Jay Pelosky: “The Higher You Go, The Tougher It Gets”

Published on
September 1st, 2020
60 minutes

Charlie McElligott – Macro’s Seasonal Shifts and the Volatility Compression Slingshot

Jay Pelosky: “The Higher You Go, The Tougher It Gets”

Investment Ideas ·
Featuring Jay Pelosky

Published on: September 1st, 2020 • Duration: 60 minutes

What can investors do when the easy money has already been made? Managing editor, Ed Harrison, explores this question and more with Jay Pelosky, chief investment officer and co-founder of TPW Investment Management. Pelosky shares with Harrison his base case for China, Europe, and the U.S. as well as emerging markets, and he describes as what he sees as weakness in the long-end of the U.S. Treasury yield curve. Pelosky and Harrison then discuss how a successful vaccine would affect specific sectors of the market, such as tech and industrials. Finally, after sharing his thoughts on how the 2020 election would impact markets, Pelosky analyzes the potential new geopolitical coalitions that could form should deglobalization continue. Filmed on August 28, 2020. For Pelosky's latest report, "As The Tri Polar World Turns - The Higher You Go, The Tougher It Gets," click here: https://www.tpwim.com/insights/tri-polar-world-turns-08-20



  • CR
    Christopher R.
    22 October 2020 @ 00:59
    I don't understand how the US handled Covid-19 the worst when there's not one country other then China that has done Covid tests more then the US. Countries obviously are going to have much lower numbers if they do not conduct Covid Tests. These countries are obviously measured differently due to size differentiation in population. The united States has handled the situation far better then any other country. It's not even the leading cause of death anymore. That sounds like a major improvement when comparing the recent spikes and deaths in these country that were "handling it well".
  • JS
    John S.
    2 September 2020 @ 00:27
    The US should be embarrassed that they consider Biden a viable candidate for president
    • WM
      Will M.
      5 October 2020 @ 18:32
      Having closely watched the US presidential races for decades, its difficult to imagine the leader of the free world being either of the current candidates. I believe too much is expected of candidates now as their private life and what they said or did decades before gets brought up by the other side and a voracious click bait media. Voters have done a lot of this to themselves. What is clear to me is that the world changed dramatically between 1990 and 2000 let alone 2010. I think we are going to look back in anger by or even well before 2030 at how the Western democracies allowed themselves to be laid waste to. The point of RVT to me, is how to best position myself and my family to come out at least neutral instead of a burden to my family or my country.
  • FL
    Fabrizio L.
    6 September 2020 @ 16:10
    I would enjoy hearing Mr Pelosky's opinion about the Softbank speculative actions, what they mean to his understanding of the price action of August, and if it changes his outlook in any way. thanks.
  • CA
    Cyrus A.
    6 September 2020 @ 12:07
    Some interesting, original and well-developed points on regionalisation, Europe and US outlook. However, I don't share Mr Pelosky optimism on a vaccine. Leaving aside the difficulty and lack of success in developing vaccines for previous corona viruses, even if a vaccine is developed, it is one thing to do so in a laboratory in very small quantities and quite another to produce 7 billion doses at scale (and that's assuming no boosters are given and one jab will suffice). The evidence so far on antibody efficacy seems to point to multiple doses being required. You then have the additional challenges of not only supply chains for production but also distribution (a number of the vaccines being developed currently require storage in minus 50 degrees celsius environment). How do you transport that across the whole of the US, never mind globally and to rural areas? Finally, and I think this point is underestimated, Mr Pelosky's argument assumes populations will be sufficiently confident and trustworthy towards receiving what may be perceived as a rushed through vaccine. We don't have to look far to seeing rising mistrust of 'experts' and consequently low vaccine participation rates (unless govts mandate it which opens a whole other set of issues). In short, 'getting a vaccine' is not a panacea and this basic, one-dimensional thought process masks a series of additional underlying challenges and difficulties.
  • ns
    nikolay s.
