The Fall Of The Giants

Published on: October 21st, 2018

This week Raoul moves his focus to the biggest tech names and the risks that lie ahead.

Comments

  • RP
    Raoul P. | Founder
    26 October 2018 @ 11:39
    Well, I have been warning you all that these market leaders were close to breaking....its seems that in now underway.
    • LD
      Lance D.
      26 October 2018 @ 14:15
      thanks . Google trend line broke so is this the highest prob that the market has now peaked ?. i guess (now i think on it) you would say something like we now have a clear risk reward .
  • MG
    Miguel G.
    25 October 2018 @ 15:38
    Due to the severe damage that has been done to faang stocks and how over sold they are at this point, would you be able to give us levels to watch for re-entry or add ons if these names start to have a dead cat bounce?
  • DY
    Dmytro Y.
    25 October 2018 @ 01:15
    Any flash updates from Macro insiders ? So much has been going in the markets already these past 2 weeks. Thank you
  • MS
    Mark S.
    22 October 2018 @ 22:02
    Hi Raoul, So highlighted at the top of your letter is that rates are going up. Am I to understand that you have joined Julian's position and abandoned yours? thanks
    • KJ
      Keith J.
      24 October 2018 @ 13:20
      Raoul posted on twitter today saying he is super-bullish US fixed income as he thinks the Fed have over tightened.
  • NI
    Nate I.
    21 October 2018 @ 20:55
    TSLA is a train wreck but the balance sheets and income statements of FB and GOOGL are so pristine that's it hard to get short - especially GOOGL. Moreover, these companies own Congress so I'm not holding my breath for adverse legislation. They are such big components of the ETF and index complex that they will certainly decline in a fear driven sell-off, but I think the same could be said of AAPL, AMZN, MSFT and JNJ among others.
    • EF
      Eric F.
      21 October 2018 @ 23:21
      You’re right Nate but FB’s advertising revenues could be badly hit if legislation impacts the ‘effectiveness’ of the platform. Same with Google. Issue is most regulators don’t understand the mechanics, but I think that will change.
    • RP
      Raoul P. | Founder
      22 October 2018 @ 10:43
      Dont forget that advertising revenues rise and fall with global GDP and are highly levered to it. Any global slowdown and ad revenues will fall 30% to 50% in 6 months,
  • JC
    Justin C.
    21 October 2018 @ 20:58
    Raoul, Are you waiting for the second shoulder on FB to materialize before opening a short position? Also, thank you for the $TSLA input - my largest short position. Narrative, chart, etc. seem to be favoring a big break here.
    • RP
      Raoul P. | Founder
      22 October 2018 @ 10:42
      Yes, Im awaiting further price action. These are not easy shorts due to their mass market following and non-adherence to macro in general... but the time is getting close.
  • CS
    C S.
    21 October 2018 @ 07:12
    Hi Raoul (and Julian, if able to chime in) - This is off-topic, but of personal concern because most of my liquid wealth is in HKD in the HK banking sytem. The recent Kyle Bass interview indicates a possible HKD devaluation, and his suggestion that funds available to defend the peg are 70% depleted (within 3 months, which suggests a potentially short remaining fuse of 6 weeks of defence left). I see, potentially 3 risks for someone in my position: 1) currency devaluation (ameliorated by switching currencies); 2) HK bank failure/loss of deposit; and 3) Location risk - imposition, for whatever period, some form of capital controls. I am able to move funds out of HK (Singapore). Are you able to comment on the potential risks as you see them to the HKD, and offer any thoughts on actions to consider given where my funds are currently located? Thanks in advance for any input you're able to make. Cheers.
    • CS
      C S.
      21 October 2018 @ 07:18
      A follow up, which might be of interest to others, is the prospect for shorting the HKD. What happened when the CHF devalued 20% overnight a few years ago? Where shorts paid, or would force majeure be called/counterparties for FX contracts default? (a recent comment by Peter Brandt was he uses Futures for Fx trading as he knows who the counterparty is, whereas, in the spot market you have no idea who is on the other end of the trade. I use a bank for FX trades (albeit, a HK bank - Hang Seng). Regards.
    • KJ
      Keith J.
      21 October 2018 @ 10:23
      There were some comments on the Kyle Bass video to the effect that this 70% depletion statistic is incorrect.
    • MW
      Marco W.
      21 October 2018 @ 15:15
      Reference: (https://www.bloomberg.com/amp/view/articles/2018-09-27/hong-kong-s-big-banks-including-hsbc-lift-prime-deposit-rates) You are probably looking for this. Hong Kong aggregate balance represents the level of interbank liquidity. Therefore it represents the commercial banks's ability to defend Hibor/prime rate (not to follow Feb fund rate or Libor up). Once depleted, the commercial banks need to follow Fed to raise rate due to the currency peg. It is very remotely related to the central banks's ability to defend the peg.
    • CS
      C S.
      21 October 2018 @ 17:05
      https://www.hkma.gov.hk/eng/key-functions/monetary-stability.shtml From page 6 of 12 on Monetary Stability: "to improve the transparency of the Currency Board Account, a specific portion of exchange Fund assets has been allocated to back the Monetary Base since october 1998. the Backing Ratio (defined as the Backing Assets divided by the Monetary Base) moved within a narrow range of 106.3–107.5% during 2016, without touching the upper or lower trigger level. the ratio closed at 106.7% on 31 December (Chart 5). under the leRS, while specific exchange Fund assets have been designated for the Backing portfolio, all exchange Fund assets are available to support the Hong Kong dollar exchange rate. in the event of abrupt shocks, the sizeable amount of financial resources of the exchange Fund provides a powerful support to Hong Kong’s monetary and financial stability." Here https://www.hkma.gov.hk/eng/key-functions/exchange-fund.shtml is a description of Exchange Fund assets. "the total assets of the exchange Fund reached HK$3,618.7 billion at the end of 2016."
    • RP
      Raoul P. | Founder
      21 October 2018 @ 18:35
      The best answer is to open a Sing bank account so you have options. Then assess and split assets.
    • CS
      C S.
      22 October 2018 @ 02:31
      Raoul, I'm sorry to be a pest, but lets assume for a moment Kyle is spot on, and a devaluation of the HKD occurs. He said a few things during the interview that suggests this event could happen soon. Would you be able to ask him, if this is a correct understanding of what he thinks (say, before the end of 2018)? Thanks (I owe you one).
  • FM
    Fraser M.
    21 October 2018 @ 08:07
    Raoul - the vulnerability of the ETF industry to the backlash against FB and GOOGL - in the form of an eventual rollback of passive investing - is becoming increasingly evident in Blackrock’s share price. As you’ve stated before and I agree; the best way to play a theme is often not directly but in a secondary or even tertiary way. A BLK short seems to fit the bill in many respects.
    • KJ
      Keith J.
      21 October 2018 @ 10:25
      Agree the knock on effects could be more profitable here. I saw a chart of facebook’s 180 day implied vol and it’s around 40%. Seems a steep price for trying a trade with put options. Similarly an outright short needs to nail the timing.
    • RP
      Raoul P. | Founder
      21 October 2018 @ 18:34
      Love that thinking. I am super bearish the asset mgt industry too. Wrote a long article about it in GMI.
    • EF
      Eric F.
      21 October 2018 @ 23:22
      Like it Fraser, would love to hear more!
  • EL
    Edward L.
    21 October 2018 @ 22:14
    Raoul, I think you agree we are in the final leg of the fourth turning. Chaos will follow as fault lines become exposed. Earlier you and Julian had ?disagreed on the path of interest rates. It appears you now agree interest rates will rise.

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.