The Insolvency Approaches

Published on: July 20th, 2020

Raoul is eyeing the shift from the “Hope Phase” to the “Insolvency Phase” as the evidence continues to stack up that the next phase is upon us…


  • BF
    Brad F.
    22 July 2020 @ 19:16
    Join the conversation with 434 other RV Pro members, 2 RV founders and 2 RV Teammates in the free RV Fans Slack group:
    • DR
      David R.
      24 July 2020 @ 09:32
      Dead link. Please re-post! Thank you.
    • IB
      Ivan B.
      26 July 2020 @ 02:22
      David R., try this one
  • RG
    Razmig G.
    21 July 2020 @ 17:04
    Hi Raoul, What if the same scenario as in March plays out? Sharp drop & massive rescue & more of the driect money for people to spend. Won't Trump & Powell (he's got vested interest too) do everything to keep things afloat for the elections? Also worth considering that the Fed has anticipated the insolvency & has a plan ready for this. For sure they won't intervene at ATHs & will wait for things to drop and using negative market abs virus sentiment for their advantage to step in. So that criticism of their intervention will be minimal if any. Thanks
  • AW
    Andrew W.
    21 July 2020 @ 15:18
    RP: To echo a question below, TGA bal hasn't been put to work yet. Couldn't a juicing by Mnuchin delay your hypothesis to after November? That's a lot of cash they're sitting on, and what are the chances they won't use it in the secondary market before the election? I can't imagine they'd want to leave Biden with that kind of gift.
  • MC
    Mike C.
    21 July 2020 @ 12:42
    Thanks Raoul, What happens to risk parity strategies when the UST 10y yield goes to zero? Referencing Mike Greens model simulations. Mike seems to think this is when "computer says no" happens (ie they break down). Would love to do a deeper dive. Timing looks interesting. Thanks.
  • IB
    Ivan B.
    21 July 2020 @ 10:15
    I agree it's a great analysis, succinct and logical, makes sense. There's a tiny problem... markets have not been logical at all in the last few months. There's a lot of talk in the comments below about Fed saving the day again, but what about Robin Hooders? If Fed doesn't have moral right to buy stocks when they are ATH (again, perfectly logical) then Robin Hooders will if you believe this narrative and PA in Hertz... It's not a criticism of the analysis rather sharing my struggles making logical senses out of illogical markets...
  • MA
    Muhammad A.
    21 July 2020 @ 06:20
    I don't think there is a world where AT&T is allowed to go to zero regardless of whatever the debt burden is. The bailout will come long before that happens. To me it seems like the Long Tech / Short Financials is the trade here. Even if this pans out as Raoul expects, the low debt tech sector will outperform and financials (esp. regional banks) will continue to suffer. This analysis needs to be accompanied with the importance of a company like AT&T in the US, especially in an environment where they are bailing out everything left and right. I think this goes the way the HYG trade did earlier this year. You get a step down in Oct., right before the election and they get money from the govt. for free just to keep people on the payroll and we worry about this in 2021. Fed will help print collateral for any company that is a systemic risk and backstop the bonds, which will reduce spreads, while fiscal will backstop any and everything and provide enough cash to avoid the debt holders from calling an event of default and we chug along.
    • RR
      Raj R.
      21 July 2020 @ 07:44
      i think you are right about Fed backstopping systemically important institutions. Ray Dalio big debt crisis has called this framework out for the Fed to pursue in the future.
  • MC
    Michael C.
    20 July 2020 @ 19:37
    What is it about GE and T that makes them stand out from F on your BBB list? Have you taken into consideration the likelihood of govt. bailouts of certain industries over others?
    • RP
      Raoul P. | Founder
      20 July 2020 @ 23:35
      Just the charts and their size, really.
    • BP
      Brett P.
      21 July 2020 @ 06:32
      What a world we live in where a primary concern when thinking about an investment is trying to figure out if the gov't is going to move against your position.
  • BG
    Barry G.
    21 July 2020 @ 03:07
    Great work, Raoul. I have been following this narrative for a few months. I thought you would have had Ford included and maybe GM. You have mentioned these several times; why have you left them both out?
  • CS
    C S.
    21 July 2020 @ 02:42
    As a side issue, with respect to that Citi data and your view on banks generally - I have an Interactive Brokers account. Got quite a bit of cash on hand still, and the USD for example are parked in Citi by the brokerage. I've CAD in Canadian banks and AUD in Australian banks, through IB too. My question is, what measures have you taken regarding protecting whatever cash you have on-hand? Cheers.
  • SS
    Shanthi S.
    21 July 2020 @ 01:39
    Thank you Raoul.
  • AB
    ANDRE B.
    21 July 2020 @ 00:39
    Hey Raoul, thank you for this great piece! Two questions: 1 - Could you provide stop-loss levels for those willing to short GE and AT&T now? 2 - What about EM banks such as Russia and Brazil? Best!
  • HM
    Hazvinei M.
    20 July 2020 @ 23:58
    Thanks for the update. I think it was telling that your last point, referencing volatility. Not sure if you consider the VIX a trade, but today it broke a key inidicator, went below 0 on the %B for VIX daily. Could VIX calls be part of your short strategy? There is a storm on the horizon, and doesn't look like the VIX gap from March gets closed just yet.
    • RP
      Raoul P. | Founder
      21 July 2020 @ 00:07
      I struggle with VIX as you need to be so right on the timing or you get killed. Im not short term enough to get that right but I know many of you like trading VIX/
  • KS
    Karin S.
    21 July 2020 @ 00:04
