Meeting Of Minds – November 2018

Published on: November 28th, 2018

In this month’s Meeting of Minds, Raoul examines the unusual price action associated with Bitcoin before its collapse this month and asks whether there is any connection between the 6200-support line in the Bitcoin chart and the recent misadventures of Bitfinex. And, Julian updates his market roadmap given the volatility we have had in global equities. He notes that we have hit key inflexion points and that the environment is no longer safe for bond shorts.

Comments

  • DS
    David S.
    30 November 2018 @ 17:10
    Julian, so you think we may skip yield curve inversion and head straight into steepening..? With this slowdown starting to be felt everywhere I would of thought the chance of a recession 18-24 months was increasing..?
    • JB
      Julian B. | Contributor
      3 December 2018 @ 17:27
      David couple of observations. 1) In the piece we discussed playing a steepener on the forwards swaps curve. Historically this has always led the cash curve. Cash should keep inverting until the Fed is done hiking. Raoul thinks that's Dec but I think we may have another hike in the spring. 2) As for a recession, my guess is that IF we get one it won't take that long. That said personally, I think we are looking at a mid cycle slowdown vs a full blown recession but that's only because I expect the Fed to be dovish and more importantly congress to support more fiscal spending. If I'm wrong then given the unwind of excesses created by super low rates then a recession is a given.
    • DS
      David S.
      13 December 2018 @ 08:59
      Thanks Julian
  • HO
    H2 O.
    5 December 2018 @ 14:44
    Thanks for another great update. I find it hard to get on board with the case for rising inflation next year. Most important is that wage demands don't increase when housing and energy are tanking together, which is unfolding right now. Also difficult when households are going to have to swap consumption for debt service as mortgages and other rates reset higher. Yes, we are at structurally low levels of unemployment, but labor market tightness has been overestimated, and the drivers of broad wage gains/demands (outside of a subset of sectors) are just not there. Have to consider a disinflationary bust scenario as well. But, the strong dollar is definitely on borrowed time, which is already being reflected in forward rates. Once the mainstream and Fed confirm what the bond market is already saying, USD will weaken and this might be positive for the inflation outlook. Julian's bear steepener is the way to go methinks, albeit for slightly different reasons.
    • DB
      Daniel B.
      6 December 2018 @ 05:23
      My reply is just up there👆🏻(replied to my own comment! Duh!)
    • HO
      H2 O.
      6 December 2018 @ 14:52
      Theoretically, sure they could prop up the USD, but with the goods deficit ballooning and domestic conditions tightening they want to go in the opposite direction. The deeper issue with QT is that the banking system is short of effective reserves, meaning that big banks have lots that they don't want to lend to other smaller banks, and this among many other things is driving financial condition tightening.
  • DB
    Daniel B.
    6 December 2018 @ 04:03
    Open question to anybody reading these comments (sorry for the ignorant question, but I'm still on a learning curve with all this stuff) - why are 10 year treasuries gaining at the moment (ie. yields falling)? I thought the steepener trade was going to lower shorter-end yields? Is the 10 year change reflecting recession fears v the shorter end being impacted by the Fed pause (and subsequent reversal)?
    • DB
      Daniel B.
      6 December 2018 @ 05:22
      Agree with what you’re saying, but RE USD strength; can’t the Fed keep QT’ing and reducing dollar supply to maintain USD value?
  • DB
    Daniel B.
    4 December 2018 @ 21:37
    Raoul, amazing work on Bitcoin, great investigation! Question for both gents; what's your take on commodities, specifically soft commodities? Going into recession do we see consumption fall and prices bottom even further or is it still a favourable time to buy at these long term lows?
    • RP
      Raoul P. | Founder
      5 December 2018 @ 11:00
      I still think they go lower as the dollar rises and demand in the overall economy falls.
  • MB
    Matthias B.
    30 November 2018 @ 19:02
    dear Julian and Raoul, just a general observation / remark: it is my impression that macro insider is getting better and better after the initial "slow start". So well done, it is truly value adding. I did renew TT but do hope that it will improve as well, as I somehow lack conviction about the value of some content providers. Going back to macro, I will be very keen to see how the USD fares once year end has passed, on a purchasing power parity consideration, the USD appears vastly overvalued against Yen, Euro and Sterling. With such low oil prices, this must be a big boost to the Chinese current account which would soften the devaluation pressure towards 7 and line up an attractive risk/return EM trade.
    • JB
      Julian B. | Contributor
      3 December 2018 @ 17:19
      Thanks Matthias! I think both Raoul and I would like to be able to take 100% of the credit for MI. But I think we have to be realistic and say that the environment has also got better for macro! As for the $ we are both watching it VERY carefully!
  • JQ
    JACK Q.
    3 December 2018 @ 16:37
