Coronavirus: Raoul’s Macro Outlook

Published on
February 6th, 2020
28 minutes

Coronavirus: Raoul’s Macro Outlook

The Expert View ·
Featuring Raoul Pal

Published on: February 6th, 2020 • Duration: 28 minutes

Real Vision CEO, Raoul Pal, comes on to share his insights on the recent coronavirus outbreak, which he believes might threaten fragile global economic growth by inducing a worldwide demand and supply shock. He argues that, pandemic or not, central banks will have no choice but to lower rates even further as countries scramble to contain the virus impacts at the expense of their economies, and he recommends that investors prepare for this contingency by betting on bonds like never before. He also looks at the knock-on effect and other plays on the potential outcomes. Raoul’s talk includes data-driven insights from his premier research publication, The Global Macro Investor, which is usually only available to the world's largest hedge funds and family offices. Filmed on January 31, 2020, in Grand Cayman.



  • SP
    Simon P.
    29 February 2020 @ 02:49
    WoW! That’s what I call a good call!
  • BP
    Brian P.
    25 February 2020 @ 06:02
    Virus = scapegoat/excuse, the reaction to it = black swan. Makes you wonder why they reacted so strongly and how they knew exactly what it was immediately. If actions speak louder than words... I'd say it leaked from their lab.
  • wj
    wiktor j.
    7 February 2020 @ 12:16
    Awesome. A few things to add: 1. The test kits we have for corona-virus are not good. Many false negatives. It came out from on Polish news that you need a lab test for 1 day to be 100% sure. Today I read Novacyt are rushing a new way to test for Corona. 2. Even if we get a Corona virus vaccine today. Who is going to mass produce it when most of our production for drugs is in china? 3. I have read a lot of main stream media. I have seen movies from china Wuhan hospitals from February (on alt media). I still see people dying. Why isn’t it being reported that 7 crematoriums are built in Wuhan area which are working 24/7? I only see pictures of the hospitals. 4. I have heard a dog being infected. This animal could spread the virus without being sick. Has ANYONE tested birds? There is literally NO information. Does the virus work on birds? Can they spread? Before I get information on all this I am shorting. Buying canned food, filling up my freezer. I don’t believe in a reflation because no one will believe it.
    • LI
      Luca I.
      24 February 2020 @ 14:25
      Hey Wiktor! As far as I know, the virus is transmitted only between humans. No in Italy we have 200+ deaths, How are the shorts going?
  • JO
    Jeffrey O.
    9 February 2020 @ 09:32
    Great analysis Raoul! Thank you for your insights and investment advice. I love the long bond trade idea. But throughout the video, I couldn't help but remember the story of Marc Cohodes. At the beginning of 2019, Grant Williams interviewed Marc and recorded the story of his brokerage's demise during the financial crisis of 2008 in the clip, "The Price of Being Right". His story is a poignant reminder that you can get everything right as a short seller, but the government (or large bank) can change the rules during a crisis and put you out of business. Food for thought for any prospective market timing, vanity trading, put option buying, traders out there. ;)
    • LI
      Luca I.
      24 February 2020 @ 14:23
      Hey there! Can you share this clip, "The Price of Being Right"? I haven't found it
  • NB
    Nikola B.
    17 February 2020 @ 11:46
    With all due respect Raoul, I don’t fully agree with your arguments on Brazil. Brazil indeed exports a lot of commodities to China and especially Iron Ore. The recent weakness in BRL is mainly related to the drop in key Brazilian export commodities emanating from coronavirus situation. But it’s also due to BRL becoming an EM carry trade funding currency as the Brazilian central banks has cut rates from 14% to 4.25% in the matter of 2 years. But the main reason i disagree on your argumentation is that Brazil has a very closed economy, it’s very close to being a full on autarky. It’s external vulnerability is very low, current account deficit is low and more than easily covered by FDIs. On top of that the Brazilian central bank has the 3rd largest USD reserves war chest in the world. I’m not saying that your EMFX crisis thesis is completely wrong. I’m just saying that Brazil is probably one of the least vulnerable EM countries out there and it would probably be one of the last - not the first - dominoes to fall
  • SC
    Sean C.
