Pensions Update from the Flows Master – Live with Mike Green and Raoul Pal

Published on
October 5th, 2020
76 minutes

Pensions Update from the Flows Master – Live with Mike Green and Raoul Pal

Live ·
Featuring Michael Green

Published on: October 5th, 2020 • Duration: 76 minutes

Mike Green of Logica Capital Advisers returns to examine the current state of pensions and the other sources of passive flows that have become so important in today’s market. Mike is joined in this discussion by Real Vision CEO Raoul Pal who is also keenly focused on what could happen to pensions and their beneficiaries should his “Unfolding” thesis play out. As well, they will take questions from the audience and extend the conversation beyond the titular topic of pensions.



  • SG
    Sashi G.
    16 October 2020 @ 11:09
    The title is quite a misnomer - though the description of the interview below gives a disclaimer that this is a wide-ranging discussion - which was great. Just really not much focus on pensions.
  • SG
    Sashi G.
    16 October 2020 @ 09:55
    I have been following the "pending" pensions crisis now for well over 10 years. It keeps staying on the horizon. The logic stated all along and in this interview is sound as to why there will be a pension crisis. However after seeing "policy" responses to new crises over the past few years, and especially this year - my take on this is now changing more to this will not happen. Meaning - pensions will not be "allowed" to blow up. If central banks can create SPVs to buy high yield bonds, flood liquidity and do almost anything else (as they constantly remind us they can) - once this pension problem really gets centre stage (as will insurance companies face the music some time in the future, for example) - money and solutions will be created to "solve" the issue and kick everything on further down. 100 year special bond any one to "fund" pensions... If anything - politically hard problems will never be solved in a way that causes pain -as we have seen since maybe LTCM days. The Reagans and Volckers do not seem to be around any more, anywhere in the world. It would be more interesting to start to think more of what happens eventually as we keep zombifying everything in sight with bailouts and liquidity infusions, pensions included, in our now (everything-but-in-name) MMT era.
  • MC
    M C.
    14 October 2020 @ 12:38
    Can Real Vision increase the volume of the recording so that if we listen at outdoor? If recording volume is high, end users can always reduce volume but it the recording volume is low, even we max out our phone, it will still not be laud enough for outdoor. Just for your feedback. Thanks.
  • SB
    Sean B.
    13 October 2020 @ 20:25
    Excellent interview
  • JB
    Jim B.
    13 October 2020 @ 19:14
    Mike, join the caravan out of California! I left several years ago. Lots of room and good quality of life here in Wyoming.
  • JH
    Joel H.
    12 October 2020 @ 04:07
    Great interview, thanks guys!
  • BK
    Brian K.
    12 October 2020 @ 03:21
    Mike Green the Mickey Mantle of Real Vision Host/Guests
  • wj
    wiktor j.
    11 October 2020 @ 12:43
    This interview alone is worth the sub price! More mike green plz.
  • HS
    Henry S.
    10 October 2020 @ 18:31
    Good interview, even the many deviations from topic were good. Insights into passive investing forces and bond jump to default risk particularly good.
  • SS
    Scott S.
    9 October 2020 @ 15:27
    Fantastic interview!
  • TM
    Tommy M.
    9 October 2020 @ 14:33
    Can we get the transcript, please?
  • JM
    Jason M.
    9 October 2020 @ 09:32
    Pensions where also senior in Greece. They got a haircut after a long struggle.
  • MD
    Matt D.
    9 October 2020 @ 02:24
    Great interview Mike and Raoul! Yep. Really insightful thinking. I appreciate the ending comments too - that to me is a concern. Where can people go - it is a bit disturbing to see the same behaviour in the US, UK, here in Australia - not sure about the EU. Better off in Sweden?
  • TB
    Tyler B.
    8 October 2020 @ 22:26
    Who gave this a thumbs down? SHOW YOURSELVES
  • DB
    Donna B.