    5 September 2020 @ 21:51
    Investing in China is like investing in Germany.....in 1938.
  • VG
    Viktor G.
    4 September 2020 @ 07:46
    Interesting view. Thanks.
  • DR
    David R.
    3 September 2020 @ 12:43
    I like that different perspective, I’ll go take a second look at my charts and will re-do my homeworks. Thanks!
  • AA
    Andrew A.
    3 September 2020 @ 07:42
    Great guest. Disagree with a lot of what he says but its refreshing to have somebody as straightforward as him. Invite him back in 9 months!
  • GH
    Gregory H.
    3 September 2020 @ 05:02
    JFK didn't "do much" because he got got (anyone with a brain can connect the dots to what really happened)... not even 3 years as Pres... if your gonna try to change things at that level of power, better have your allies...
  • DS
    David S.
    2 September 2020 @ 02:01
    Mr. Pelosky has been proven correct on unusual calls before. I agree that China and the East will have a stronger recovery. They isolated COVID areas and got the rest of the country working as quickly as possible. America handled the pandemic poorly from the beginning, but we can print money. There are so many things that can go wrong in Europe. I do not see any chance that the Euro will ever be a reserve currency even though the concept fits into the Tri-Polar world. It will be part of the FX basket of currencies until it is gone. Without a sovereign and with 100% agreement to get something done, I think that Voltaire will be correct again that the Euro will eventually be worth the paper it is printed on. Hopefully, I am wrong and Mr. Pelosky is correct on Europe. DLS
    • GH
      Gregory H.
      3 September 2020 @ 04:50
      There are very few growth equities (including future tech monopolies) to own in Europe, which leads one to wonder why Euro would be in high, secular demand... Japan has same problem...
  • JT
    John T.
    2 September 2020 @ 20:04
    There have been political calls to restrict Chinese ADR's or require that they face the same reporting requirements as other exchange traded companies. Do you see much risk that a flare up here could force US investors out of Chinese ADR's, or at least get them to reduce exposure? This would definitely force some selling of the Chinese tech giants if it happenned.
    • GH
      Gregory H.
      3 September 2020 @ 04:47
      It could very well happen to cut China off from sucking in dollars in the next couple years...
  • JS
    John S.
    2 September 2020 @ 00:27
    The US should be embarrassed that they consider Biden a viable candidate for president
    • RM
      Robert M.
      2 September 2020 @ 00:49
      And not be embarrassed that we elected someone like Trump as president? These boards work best when we keep political opinions like Trump or Biden out of it and focus more on policies and how they impact companies and hence our investments.
    • PB
      PHILLIP B.
      2 September 2020 @ 01:52
      Who cares about your politics. Go post on ZH.
    • LS
      Lemony S.
      3 September 2020 @ 01:41
      Don't get mad at John, it is objectively verifiable that Joe Biden is the most incapacitated candidate to ever run for president, mentally and physically. It's a joke by any normal or sane/critical thinker. And he won't debate, yet hacks like Robert and PHIL make John to be the bad guy. Hysterical.
  • PP
    Patrick P.
    2 September 2020 @ 02:36
    All this vaccine crap is a joke ... we are suppose to have a vaccine for the flu... mostly worthless. My bet is something will show up that is a vaccine in name only... it will also be worthless. The drug companies will make billions and nothing will change much. Antiviral treatments will make a difference in mortality and nothing else.
    • LS
      Lemony S.
      3 September 2020 @ 01:39
      That's why this "emergency" and flattening the curve (accomplished early, quickly) turned into an election year fraud plandemic of control and consolidation.
  • JP
    John P.
    2 September 2020 @ 03:37
    Is the US weaker than Europe in covid really relevant? We have less deaths per capita than most of the major countries (UK, Spain, France, Italy) and the second wave/overwhelming of the ICUs didn't even happen. Rates are now lower in most places where the prior was to reopen at that point but governments are still keeping lockdowns in place. It seems the main differences is covid in America is politicized. Europe on the other hand has the international tourism industry. I think monetary policy had a much bigger effect on currency moves than covid.
