The Recovery: Shape Matters – Live with Raoul Pal & Mike Green

Published on
April 8th, 2020
Duration
82 minutes

China, Coronavirus, and Trust – Live with Leland Miller


The Recovery: Shape Matters – Live with Raoul Pal & Mike Green

Live ·
Featuring Mike Green

Published on: April 8th, 2020 • Duration: 82 minutes

These are unprecedented times – entire countries have shut down, large portions of the global population are quarantined, business has come to a grinding halt, and markets are in disarray as they rally on hope and collapse on fear. With China showing the first signs of a return to relative normalcy and Europe seemingly making its way to the other side of the deadly curve, we are faced with one question: what will the shape of the recovery look like? Do we slide into oblivion from here (L)? Make a quick recovery (V)? Or go down a protracted road of pain and misery before seeing light (U)? To gain some clarity on what is possibly the single most important question of today, Raoul Pal, CEO & co-founder of Real Vision, joins chief strategist and portfolio manager at Logica Capital, Mike Green, to debate what the endgame looks like. Having expressed opposing views of life on the other side of COVID-19, this week’s Real Vision Live promises to shed light on the most important conversations taking place in capital markets right now.

Comments

Transcript

  • AV
    Alvin V.
    4 May 2020 @ 08:47
    Great great interview, thank you. I'll just like to raise a point. 1:18:20 - ... if you don't actually make good on this payment, I'm going to extract physical pain. .... monopoly on violence.... Putting it this way concerns me because there could come a day (which I don't know when) when the monopoly is held by say China or another power. Does that mean the usefulness of a particular currency is only tied to it's military might and it's ability to inflict unthinkable pain? If that's the argument against Bitcoin, then why bother with Gold or anything else other than the USD for now?
    • AV
      Alvin V.
      4 May 2020 @ 08:49
      Sorry, I just saw that the point was discussed already. My apologies.
  • sc
    sung c.
    23 April 2020 @ 04:51
    Great discussion. Thank you for that. On Mikes point about Bitcoin not having an army behind it to enforce it, here is a hole I find in that thesis, IMHO: With fiat currencies, yes, I totally agree that the nation with the biggest guns control which fiat will be the dominant accepted currency. This is because fiat currencies are printed at will and manipulated by Central Banks and used to carry out political agendas; and as such, they need guns to enforce their agendas, otherwise the rebellion against such action could not be controlled. However, here are two differences with Bitcoin. 1) Since it cannot be controlled, created, or manipulated, there will not be cause for rebellion against it except at the beginning, which might come from the Central banks that want to oppose it. However, once it has become the accepted standard, no big guns are required since everyone is using it out of agreement that it is the best standard, and since everyone agrees that no one is forcing its use and no one nation is gaining over another nation from its use, the need for "big guns" disappear. 2) The only time so called, "big guns" will come into play will be at the beginning when Bitcoin becomes large enough and dominant enough to pose a threat to the then dominant fiat currency in use. If the U.S. feels threatened and decides to outlaw Bitcoin, then this still does not destroy its main purpose stated in (1). This opposition would only further show people that Bitcoin actually has merit. At such a time, it would also show many nations who already do not like the U.S. dollar as world reserve currency, a reason to support Bitcoin and push for its adoption and use as the new standard. Under this scenario, Bitcoin does not need big guns to exist because its adoption will occur by agreed consensus by the majority of nations over time. Why would they do that? Because there will come a time when the world becomes tired and untrusting of the current broken system of U.S. dollar as world reserve and will look for the better solution that can be trustworthy and peaceful. Once they all see Bitcoin as this solution and start adopting it in agreement, the reason for the "big gun" becomes null and void.
    • TE
      Timothy E.
      23 April 2020 @ 08:27
      No one on the finance side seems to be addressing the risk associated with BTC being destroyed by a world government, particularly China. China right now is capable of doing an attack which would kill bitcoin. They own 81% of the mining pools and could commandeer them and destroy BTC within an hour. 81% of mining pool power controlled by China as of March, 2020: https://www.buybitcoinworldwide.com/mining/pools/ A report that links to a study from 2018 showing China is able to bring down BTC: https://thenextweb.com/hardfork/2018/10/08/china-means-intent-destroy-bitcoin/ A blog post from early 2019 going through many of the rebuttals of the BTC community and explaining why they are not sufficient: http://galgitron.net/Post/How-China-Can-Kill-Bitcoin
    • sc
      sung c.
      24 April 2020 @ 03:49
      Response to Timothy E. Reply: That is factually no longer true. If China could, they would have done so. The best they could do was to outlaw its trading and even then that only hurt BTC temporarily until people moved trading out of China or went underground.