    8 October 2020 @ 22:18
    So much wisdom in Mike. Many good quotes. Always enlightening. Thank you.
  • AC
    Alvaro C.
    8 October 2020 @ 21:35
    A fascinating interview; this is the type of material that makes Real Vision unique. On the discussion about Long-Vol strategies (~26:00) not been large enough to replace bonds in portfolios (around minute 26:00): Can Mike comment on using Gold as a Long-Vol Asset in portfolios and/or as a replacement for bonds (i.e. using Gold instead of long bonds to construct an "efficient frontier"), especially given that low bond yields have significantly reduced Gold's cost-of-carry? Thanks !!
  • LC
    Lee C.
    7 October 2020 @ 18:53
    People are buying RV's not because of "live for the moment" sentiment. They are buying RV's so they can drop the keys in the mailbox and still have a dry place to live and the luxury of pooping at will. The moral hazard and lack of accountability of 2008 made it perfectly fine to simply walk away. If you loose your job and have a 500K mortgage and a 200K 401K why would you sell your 401k to pay the debt on the house and then loose the house anyway because of the FED and their stupid pet tricks? In my hippie days when the heat was on your tail, it was called splitting for the coast in a van. Just drop off the key Lee and get yourself free. The advantage of an RV is you have no address. It's also the disadvantage.
    • PB
      PHILLIP B.
      8 October 2020 @ 20:10
      I've been wondering also how much of this is households choosing, making a plan for their next steps. Houses are terribly expensive both on a per foot basis to purchase (depends on market) and in ongoing taxes and maintenance. Even if one has equity, so what, it's illiquid. For members of household who are in their 60s, only some $200k in the the 401(k), not too bad a decision to ditch the house, take SSI early, and screw the effect on one's credit score.
  • Hv
    Hannah v.
    8 October 2020 @ 17:57
    Looking skinny Mike. Good job!
  • KM
    Kelly M.
    8 October 2020 @ 17:00
    Raoul, I don't think any of my aerospace engineering professors - who were outstanding teachers, were making millions. Nor would I call them rockstars. When you talk about education you are thinking purely in terms of your educational background. The degrees that give you the technology you are using need labs and teams of students in those labs experimenting for the educational experience. That is not something you can do totally online. The wind tunnels I used were the size of a large house and while some of that training can be simulated now on the computer you still have to touch the physical world when you are engineering physical things.
  • BB
    Brian B.
    8 October 2020 @ 16:11
    RE: movie theaters, Macy’s, etc closing... *many* states have relied on suburban sprawl for years, new malls and new strip malls, because of the *construction jobs*. The construction jobs pay far better than the resulting minimum-wage retail. Key for Tax base. You see this clearly in certain states’ opportunity zone incentives, it’s only there to encourage construction. It’s this dynamic that Amazon upsets in a huge way.... No need for the density of malls and strip malls —> reduced construction jobs... state budget woes.
  • ar
    andrew r.
    8 October 2020 @ 15:07
    Mike: I think I didn't quite understand how it is passive fixed income will start to take alpha away from active. They still have that index-construction problem (buying more as prices rise), correct? Thanks for your help!
  • ar
    andrew r.
    8 October 2020 @ 15:00
    I'm glad Mike and Raoul wandered off, as it were, into education. That was a very substantive segment, if you ask me.
  • JD
    Jesse D.
    8 October 2020 @ 00:13
    Love Mike!
  • MP
    Michael P.
    7 October 2020 @ 22:53
    Mike Green is the GOAT. As a fellow California resident I could not agree more with your comments on the current political climate. One party rule has created this nightmare. As a financial advisor for 35 years in California, I have seen and continue to see literally dozens of clients leave in the last few years. Phoenix, Scottsdale, Reno, Austin, Sun Valley etc. All to get away from the high cost of living, confiscatory tax policy and political extremism. Current ballot proposals that create more division between the haves and the have nots, higher taxes and more costly regulations with no end in sight. Its all about control. Those with assets and the ability to leave are voting with their feet. What a shame
  • DH
    Daniel H.