    • LS
      Lemony S.
      3 September 2020 @ 01:38
      Pelosky, a NY hack on this level too ... pretty funny. He won't talk about how Cuomo's sending the virus into nursing homes caused over half of all the deaths. More than that if you include the same actions in PA and NJ.
  • PP
    Patrick P.
    2 September 2020 @ 12:23
    Lyndon Johnson .. without a doubt worst President ever.... Just start with the War on Poverty. How about Vietnam and go look at The Department of Housing and Urban Development. How about the cost of healthcare?....(because of Medicare and Medicaid). How about food stamps? and on and on.... one shit program after another and most of it feeds into our current national debt.
    • RM
      Robert M.
      2 September 2020 @ 15:41
      Signing the Civil Rights Act was one of the strongest moves by a president when you look at what was going on in American society in the 1960s. Just that one action makes Johnson not "the worst president ever."
    • LF
      Liam F.
      2 September 2020 @ 22:06
      Trump. Worst President ever. No competition anywhere in sight. Il Grande Douche' makes GW seem like a genius and Buchanan a saint.
    • LS
      Lemony S.
      3 September 2020 @ 01:37
      Funny how the "Civil Rights Act" window dressed a new father in the black home (the government)... and losses on every other level. As if the Democrat party ever supported rights for blacks, they only caused more dependence and division, which is the same playbook right now.
  • CJ
    Christopher J.
    1 September 2020 @ 11:45
    Presumably his thesis is bad for gold if we get this rotation out of bonds tech into value em - what do people think or could Ed address tonight?
    • CJ
      Christopher J.
      1 September 2020 @ 11:49
      or put another way, does this challenge the long gold real vision consensus in any way?
    • lf
      liam f.
      1 September 2020 @ 18:40
      I don't think so. The rotation out of bonds is presumably a rotation into gold, maybe at an accelerating rate compared to today.
    • lf
      liam f.
      1 September 2020 @ 18:41
      A rotation into growth is a bet on inflation.
    • JE
      Jonathan E.
      1 September 2020 @ 19:53
      Gold will have its up and downs but the backdrop is strong and market cap is small relative to other markets. Tricky part is working out how best to play a volative asset in a volatile market. I agree with Raoul we havent seen the half of it yet regards the pain on main street. Going overseas is presumably a weaker dollar play but the european banking sector for one.
    • RM
      Robert M.
      2 September 2020 @ 00:52
      Don't see it as bad for gold. Really see gold as a play on inflation. Value stocks and gold could rally at same time if value stocks have pricing power.
    • dw
      douglas w.
      3 September 2020 @ 00:05
      I thought Jay's matter of fact comment on the us dollar weakness as a result of poor control of the virus is so obvious now that he said it, masked by outperformance in nsdq/tech. The currency is the B.S. pressure release valve, not stocks/bonds.
  • MC
    Mike C.
    1 September 2020 @ 12:49
    To the RV content manager - Please run a round table interview with 3 or 4 macro experts (preferably chaired by Raoul) titled "What happens if we get a vaccine before Christmas?". What would be the impacts to: 1.) Risk sentiment & Sector performance 3.) Inflation expectations 4.) USD & FX in general 5.) Government fiscal transfers 6.) Fiscal policy under Trump vs Biden (would a vaccine announcement before Nov influence the election outcome?) 7.) Attitude towards China & Foreign policy implications 8.) Fed policy 9.) Interest rates and the curve 10) Employment & Aggregate demand 11.) Demand for credit and "The Insolvency"
    • PJ
      Paul J.
      1 September 2020 @ 14:11
      Do this without Raoul.
    • MC
      Mike C.
      1 September 2020 @ 21:13
      Chaired by Roger Hirst then?
    • RM
      Robert M.