    Hey Julian - if you were to express the steepening trade via Eurodollar futures, which contracts would you choose? EDZ9 vs EDZ0 or EDZ9 vs EDZ1?
    • JB
      Julian B. | Contributor
      3 December 2018 @ 17:16
      Jack I'd push the whole think out further because I'm still afraid of legacy inflation/wage pressures in Q1 next year. So EDH1 vs EDU2
  • VG
    Vivek G.
    30 November 2018 @ 11:59
    Hi Julian, Raoul - interested to know whether the recent Jay Powell speech or release of last Fed meeting minutes have in any way changed/nuanced your individual/collective views as articulated in this piece/prior pieces. Regards
    • RP
      Raoul P. | Founder
      30 November 2018 @ 15:38
      Buy bonds! The pause is coming... and the Fed NEVER pause. They stop and reverse within 14 months.
  • BC
    Brent C.
    28 November 2018 @ 20:10
    Julian, given your view on the steepener trade, would you consider playing it through mortgage REITS at all? Or perhaps any specific higher quality books given spreads could continue widening?
    • JB
      Julian B. | Contributor
      29 November 2018 @ 15:02
      Brent that's a pretty clever way to play a pseudo steepener. I just looked at IYR vs the 2-10 cash curve and the correlation very solid. One word of caution. What we have advocated to our institutional clients is a steepener on the forward swaps curve not the cash curve. The swaps curve always turns early and the cash curve typically keeps inverting for a few more months. This would happen if for example, the data especially inflation forces Powell to hike in Dec and March. That said it’s a very decent idea so I'd definitely have IYR on my radar!
    • BC
      Brent C.
      29 November 2018 @ 18:14
      Thanks for the reply Julian! I actually expect the situation you just described, and that's why i haven't put it on yet. My game plan is to swap a relatively large FLRN position into something that will benefit from a steepener once it becomes more clear hikes are done/nearly done. I was specifically looking at MORT though, but welcome any/all ideas. Have you ran the correlation on MORT by chance?
  • JK
    James K.
    29 November 2018 @ 02:28
    Julian/Raoul - after today’s Fed Powell’s speech ....does this impact your timing of Fed rate hikes, ie now quite possibly “1 and done”....for the time being ? Noticed TLT was actually down today ...hmmm.... bond market may be seeing future inflation and doesn’t like slowing down rate hikes ..? Gold/Miners also up well .... Is it possible Trump got what he wanted from Powell today, so Trump can now go into the G7 meeting, this weekend, with more aggression, not worrying so much about the Fed and stock market ? Trump can stand stronger against China now ...IMO ... Thanks ....
    • JB
      Julian B. | Contributor
      29 November 2018 @ 14:49
      James ...couple of things. Clearly a change in tone from Powell but perhaps not in substance (see my Tweet https://twitter.com/JulianMI2/status/1067879401537191936) . The bottom line is that they were always going to be data dependent and in particular with regards to labour market. Therefore if I look at my models,I'd guess we probably have at least 2 more hikes before a pause. In terms of Treasuries we discussed in the piece how we are out of shorts and playing curve steepeners. They are tough for anyone but professional accounts. But rather than buying TLT, which is long dated I'd suggest something shorter. The long end is trading horribly and supply is a massive issue. Finally, my contacts are quite upbeat about a trade "deal" that said we talking about a ceasefire at best i.e. a delay in tariffs. Big picture the relationship gets worse next year.
  • KH
    Kyubeom H.
    29 November 2018 @ 10:15
    Julian, During the expiration of debt ceiling resolution in 2017, huge amount of cash were released in banking system causing a relief of broad financial conditions even though the fed kept hikes. The similar event will come in March 2019. I expect this time would be different. QT will absorb the liquidity, so the relief would be shorter-lived than in 2017. But still financial conditions would be eased meaningfully during the event. Any opinions of the expiration of debt ceiling resolution in 2019?
    • JB
      Julian B. | Contributor
      29 November 2018 @ 14:36
      Interesting, let me see if I can get anything from my mates in DC on debt resolution
  • KJ
    Keith J.
    29 November 2018 @ 08:05
    Would be interested, in the next Insider Talks, to hear some of Raoul and Julian's top prediction for 2019. Maybe a high probability, medium probability and low (but higher than the wider market expects) probability.
  • MR
    Michael R.
    29 November 2018 @ 08:05
    good read. thanks. this 'peg' might has to do something with current break even for bitcoin. - must be around that area depending on various factors. some big miners are possibly trying to get rid off as much of that stuff as possible.... https://medium.com/@sunnyday.james/estimating-the-break-even-price-for-new-bitcoin-mining-units-88e39a0f5f9a
  • JC
    Justin C.
    29 November 2018 @ 00:49
    Raoul, Had I not seen your two tweets screaming how artificial the Bitcoin price action was prior to the recent collapse, then I might have held my allocation to $BTC instead of selling. It was so obvious the way you laid it out, but I was frankly not paying close attention given how stable the price had become. I owe you a beer or two :) Thank you.

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.