    15 February 2020 @ 21:29
    Who’s giving thumbs down? Because his view didn’t agree with your’s? You don’t like it when stocks go down? Come on. It’s a well researched framework. Thank you again Raoul!
  • MS
    Matt S.
    11 February 2020 @ 02:23
    "Volatility is infectious" Is that some kind of a sick joke?
  • TC
    The C.
    10 February 2020 @ 06:31
    Missed your interviews Raoul! I'm an engineer in the mining industry in Australia; just got to work this morning and found out Rio Tinto is freezing projects and that we have been unable to source some of our parts because the factory (in Beijing) was shut down and ppl were working from home. Not to be a fear mongerer but this could get quite serious, especially hitting Australia. One of the universities in Melbourne delayed their semester start too. We dont have much other than housing, mining and selling university degrees here... Who would have thought we'd start 2020 with Coronavirus huh.
  • AC
    Antoine C.
    9 February 2020 @ 18:48
  • JD
    J D.
    9 February 2020 @ 11:46
    Great, thanks for sharing your framework Raoul.
  • RG
    Razmig G.
    9 February 2020 @ 08:28
    I Learn something new everyday. Great skill for explaining things & connecting ideas. Gracias!
  • JK
    Jim K.
    9 February 2020 @ 03:47
    Great stuff Raoul. Quick question: given your view on the downside is oil prices that you envision I was wondering if you had a view on NOK given it has sold quite a bit with the move being a bit worse than in late 2015/ early 2016 when oil was down to around $27-30 per barrel. Thanks!
  • DS
    Dan S.
    7 February 2020 @ 03:36
    Nice piece! What expiry dates are people using for their Eurodollar GE calls?
    • JO
      Johnny O.
      8 February 2020 @ 18:34
      May and June are far enough out and have good open interest
  • IA
    Irshad A.
    8 February 2020 @ 04:13
    at 09:25 Raoul talks about a "Macro Purity Curve". What is that exactly?
    • JO
      Johnny O.
      8 February 2020 @ 18:28
      I understood he was saying that the most pure and direct and undiluted effect of macro changes is seen in bonds, commodities and currencies, whereas the impact on equities and credit is more convoluted and sometimes delayed.
  • MN
    MIMI N.
    6 February 2020 @ 21:20
    I love the way you think through issues. Thank you.
    • ly
      lena y.
      8 February 2020 @ 15:27
      Non political presentation! 👍
  • BF
    Bret F.
    8 February 2020 @ 12:37
    USDCAD huge Cup and Handle. Could Chinese asset need to liquidate ?
  • JH
    Jesse H.
    7 February 2020 @ 21:07
    Very interesting analysis. Thank you, Raoul. One question for you on the knock-on effects over the coming few months: could a recession, triggered by the nCoV19 catalyst, kick off a corporate debt issue / widespread downgrade? Would be interested in your thoughts on the “Doom Loop” you had previously posited in earlier videos. Even if Moody’s and S&P allow artificial ratings to sustain, I see a recession and big drop in capital flows as starting to expose some of these Zombies and forcing their hand. Many thanks once again, Jesse.
  • ER
    Ernesto R.
    7 February 2020 @ 19:20
    Excellent this is why I subscribe and I enjoy real vision. I’d learn to much hearing more from Raoul or even see him jump back into interviewing. thanks for the tips
  • RW
    Richard W.
    7 February 2020 @ 17:16
    Does the huge plague of locusts reported from Africa need to be factored in to agricultural commodity prices?
  • PU
    Peter U.
    6 February 2020 @ 13:03
    I believe the virus scare has already been processes, expressed and quantified.
    • PU
      Peter U.
      6 February 2020 @ 13:03
    • FG
      Flavio G.
      6 February 2020 @ 21:20
      Think twice
    • RW
      Richard W.
      7 February 2020 @ 17:06
      I think not!
  • JH
    Johan H.
