Meeting Of Minds – October 2018

Published on: October 26th, 2018

In his Meeting of Minds contribution, Raoul examines how financial conditions have already tightened when you allow for the ever-rising scale of private sector debt which is now reeling under affordability strain. He predicts a recession in 2019. Julian explains why the Fed has an intellectual framework that justifies further tightening but demonstrates that the reaction function of the equity market will dictate the delivery of that framework.

Comments

  • AA
    ANUSHKA A.
    25 November 2018 @ 00:25
    Hi Raoul. Is there any data you can pull out on the 401K.. in total how much is invested in which assets classes and showing trend.... to concur with ur view i am looking for when 401k balances will start to reduce and which assets classes are the money coming out of
  • DY
    Dmytro Y.
    31 October 2018 @ 04:16
    Julian hi, you said in below comments "if and when the Fed starts to ease again for me thats the signal that yields take two steps forward". Would this be bullish or bearish for metals like Gold? Thank you
    • JB
      Julian B. | Contributor
      13 November 2018 @ 16:59
      If the Fed is forced by asset weakness to ease again Dmytro I think that would be very bullish for precious metals
  • MG
    Miguel G.
    5 November 2018 @ 14:50
    Can we get an email alert please when a new post is uploaded to macro insider subs
  • MD
    Michael D.
    5 November 2018 @ 00:07
    Hi Raoul, Very interested to hear more re your tweet earlier today about lightening up "a lot of risk in short eq's, short commods, long dollars, but not bonds". Suppose shld reduce short EEM and EUR/USD too? Going long anything? Best,
  • TW
    Timothy W.
    1 November 2018 @ 13:58
    Hi Raoul and Julian, In general, what is your weapon-of-choice to play the currency markets? Options spreads? I’m sure it’s a case-by-case basis based on r/r etc., but just generally what are some of your favorite instruments? Thanks, Tim
  • FM
    Fraser M.
    1 November 2018 @ 09:48
    50 million 'new home' sales since 2007? This must be existing home sales?
  • PM
    Philip M.
    31 October 2018 @ 19:55
    Fascinating and useful to see how Residential Fixed Investment as a percentage of Total Fixed Investment leads ISM. This continued analysis has really changed my trading, especially my research approach. Would be grateful for more discussion (or review) on the EDZ0 trade from May.
  • LD
    Lance D.
    31 October 2018 @ 15:07
    Hi guys i have a question, i have literally copied & pasted the following sentence from a historic comment - "I look at US macro and the data is pointing to the economy slowing down in Q3 in rate of change terms" My question is - how do i go about looking @ the data and then decide that the economy is going to grow or decline in a future Quarter? maybe this is covered on the rvtv platform (apologies if it is) if so which video? if not maybe an idea for a future video perhaps OR maybe some body could give directions how i could achieve the above Question right here if possible. Thanks
  • RM
    Ritwik M.
    30 October 2018 @ 19:10
    Good Read
  • ap
    andrew p.
    30 October 2018 @ 10:28
    I am confused as there have been no trade recommendations with entry exit levels during this volatile period ?
    • LD
      Lance D.
      30 October 2018 @ 11:49
      Andrew check out the in focus pieces & flash updates. you will find recommended levels to watch.cheers
    • LD
      Lance D.
      30 October 2018 @ 18:30
      IF you look at butterflies & hurricanes piece it was choca full I've just gone over it myself just now . i actually missed some big moves
  • ap
    andrew p.
    30 October 2018 @ 10:28
    I am confused as there have been no trade recommendations with entry exit levels during this volatile period ?
  • ap
    andrew p.
    30 October 2018 @ 10:28
    I am confused as there have been no trade recommendations with entry exit levels during this volatile period ?
  • ap
    andrew p.
    30 October 2018 @ 10:28
    I am confused as there have been no trade recommendations with entry exit levels during this volatile period ?
  • ap
    andrew p.
    30 October 2018 @ 10:27