    • YR
      Yunier R.
      25 April 2020 @ 05:17
      You need to understand mining more to make such claims. A mining pool being in china does NOT mean ALL the hashing power is in there. A mining pool as the name suggests is just so people from all over the world get together to spread bitcoin rewards payments. I could setup a mining rig in US and join a pool in China, this does NOT mean china or the pool can control my hardware, I can choose to change at any point.
  • PR
    Peter R.
    24 April 2020 @ 04:10
    Once the price of Bitcoin starts to hit new highs, I'm sure he'll come around.
  • AK
    Ado K.
    21 April 2020 @ 21:29
    Wow the Bitcoin part was just painful. I want to first of say that Mike is a genius, and if I one day in my life can achieve half of his knowledge I would be ever so lucky. Bitcoin actually changes the landscape of physical violence. The fact that it works outside the "meat space" as Mike refers to it is perhaps Bitcoins biggest attribute and not its downfall. Jesus, Donald Trump and Putin combined can not with the help of the US, Chinese and Russian army confiscate your Bitcoin. They can kill you but that does not mean they get the asset. This is purely because it stands outside of the "meat space". Meaning that it is an asset that does not depend on the backing of physical violence, hence making it the safest asset in the world. People often leave their street smarts at home, they define safety based on volatility or how big guns the entity backing it has. From the playground you know that the safest asset is the one that no one can take from you, and Bitcoin is the first asset that no one can take regardless of how big guns they have. Hence meaning that it empowers the individual at expense of the collective. This is Bitcoins gift not its curse. Lots of love to you Raoul and Mike, and thanks a 1 000 times over for this video, will re watch many many times!!!
    • CP
      Curt P.
      22 April 2020 @ 02:49
      I agree with Mike G on bitcoin, and here is why: Yes, i cannot confiscate your bitcoin, but i can control all the bitcoin exchanges so that you cannot covert your bitcoin to a useful currency. And i can grab a few bitcoin bigshots, and shoot them. Game Over. Bitcoin is a money laundering operation. It's only purpose is to provide a way for rich people living in China to get their wealth out from behind capital controls. There will be state-controled digital currencies, but it will not be bitcoin.
    • sc
      sung c.
      23 April 2020 @ 16:53
      Totally agree Ado K.! Also please view my reply above from Sung.
    • sc
      sung c.
      24 April 2020 @ 03:51
      Response to Curt P: That is a very inaccurate, incomplete and immature understanding of the Bitcoin network.
  • JH
    Joel H.
    23 April 2020 @ 23:30
    Another great one. Alot to think about, thx guys.
  • DS
    David S.
    9 April 2020 @ 05:19
    Mike G. – Thanks for a great interview. I believe that you care about people and your renters. After making a humanitarian decision your economic side jumps in and properly presents the economic benefits. Well done. DLS
    • RS
      Richard S.
      10 April 2020 @ 15:35
      I always find Mike Green’s views to be thought provoking. I also find his more constructive view on the equity markets worth considering since it’s in the minority view. While I 100% buy in to his view that large mega corporations will benefit from the hollowing out of small businesses leaving less competition I do have a problem with the fact that for example millions of restaurant workers, hotel workers, and other small business workers who lost their jobs were also Amazon consumers....doesn’t this unemployed disenfranchised group of consumers represent consumer demand destruction ???
    • CB
      Clifford B.
      23 April 2020 @ 15:46
      @Richard S. On a side note, how Amazon has never been charged via Anti Trust is mind boggling.
  • MN
    Murillo N.
    9 April 2020 @ 06:32
    I appreciate hearing Mike's view. It seems to me that most of the people I listen to are very sure there will be another crash coming, so it's great being exposed to the contrarian argument coming from someone this intelligent
    • DS
      David S.
      9 April 2020 @ 19:41
      As I recall the argument, Mr. Green believes that more and more passive investment will continue to drive the market up. He is experienced and smart enough to arbitrages inconsistencies in the market. I am sure that only a few investors, pro or amateur, are anywhere near his level of expertise. That is one reason that passive is so attractive to many investors in the long run while they hold their noses in the short run. DLS
    • II
      IDA I.
      10 April 2020 @ 10:07
      yes, but most of the people here say a crash is coming, it seems to me that retail investors who invest in mutual open end investment funds, are sure that the market will recuperate everything, because is what has always happened in the last 10 years, and this is what their brokers are telling them. Brokers who work on commission have to believe this, because they get commissions they can't afford to sell both bond and stock funds. there are no investment funds barely which invest in gold.
    • MN
      Murillo N.
