Meeting of Minds – October 2017

Published on: October 28th, 2017

This month, our contributors focus their attention on 2 essential parts of the US economy – consumption and inflation. With consumption now an unprecedented 70% of GDP, understanding consumption patterns will be crucial to determine the timing of the next recession. Raoul expects 2018 to be the turning point. Julian, on the other hand, looks at the US inflationary impulse, which leads him to strengthen his call for higher bond yields before Christmas. He goes on to look at what implications this may have for other assets including USD.

Comments

  • BD
    Borut D.
    15 November 2017 @ 13:41
    Dear Raoul, I hate to say it, but I think there is an ongoing inconsistency in your interpretation of charts. In your talks, you've mentioned quite a few times the term "rate of change". In this piece, you present a few charts that display the rate of change, however, your interpretation is as if they were normal charts and not a chart displaying a derivative of the observed parameter. For example: - you say " consumption overall is weakening and there is less demand for goods and service" - but the chart clearly shows that the growth of consumption is 4% YoY - so there is not less demand, but more demand for goods and services than last year - then you state "Durable Goods bought by the household sector also appear to be slowing..." - it is not true, they are still growing and accelerating -- just the growth rate is slowing - then you state "Clothing Sales have also collapsed and are at levels only seen in a recession..." - no they have not collapsed - they are growing and are bigger than the previous year - only the rate of growth is at recessionary levels - "Restaurant Sales are in freefall... " - no they are not - they are growing - but at a slower rate - ... So I think either the charts are wrong or your interpretation is wrong. What bothers me is also that when you want to make a point, you provide charts that are a little bit misleading because the axises do not intersect at 0. For example, the chart displaying the US consumption as % of GDP. If you had presented the chart with the whole scale down to 0, it would be much less dramatic. (btw: The chart has been at an all-time high most of the time in the last 40 years...so maybe it does not tell a lot). Also if the charts are right, that the whole premise of your piece is wrong - since the consumption is not slowing. You can think about this also from another point of view: if we have GDP growth and consumption as % GDP is rising, how the hell can we have falling consumption.?? I kindly ask for more exact wording and less bias. I am also a little bit disappointed that a report that should be world class and premium is in some parts banalized and downgraded to a pub conversation...however without the obligatory beer :) Best Borut
  • BD
    Borut D.
    15 November 2017 @ 13:41
    Dear Raoul, I hate to say it, but I think there is an ongoing inconsistency in your interpretation of charts. In your talks, you've mentioned quite a few times the term "rate of change". In this piece, you present a few charts that display the rate of change, however, your interpretation is as if they were normal charts and not a chart displaying a derivative of the observed parameter. For example: - you say " consumption overall is weakening and there is less demand for goods and service" - but the chart clearly shows that the growth of consumption is 4% YoY - so there is not less demand, but more demand for goods and services than last year - then you state "Durable Goods bought by the household sector also appear to be slowing..." - it is not true, they are still growing and accelerating -- just the growth rate is slowing - then you state "Clothing Sales have also collapsed and are at levels only seen in a recession..." - no they have not collapsed - they are growing and are bigger than the previous year - only the rate of growth is at recessionary levels - "Restaurant Sales are in freefall... " - no they are not - they are growing - but at a slower rate - ... So I think either the charts are wrong or your interpretation is wrong. What bothers me is also that when you want to make a point, you provide charts that are a little bit misleading because the axises do not intersect at 0. For example, the chart displaying the US consumption as % of GDP. If you had presented the chart with the whole scale down to 0, it would be much less dramatic. (btw: The chart has been at an all-time high most of the time in the last 40 years...so maybe it does not tell a lot). Also if the charts are right, that the whole premise of your piece is wrong - since the consumption is not slowing. You can think about this also from another point of view: if we have GDP growth and consumption as % GDP is rising, how the hell can we have falling consumption.?? I kindly ask for more exact wording and less bias. I am also a little bit disappointed that a report that should be world class and premium is in some parts banalized and downgraded to a pub conversation...however without the obligatory beer :) Best Borut
  • WD
    Wim D.
    5 November 2017 @ 10:48
    In this scenario with higher yields, higher USD and higher USDJPY, I do see gold as short.
  • CS
    C S.
    28 October 2017 @ 13:09
    A November 'tape bomb' would be political spats that seemingly cast either dark clouds else rainbows over the prospect of timely tax/USD repatriation deals in US(?) In the event of risk-off effects, would AUDUSD be approximate to USDCAD, or USDCAD better? Maybe it depends on user familiarity/preference.
    • JH
      Jonathon H.
      5 November 2017 @ 09:43
      USD/CAD more oil driven, AUD/USD more China/iron ore driven. They do however trade somewhat similarly
    • JH
      Jonathon H.
      5 November 2017 @ 09:43
      USD/CAD more oil driven, AUD/USD more China/iron ore driven. They do however trade somewhat similarly
  • NR
    Nicholas R.
    29 October 2017 @ 21:27
    If people aren’t buying as much food, appliances, cars and houses, how does GDP rise 3%. Nicholas R
    • DB
      David B.
      1 November 2017 @ 04:12
      Inflation..
  • MP
    Mark P.
