The Fed’s New Plan: What’s the Difference? – Live with Jonathan Turek & Raoul Pal

Published on
September 10th, 2020
58 minutes

Market MOVEs with the Convexity Maven – Live with Harley Bassman

The Fed’s New Plan: What’s the Difference? – Live with Jonathan Turek & Raoul Pal

Live ·
Featuring Jonathan Turek

Published on: September 10th, 2020 • Duration: 58 minutes

Real Vision CEO and co-founder, Raoul Pal, joins Jon Turek, author of Cheap Convexity, to discuss the rapidly evolving macro environment – born out of the Fed’s new policy framework – and an ever-weakening U.S. dollar. With the Fed shifting toward average inflation targeting and long-term accommodative policy, Pal and Turek consider whether this will spur on the recovery the Fed is aiming for, how fiscal policy may be required to assume a greater role in economic recoveries by becoming more aggressive, and how this sets the stage for a new, emerging FX paradigm. To view some of Turek’s charts, click here:



  • MH
    Martin H.
    29 September 2020 @ 05:42
    Doesn't crypto somewhat kill the banks rent seeking model? Everything that they do can be replicated at lower cost and higher reward in a crypto world. No? Could that be a part of the current bank share price action?
  • BD
    Blake D.
    16 September 2020 @ 16:29
    Is there a transcript for this?
  • je
    james e.
    15 September 2020 @ 14:27
    Raoul: If USD down, "buy EM and go to the beach". What would be the EM trade? Specifically, how would one buy EM?
  • DK
    David K.
    14 September 2020 @ 17:33
    Being older with 30 years in the business, it's great to see and hear someone articulate current macro through young eyes.
  • TB
    Tobin B.
    11 September 2020 @ 23:16
    Centralized digital currency is a bad idea. Too much power in the hands of too few. What if they ever decided to say, deduct from your account? What would you be able to do? Not a damn thing.
    • SB
      Stephen B.
      13 September 2020 @ 22:47
      Or defund you if you held the "wrong" views. Way too much power which will surely be abused.
    • JA
      John A.
      14 September 2020 @ 15:15
      Much of this power already exists thru the banking and taxation systems. Your accounts can be frozen and you can be put under investigation before even seeing a grand jury. If you can't prove where your income comes from, the government can seize those assets until you do. What digital currency allows is more targeted versions of the same policies we have now. Instead of the PPP loan program thru banks, you can send the money directly to those who have it, and you can audit that spending with supreme granularity. Yes, it is greater control and it makes it easier for the state to use that power. But this power already exists, your only protection from it is the same as it ever was. Value stores out in diversified legal jurisdictions. Really, the fact that there will be competing digital currencies and a need for honest records of account are what will make it possible to find alternative places to store money if your jurisdiction tries to implement such policies. Someone somewhere will want to attract fleeing capital if push comes to shove. And historically, America has always tried to make itself an attractive place to do business. While the potential for abuse will be there, the opportunity cost of trying to do so will probably make it unattractive when compared to the amount of money that can be made from strong laws and property rights. As it has been historically.
  • tr
    tom r.
    12 September 2020 @ 01:05
    These interviews are getting more boring every week. How does a subscriber make any money on a discussion like this. Here's a novel idea you haven't addressed even though some of the top money managers have, may be the largest factor. Trump wins by a landslide and the dems lose the house to boot. These massive Trump rallies going on all over the country are very telling. Maybe you need to get out more and see what is happening on land, sea, highways and in the air. I was in one of the hundreds of boat parades on the Labor Day weekend. They are all over YouTube and you have to be in one to even believe it. We are about to enter a whole new world in my opinion.
    • Jv
      Juri v.
      12 September 2020 @ 02:04
      tom.... jonathan laid out his entire world of macro, clearly mentioned his favorite trades and asset classes by name and you bore us with your subscription and in-capabilities of earning enough money... i dont know...
    • Mt
      Miami t.
      12 September 2020 @ 07:36
      I agree on the Trump part. In my mind there its a certainty Trump is going to win in a landslide and take back the house. In every metric he is doing way better than 2016. I dont understand the doubt.
    • AB
      Alastair B.
      12 September 2020 @ 11:42
      It is easier to sell hate than love. Selling Trump hatred generates advertising revenue
    • WW
      Will W.
      12 September 2020 @ 15:05
      Not going to weigh in on the politics, but I absolutely agree one has to try to find a way too literally or figurativley get out of one's personal bubble to get a feel for what is really going. We have what we have called our "Covid-19 van" and have safely been able to travel all across the country this summer, and regardless of one's media source the reality is often very different than what one is consuming.