      2 September 2020 @ 01:00
      Good idea. To me, the biggest question is the timing of Raoul's insolvency thesis and the introduction of the vaccine. Insolvency is permanent damage as businesses close. A vaccine is a release of old shopping habits like travel, that clearly benefits with a de-risking of the virus. Restaurants get busy again, yet 20% of them may be out of business. Large events may take time to get back to normal attendance. So many timing questions. But an effective vaccine will benefit travel first, in my opinion.
    • LF
      Liam F.
      2 September 2020 @ 23:27
      Panel = great idea. But before X-mas timing is super unlikely. Fauci says mid 2021. Q1 seems highly optimistic. Maybe have a panel that takes a scenario-based approach. Two panelists describe the vaccine-coming-soon outcomes (world 1) while the other two focus on a vaccine-coming-late-next-year outcomes (world 2). How would these two different worlds operate economically?
  • PT
    Philip T.
    1 September 2020 @ 14:45
    Great insights. Only critique is that US and Europe will always be less focused and able to achieve goals versus China - democracies are less efficient than dictatorships.
    • GD
      Graham D.
      2 September 2020 @ 01:18
      Democracies can certainly be less focused than dictatorships but where’s the evidence that they are less efficient? But it’s hard to argue against his view that the US political system is dysfunctional and (I’d add) has considerable institutional corruption baked in.
    • DD
      Donovan D.
      2 September 2020 @ 18:29
      @Graham D. do recall how fast China was able to build a hospital in the middle of the pandemic? I can recall Cumo stating on national television that the US isn't designed to do things like that, it takes longer. This is just one example I think another in my opinion would be how China contained covid compared to America although I do admit much of it is due to leadership but then again it's how our government is allowed to run compared to that of a dictatorship. It's very sad and frustrating imho.
  • BA
    Bruce A.
    2 September 2020 @ 03:17
    Pelosky makes heap of sense as regards marginal portfolio adjustments as economies reopen. Doesn't mean I bail out on precious metals though. As I've lowered cash levels, the money has been going into Intl Developed ex US and an allocation to commodities. Then add some EM to the mix especially if/as USD falls.
    • BA
      Bruce A.
      2 September 2020 @ 03:44
      Clarification: EM with 'near sourcing' potential.
  • HR
    Humberto R.
    1 September 2020 @ 16:49
    Way too political with his investing outlook and ideology. He thinks the U.S. has done worse in managing the virus than Europe. Head in sand along with Biden.
    • RM
      Robert M.
      2 September 2020 @ 00:23
      US has done worst. Tied with Brazil for handling of the virus. Excellent article in WSJ today discussing how badly it was handled.
    • PB
      PHILLIP B.
      2 September 2020 @ 01:54
      There're several months of data now on how various, developed market countries have done with COVID. Check it out.
  • SZ
    Szar Z.
    2 September 2020 @ 01:26
    Did this guy just say tech doesn't play a role in the currency markets?
  • RF
    Ray F.
    2 September 2020 @ 00:54
    One of the best interviews I watched this year!
  • RM
    Robert M.
    2 September 2020 @ 00:41
    Don't necessarily disagree with his thesis. Have been debating on the rotation into recovery stocks. Tech stocks appear greatly overvalued. My issue is the timing. We will get a vaccine. But it will not be a light switch for turning on the economy. One, vaccine may only be 50% effective. Two, only 50% of country may get the vaccine. Three, it will take time to distribute the vaccine and test its effectiveness. So believe this will drag out longer than his thesis suggests. So between today and a rebooted economy/effective vaccine, Raoul's insolvency thesis can play out. Bankruptcies will increase and a large number of small businesses will go under. Unemployment numbers will come down from current levels but will remain historically high. Consumer spending will be dented in the near term versus exploding upward with a vaccine announcement. At this point, the issue is not the virus and a vaccine, but the damage done to the heavily indebted economy. There is a play in recovery stocks, question is when and recognizing it will be into a weak US economy. On China, agree with his point. Semiconductor industry may be hurt long term by in-house development by China. US is stuck between a rock and a hard place on this one. Stop shipments to China in the short term and it may inhibit Chinese companies. But China will ramp up their own development probably stealing US technology and will end up as a competitor to US semi companies who sell a lot of chips today to China.