    1 November 2017 @ 02:55
    Great stuff again. Thanks. Regarding Julian's USDJYN trade, I contemplate the outcome of the tail risk of a Korean Hot War or at least signficantly increased tensions. Assuming this would be risk off, carry trade would unwind through Tokyo by necessity, but as Tokyo is in the N Korean crosshairs, liquidity could leave i mediately for safer havens ( UST, USD, gold?) and unxpectedly devaluaing the JYN.
    • MP
      Mark P.
      1 November 2017 @ 03:00
    • MP
      Mark P.
      1 November 2017 @ 03:03
      YPY. Sorry not my day job.
    • MP
      Mark P.
      1 November 2017 @ 03:04
      JPY Too old school to have learned to type as well. Doomed.
  • SW
    Steven W.
    31 October 2017 @ 13:55
    I cannot access this article either. Others had issues days ago. So still not rectified!
    • MP
      Mark P.
      1 November 2017 @ 02:57
      Milton suggested I clear my cookies on my iPad and it fixed it immediately. I am Luddite not techie, so my relay if suggestions ends there, but I hope it works for you as well. Mark
  • MP
    Mark P.
    31 October 2017 @ 01:28
    I started reading the other night and like some other subscribers am unable to access article on my iPad. Tapping on center icon and all the usual, but no text.
  • RI
    R I.
    30 October 2017 @ 12:20
    I thought Julian's section was insightful. Separately, a general question for the authors, what do you make of the consistent phenomenon that the oil price tends to peak right in the middle of NBER recessions?
  • WE
    William E.
    29 October 2017 @ 19:33
    Many thanks gentlemen!
  • DW
    Daniel W.
    29 October 2017 @ 10:18
    Does anybody know if trading 5y breakevens is possible via Interactive Brokers? I was searching for TIPS but the search did not yield any results.
    • DW
      Daniel W.
      29 October 2017 @ 12:04
      There is an ETF "TIPZ" which includes 2 to 5y TIPS. The "ISTB" includes 1-5y regular bonds. Any opinions if These securities are sufficient to trade the spread JB mentioned? If so, would I just buy x Dollars worth of TIPZ and sell x Dollars worth of ISTB?
  • JV
    Jason V.
    28 October 2017 @ 12:03
    Excellent report. But regarding Julian's 'In Focus' piece on USDJPY, the recommendation was to "buy some USDJPY in this retracement period, somewhere in the 111 to 109.60 area". As the lowest tick we've had since that report was released has been 111.65, then we shouldn't have entered yet on that pullback. And to the upside, Julian was looking for a "punch up and through our highlighted 114.25/115 zone" for entry. Again, with the highest tick to date being 114.43, we still shouldn't be in the trade yet until 115 is breached. In the intro to today's 'Meeting of Minds' it says that Julian "recommended buying USDJPY with plans to add on a break above 114; since that piece ... JPY has weakened to levels where one should think about adding to the position". So according to the 'In Focus' piece we shouldn't be in the trade yet, and according to the 'Meeting of Minds' piece we should already have been in the trade and now looking to add to a profitable position. Which is it?
    • TA
      The A.
      28 October 2017 @ 13:05
      Julian stated that it was a possibility that we wouldn't see a pullback: "An even more near-term bullish outcome would be that we track sideways and don’t pull back much before we break to new highs. This reflects my view that the sideways phase that has lasted all year, is coming to an end and that the next meaningful trade is likely to be a break higher. Should we fail to hold 109.50, I would worry that this has been another false start and that the time is not yet right."
    • JV
      Jason V.
      28 October 2017 @ 21:18
      Scenario 1 was to buy on a pullback into the 111.00 to 109.60 zone. Scenario 2 was to buy on a breakout with a daily close above 115.00. At this moment neither event has occurred. Therefore technically we should not be in the USDJPY trade yet. In the conclusion section of Julian's 'In Focus' piece he says "As always, risk/reward is key, and I will be looking for either a retracement or a punch up and through our highlighted 114.25/115 zone." Or have I completely misread this?
    • CS
      C S.
      29 October 2017 @ 09:40
      Not sure the kind of margin youre working with Jason but (coming from a non-expert) I might buy say one lot of JPY now and perhaps add to it when it breaks/or breaks and restests 115. You will have to determine where you might stop-out if the trade doesnt work. I havent bought yet either. I use the recommendations as a guide (direction) and a little of my own judgement on details. Seems a working risk/reward ratio is 1:5 and if youre/theyre right more than 20% of the time then you make a profit.
  • DS
    David S.
    29 October 2017 @ 01:17
    I cannot acess the article as well.
  • BS
    Bruce S.
    28 October 2017 @ 19:05
    I cannot access the article!
    • TH
      Thomas H.
      29 October 2017 @ 00:50
      Click the center icon.
  • SD
    S D.
    28 October 2017 @ 18:20
    A really valuable piece of research. Thanks.

Mark Yusko

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

Mark Yuskois 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 authoredThe Mobile Wave: How Mobile Intelligence Will Change Everything, which earned a spot onThe NewYork TimesBest 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 offeringwhichutilizesa 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 innovativeways 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 channelwatched 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 hebegan his career by training traders in technical analysis.

Peter McCormack

What Bitcoin Did, Journalist

Peter McCormack is a full timejournalist/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 humaninterest recordings, documentaries and films Peter has recently launched theDefiancepodcast andDefianceTV.

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 clientsand 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 whichhe 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. Meltemoversees 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.