tactics and/or strategies being used by others. Thanks!

Per IRS regulations, after reaching age 70½, you are generally required to start withdrawing money from a traditional 401(k) or IRA. Why would BB not sell equities/ETF from their 401k?

So if everybody goes for the exit as A M. describes will is my money going to be safe with my broker Saxo Bank ?

Very valuable exchanges with subscribers. Love it. Thanks, everyone.

Excellent and thoughtful pieces. Julian: Will the high yield on CEF's like DSL and PCI help shield them from a bond asset decline, or will they similarly fall equally as bond prices fall? Or are they impacted worse than other bond based products, as everyone heads for the exit? Thank you both!

Raoul Since BBs have equity in houses, when cash is needed do you have a view on how they will access? Debt? Sale and downsize (lowering cost of living esp. if property taxes raise to deal w pension shortfall)? Looking at possible knock-on effects in housing markets when cash is needed to live such as an increase in supply w decrease in demand. Love to hear your view and if there's research on this you can share. Thanks for the great article.

Roaul, concerning the BB-paper I've some thougths: While I fully agree to the expected changes in consumer spending, I have some doubt on the proposed massive equity selling of BB's themselves. When 1% of BB's own 99% of BB's total wealth, to me that would mean that they also own a vast majority of stocks held by BB's. 99% do not have any (significant) amounts of stocks and therefore cannot sell large volumes. The 1% on the other side may need to sell only very little to support their living standard, i.e. they can keep the vast majority of what they already have. On the other side, I fully agree that U.S. pension funds will have to sell significant amounts of their overall assets in order to meet outlays. Anja

On the topic of ETFs I found this gem a month or two ago: "SEC to allow delisting ETFs in saturated market A Securities and Exchange Commission rule, effective in October, would allow an exchange-traded fund to be delisted if its index became too concentrated or its underlying assets became illiquid. The regulator seeks to protect investors as the $2.8 billion ETF market continues to expand." No need to worry! The SEC are determined to engineer a "permanently high plateau" for equity prices!

Julian, your furniture comment precipitated a trip to Home Depot in search of some "Super Monkey Grip" Fed proof Velcro sheets, the orange jacketed fellow manning the adhesive isle struggled to understand my intended application. He assured me the adhesive tensile strength was maximum legally allowed, but alas after getting a landline phone and scratchpad firmly attached.......the rest of the furniture still rests on the floor,.....but I inverted it all....thinking attempted compliance to bank regs was sort of noble

Sweet! I've just gotten some value for my $$$ on being part of Macro Insiders. Glad they're discussing "actionable" strategy which could prove profitable beyond subscription costs and loss of principle. If that happens, the price of being a member is priceless. We'll all be vacationing in the Cayman Islands!

Raoul & Julian - Wonder whether a special "Macro Insiders" chatroom, help board or something like that where members could more generally ask questions / share ideas would garner interest. Of course, there's always Twitter... But for example, I'm having trouble finding a trading platform that offers options on eurodollar futures out to dec 2018. Can't even seem to do that with InterActiveBrokers. If anyone here has suggestions for a US resident, I'd love to hear them. Thx!

My biggest concerns reside more with CBs + High Frequency trading. Almost to the point where fundamentals no longer matter. Liquidity is almost always added in pre markets to prevent selling. Its like clock work for currencies and equities in US markets around 6:00-6:30 am. I still believe in cycles and try my hardest to play on macro conditions on a 2-3 years timeline. It just gets frustrating when you have been sitting on roughly 45% cash waiting for the opportunity to buy equities at a discount. I'm a believer in taking risk only when opportunity presents itself heavily. Currently I'm short the spy and qqq while long gold and silver. Waiting for more confirmations on the dollar and heavy cash. I also dabbled in Jan 2019 puts in F and FCAU

It definitely does seem like Raoul's and Julian's ideas form a long and short term view of markets. Raoul's is more structural and longer term while Julian is around 1-4 years(I'm thinking), even though he did use a 700 year chart!! If Julian is correct and a rise in inflation gives the green light to raise rates, that may be a great entry point for Raoul's structural change thesis. What a first issue this would be!!!

Raoul, I've heard this argument about BBs retiring for a while now and I'm yet to see someone acknowledge that precisely the time that BBs are retiring their kids who are likely 25-30 years younger then them (Millennials and a larger generation) will entering their peak spending years. Is there a scenario where Millennial 401k flows absorb BB sales?

"The Almighty tells me he can get me out of this mess, but he's pretty sure you're f**ked."

Certainly some food for thought in here. For me the killer line was "Europeans have mainly come to terms with the lower returns from their private pensions but not their state entitlements. Their governments will live with the realities later as their state pension systems collapse along with many defined benefit schemes." It's as much worth thinking about what the path to this collapse means as the end collapse itself. Governments won't give up public sector pension entitlements without first attempting to confiscate as much as they can from investors who have seizable assets. In the UK, unlike what's discussed here about the US, there are no public pension plans with a pool of money that will run out at a given time, it's 100% on the never never for future taxpayers to stump up. When you start to see stories like Grant posted https://twitter.com/ttmygh/status/891338236110544896 and kite flying for 100% inheritance tax in the UK this week, I think spreading capital around different asset classes, institutions and even jurisdictions will become more important, especially as Raoul says when the next recession happens and the previously unthinkable becomes reality. Enough of the doom and gloom - hoping for some great positive ideas for where to invest in the coming weeks and months!

If most BB don't have adequate savings to retire and therefore begin to fall short in retirement I wonder if we get the next phase of QE - Helicopter money?

OK, I think you all come around to my house for sunday dinner, to explain this further to me..... the wife does a mean yorkshire pud !!