      10 April 2020 @ 10:44
      For sure, I don't mean to represent my experience as a representative slice of the market. It's just that, as an amateur investor myself, I'm still building a "portfolio of experts" I listen to in order to get a feel for where the market's collective head is at, and where it might go. It just seems to me that lately, my whole "portfolio" has been long retest, so it's nice to see some thoughtful disagreement since seeing everyone I listen to agreeing on something makes me think that there's something I'm missing
    • CB
      Clifford B.
      23 April 2020 @ 15:45
      Agreed. Everyone is singing that the ship is gonna sink to new lows. It very well may but nothing is certain.
  • CM
    Chris M.
    23 April 2020 @ 00:41
    On the discussion of interest rates, just read a study looking at pandemics that killed over 100,000 worldwide going back to the 1300s. in intermediate and long term, rates dropped below normal for decades though in the short term did increase. Lacy Hunt has good comments on the subject in his most recently quarterly report at Hoisington. As far as the study on pandemics, you can read here: https://www.frbsf.org/economic-research/files/wp2020-09.pdf
  • TP
    Timothy P.
    9 April 2020 @ 17:01
    I understand Mike's view, because he's deeply involved in the legacy financial system. Just as I don't expect a fish to tell me how to catch and cook it, I don't expect a Macro trader with a full career's experience on Wall Street to tell me to buy Bitcoin. I don't say this as a slam on Mike, I consider him well versed and articulate on many subjects in the financial space. I only mention this as a perspective mismatch. We see what we want to see, and that inherent bias is something you fight every day if you trade--your worst outcome is if you succumb to your own second-guessing and fear. When Mike speaks of enforcement, he's talking from a place of familiarity with sovereign structures and financial contracts. What the issue really is about isn't just enforcement, but the ability to subvert and game the system you are participating in. Algorithmically enforced escrow, for example, already exists in Bitcoin. If a party attempts to cheat, they lose their funds. That is an enforcement mechanism that forces compliance. Its decentralized, so Company XYZ can't manipulate the algorithm to game the system. This is what I think is the disconnect that Mike experiences. Being used to a final backstop of physical force, versus an algorithmic-enforced outcome. Good interview Raoul, I enjoyed the wide-ranging topics.
    • IO
      Indi O.
      21 April 2020 @ 23:53
      Spot on. It's what you do in the event someone cheats vs making it impossible for someone to cheat in the first place. No armies required. The code becomes law of nature (for its environment), not law of man.
    • ME
      Mina E.
      22 April 2020 @ 02:49
      His reference to the state holding a monopoly on violence is expressly discussed in "The Sovereign Individual", which goes into impressive detail about how microprocessing will take away this monopoly from the state.
    • CP
      Curt P.
      22 April 2020 @ 15:17
      Consider this: You have all your assets in Bitcoin. I (the gvmt) close down all bitcoin exchanges in the country and in any countries which i have imperial influence in. Now you can't change your bitcoins into a usable currency. Furthermore, I (the gvmt) round up a few of your bitcoin big promoters, and give them an Epstein treatment.
  • PD
    Peter D.
    10 April 2020 @ 00:42
    Green is delusional if he relies on that study of the economic impact of pandemics: http://ssingh.ucdavis.edu/uploads/1/2/3/2/123250431/pandemics_jst_mar2020_.pdf This for four reasons: 1. This time is different. COVID-19 deaths appear to be vastly skewed in patients in the over 70 bracket, most of whom had other illnesses. Not people active in the labor force. It is unchivalrous (but necessary if we want to examine this argument) to point out that the loss of net claimants on state wealth, has a different effect than the loss of working folk (everyone worked during times of historical pandemics). 2. None of the pandemics in the study occurred when global debt levels were at 200%+ of GDP. (As is the case today), 3. Death rates today (despite the losses from COVID-19) are actually stable or falling, unlike during previous pandemics. One possible reason is that being locked up, makes every safer.. (Eg. car accidents kill far more people than COVID-19: and are likely plunging). 4. Following the "Spanish Flu" Western economies benefited from an unprecedented increase in wealth stemming from the massive wealth extorted from the Germans in 1919 at Versailles. We won't have those receivables this time around. ***** Love Mike. He always makes us think. But on this one he is out to lunch.
    • CP
      Curt P.