    • TE
      Tom E.
      13 September 2020 @ 16:07
      For God’s sake keep the partisan politics out of RV
    • JA
      John A.
      14 September 2020 @ 15:07
      The sitting president has little to do with markets right now on his own in a vacuum. What is going to drive markets in 2021 is what happens with monetary and fiscal, and with how the various levels of government interact with one another. Neither Presidental candidate is in a position to ignore the challenges America faces over the next 3 years, so in many respects, the outcome is going to be similar even if the messaging and the political dynamics are very different depending on who wins. You should be more concerned about who winds up in control of the senate and house than who winds up in the White House in my opinion. And be careful with political bias, it is a fantastic way to lose money.
  • SB
    Stewart B.
    14 September 2020 @ 12:15
    Great guest. Knowledgeable and balanced. Please invite back.
  • FL
    Fabrizio L.
    11 September 2020 @ 21:31
    Pboc, doj, ecb, fed.... wow this smart young men is a great example of what newgen post Greenspan Investors are like! Unsurprisingly having lived all his investment life in a world where the only thing that mattered is which put-is in place, be it greenspan, yelen bernake or powell or draghi he is totally blinded by the “power” of these liquidity providers! If the fed succeeds, if policy succeeds, if fiscal succeeds..... Wow! Bleak outlook betting our future in hoping that these institutions jump start the world. Yes the world young friend its all interconnected and it looks to me you are ignoring all the “bad and incompetent guys” that are proliferating amongst global leaders..... its not only about what happens in the US, everyone in this small closed system needs to play ball for things to work out! Best of luck keep it up!
    • SB
      Stephen B.
      13 September 2020 @ 23:49
      Agreed - particularly his surprised in his confidence in the ECB.
  • SB
    Stephen B.
    13 September 2020 @ 23:12
    The RV, July 30, interview with Pietro Ventani opined that the July EU bail out was too small, too late and too conditioned for Italy's needs. Raoul asks in this interview why the Netherlands would not say "FO" if asked for more money but at least they do some trade with the South (and their economy is also deeply tied to Germany's, that does do a lot of trade with the South). The break point for me is more likely to be Denmark, Sweden or Finland saying no.
  • SB
    Stephen B.
    13 September 2020 @ 23:12
    The RV, July 30, interview with Pietro Ventani opined that the July EU bail out was too small, too late and too conditioned for Italy's needs. Raoul asks in this interview why the Netherlands would not say "FO" if asked for more money but at least they do some trade with the South (and their economy is also deeply tied to Germany's, that does do a lot of trade with the South). The break point for me is more likely to be Denmark, Sweden or Finland saying no.
  • SB
    Stephen B.
    13 September 2020 @ 23:12
    The RV, July 30, interview with Pietro Ventani opined that the July EU bail out was too small, too late and too conditioned for Italy's needs. Raoul asks in this interview why the Netherlands would not say "FO" if asked for more money but at least they do some trade with the South (and their economy is also deeply tied to Germany's, that does do a lot of trade with the South). The break point for me is more likely to be Denmark, Sweden or Finland saying no.
  • DS
    David S.
    13 September 2020 @ 19:38
    I now understand better the Robinhood investment optimism. Mr. Turek is erudite and accomplished but his generation has not lived through a time when the government did not bailout the economy. In fact, the Boomers are a blessed generation also in a somewhat similar fashion. I am old and see the problems of constant bailouts differently. Euroland, the EU, the US, China, the Middle East face immense social and economic challenges. My outlook is distorted toward the downside. Both Mr. Turek and I may be playing our proper roles in social problem solving. It does not surprise me when the government gives everyone money, personal "income" goes up. If the government prints a lot more money we can double or triple personal incomes. (The more printed money ends up with the wealthy the less CPI will rise. If we take money from the middle class and give to the wealthy, CPI will go down. What a great idea! – my idea not Mr. Turek’s idea.) I will be really surprised if US citizens will want to pay back the federal debt generated. With an out of control debt, the wealthy in the US will flee because they can! – like NYC is enduring for the moment. We would be in a bad place if the younger generations were not optimistic. I hope they can find a way to get all of us through this. The best of luck to Mr. Turek. DLS
  • EF
    Ed F.
    13 September 2020 @ 16:59
    Jonathan is an excellent guest with so much knowledge and so little to plug/ front run. A regular going floor?
  • DP
    Duane P.
