Comments
Transcript
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CTthe lack of awareness it takes to speak with such smugness and arrogance is pretty amazing to see, They speak in such absolutes you'd think they hit the ball of out of the park in terms of calls and p/l.
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DHBunch of bears echo-chambering their way for the last 3 years. There are hundreds of respected Bulls out there, but Raoul either does not want to engage with them (and likes living in this little world), or RV does not have the credibility or courage to invite/debate/discuss/brainstorm with bulls outside their comfort zone.
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NBThanks guys, good listen (had to rewind a few times to catch up my small mind), but I missed any comment on Australia in response to Raoul's question!?!?
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MSThat was really good.
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SBI'm long beef too, not because of financial mechanics. I'm long beef because demand is at all time highs. The health industry, the need for men/women to be muscular on a MASSIVE scale (just look at instagram), keto diet, hunting, Joe Rogan-like people boasting about it etc. Bottom line is, right now, people want beef!
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DCKeith is not an Uber bear either. Hedgeye were bullish on US stocks. For 9 consecutive Quarters into Oct 2018. They are now predicting stagflation into 2Q20 then Quad 4 (risk off). It’s not about predicting recessions. It’s about being in the right asset classes for the background macro environment which is based on the ROC in inflation and growth plus earnings data thrown into the model. Asset allocations are based on the Quad model. Hedgeye are not bullish or bearish. They are objectively data driven.
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DCCrap. Typed a good response and the crappy site rejected it and dumped the text. Cheers Raoul.
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CHGreat conversation, but when the question was asked about Canada and Australia the narrative never moved to Australia.
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asTalking heads
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MHGreat show Raoul and Keith . Please continue this every 3 months if possible. Raoul asks WTF is going on. I leave you with some lyrics from one of my favorite musical groups:The grabbing hands Grab all they can All for themselves after all The grabbing hands Grab all they can All for themselves after all It's a competitive world Everything counts in large amounts
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FGKeith's Quad-based investment thing: As a strategy, is it back-testable? Would like to see some evidence on that. Because if it's not back-testable, it's just marketing.
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NDGreat show Raoul and Keith. I agree with your sense of the direction things are going, however, Dabangg I, has a good point. I beg you, Raoul, to have a one-on-one debate / discussion with the Wharton Professor Jeremy Siegel who makes compelling arguments that are more along the lines of no recession in sight and US equities being fairly priced on average. Perhaps there are others that Dabangg i can recommend as I am happy to hear more and varying perspectives. Keep up the great work.
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GGGreat discussion. Thanks RV!!
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RAThanks Raoul for getting us the 90 day free trial for Hedgeye’s work. Becoming more familiar with their process really helped to get the most out of this video. Excellent interview you guys.
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DFThanks Guys :-)
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PPBoth these guys dramatically underperformed the market since 2009 I’m pretty sure.
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LJI never really understood the teslaq vigilantes. if you're really that sure about tesla going to 0 just buy put options with the furthest expiration date you can find. Risk what you're willing to lose. If you're right than you just made shit ton of money. If the expiration date hits and you're out of the money you know you were wrong but atleast you didn't lose all your capital you just lost whatever capital you put in the puts nothing more nothing less.
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MTcertainly one of the better dialogues seen in recent times, I've read the transcript twice, however just to be a little bit 'picky' .... Keith of course is a consummate salesman, and took the opportunity to plug his risk range product e.g. " people tell him they couldn't survive with out...." etc OK the idea is sound but you don't need to pay money to derive a daily range. ..... This can be done very simply buy turning to the options market for assistance. We can use Implied Volatility (IV) of any stock to calculate the expected range for any time frame e.g. in the following formula set N = 1 for a daily range, or N = 30 for thirty day range.... etc Price (of the stock, or futures) * (IV/100) * Square Root ( N days / 365).
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JSAs an RIA with 34 years in the business I can't imagine shepherding other people's money without Hedgeye. Confident in the process, making far fewer mistakes, and sleeping better at night. Best part...my clients think I'm a genius and (although there are occasional pangs of guilt) I've learned to live with it.
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PGAAA conversation! Keith and Raoul always deliver!