      22 April 2020 @ 15:13
      I'm in two camps on this one. Mike is correct that pandemics are neutron bombs, but he is incorrect that this applies to COVID (as you point out) since it doesn't kill workers. COVID is actually a #MrClean that removes a lot of economic burden from the working population (old and sick people). Every Western society knows that their biggest problem is too many old people and the corps that feast on them (healthcare, etc). If COVID does run through the population a few times, it will be positive for productive growth in those companies which actually make useful things. Consider it like a brush fire that cleans out the dead underbrush. COVID is actually quite necessary if de-globalization is to actually happen. You can't run a competitive economy with millions of luxury pets (retired and other non-working) sitting on the backs of a small number of workers. The workers simply will not breed, and then into demographic death spiral you go (Italy, Spain).
  • GS
    Gerald S.
    10 April 2020 @ 13:16
    In the short run next couple of months) Mike very well may be right. Here are my concerns with his position: 1) 401k inflows continue. Ok, but will they continue at the Jan 2020 level? Haven't some people switched to more conservative allocations? Unemployment will likely stretch beyond the initial wave of service jobs. This will ultimately reduce 401k's inflows. I'm not saying they go to zero, but I suspect they are reduced 15-20%. 2) Buy-backs. There is a ton of pressure and attention being paid to these. Again, they will not go to zero. But does it make sense that they will also be reduce by let's say 20-30% 3) Earnings / demand. This is the big one! Ok, I get it, the passive inflows don't care. -- until they do,
    • CP
      Curt P.
      22 April 2020 @ 15:02
      I agree. Inflows will be impacted b/c the folks who do contribute to 401ks are getting big haircuts in incomes. The stimulus bills only serve to keep the bottom of the income distribution from devastation. Gvmt has now allowed for penalty-free 401k withdrawals... And yes, earnings (at least real earnings) are going to be crushed for a variety of reasons, but higher labor costs long term is the big one.
  • DS
    David S.
    10 April 2020 @ 21:29
    Can someone explain in clear, simple terms what Mike Green is talking about when he suggests that the market downturn was principally a technical/structural event, much like 1987? I read his blog post in which he breaks out his thesis in detail and it is incredibly arcane and confusing to someone who is not a professional quant. Lol. To be honest, the look on Raoul's face at certain points in this interview suggested that even Raoul was a little befuddled.
    • CP
      Curt P.
      22 April 2020 @ 14:57
      Two things: 1) structural vol sellers 2) risk-parity funds Both had to unwind at nearly the same time, spiking vol and selling off equities, which spiked more vol. The entire event was a deleveraging complex. You could see it in the price action.
  • MC
    Michael C.
    22 April 2020 @ 12:55
    So if this crisis accelerates the already entrenched process of market consolidation it should also mean wealth inequality accelerates with it, ripping up the social contract at an accelerating pace. Sounds like an express ticket to a volatile dystopian future. Intro Jim Richards with his book Aftermath.... (PS really good interview. Very Challenging, Thankyou.)
  • RP
    Richard P.
    11 April 2020 @ 22:08
    Great talk, I disagree with the bitcoin argument and think it’s actually a good thing there’s no army behind it and it’s borderless. Kinda like this virus. I’m a software engineer and I can tell you bitcoin can’t be stopped, even the on ramps. Any asset in my eyes not controlled by any government is worth A fortune in my eyes. However we will innovate on top of and fork from bitcoin. Cardano is by far the best securitisation and decentralized low power project I’ve seen so far but it’s a very difficult problem to solve and will take years to build
    • BF
      Billy F.
      14 April 2020 @ 01:55
      RICHARD P I AGREE SIR!! I HAVE BEEN FOLLOWING CARDANO SINCE EARLY 2018 AND WHAT THEY ARE DOING WILL BRING SO MUCH TO SO MANY PEOPLE BUT WE NEED TO KNOW HOW TO USE IT AND SHOW PEOPLE HOW TO USE THE TECH!
    • AK
      Ado K.
      21 April 2020 @ 22:02
      Shilling Shitcoins on RV really? Cardano is at best a failed project and at worse a direct scam.
  • JS
    Julia S.
    19 April 2020 @ 20:12
    Incredible interview and insights. If you believe you may have missed some key points during the rapid-fire pace 80 minutes, I'd highly recommend you read the video transcript and/or download Mike Green's Logica Funds' post: "Policy in a World of Pandemics, Social Media, and Passive Investing," which covers many of the same topics in greater detail. His funds' returns, based on his various theses on the rise of passive management contributions to market structure fragility, seem phenomenal. If only the entry point were not $1M to invest, I'd be all over it (his views on BTC notwithstanding) :-)
  • AM
    Aengus M.
    9 April 2020 @ 12:35
    Can we have the link to the Bloomberg article Mike mentions please.
    • NG
      NIKITA G.
      15 April 2020 @ 21:17
      Have you found it?
  • JM
    James M.