    12 September 2020 @ 19:20
    Does anyone know where I can read about Jonathan Turek's background or experience? He doesn't seem to have a Linkedin profile.
    • AB
      Alastair B.
      13 September 2020 @ 04:58
      If he’s off social media then he is smart
  • DS
    David S.
    13 September 2020 @ 01:46
    RAW DATA. Inflation and deflation are about the purchasing power of a unit money period. Both are happening all the time. Everyone tries to average them or simplify them. Is the average better? At the simplest level they are about the change in the price of one item in a chosen unit of value. If I had US$10,000 ten years ago I could by about 8.3 troy ounces of gold. Today if I have US$10,000, I can only buy 5.1 troy ounces of gold. The price of gold is inflated by about 62% over the ten years. If everyone buys the same basket of goods, the CPI works. This has not been true for a long time. The wealthy basket of annual purchases is markedly different from the poor – the wealthy may buy a Ferrari and a Burgundy while the poor may buy a used pickup and a beer - not sure who is happier. The average inflation basket has little meaning in macro. What basket can you possibly use? For investing today, you need to look at raw data first then massage it yourself if you can! A good example is the US unemployment data analysis by Mr. Harrison showing that the seasonal adjusted data were distorting the US employment picture during the early COVID crisis. The raw data showed a better picture. Other distortions are the nebulous real GDP and real interest rates. Adjusted numbers are meant to give a better picture, but how can they when seen from multiple points of view? If they add to your understanding, then go ahead and use them. For me, the raw data hopefully not revised ten times is the best starting point. In the macro world you have inflation and deflation at the same time. Everything is in flux. That is why it is so hard to put macro in a box. It is even harder to understand what trades will work. This is the puzzle that intrigues. Making a profitable trade from analysis is what drives. The macro world understanding will continue to be more and more fragmented as we continue to experience two tsunamis at the same time – zero bound interest rates and COVID Times. These two tsunamis already swirling together like the Maelstrom of Saltstraumen become more devastating as governments at all levels try to mitigate their damage in real time. Even the raw data is suspect why should the massaged data be better. Multiple points of view and experience help the macro trader guess how all the other traders will trade. After all, the markets are the best guesses of all of those with skin in the game. A most difficult job. I am glad I am retired. DLS
  • Md
    Matthew d.
    12 September 2020 @ 17:44
    This was a fascinating interview thanks guys!
  • SS
    Sami S.
    12 September 2020 @ 17:05
    Thanks. Any thoughts on Europe? Could you Raoul debate Jay Pelosky about Europe's economic future as you gents seem to have opposing views on this.
  • JR
    Jason R.
    11 September 2020 @ 19:38
    Smart kid, but like a lot of young folks, he's overzealous in his timeframe. Bottom line: Growth can't come back anytime soon given the global decisions made regarding Covid response earlier this year. Major global sectors impaired due to crushed demand that will come back, but slowly. This will take at least 24-36 months to work itself out. I don't think we're anywhere near the epicentre of this thing. Reality is going to catch-up at some point, and I fear that means downward pressure on U.S. equity markets given how insane and irrational things got over the summer. The cracks have started to happen. Wait until the ice actually breaks and we fall through.
    • AB
      Andy B.
      11 September 2020 @ 20:29
      Reality can take a long time to catch up as policy response , both fiscal and monetary, will continue to be of gigantic proportion.
    • JR
      Jason R.
      11 September 2020 @ 21:07
      As will the continuing increased debt load that just exacerbates the problem, Andy. At some point, the bill comes due...either through a sustained negative response, or a move to an alternative.
    • AB
      Andy B.
      11 September 2020 @ 21:16
      Totally agree. My point is that it might take a long time. I was expecting the bill to come due after the great financial crisis in 2007. More than a decade later no structural issues have been addressed. I would not be surprised to see another couple of years of the same. At some point like you said something has got to give either via a deflationary or inflationary adjustment.
    • VK
      Viresh K.
      12 September 2020 @ 10:18
      Except the economy is already growing....
  • SZ
    SALEH Z.
    12 September 2020 @ 07:33
    I have been reading Jon's work for about 3 years now - he is without a doubt one of the best bloggers on global macro and my guess is with some more real-world investing experience he will only get better with time. Its easy to be dismissive of him given his age (I was skeptical myself initially) but he's been fairly consistent in his process and I always learn a thing or two from reading his work.
  • SL
    Shawn L.