    This is a dumb question, but how did Raoul say to short GE and T when it's time? Not buying puts, did he say futures?
    • RP
      Raoul P. | Founder
      21 July 2020 @ 00:06
      Haven't decided but owing to the long nature of the trade, it would likely be outright short the stock, if you are able to.
  • CL
    Cyril L.
    20 July 2020 @ 20:04
    Great update Raoul. I understand you're looking at the BBBs from a top-down perspective, but more from a bottom-up perspective the one thing I would mention is that PE funds have a lot of dry powder and could bid for assets from some of these names to take advantage of the discrepancy between public and private valuations. KKR was even rumoured to be looking at taking Walgreens Boots wholly private a few months ago. Now large LBOs are not an easy thing to do right now, but contrary to what some people think the debt markets are not frozen at all - leverage would have to be lower but if PE firms can buy at an attractive price they can probably make the equity case work, at least in their models. They won't bid in a crash, but if indices hold up and it's just these names breaking lower, I could see that happening. Jumbo deals tend to happen in the latest stages of the cycle. I haven't looked at GE but a colleague of mine has and he thinks they still have many more assets they could sell - the sum of the parts is greater than the whole - and are unlikely to be downgraded to junk. That's a risk for shorts, likely manageable, but something to be aware of for the smaller names in that list. The largest ones (Ford, AT&T, Citigroup, etc.) are out of reach for PE so maybe safer.
    • RP
      Raoul P. | Founder
      20 July 2020 @ 23:34
      Yes, Im sure there will be spin offs, etc but Im also sure the PE funds would prefer to buy out of Chapter 11 or when the markets have more fear.
    • CL
      Cyril L.
      20 July 2020 @ 23:51
      That would make sense but that's rarely their MO apart from the few that have distressed expertise (e.g. Oaktree). And there is a long road from BBB to Chapter 11. Not saying we won't see any of these companies go into Chapter 11 - that would be consistent with your view on depression, certainly - but that should be the exception rather than the rule and/or drag on for quite some time. And there are drawbacks to waiting for Chapter 11 - the induced stress can cause lasting damage to the assets. They usually prefer to buy outside of the max volatility periods - much cleaner, and more visibility on the financing. Maybe because they need to manage their LPs' nerves as well. Lastly, they don't get paid as much (if at all) on capital committed but not invested. So sure they might hold off if they're really scared about the outlook, but they have strong incentives not to.
  • JW
    J W.
    20 July 2020 @ 20:01
    There is a simplicity and elegance to this reasoning that is difficult to deny.
    • RP
      Raoul P. | Founder
      20 July 2020 @ 23:35
      Yeah, but it has to work! The SPX just keeps going up, even though the banks keep falling. I'd rather they were both headed in the same direction...
  • JM
    Jake M.
    20 July 2020 @ 22:05
    Hi Raoul, I know you are on the watch closely for us monitoring all the signals. Should we be expecting new trades in the (near?) future from you in the form of shorting troubled companies like AT&T?
    • RP
      Raoul P. | Founder
      20 July 2020 @ 23:34
      If they confirm, yes...
  • JG
    Johan G.
    20 July 2020 @ 18:20
    Thanks Raoul, I am with you, my only concern is the 1,5Trillion USD in the TGA and we are approaching election. If the markets start breaking can they manage to kick the can down the road one more time?
    • RP
      Raoul P. | Founder
      20 July 2020 @ 18:24
      The banks don't seem to be concerned about TGA, just the headline indices with the bubble stocks but lets see, as ever.
    • JG
      Johan G.
      20 July 2020 @ 18:41
      Strange world, in Norway residential real estate continued up as the country reopened on the back of lower interest rates on mortgages. Market is presently hot.... And our biggest bank came out with Q2 record results because of higher margins and lower than expected loss provisions. Shares bounced 10%.....
    • SN
      SAT N.
      20 July 2020 @ 23:18
      Trump has married his success to stock market prices. Trump is more anti-China than Biden. If you are China, what would you do?
  • JI
    Janne I.
    20 July 2020 @ 18:28
    What happens if the FED says that they are going to be buying stocks? Another bounce back to new highs?
    • RP
      Raoul P. | Founder
      20 July 2020 @ 18:40
      It would be politically very hard for them to announce that with markets near all time highs...
  • B
    Benjamin .
    20 July 2020 @ 17:58
    Great update Raoul, thanks. Super frustrated by these range bound markets, ready to put some risk on!
    • RP
      Raoul P. | Founder
      20 July 2020 @ 18:02
      I hear you... the picture is shifting but so very slowly! It is summer after all...

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.

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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.

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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.

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What Bitcoin Did, Journalist

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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).

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Bitwise Asset Management, CEO

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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.

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CoinShares, Chief Strategy Officer

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Meltem is passionate about education and advocacy, and teaches the Oxford Blockchain Strategy Programme and co-chairs the WEF Cryptocurrency Council.