    7 February 2020 @ 16:44
    I think that in order to know how the Coronavirus will affect global prices in 6-18 months, you have to know in what ways it is dissimilar from previous outbreaks; Incubation times, mortality rate etc. It would consider the robustness affected countries healthcare systems as well. Singular cases in Norway or Canada will not matter in the long run, on the other hand if an outbreak takes place in one of the weaker countries South America, the Coronavirus might have a renaissance. Early estimates of vaccines will arrive are 2-4 years at best, and if it arrives by then it will be rushed with healthier versions following.
  • SM
    Seth M.
    7 February 2020 @ 13:13
    How do I find a money manager that subscribes and implements these strategies from Raoul? Would very much appreciate any suggestions.
  • km
    kenneth m.
    7 February 2020 @ 12:08
    Thanks Raoul - exactly why I subscribe. No guarantees but a useful way to think about what is going on and what impact it may have. Very useful to have these kinds of inputs as we all navigate our way through the current challenges.
  • RP
    Richard P.
    7 February 2020 @ 09:33
    Brilliant! this is why I subscribe and I love real vision. I’d love to hear more from Raoul or even see him jump back into interviewing.
  • FG
    Flavio G.
    6 February 2020 @ 10:18
    Great analysis Raoul. Not a lot of info coming out of the 2019nCoV-India pair. One thing is the Chinese reaction but another completely different story would be how India deals with it. Remember India has pretty much the same population, it is dense and it is stone-age in terms of infrastructure and most importantly, in terms of its capacity to coordinate a response in an effective manner. We will all be in deep s**** If 2019nCoV spreads there. But India itself will go down 1st. Any ideas on how to play this one?
    • RP
      Raoul P. | Founder
      6 February 2020 @ 10:45
      Wait and see if it spreads there. It would be horrific it is took hold.
    • FG
      Flavio G.
      6 February 2020 @ 21:02
      Bought some INDA puts on this news: "Hundreds of Coronavirus Suspected Cases Crop up Across India" and some TLT. Thanks Raoul, great job !
    • CH
      Charles H.
      7 February 2020 @ 06:09
      A major 2019-nCoV outbreak in India would be truly dreadful.
  • KC
    Kirk C.
    6 February 2020 @ 13:49
    Any comments on the tencent app showing (for a short time) 154000 confirmed cases?
    • SS
      S S.
      6 February 2020 @ 13:57
      I saw that too. That showed over 20,000 deaths so far. But I believe even those numbers are under because a lot of people are dying and being sent straight to the crematorium without being confirmed Coronavirus holders.
    • CH
      Charles H.
      7 February 2020 @ 06:07
      The main limit on case identification is likely the hard limits on diagnostic test capacity. Irrespective of the tencent figures, numerical epidemiology (Prof Neil Ferguson) suggests that the detected cases probably represents 10% of actual cases. In other words, the official statistics are rubbish.
  • NR
    Nicolas R.
    6 February 2020 @ 20:41
    Something profound happening right now in China, something I never saw in my 13 years there. WeChat and Weibo lighting up with raw emotion, grief and anger with the system in the wake of Dr Li Wenliang's passing, one of the original group of doctors who tried to sound the alarm but was reprimanded. Chinese citizens reaching a breaking point? Watch this space. Adds a whole new dimension to the virus story and what we're seeing unfold.
    • DS
      David S.
      7 February 2020 @ 04:53
      There are also reports that he did not pass. It is difficult to tell what is actually happening. DLS
    • CH
      Charles H.
      7 February 2020 @ 06:04
      There are anecdotes of authorities welding sick people into their apartments, and regional authorities commandeering mask shipments en route to other provinces. There is widespread anger. Perhaps the central government is powerful enough to keep a lid on the situation, but it is also possible that the country experiences a temporary disintegration into competing regional fiefdoms. If we start to hear stories of a generalised breakdown in law & order, or perhaps spats between regional PLA units, then it will be clear that a phase change will have occurred.
  • CH
    Charles H.
    7 February 2020 @ 05:58
    Great analysis, thanks. Story for Brazil = story for Australia, except Australia also has a real estate bubble that is dependent on 1/3 USD-denominated foreign credit. A persistently depressed Chinese real economy means serious trouble for Australia.
