RAOUL PAL: It's been one of the most interesting two weeks of programming we've ever done at Real Vision. I think it was really useful to come with a theme and test a hypothesis. And for me, personally, I find it incredibly useful, because what I write and look at this stuff, I operate in a vacuum, where I try to filter down the noises, and I try not to listen to too many people. But there comes to a point where you need to make a call. And with that, you do need to open up the filters a bit more and hear some more opinions.
And the way to do that is get the people that you trust. And again, as you can see from the two weeks program, it's not necessarily people with the same view as me. So I'm not trying to get confirmation bias in any of this. What I'm trying to do is have a nuanced understanding so I can understand where I'm right, where I'm wrong, and how to play it.
So I think over this week, I've learned that much like-- I set up a Twitter survey at the beginning of this, which was to see what people total probability was of a recession in the next six months starting. And it was split 50/50 basically. So of the, I think it was 5,000 or 6,000 people on Twitter who answered that short survey, everybody was split. And I think we've seen that from the programming over these two weeks, that people aren't quite sure where it's going to fall. People who look at the data itself tend to have seen some sort of stabilization in some areas.
That has made people pause. I remember Teddy Vallee was saying that some of his forward looking indicators might have turned up. But if we remember from ECRI and Lakshman, he wasn't so sure that he was seeing any pickup. He just didn't see the more determined deceleration of growth.
So it's not clear from those guys, whether we're going to see anything weaker yet. But when I speak to people like John Burbank, and I hear from people like Christophe Ollari and others, they're more concerned. And I think those are the people who've been paid to have the view. And I think that's interesting that they are starting to say, look, the balance of probabilities is for something much bigger.
For me, it's clear that you're going to make all the money from making this call, and you see a few of these. And sometimes you'll get them wrong, and sometimes you'll get them right. 2015 was one of the times I nailed it all the way down, and then I thought this is going to turn into a full recession, not just a collapse of the oil market and global industrial production. And that didn't happen because of the stimulus.
But we've heard over this series of shows that that stimulus isn't there. There is a real concern the Fed might be pushing on a string, as well, much like the ECB have been, that there's really nothing they can do that's going to generate the growth that we need to offset this. And I think the aging population dynamics and other issues are really real and meaningful.
But does that mean that the equity market is a bad place to invest? It's not clear yet what is going to upset that apple cart. But I do think that the wheels have been set in motion. My view is always that there is the general business slowdown, but then there's the one thing that tips things over the edge. And I think that one thing was tariffs. I do think that they were much more significant in their impact on psychology of businesses than anybody appreciates.
I also think that the dollar is a big risk in this equation. And I talked about it in the original expert view, and other people have referred to it. The dollar's been thrashing around in a very tight range. To me, as we're shooting this, I have a feeling it's going to break higher. I really do. It had every opportunity to break lower. We had the Fed cutting rates, the ECB cutting rates, everybody cutting rates. And every said, the dollar will collapse in that environment.
We've seen that. We've seen some sort of pause in the trade tariff negotiation issues. That didn't cause the dollar to go lower. In fact, I can't see anything that's going to cause the dollar to go lower than here. We're going into the Fed meeting, and I'll talk about that in a sec. But the reality is is if the dollar is not going lower, chances are it's going to go higher. It could get stuck in a range. But I don't think that-- the structure of the market to me feels like it's going to break higher. If it does, we know what to do.
That will tip the dynamics significantly towards a much faster slowdown of global growth, a much faster deceleration of commodity price, a much faster deceleration of emerging markets. And I think that is the thing that would tip everything over the edge. And I think it is coming.
But as we come into this process now, we need to think, okay, how do we play this? And the FOMC meeting that is coming at around the same time that you'll be watching this is going to be a tricky one, because some of the data has not been as weak. People have been following employment data for example. So the market's trying to grapple with is it going to be 25, is it going to be 50, is it going to be nothing. There's many people who think it should be nothing, the Fed should not be cutting rates.
I think the Fed behind the curve, and they need to cut 50 and 50 again, because of the number of factors that I talked about in the original program. But what's important now is what are the outcomes from that meeting? And how I look at it is this. If the Fed cut zero, nothing happens. I think that the dollar screams higher. The dollar screams higher, oil collapses, commodities collapse, global growth collapses, and the Fed are cutting 50 and 50 again super fast.
So I think if they don't cut, the bond market sells off very quickly and then rallies very fast along with the dollar. If the Fed go 25, I think it's a similar situation. I think the market may or may not be pricing in 25 or 50 at that point, let's say, 25. And the chances are that this moment you get the 25 cut, the market's going to go, what's next. We have to price and probability of another cut because the Fed never cut once.