    12 September 2020 @ 05:32
    To me the bottom line in this whole debate of the two narratives comes down, not to whether the dollar will ultimately go up or down, but will innovation (through growth) take over market support from the fed. In other words, will we see real growth and grow our way into these currently high valuations. Very few people are talking about the current state of innovation. With education stagnating, visas canceled for foreign grad students in America, tech having already taken over the world, new tech like tik tok being threatened and AI advancing beyond most startup's abilities, where is this innovation (growth) going to come from? Are we going to see explosive Moore's law type growth via quantum computers? I would argue, no because governments are hoarding this technology for cryptography fears. What about space travel, cyber brain implants, electric cars? I would strongly argue we will not see real innovation as we are in a down trend of innovation. We have peaked through the brilliant information and big data age and are now headed into the threatening disinformation and stollen data age. Tech has blessed us and now it's tools are being used for nefarious purposes all across the globe and even big tech does not know how to stop it. Sure regulation will come in for public safety, but will that spur innovation? Unclear to unlikely. Added to all this, the global climate crisis, geopolitical tensions and social unrest continue to to escalate putting downward pressure on innovation taking hold. Positive change becomes even more difficult as many people fight change when unsettled. If we can't agree on the safety of a future covid-19 vaccine or the importance of waring a mask, how are innovators going to convince people to do anything substantially new? I agree with the idea that the best chance for a good outcome (growth) is a FDR NEW DEAL + JFK MAN ON THE MOON presidential mandate, and I think we would need both. But is either party proposing candidates of FDR or JFK caliber? Politics has changed and so has growth in America.
    • SL
      Shawn L.
      12 September 2020 @ 05:40
      Ah, but there is Bitcoin and although I have drank the cool-aid I do not see an old style Gold Rush playing out in crypto mining and supporting the national economy. Pick and shovels are easy to sell, high end graphics cards and the computer skills needed to mine crypto do not scale to the general public. 98-99% of people have to pay other people to set up their websites for them. Using Wix doesn't make you a programmer.
  • MC
    Mike C.
    12 September 2020 @ 05:12
    What was this? It was like watching Mr Miyagi training Daniel LaRusso in The Karate Kid. If I have mastered Microsoft Flight Simulator does make me a qualified Fighter Combat Instructor?
  • SL
    Shawn L.
    12 September 2020 @ 04:59
    Jon is a very smart guy, but misspoke in regard to a positive -vs- negative feedback loops. Negative feedback loops are loops that self limit and shut down, stopping activity. A positive feedback loop self reenforces, promoting activity in a run away type loop. Whether a positive feedback loop switches from going up to going down, does not change it from a positive feedback loop to a negative one. It is still a positive feedback loop, only in a negative direction. The crux of the difference is whether it self reenforces (positive) or self limits / shuts down (negative). At least this is how I understand these feedback loops and how they work in medicine.
  • DN
    D N.
    12 September 2020 @ 03:00
    Digital currency as a means for transfer payments (substituting infrastructure) is an interesting thought. But wondering if CBDC would have a different monetary velocity and credit multiplier profile? CBDCs, all else equal, would compete with bank deposits (substitute)....which is essentially a trade off between turnover of money/spending in the short term vs blunting credit expansion via the commercial bank plumbing (which relies on deposits) when balance sheets are repaired in the longer term. Big implications.
  • jh
    jason h.
    12 September 2020 @ 02:31
    I wonder what he thinks of BTC and why Raoul you didn’t ask? Also wonder how Raoul would rate on a scale of 1-10 his Nikke call option 6-9 month timeframe idea?
  • rs
    ross s.
    12 September 2020 @ 01:39
    Smart young man but I feel Raoul gave him an education..And I learned from that alone.
  • RA
    Robert A.
    11 September 2020 @ 22:04
    Vintage RV curation—where the heck did you find this guy! Excellent thinker and communicator with some original Macro views. Excellent “Plus” value product.
    • RP
      Raoul P. | Founder
      12 September 2020 @ 00:10
      I know, right! We met on Twitter...!
  • JA
    John A.
    11 September 2020 @ 20:58
    I kinda feel that his growth argument takes for granted that growth just comes back. In order for growth to come back, banks are going to have to feel comfortable with taking on risk in a world with flattened yield curves. We have had subdued growth and inflation since 2008. It is this assumption that growth will just happen before the current debt problems are sorted is where I diverge.
    • JR
      Jason R.
      11 September 2020 @ 21:08