  • DS
    D S.
    7 February 2020 @ 02:41
    Democrats will have a huge advantage over Trump if the market collapses before the election. The liberal media can try to cause coronavirus panic among investors. At the same time, Senate Banking Committee Democrats will put pressure on Powell to weaken the repo injections. The market might collapse this summer. IMO
    • RM
      Robert M.
      7 February 2020 @ 05:23
      Have a Republican senator putting pressure on Powell right now.
  • FI
    Frank I.
    6 February 2020 @ 07:00
    Great discussion. How can retail investors get exposure to the bonds and eurodollars described by Raoul in this vid?
    • IB
      Ivan B.
      6 February 2020 @ 08:41
      Bonds can be done via TLT etf, but retail can buy futures via Schwab trading account or any other as well
    • Cd
      Christiano d.
      6 February 2020 @ 20:21
      I assume the (WKN A12HL9) - USD Treasury Bond 20+yr UCITS ETF would work as well. Am I wrong?
    • FI
      Frank I.
      6 February 2020 @ 23:56
  • PF
    Patrick F.
    6 February 2020 @ 21:58
    Adding to your Brazil comments, the Brazilian central bank cut rates again yesterday to 4.25%, an all time low. USD/BRL is retesting resistance levels at the 4.0-4.3 range, which have held since 2002. Irrespective of what happens with China and the virus, things look ugly for the Real. Add in the fact that China is Brazils largest trading partner, for example representing 72% of Petrobras exports, and you may have a perfect storm brewing. That being said, things feel very normal in Sao Paulo, if not leaning optimistic. Equity markets are hovering around all time highs, locals tend view the central banks actions favourably, and pension reform was passed several months ago. So certainly the storm clouds on the horizon haven't been noticed by local investors, yet. Personally I will be watching Petrobras as a harbinger for a change in domestic investor psychology. There is a commonly held belief among Brazilian investors that "as goes Petrobras, so goes the Brazilian economy". Petrobras shares had a relatively uneventful 2019, so I think a signifiant move to the downside or a signifiant increase in negative news coverage, may be the catalyst that causes local investors to realize that shit has hit the fan.
    • RP
      Raoul P. | Founder
      6 February 2020 @ 22:40
  • AT
    Andrea T.
    6 February 2020 @ 20:54
    Also, the euro is gonna fall hard against the dollar. With Chinese demand lowering, who will buy European (especially German) products?
  • PT
    Pradeep T.
    6 February 2020 @ 20:09
    Raoul, Happy Birthday! Thanks for the excellent analysis. Can you please alert us incase you have flash updates updates as soon as you have one; I shall check for macro insiders flash updates regularly and follow you through twitter alerts.
  • AM
    Artem M.
    6 February 2020 @ 14:09
    Your last comment on Bitcoin as a solution to the current 'system', got me thinking, they (the Fed) might use it to create a 'debt jubilee'. Here is a possible scenario I came up with, at some point the US will move to a new USD Coin (or whatever), they will allow for people and companies to covert thier USD to USDC, assuming the funds can be shown to me 'legitimate' (received legally). All dollar denominated debt will remain in USD as well as a bunch of 'non-legitimate' money, which will go into hyper inflation, and debt will be settled at pennies (USDC) to the dollar (USD). Assuming correct fiscal policies are used to disperse additional USDC into the economy, I could see this resulting in a non- apocalyptic (especially for America), global USD unwind. Am I missing something?
    • AK
      Ado K.
      6 February 2020 @ 15:43
      This is possible, but I think hyperinflation is a way to soft expression in this scenario. As soon as they start doing that, the smart money is going to understand what is going on and USD will literally go to zero within days if not hours.
    • PT
      Pradeep T.
      6 February 2020 @ 19:35
      Possible, but Raoul was focusing on the immediate upcoming 6 weeks; and bitcoin might not be the place where action happens.
  • MC
    Mathew C.
    6 February 2020 @ 07:42
    Thailand decimated?? 🙄
    • GF
      Gordon F.
