I find Roaul's thesis very compelling because he is using data (aka long-term charts) to paint the picture, which leads me to believe we will see lower yields and a stronger dollar. Julian's thesis is also solid but I think the missing piece of the puzzle for me is how do other factors (e.g., dollar denominated debt, performance of other economies etc.) weigh against the domestic factors (such as the expanding current and fiscal deficit, Fed' actions). What if the other factors overpower the domestic factors in Julian's thesis, shouldnt they drive the dollar higher? To think that other economies will do better than the US economy is a little far-fetched IMHO.

Hey Raoul! I have a bit different question. One not so much discussed lately. USD/JPY. While much attention has been on EUR, AUD, GBP, rates and stocks (even though they are vanity trade :) ), a part of your core unfolding thesis is also explosive surge in USDJPY (with target of 150 and beyond). Do you still see it coming? Has your time horizon (or even direction) for this to happen changed after FED went all in? In your GMI portfolio there is JPY 120 call option with a bit less than 2 years left to expiration. So 1 year longer than EUR and AUD options. Do you see JPY being the last big one standing against the dollar? What could be the mechanics of JPY's weakness? BoJ outprinting FED (it has in the past without much damage for JPY)? Recession in Japan being more severe than in US? Deep current account deficit in Japan? Or simply Japanese public losing faith in JPY (is it possible given their culture?)? Run away inflation in Japan probably is not the expected reason, I guess? Because deflationary forces has tend to strengthen JPY in the past, where do you see change in mechanics that can cause it to weaken in the (probably) coming next wave of deflation? Thanks for you time and wisdom!

I understand your deflationary thesis w.r.t bonds and dollar, and it has a high probability of playing out. One thing that I don't understand is your view on Gold's performance during the deflationary phase. If you are expecting real rates to increase, wouldn't that put a downward pressure on Gold? Maybe you are expecting Gold to move down first, but eventually would move up when Fed kicks in with their easing (that would get us to reflation and then inflation)? If this is the case, then other risky US assets (e.g., equities) may also do well during the eventual inflationary phase. So it feels like your time horizons for strong dollar (near term) and strong Gold (medium to long term) are different. What am I missing? The only counter argument I could think of is, there would be insolvency during the deflationary phase, and that would divert funds to flow from risky assets to risk off assets. But I find I still struggle to reconcile with Gold's performance when real rates are rising.

Hi Raoul, It feels like the EUR is going to test the top of the range again..... If it does manage to break through and hold, would you keep holding on to the short position? Thanks Kavi

Raoul, What is your reason of not picking US Dollar against Canadian Dollars?

Raoul, Can you please comment on why you choose the CRB Raw Index? Why do you think it is the most relevant commodity index when it excludes corn, soy, wheat, sugar, iron ore, coal, crude oil? How are hides, tallow, rosin, rubber and print cloth more important inputs than the commodities I just mentioned? If we include these commodities in a broader index then prices have been rising. Couldn't we instead be in a dance of death between deflation and stagflation? Worst of bpoth worlds. Still bullish for gold and btc.

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Your dollar call moves against Julian, Hedeye and MSA to name three I respect. Relative to your 4 top picks, ( gold, Bitcion, yields lower, and USD down) could you rank your conviction for each? Thanks!

It sounds like your conviction level is rising, which makes sense given your framework and the underlying data points. As you go from high alert to trigger/trade, and given the hope bubble is most pronounced in US equity indices, why doesn't a meaningful short in NDX/SPX play a larger role in your risk strategy? Given the duration of historical "hope" bounces, and the subsequent downside move, why not take advantage of falling vol (albeit still high) and buy a 6mth far out of the money NDX or SPX put?

Great and timely update. Just a note on formatting: I had to zoom to 250% to read the labels and axis on most of the charts. The ones on pages 12-14 from your own model were fine, but the ones with market data are just badly formatted. Completely unnecessary. Please invest in bigger font sizes.

Your arguments are just as compelling as Julian's :) It's hard to imagine the deflationary damage of this recession is over, but it's also hard to imagine how it all doesn't lead to significant inflation/stagflation either...

Thank you Raoul. Very compelling. The case for inflation is also a compelling one, intellectually at least, but the charts seem to be prophesying decline as you say. Something ominous must be lurking just beyond the horizon.

Thanks for the update Raoul. After seeing the daily mind blowing mismatch between the 'unstoppable' bull market and people struggling to make a living in real life, I could use some perspective!

Watching Trump’s rally in Tulsa reminded me of the apocryphal quote from Mark Twain: “It ain’t what you don’t know that gets you into trouble, it’s what you know for sure that just ain’t so.” What do we know for sure, that possibly, just ain’t so? Looking at the recovery statistics of other countries, with far less monetary and fiscal stimulus taken by the US, the US stock market is discounting a “V” shape recovery: For sure! However, Trump’s speech in Tulsa is a reminder that, unlike all of the other countries infected with COVID-19, the president failed to unite the country to do what is necessary to reduce the spread of a virus that is not life-threatening to the majority of the population. In fact, wearing a mask has become a political symbol. President Trump recently told Michael C. Bender of The Wall Street Journal that he believes that some Americans are wearing masks during the coronavirus pandemic to express their disapproval of him and not as a preventive measure. Not surprisingly, most Trump supporters in Tulsa were not wearing masks or practicing social distancing. Outside the rally, most of the protestors appeared to wear masks, however, they too were crammed together, with the possibility of becoming “super spreaders”. In short, if the current spike in Houston and Florida is replicated in other parts of the country, we could see a sharp fall in the current consensus on economic growth in the US. We do not know for sure that ain’t so!

Raoul, as a fairly recent PRO subscriber, I have been following the various content on RV quite intently for the past month, as well as looking at other sources to gain insight. I appreciate your transparency and openness to people challenging your view. However, I think you're bang on. Part of my frustration with people undertaking analysis is their tendency to underestimate complexity and look only a few simple correlations that happen to validate their particular view and bias. You provide a variety of data points from which we can then look at them as well as others to undertake a broader and more complex multivariate review. This, along with the qualitative evidence out there (just ask your local wholesaler or retailer of almost anything if things are "back to normal") point to a storm coming. It's just a matter of when. Thanks.

that twd chart....

Thanks for putting this together. I personally found it very useful. Not sure how others here are playing this but I'm along for the ride with Julians weak dollar trade atm but am ready to jump ship into the dollar when it looks like it's going to start to turn. Perhaps it all starts coming together post the summer but that's guesswork on my part.

ED trades, a bit early but turned out spectacular, TLT trade very profitable, Gold trade working well, both SPX and HYG long puts we're stunning in both timing and accuracy, unbelievable. Ok, timing slightly off on 5 year bonds. I've no reason to doubt your framework, trying to tune out the noise.

thanks Raoul, I'm looking forward to the updates if things are going to shift quickly. Fintwit seems to be a good sentiment indicator to me and in the last month I noticed people on fintwit when they wouldn't normally be eg earlier, weekends and there has also been a subtle shift in things like whining about the rally - or maybe I blocked them. Point being, I think people are beginning to man battle stations or to be less dramatic just looking for a potential change - as I am, so thanks again keep it coming

I appreciate the fact that you took the time to review your framework and re-affirm the fact that it is still in play. Sometimes you need to re-focus the troops, especially if the noise levels appear to be turned up a notch or two :-).