So in that case, the euro dollar market, the Fed funds market, and the bond market probably start rallying. It's the short end of the market that I really care about. John Burbank laid out that case of why that trade is such a phenomenal trade, as I think rates go to zero. So I think that's setting up as a great trade. The other thing that I think is super interesting to me is when I look at the 2000 recession and the 2008 recession, the dollar played a very big part in that. And the dollar rallied both times.
And the reality is the dollar rallies as soon as the Fed cuts. And particularly in 2001, in January 3, 2001, the dollar had been selling off in the anticipation of the rate cut. As soon as it cut, the dollar just exploded higher. And that combination of the strong dollar into the cycle meant that the Fed were forced to cut faster. So I think that is coming in this whole situation.
If it's a 50 basis point cut, I think maybe the dollar stays range bound for a little longer. But remember, the dollar is based around a smile. And that dollar smile is if things are really bad, then the dollar goes up. If things are really good, then the dollar goes up. And it's in the middle where the dollar does badly. And in this environment, I do think that if the Fed going 50, and they're communicating why, then it's telling us that global growth is bad and the dollar should rally.
So those are my kind of outcomes. I do think that you're going to get the opportunity, maybe before the meeting to start buying bonds again, particularly the short end, and I think there might be a chance to sell oil and copper. We looked at the chart of copper in particular in the first program. And I think that's an interesting opportunity to look at.
The equity market, I would call it the vanity trade. We all want to short equities, because you know you sound like a hero, because you sound like Paul Tudor Jones in 1987. The reality is equities in a bear market are not the best risk return. And the reason for that is that volatility goes up. And volatility in equities-- very high volatility means that the reward you get out of that trade is less high quality.
The volatility doesn't go up as much in euro dollars for example. So the risk adjusted reward of the euro dollar trade is far superior in every measure than the equity trade. Occasionally, you nail it dead right in equities, and things just freefall, and it works in your favor. That's not the easy trade. I remember it so well. I think I've recounted that story before of a good friend of mine in 2000, 2001, who got it dead right. He was like, I'm bearish. I need to short the equity market. He shorted the equity market. And because he oversized his trades, what he found was every time he should have been adding to a trade, he was getting stopped out. Every time he should have been taking profits, he was adding to trades, and he just got chopped up. And he lost 30% over that period from being right. And that's the volatility of the equity market and how hard it really is to trade an equity bear market.
Stan Druckenmiller told us very clearly as well. He says all of his money is to be made from the bond market, and in particular, he is another euro dollar trader. So I think that is the key thing to focus on right now. The other thing is, okay, maybe I'm wrong. And I think everybody told us, we should see a resolution of this over maybe August, September, and October. If we start to see the negative resolution over that period of time, we know what to do. If it's a positive resolution, and this is another false alarm, then it's pretty simple. The dollar should start to weaken and with that, emerging markets become the asset of choice.
Commodity markets, we've heard from a few people, are relatively discounted, so in which case, you're taking the lid off that market. And we can see commodities rally strongly. So that's how I look at this, so that there would be a reflation trade to be had. I don't think it's a great reflation trade. I don't think it's a high quality trade. But I understand how we could trade it if we needed to.
But for me, the balance of probabilities lies on getting that recession call right. This cycle has been as similar to the '90s cycle, the other longest cycle in history. It has been incredibly similar. That had those two false lows, like this one had, and then eventually, it broke. It feels like we're there now. It feels that people don't want to trust what they're seeing, because the equity market's at its highs. The equity market was at its highs in 2000, too. It was pretty much at its highs in 2007.
So don't trust the equity market. Trust the bond market. The bond market's the thing that tells you the story. And it's been screaming to you that the global economy is slowing down fast. And the US is part of it. And I think that is the story that I think many people don't understand. Most people watching Real Vision have not been historically bond market guys. It's been an equity world out there. And to shift your mindset and to understand the opportunities across asset classes gives you the real edge that it takes to make money in a really complicated situation, like a recession.
So hopefully, you found this series of programming as useful as I have. You might reach different conclusions. And that's fine. Again, I've always said, there are no certainties in this world. All I'm trying to do is corral all the information you could possibly need to make an informed opinion, because being ahead of the crowd, taking the opposite opinion to what you think the market's thinking is where you make the real money.
You can jump on the trend later. But first, this is the turning point that matters. And I think the turning point or the returning point with the bond market yields falling is upon us again. And I think the opportunity to make a lot of money is coming up rapidly. Thank you for coming with me on this journey.
It's been a real journey of discovery and learning, which is what I set out to do in the beginning. And I wanted to bring you all with me to come and find out about my hypothesis. Was it right? Was it wrong? Where are the weaknesses? Where are the strengths? And I think that's been the great thing about this whole two-week journey of discovery that we've all found things that we didn't know. To learn new things is really what we're in watching Real Vision for. It's something that adds value to our investing lives. And I hope you found it super useful.