  • DS
    David S.
    1 September 2020 @ 19:01
    I must watch the rest of the presentation later. I hope Mr. Pelosky will address the aftershocks of the pandemic in the US in the last half of the video. We cannot get back to normal if the American consumer is so in debt that the economy will continue to suffer from lack of spending. The US economy is based on consumer spending. The government can fill in the gap with non-productive life support using fiscal policies in the short run. Somehow the economy must get back to functioning on its own. Then all levels of government, corporations and private individuals must stand on their own feet again. If not, the pandemic will be one of the major lost battles that defeated us. DLS
  • DS
    David S.
    1 September 2020 @ 18:52
    Always a pleasure to hear from Mr. Pelosky. Another positive interview. Thanks. Testing tracking and tracing are the first leg of the fight against COVID-19. The second leg is an effective vaccine. The third leg is how well the medical community can treat a COVID-19 patient. In the US like many other countries we failed in our effort to test, track and trace. We even failed in identifying the threat on a federal and state level. We will do a lot better on the vaccine. The patient care is improving all the time. As we find new therapeutics and procedures to help patients recover at home, the sooner we can get started on a new normal. DLS
  • SS
    Stephen S.
    1 September 2020 @ 17:44
    Comparing LBJ to Biden at this point really makes no sense to me. LBJ was in his late 50’s to early 60’s during his term. Biden would be in his late 70’s to early 80’s by the end of his term and it shows. Wouldn’t count on any “Great Society” style legislation coming out of Biden White House.
    • RK
      Robert K.
      1 September 2020 @ 18:07
      "...positives of the LBJ era"...really?
  • AA
    Aymman A.
    1 September 2020 @ 16:27
  • SS
    Stephen S.
    1 September 2020 @ 15:02
    Appreciate his view, not sure I share his optimism, but do agree Emerging Markets and international stocks are likely a good place to go.
  • SD
    Sudipta D.
    1 September 2020 @ 14:53
    excellent interview. Would be good to do a follow up in a couple of months to see how his views evolve. Good work RV team. Very thought provoking.
  • KF
    Kenneth F.
    1 September 2020 @ 14:31
    Clean Energy isn't Clean.
  • RW
    Richard W.
    1 September 2020 @ 14:00
    This was vastly better than the last interview. Jay explained his themes, where they came from and what he understood. I found it really interesting and informative. I don't necessarily agree with all he says, but his arguments were clearly put.
  • FS
    Florian S.
    1 September 2020 @ 13:24
    Outstanding interview! Love the contrary take on many key issues which Jay explains in a logical way
  • DR
    Danilo R.
    1 September 2020 @ 13:18
    Yes that makes sense, buy Euro no growth stocks with older populations when the dollar has been devalued. Besides US which region is oil self sufficient? There is a great reason why the US does not want China IPO’s. Fake gold, fake coffee sales, and fake German fin tech global aggregate. Taiwan and South Korea outperformance is tied to US tech. What is a better play, big tech which is based on productivity gains or green deal based on government regulation?
  • BS
    Boris S.
    1 September 2020 @ 12:39
    Saying technology cant carry S&P higher after the last decade takes some audacity to say tho..
  • Mo
    Master o.
    1 September 2020 @ 10:02
    Excellent Interview. Turkey is just LOL under Erdogan. Ed can you please bring back Keith McCullough and Kevin Muir to see what their current and long terms views are?
  • SB
    Stewart B.
    1 September 2020 @ 09:57
    Great interview. Jay Pelosky is an excellent source of new ideas (whether you agree or not). Ed - thanks for playing the Devil's Advocate :) It would be great to see Jay back in a couple of months.