    I am confused as there have been no trade recommendations with entry exit levels during this volatile period ?
  • ap
    andrew p.
    30 October 2018 @ 10:27
    I am confused as there have been no trade recommendations with entry exit levels during this volatile period ?
  • KR
    Kieran R.
    29 October 2018 @ 23:44
    Best piece ever
  • RM
    R M.
    28 October 2018 @ 19:52
    Gents, excellent work! Same question for both of you please: When the fed starts to ease again, is there a concern that the fed may lose control of the long end of the curve? (Roaul has tweeted he is alrady in the 10 year, so I guess your not worried?) And how best to position for the ease? Gold or treasuries?
    • SV
      Steven V. | Contributor
      28 October 2018 @ 20:49
      The Fed hasn't had control over the long end of the curve since the 1980's. I'd strongly recommend reading, "Greenspan’s Conundrum and the Fed’s Ability to Affect Long - Term Yields" that was published by D Thornton of the St. Louis Federal Reserve in August 2012.
    • RM
      R M.
      28 October 2018 @ 23:00
      Steve, thanks, understood....to be clear will the bond vigilantes demand higher rates for long term credit even if short rates fall? I think Raoul believes 10 year rates have peaked, but Julian thinks the 10 year may have more to go....Your thoughts Steve? Buying the 10 year now?
    • JB
      Julian B. | Contributor
      29 October 2018 @ 15:41
      Hi RM, As you know vs Raoul, I'm a structural bear on fixed income and believe we saw the low in yields in 2016. That said the move to higher yields can't be linear, because as we can see higher rates/yields undermine stocks and rate sensitive sectors like housing and autos. Hence, we have said that the process to higher yields will be "one step forward, one step back". Thus with stocks under pressure and economic growth at risk of weakening, we appear to be on the cusp of a step back. However, if and when the Fed starts to ease again for me thats the signal that yields take two steps forward.
    • RM
      R M.
      29 October 2018 @ 18:35
      Thanks Julian, appreciate the reply, looking forward to a piece about what happens when the Fed blinks.....
  • SN
    Sean N.
    29 October 2018 @ 18:04
    Awesome in depth analysis from both Raoul and Julian! As usual, so hard to sort out the short to medium term scenarios. Maybe Raoul is right and 'real life' economic conditions are at their peak and about to start falling steadily, and take everything else down with them. Or perhaps as Julian states the topping process can be more rounded, and the Fed can keep tightening longer. Like Grant always likes to say, "it's going to be a hard needle to thread". Politics and behavioral psychology dominate the short term moves ... Would be great to see both your updated views (and where you agree) on the long term adjustment that seems inevitable here and how / when to position for it. I have trouble seeing a future where my dollar doesn't buy a lot less than it did in the past... Thanks!
  • ag
    anthony g.
    27 October 2018 @ 21:19
    Good article - some thoughts - from Rosenberg to Hedgeye - Raoul is more right than Julian on this one in my view - We shall see.
    • JB
      Julian B. | Contributor
      29 October 2018 @ 16:19
      I'll take that bet! ;)
    • RP
      Raoul P. | Founder
      29 October 2018 @ 17:21
      haha... Im not going to fall foul to hubris so I'll just wait and see...
  • HO
    H2 O.
    28 October 2018 @ 21:05
    Currently Fed and eurodollar futures are pricing 2-3 rate hikes next year. My view has been that Dec will be the last one, and terminal value for the Fed balance sheet will be much bigger than initially planned. They should wrap up balance sheet shrinkage in Q1 next year IMO. This matches with much of Raoul's analysis. If this happens, and markets reprice based on such adjusted expectations. How would this change your outlook? Especially where it applies to the max range for the current USD cycle. Thanks for a great update.
    • JB
      Julian B. | Contributor
      29 October 2018 @ 15:35
      Hi, H20 I'm not sure that the Q was directed at me but anyway. I think its a realistic assumption to assume Dec provides at least a pause IF stocks fall further, remain weak and if housing continues to falter (you might want to go back and read our piece on housing from the spring). At that point, my guess (will depend on what the Fed does with the balance sheet) I think a lot of things could change, especially if the dollar peaks.