    15 April 2020 @ 16:31
    Great interview IMO. I think both of these fellas are excellent at explaining market dynamics and I have learned a lot from them both over the last 7 years. However I think there is a massive point missed which I,m sure both of them are aware but did not bring up. I would bet my left nut they both would agree that true "Free market capitalism" has probably never existed but that we are about as far away from it today as ever in history maybe. The Japan fully centralized print n buy everything gig is where we are heading globally as Mike suggests I think. It has "worked" kinda there with a fairly subservient obedient population, social structure, universal health care etc. As Raoul has said in the past they just have a debt jubilee and start again. I don't think the outcome will be the same in France, Germany, UK etc and most definitely not the USA with its lack of universal healthcare, inadequate social safety net and its grotesque parasitic corporate criminal nonfunctional or representative corrupt government, not to mention 600 million fire arms and some justifiably pissed of people. Not to suggest the other governments are not corrupt and are not heading in the same direction as the USA, just that the USA is on a different level IMO. If the parasitic class of rentier's continue with this trajectory as it seems they are with or without UBI then the level of disruption, violence, breakdown of any limited social cohesion that exists today will be so dramatic that the great depression could look like a relatively passable outcome. The biggest fear IMO above all else is the complete dislocation of USA leaders and their complete disdain for their own people, other nations, and the ecosystem that allows our existence, their childish petulance towards the possibility with their actions to nuclear Armageddon, just look at Syria, Taiwan straits, Iran, Venezuela, etc and there imperial acceleration of military expansion there during the opportunistic pandemic as I,m sure they see it. There have been many impressive leaders to come out of the USA in the past IMO but the corporate lackeys we have today and for the last 3 decades are not gonna rectify these immense problems, Environmentally, Politically, Financially or Socially. 'Donald Trump' 'Joe Biden' and their cohort? The RNC and the DNC ....Really!!!!? What the USA the most powerful empire ever does in the next decade will dictate the future of the human race's survival and is why they the American people are so important IMO. It doesn't look good to me for the human race never mind the digital number on the screen of you 401k.
  • GC
    Guillermo C.
    15 April 2020 @ 16:29
    I wish he's wrong in everything he's said. Sounds awful for the future. A great depression seems like a healthy thing after listening to this.
  • RG
    Ryan G.
    12 April 2020 @ 10:23
    So is mike suggesting we have seen the bottom?
  • IH
    Ian H.
    10 April 2020 @ 01:24
    Thanks for this very insightful video. Important to hear a different viewpoint. With all of your guests could you please include their social media handles. Mike Green shares his name with an NHL player, so it makes it hard to find him on Twitter.
    • AS
      Annette S.
      12 April 2020 @ 08:22
      Yeah, that would be helpful. Mike is @profplum99 on Twitter.
  • AR
    Anthony R.
    12 April 2020 @ 06:30
    Great interview with Mike and to get a different perspective to Raoul's 'unfolding' perspective. The point raised that this pandemic is accelerating the consolidation of big corporate companies is interesting and may be correct to a degree, but I think there is an opposing force at work in the digital space. Decentralised finance is emerging with the creation of smart contract platforms like ethereum, cardano, Hedera etc. These digital ledger technologies destroy some of the rent seeking intermediaries (potentially breaking apart some of the collectivism from big corporates). Interestingly, some big tech corporates see the value in the space and have joined governing councils (i.e Google cloud, IBM, Boeing have joined the Hedera governing council). Bitcoin is the back bone of this new DLT space and I don't see a world without it. Countries are legalising DLT technologies and big corporates are getting in on the action. It will be enforceable just like other assets. I think as this pandemic continues over a longer period Mike's thesis on the passive flows from 401ks supporting indexing will prove wrong. White collar jobs are receiving pay cuts, people are switching to conservative options and some countries have even allowed people to withdraw money from their retirement accounts. In Australia, we can access up to $20,000 if in distress during this period.
  • CW
    Claude W.
    11 April 2020 @ 21:38
    Probably the single best interview on RealVision, big statement with so many superb ones!
  • BG
    Barry G.
    9 April 2020 @ 09:25
    It was a fascinating discussion between two heavyweights - both Mike and Raoul’s mindsets on how this will play out are completely different. Mike throughout the interview was bullish on equities, especially the top NAS companies. However, towards the end he let his guard down and we could see that he was concerned that there will be stormy waters ahead for some of these firms. On Bitcoin sovereignty never happening, he scared the living daylights out of me! I was ready to run to the hills.
    • Dv
      Daniel v.