      6 February 2020 @ 18:31
      Not directly by the virus, yet at least, but a huge part of their economy is tourism, and that is WAY down. My wife and I went to Thailand in May of 2003, at the end of the SARS scare, and had a lot of the popular tourist places almost to ourselves, That really hit their economy hard as well, and this looks like a repeat, even if it doesn't get any worse.
  • JS
    Joseph S.
    6 February 2020 @ 15:59
    Thanks Raoul. Any concerns that the Fed will lose control of the Repo Market; or, will they just paper it over?
    • RP
      Raoul P. | Founder
      6 February 2020 @ 18:05
      There is a special coming up in a few days on this...
  • PG
    P G.
    6 February 2020 @ 17:00
    Happy Birthday Raoul!
    • RP
      Raoul P. | Founder
      6 February 2020 @ 18:05
  • CS
    Christos S.
    6 February 2020 @ 16:47
    All makes sense and I do like the Eurodollar trade, but the volatility contagion is very different now. Everything seems to be pinned off the S&P vol. You can see the weakness in commods and rates but vol is doing the opposite. Its the S&P vol crush that's spreading. S&P seems impervious to everything and as its vol collapses so has that of crude and especially currencies. You cannot stay long vol for long without getting buried by θ so as long as the gamma trading mania continues I don't see a way out of the low vol regime - it didn't get knocked out of it from the drone attack the Suleimanin strike or the virus. When vol did appear, it only lasted a couple of days. This thinkg will need something big to break - default somewhere perhaps....
  • TC
    Thomas C.
    6 February 2020 @ 16:13
    First class and thought provoking presentation as always Raul!
  • JL
    James L.
    6 February 2020 @ 12:50
    So Eurodollars and Fed Funds going negative, or just hitting 0?
    • RP
      Raoul P. | Founder
      6 February 2020 @ 13:41
      Who knows at this stage... one step at a time
  • EP
    Eli P.
    6 February 2020 @ 13:35
    thank you raoul -
  • SS
    S S.
    6 February 2020 @ 12:10
    @Raoul. Disneyland is in Shanghai not Beijing.
    • SS
      S S.
      6 February 2020 @ 12:23
      Great interview by the way. I disagree on the Brazil FX idea. China will continue to buy from Brazil and I don't think anyone believes China is going to buy 200Billion from the US. They just bought themselves time. They are already asking for flexibility in the Phase 1 trade deal because of the Coronavirus.
  • MB
    Michael B.
    6 February 2020 @ 11:55
    Remember no one can trust a word coming out of official Chinese sources Rumours around about numbers, China not allowing US specialists in, Immediate cremation after death & bio weapons For more balanced Virus news look at
  • TR
    Tara R.
    6 February 2020 @ 09:08
    Question for Raoul... as a retail investor using ETFs to trade this framework, how do TLT and GLD/GDX compare on a 12-24 month horizon? Is one or other better, all three equal or does each perform better at different stages? Thanks as always, your pieces always resonate..
    • RP
      Raoul P. | Founder
      6 February 2020 @ 10:16
      I like all three but bonds the most ...for now.
  • PV
    P V.
    6 February 2020 @ 09:35
    Amazing clarity & logic. Totally agree on the analysis and it is clear bonds will continue to benefit. Only issue is the extent of the knock-on-effect (and the decline) in the various segments of the system before the central banks "reaction function". I suspect they will try and front run as much as possible hence minimizing the tradability of the knock-on effect. Totally agree on BTC long term. Overall another great update from RP.
  • MH
    Matthew H.
    6 February 2020 @ 06:48
    I've been following USD/KRW. It looks like its going to spike hard, interesting to see Raoul's take on this.
  • BS
    Brian S.
    6 February 2020 @ 06:29
    Love it great talk, USD/TRY looks like it wants to break higher.
  • DS
    David S.
    6 February 2020 @ 06:11
    Excellent. Thanks for the heads up. If reports are correct, the new Coronavirus is contagious before symptoms are apparent. This means that taking someone's temperature does not identify persons who are contagious. Containing the virus will be extraordinary difficult. The best thing anyone can do is build up your immune system and follow the doctors orders if you get any virus. Good luck. DLS