    • HO
      H2 O.
      29 October 2018 @ 16:39
      Thanks very much. Have the property piece in front of me now. For others interested, see Meeting of Minds from April 28.
  • CP
    CRAIG P.
    29 October 2018 @ 14:47
    Thoughts on the strategy of 1) shortening fixed income maturities for now, 2) awaiting interest rates to peak (probably in sync with the economy rolling over) and then 3) extending maturities. And if we finally have our "come to Jesus" moment with all the debt we have accumulated forcing rates up, stay short. The likelihood of our finally facing our borrowing binge dramatically increases going into a recession.
    • JB
      Julian B. | Contributor
      29 October 2018 @ 16:24
      Hi Craig, The purpose of this piece was to say that with stocks now starting to fall financial conditions are starting to tighten rapidly. Now, I'm not a structural fixed income bull but I'd be careful about being too far from benchmark at this point.
  • PN
    Paul N.
    27 October 2018 @ 04:51
    Julian, do you have any thoughts or counterpoints on Raoul’s idea that financial conditions are actually very tight despite the Goldman chart saying otherwise? Thanks.
    • JB
      Julian B. | Contributor
      29 October 2018 @ 16:21
      Hi Paul, with the correction in stocks financial conditions are tightening very rapidly and if the dollar kicks in then we could hit a tipping point. So at this exact time, I'd be more in Raoul's camp
  • KC
    Ken C.
    28 October 2018 @ 14:10
    Julian, I found your remark on Powell hilarious but so important, there will be a Powell put at some level of a decline in the stock market. Hopefully you will have some insight on that level for us to watch. "He will be feeling hot under the collar if a fall in equity prices is attributed to him going “loco”. "
    • JB
      Julian B. | Contributor
      29 October 2018 @ 16:18
      Hi Ken When it comes to the Fed “put” I'm watching two metrics. The first is the speed of any equity correction. They get very scared of rapid declines. For example, in October 2014 as the market was imploding they rolled out Bullard. At the time he was the biggest hawk and he did an impromptu guest appearance on CNBC suggesting “we could do more” (QE). Then there is the level. As you know, we have been writing that the economy needs tighter financial conditions. These can be delivered either via higher rates/yields, a strong dollar and weaker equities, which are currently taking the lead. My guess is that if the S&P drops 20% plus they will stop hiking after Dec.
  • DY
    Dmytro Y.
    28 October 2018 @ 08:10
    Comments to Raoul section : 1) some amazing charts! Please show to Mr Trump who thinks US economy is strongest in 300 years; yet it should not be a reason to stop hiking as debt grew due extremely low rates and this needs to be normalized ; 2) as I can find about 95 percent of mortgages in US are fixed interest rate. So Fed raising does not really matter to them? Only 5-6 percent of mortgages are adjusted rates and even they are usually fixed for 10-15 years (seeing some info on Forbes); hence I am not convinced Fed hikes are so impactful to mortgages? 3) Farms: Raoul truly doesn't understand commodities well! If crops are large it means supply exceeds demand and prices fall! It's not just about dollar! Agri prices only rising when there is huge drop in crops and with ever better technology, seeds, etc the crops are ever more resilient and ever better. 4) truly amazing how the official inflation is calculated when cost of healthcare and fuel and education has risen so much!? Thanks overal great charts!
  • WM
    Will M.
    27 October 2018 @ 15:54
    Simply excellent reading gentlemen. I become more nervous by the month although essentially I currently own no stocks nor any bonds, mostly sitting in cash and watching closely for the strong recommendations on investment action from you as time goes on (of course taking into account the usual investment advice disclaimers etc. etc.)

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.