    7 October 2020 @ 18:42
    The comparison between MIT & Evergreen State FTW.
  • PG
    Philippe G.
    7 October 2020 @ 18:38
    Fantastic - loved the tangent into societal concerns, what the future of work/employment could look like, technology, and education, etc...
  • JK
    John K.
    7 October 2020 @ 14:25
    To mikes point about what do you do to replace the jobs that are structurally gone, I don’t think there’s anything you can do at this point. You could possibly give low skill employees a grant to retrain themselves but retrain themselves in what? Business and healthcare would be the next step up from low skilled work but how many accountants do you really need ? How many doctors and nurses can you actually employ? Or maybe they transition over into tech but then you drastically drive down the wages of tech workers and you’re left with a similar problem of jobs paying far too little to be survivable without multiple roommates and other subsidies. I think we’re increasingly heading towards a society where a ubi is a requirement because there are no more low skill jobs to employ people at. And AI will canabalize the Rest in the next 20-30 years.
    • PB
      PHILLIP B.
      7 October 2020 @ 18:21
      Industrial policy to invest in new industries. Innovation. Use MMT to fund grid, AI, nano, bio, and any other technology where we think the Chinese might get ahead of us in. Doesn't solve immediate problem, but does provide an on-ramp to future job growth, tax revenue, Making these investments is within the capacity of our nation's leaders.
  • JR
    Jason R.
    7 October 2020 @ 17:46
    A fantastic discussion to take in and reflect on. What I appreciate most about these types of interviews are the off-ramp conversations that get at the root of some of the trends that then find their way into markets, policies, etc. First impression thought is how rapidly change is occurring in so many aspects of everyday life that the models, decision makers, etc. have yet to really understand. While this lag creates opportunity, it also accelerates risk tremendously as Mike has so eloquently pointed out. Another much of this changing experience in the West and the assumptions that then fall out of this can or should be applied to other jurisdictions? In particular, I wonder about...India. Massive amount of the globe's youth there. Huge need for improved infrastructure. Lack of standards (e.g. worker safety) / access to certain types of technology that does mean perhaps a future driven by labour productivity (i.e. throw bodies at the work) in the shorter-to-mid term vs. technological productivity as they have yet to get up the curve to the same degree that the West has? Makes me wonder about the shift of opportunity towards this area and others like it over time away from an older, less resilient West. Seems like these types of areas have much more to gain and in America/Europe, we have so much more to lose.
  • PB
    Pieter B.
    7 October 2020 @ 15:51
    Not the losing trades makes a trader humble....all you have to do is listen to Mike Green....;)
  • PB
    Pieter B.
    7 October 2020 @ 15:48
    Mike Green....if I only could be half as smart....thanks for the wonderful conversation guys!
  • JJ
    Joao J.
    7 October 2020 @ 07:01
    If there is this massive distortion in valuations due to passive flows, this would mean that there will be incredible opportunities for private equity to delist the undervalued (non-cool sectors) companies that would just be big cash cows
    • MG
      Michael G. | Contributor
      7 October 2020 @ 09:47
      Only if they were actually cheap
    • GH
      Gavin H.
      7 October 2020 @ 15:31
      In my option, this is was Samsung Electronics is just so consistently cheap. As one of the largest stocks in EM indices it would require hundreds of billions of dollars to flow into EM equities for the valuation to rise meaningfully against its huge profits ($50bn in EBITDA and $18bn in net income for 2019) and so it is stuck on a mid-single digit multiple of EV/EBITDA. It is cheap, but it is no longer a stock pickers market, as the flow of money (and therefor opinion), can only undervalue it in a passive world. Furthermore the opportunity cost for passive investors is just so low. Sectors like gold miners for example have fallen to such a low index weight that they could quadruple from here and still be less than Apple's weight in ACWI. So why bother directing new flows to gold miners when making the Apple call is a much easier decision and in fact the default decision for passive investors.