      9 April 2020 @ 10:10
      Regarding Bitcoin, this is hardly a new standpoint and one of the common arguments made by critics why BTC will never work. Opposing this, you could argue that countries like Germany, France have recently decided that bitcoin is a legal tender. Last week South Korea passed legislation today that will provide a framework for regulation and legalization of cryptocurrencies. And there are more examples here. As bitcoin is basically software code, it's very hard to prohibit it. Also, that would take the cooperation of, at least, all the G8 countries on this subject. It could happen of course and could be the reason BTC goes to zero but I think the chances of this happening become smaller as the blockchain/bitcoin industry grows and will become more powerful. No, btc will never replace the dollar, the euro, the yen but it will play it's role. Just like gold is actually not owned by 1 country but does play it's role in the global monetarian regime.
    • lm
      luke m.
      10 April 2020 @ 10:35
      interesting point about Germany and France recently making Bitcoin legal tender, with whispers that the Euro could break apart maybe Germany and France are getting ahead of the race ?
    • DR
      Daniel R.
      11 April 2020 @ 15:36
      I never understood the argument, that is hard to prohibit: You can simply ban the exchanges, and you are done. You kill any potential fiat transaction with exchanges like CEX, Coinbase, Binance, etc, and you kill the market. Also, the routing used in bitcoin and mining, is heavy centralized: around 70% of mining power is hosted in 10 networks. BTC, and crypto exist because gov allows them to exist, any serious intention on removing this from the radar, and in one week the game is over, on multiple attack angles: Mining, Network, or FIAT->Crypto flows.
  • MC
    Michael C.
    11 April 2020 @ 14:38
    @Mike When you say the shoulders are mispriced, which delta (or delta range) options are you referring to? Thank you!
  • SG
    Steve G.
    10 April 2020 @ 21:07
    At parts of this interview I feel like I'm watching the scene in the Matrix between Neo and the Architect.
  • AD
    Anthony D.
    10 April 2020 @ 20:54
    Diversity of opinion. The best feature of RV. Glued to the screen for the entire presentation. Thank you Mike and Raoul.
  • ag
    alan g.
    10 April 2020 @ 17:43
    Brilliant guest, helps me make sense off whats happening right now, against all common logic.
  • JC
    John C.
    10 April 2020 @ 14:47
    Great video as always
  • FB
    Frank B.
    10 April 2020 @ 12:19
    Had to stop the video for 10mins and curse myself for having missed that move in the GDX.
  • AH
    Ali H.
    10 April 2020 @ 11:21
    Truly one of the best interviews i've ever come across. Fascinating
  • DV
    Dimitri V.
    10 April 2020 @ 08:37
    Could listen to Mike all day, great interview
  • JN
    Jeffrey N.
    10 April 2020 @ 07:56
    Speaking with a discretionary point of view that is very much aligned (and influenced) by Raoul's work, it was great to hear Mike's perspective which was mostly counter to that (especially in a format of them speaking to each other). Mike makes the case that flows from those people with 401K's have not declined because they still have jobs and are working from home. Since this "retail" segment has not begun to sell into this bear market this becomes a supportive factor. (Therefore, taking this further, if the market does not test the lows, the retiring boomers will probably hold on too.) He suggests those who have lost jobs and are most susceptible to the virus are not largely represented in the markets. Large companies will emerge from this event stronger and with a more dominant market position. And the pension funds will get funded by the Federal government. These are good points based on his expertise and point of view which are grounded in structural elements of the markets.
  • JM
    Julien M.
    10 April 2020 @ 04:52
    Not sure if Mike is answering questions here but what really is the nature of consensus in the context of your stronger dollar comment? And I get it, the Thielian framework would say to consider betting against but are there examples in markets where consensus in a relatively shorter time frame proves to be correct for good reason consistently? or is it just that consensus itself needs scrutiny no matter the context. The stronger dollar thesis seems to be so compelling/probabilistic...borderline inevitable (which is why I'm on both sides yet to jump in).
  • PD
    Peter D.
    10 April 2020 @ 00:37
    Green is delusional if he relies on that historical study of the economic impact of pandemics: http://ssingh.ucdavis.edu/uploads/1/2/3/2/123250431/pandemics_jst_mar2020_.pdf 1. COVID-19 deaths appear to be vastly skewed % in patients in the over 70 bracket, most of whom had other illnesses. Not people active in the labor force. It is unchivalrous (but necessary if we want to examine this argument) to point out that the loss of net claimants on state wealth, has a different effect than the loss of working folk (everyone worked during times of historical pandemics). 2. None of the pandemics studied occurred when global debt levels were at 200%+ of GDP. (As they are today)é 3. Overall death rates (as opposed to those reported from COVID-19) are actually stable or falling. The reasons for this are unclear. One possible reason is that being locked up, makes every safer.. (Eg. car accidents kill far more people than COVID-19: and are likely plunging). 4. Following the "Spanish Flu" Western economies benefited from an unprecedented increase in wealth stemming from the massive wealth extorted from the Germans in 1919 at Versailles. These amounts were not formally quantified , but expectations that they would be 400% of German GDP. A couple of years later (Dawes Plan) this was reduced to about 100% of GDP. Expectations of this cash windfall, which economists today (not steeped in the Misesian tradition of looking at what you can't see )don't fully understand) created an expectations of vast future cash inflows, which surely worked to keep rates down. We won't have those receivables this time around. ***** Love Mike. He always makes us think. (Also n BTC BTW). But on this one he is out to lunch.
  • CH
    Charlie H.
    10 April 2020 @ 00:26
    Another hit to the 401k flows is with the new US CARES act anyone can withdraw $100,000 without penalty (you still need to pay taxes if it is in a traditional 401k). Enough folks will exercise this option to put a dent into this "passive flow" Mike talks about.
  • RA
    Robert A.
    9 April 2020 @ 22:40
    Just an excellent interview/conversation Gentlemen. I have enough actionable takeaways to tweak my portfolio construct and diversification as well as revisiting my ongoing BTC sizing decisions. Great job Raoul on setting this discussion up such that many of the current topics of interest to we RV’ers were addressed. I wonder if Mike “suspended” his Son’s basement apartment rent.
  • GH
    Gabrielle H. | Real Vision
    9 April 2020 @ 22:31
    Hi everyone! Mike Green has also passed along a chart to accompany this interview. It can be found on page 27 of the transcript.
  • SB
    Stephen B.
    9 April 2020 @ 15:12
    I am 100% with Mike on Bitcoin. For it to prosper in the way Raoul envisions, it needs to dislodge the most powerful monopoly the world has ever know ie the BIS + Western Central Banks. I chose not to buy Bitcoin because I saw those odds as insurmontabke. At least with gold you have history plus the Asian Central Banks on your team, which is a more balanced proposition.
    • BM
      Beth M.
      9 April 2020 @ 22:15
      Agreed. And well said.
  • PN
    Pieter N.
    9 April 2020 @ 21:27
    Can you please paste the link to the article that Mike Green referred to, re real rates staying down.
    • CD
      Christopher D.
      9 April 2020 @ 21:30
      http://ssingh.ucdavis.edu/uploads/1/2/3/2/123250431/pandemics_jst_mar2020_.pdf
    • CD
      Christopher D.
      9 April 2020 @ 21:30
      sorry ignore prev msg
  • CD
    Christopher D.
    9 April 2020 @ 21:29
    Absolutely fabulous.
  • GL
    G L.
    9 April 2020 @ 19:33
    Great interview, and very thought provoking and informative. I hope Mike's right about the assertion that "nothing's changed". On the point Mike made about the stimulus amounting to more than the expected loss in GDP from the pandemic - I don't think this is really stimulus, but more of a partial cushioning. The US economy is driven by the consumer, which in turn was predicated on record low nominal unemployment prior to covid-19. Consumption has collapsed and will remain depressed for an extended period even by people who have kept their jobs, while the unemployed are unlikely to snap back to work for a long period. The transfer of wealth from the public to the private sector and the rise in consolidation is not good for jobs - quite the opposite in my view.
    • NK
      Nick K.
      9 April 2020 @ 21:23
      Another key point which I think supports yours G L., and which is completely ignored in this discussion, is the Baby-boomer exedus from the equities space. If more and more Baby-boomers are retiring over the next few years, and large chunks of less educated millennials lost their jobs (17m so far)... how are these 401K flows going to match those volumes needed to re-inflate the bubble? Even if the top 500 improve their competitive advantage and therefore receive a larger proportion of the $s invested. Without the buybacks and Baby-boomers, won't the momentum which previously supported the Passive outperformance of Active dissipate, even if considerably cheaper?
  • NK
    Nick K.
    9 April 2020 @ 20:47
    Thank you very much guys. That discussion was very useful. It raised more questions than confirmations but, is the reason why I joined. It was a great alternative and logical view to Raoul's USD, Gold, Bitcoin, phased progression published recently. Keep up the great work! Much appreciated!
  • BM
    Beth M.
    9 April 2020 @ 19:35
    I really enjoyed this exchange...however the internet transmission was really rough...did anyone else have the video starting and stopping on them regularly?
  • PG
    Philippe G.
    9 April 2020 @ 18:31
    What can I say...another insightful conversation!!
  • AM
    Aengus M.