  • NG
    Nikita G.
    7 October 2020 @ 13:56
    Great stuff! I really enjoy when Mike goes off on a tangent - this is where you get the most value! If anyone is interested in learning more about some of the books in Mike's recommended list check out this post on the Exchange -
  • gh
    garry h.
    7 October 2020 @ 13:35
    Brilliant. Mike Green's conversations are second to none. Thankyou.
  • PS
    Peter S.
    7 October 2020 @ 12:01
    I would guess that the Indian and Chinese (baby boomers, born 50 yrs later) will buy the stocks that the US Baby boomers sell?
    • PS
      Peter S.
      7 October 2020 @ 13:24
      And also. What I see in Europe, the pension funds are increasing their investments into real estate. For them, real estate is quite similar to bonds. In the Nordics they have bought massively into housing, pushing yields down - but if they can buy 'fool proof' residential for 3,5% yield, and finance it 50-70% to an interest rate of 1% - they get (close) to the cash flow they need. The diminishing returns of bonds, is that really a problem for the US pension schemes? I´ve heard that the US Pension funds only holds up to 20% of their portfolio in bonds, vs +50% in Europe?
  • IW
    Ian W.
    7 October 2020 @ 06:00
    Always a pleasure listening to you talk.
    • MG
      Michael G. | Contributor
      7 October 2020 @ 09:48
      Thank you. My wife and kids might have some issues with this take.
  • GH
    Gavin H.
    7 October 2020 @ 08:24
    Does anyone have a source for the data on passive vs active by demographics?
    • MG
      Michael G. | Contributor
      7 October 2020 @ 09:47
      Schwab report
  • DD
    Dmitry D.
    7 October 2020 @ 09:43
    Listening to Mike's thinking is worth a subscription in itself. Don't want to give any ideas, but Mike Green-tier of RV would be an absolute must-have
  • LM
    Luke M.
    7 October 2020 @ 05:39
    He's just an incredible mind. To the old question of who you would choose to have a dinner party with, I'm probably choosing Mike Green lol.
  • EA
    Esqandar A.
    7 October 2020 @ 04:44
    Amazing and a lot to take in! Had to listen again and write down a summary to catch the points well.
  • JI
    JWD I.
    7 October 2020 @ 03:33
    That was a heavy interview...thanks!
  • SS
    Shanthi S.
    7 October 2020 @ 02:23
    He’s the best. The absolute best. Thank you both!
  • JS
    Jon S.
    7 October 2020 @ 02:18
    Related to minute 40 something when he refers to the carpe diem effect of pandemics. One can observe the elderly smoking. I do remember the day the pandemic started to extend in Europe I saw a 80 year old grandma open a cigarette box and smoke it-like saying I do not care now that covid is here. It is an image that might be out of imagination but I can clearly frame in the background of the pandemic. This is a real observation to see if the covid is gone. When the elderly stop smoking again. Some smoke always but when you do not see so many smoking lets. Your perceptions will tell. This is what I am looking at to knowing the covid risks is gone.
  • JS
    Jon S.
    7 October 2020 @ 01:46
    Great interview. Great interviewee and interviewor. Thank you both. As a side note, Raoul can you one day extend on the idea of the bitcoin „ETC“ products (and gold ones maybe too). I refer to the video on the crypto channel explaining the first European crypto „ETC“ (the one in Deutsche Börse). Respectively, what is your opinion on gaining exposure to bitcoin through that venue. Many thanks.
  • DS
    David S.
    7 October 2020 @ 01:02
    Great discussion. Always a good day to hear a conversation with Mr. Green and Mr. Pal. When everything hits the fan will gold and Bitcoin be safe havens? Will cash and land be safe havens? As the economies of the world sort it out you will need cash to make it through. Looks like everyone will continue to lower FX value of currency to compete - Lagarde today. Bitcoin and gold may go down in the interim and hopefully recover. Plan now so you do not have to sell at the wrong time. DLS