    9 April 2020 @ 16:43
    FYI, a friend (millennial) at a management consulting firm in London has just had their salary reduced (along with the rest of the company) by 10% for a minimum 3 months, it will affect pension contributions as well.
  • MW
    Max W. | Real Vision
    9 April 2020 @ 16:08
    Mike Green provided this link to a historical study of the economic impact of pandemics: http://ssingh.ucdavis.edu/uploads/1/2/3/2/123250431/pandemics_jst_mar2020_.pdf
  • AD
    Andrew D.
    9 April 2020 @ 13:33
    Hi Mike & Raoul, Thank you for another great conversation, really high quality insights. Some follow up questions for Mike: 1) You mentioned a move from 0% passive to 100% passive would warrant a 50x increase in equity market valuations. If passive dollars represent ~50% of the market today, what does that imply for a fair value of equities? If we assume Shiller's CAPE is the best indicator of equity valuations and that the long-term median is ~16, given your analysis, what CAPE level would represent fair value (i.e., what is the new median)? I'm trying to get a better sense of the actual numbers behind this statement and how you think about equity multiples/valuations in general. 2) One argument I've heard that downplays the role of passive flows in markets is the idea that active managers (including high frequency traders) account for the vast majority of daily trading volume and are still largely responsible for the day to day price discovery we see in markets. That statement (may be incorrect to begin with) likely changes in an environment like this where everyone's trading activity increases. Can you provide some context around this argument? Is it entirely flawed? And how has the role of active managers in price discovery increased or diminished over time? Thanks again for the great discussion!
    • SB
      Stephen B.
      9 April 2020 @ 14:50
      On your first question - my question too. I understand the idea of increasing concentration in index stocks but surely there has to be a limit to where P/E multiples go? Or was he suggesting that these companies eat up or otherwise eliminate their competitors, thereby maintaining or improving their P/E?
  • JO
    J O.
    9 April 2020 @ 11:35
    Great interview! Slight correction. The Nasdaq is NOT 6% off its highs. It's 17.6% off its highs as of Wednesday's close.
    • JS
      Jon S.
      9 April 2020 @ 14:47
      I believe Mike said year to date.
  • SB
    Stephen B.
    9 April 2020 @ 14:38
    It is simply priceless to explore Mike Green's thinking. Definitely contrarian, which makes it all the more valuable. Thank you RV.
  • SB
    Stephen B.
    9 April 2020 @ 14:38
    It is simply priceless to explore Mike Green's thinking. Definitely contrarian, which makes it all the more valuable. Thank you RV.
  • JM
    Jason M.
    9 April 2020 @ 14:28
    Great interview
  • lD
    lance D.
    9 April 2020 @ 14:14
    great stuff
  • MA
    Michael A.
    9 April 2020 @ 12:49
    I see what Mike is saying with regards to types of people who own 401ks haven't been as affected as they can "work from home", but the reality is many of the firms that these people work for are enacting internal policies that do show they're wobbling (albeit in the name of preserving cash). Hiring freezes, asking staff to take pay cuts etc, it's coming. For example, see PWC: https://www.fnlondon.com/articles/pwc-uk-delays-promotions-pay-rises-and-bonuses-20200406 As i said, i suspect this is just a way to preserve cash, but if this thing goes on 6+ months (which is very possible) those very companies that PWC, EY etc provide external services to simply won't have the cash to start up new projects etc. It's self-fulfilling.
  • NN
    Ninh N.
    9 April 2020 @ 12:20
    ...and why isn't MG on everyday?
  • AH
    Allan H.
    9 April 2020 @ 11:09
    Great interview and he echos my thoughts on concentration of power/economic might of large companies. From speaking to a top DC lobbyist, he has never been busier.
  • MS
    Marius S.
    9 April 2020 @ 11:01
    What an incredibly educational and helpful discussion. I can only lift my hat to both gentleman in respect and gratitude.
  • FK
    Firoze K.
    9 April 2020 @ 08:56
    Very much enjoyed this. Not going to pretend though - found it hard to follow all of it!
  • SR
    Steve R.
    9 April 2020 @ 08:34
    Totally agree with Mike's view on Bitcoin! Nailed it.
  • SB
    Steve B.
    9 April 2020 @ 07:25
    Really interesting point about the possible increasing concentration of power. I really appreciated this interview.
  • Dv
    Daniel v.
    9 April 2020 @ 06:59
    I think this interview with Mike shows us how complex this market is currently. I was also surprised that the key takeaway is "nothing has changed". That is a complete opposite view from the view that I have and that probably a lot of us here have. It's great to hear such a well informed person speak as it makes me think about my current positioning.