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ARJeez Raoul - my 8 year old dollar was sitting next to me..... 'Daddy, he said a bad word!!'..... lol.
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JMLove Hedgeye but Keith's call on Canada in Quad 2/strengthening CAD $ is mystifying? Liberal, now, minority government with only 33% support of the electorate) pursuing green policies which constrain resource (oil notably) development and divide the country West, or pursuing very foolish social spending. Quebec separatism hoping to exploit this divide for their own advantage. Housing, still a bubble awaiting a pin. Household debt very high. Canadian manufacturing not doing well.....Foreign policy has been poor, a function of weak leadership. The only positive that I can think of is that with so many negatives, the house of cards hasn't collapsed yet, Yikes!
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DHGet a bull please for a change. Feel like I m stuck in raouls (everything is going to shit) echo chamber....for 3 years!!
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JOGreat discussion, gents!
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EKFor what it is worth, my only appreciable talent - besides doing balloon animals at kids parties - is identifying people who know what they are talking about. After watching Hedgeye for several years now I can give my unqualified thumbs up. Highly recommended.
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MSover arching theme with me, is that debt is deflationary. As I watch this, global ism has turned back down. Love to hear points of view.
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asSuggest you look at this before claiming ,"never been the spread that we currently see between CCC credit and the B's( BBB)" Totally misleading and incorrect. https://pbs.twimg.com/media/EJ2GJzPWkAAvnKc?format=png&name=small
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JBKeith is always snarky about cnbc, and cramer, I really worry about people who show arrogance and try to lift their image by making fun of others. The reality is most of these fund managers have underperformed over the past 10 years compared to the market
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dbSo you're long oil but don't talk about oil? Really?
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AKAll the Real vision interviews are truly great, but Raouls are just the creme de la creme of interviews. This was truly amazing, will re-watch it many times!
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RGHello fellow people on RV, I'm a student who uses these videos for self-study. I'm looking for an explanation of what signal Keith is referring to when he says "the vol of the vol of the vol" at around 30:50. Why/how is the third rate of change of vol useful? How is it even measured? Thank you to who ever takes moment to help out!
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CLthe more I follow Raoul, the more I realize his POV is merely a cacophony of others routinely found on RV.
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NSIf you're nervous about the market, it's probably because you know deep down you're taking on more risk than you are comfortable with. Maybe you have a margin to roll-back or have a heavy asset allocation. Whatever it is, something attracted you to these bears to support a thesis for protecting yourself. Despite this, I'd caution about being a full on bear via short-selling. If you're going into short-selling, at least wait until the day this rocket going up starts to go sideways and down first. It worked for me with Bitcoin and it should work here too but the biggest difference between this and Bitcoin is that the Fed and many market makers involved here to prop things up a little longer. I think more likely we're likely going to have a Christmas rally that will drive the markets up into the new year with less of a chance of a collapse before then. Just don't be short volatility (ie. selling options) for now because it can and will go either way.
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JAKeith is excellent. I follow the hedgeye team very closely and these guys have been great.
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BMCanada coming into Quad 2, but what about Australia?!
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NvExcellent. A great run through the world
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AEGood interview. Any thoughts on what this chart says about the true shape of the economy (total - not just public corps.) and total corporate profits ($, not per share after buybacks)? https://fred.stlouisfed.org/series/A053RC1Q027SBEA
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RTThis style or Macro cross asset tourism trading went out of fashion a long time away.
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TTAligned with my view with commodity. Planning to catch WTI and DBA
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JDOne minor point of confusion. I thought Hedgeye was a research platform. Yet Keith speaks as though he's running a fund. Do they actually run any money? Just curious.
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RTOMG the POTUS lies to us about the state of the US economy... I’m shocked.
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DNNice.
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JLKeith Gutsy! Great interview and exchange from you both, Thanks!
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SMWhen these 2 get together you just know it's gonna be special. You can tell they're both as happy as pigs in sh*t when they get the opportunity to discuss what they love. And you can see the respect there for each other. Absolutely fantastic interview. Can anyone help me with sort of time frame Keith uses for his risk ranges?. Or with the SD mentioned in the bollinger bands. What time frame is useful here?. Thanks.
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laMr Doom Loop
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GK"and you got the PHD"; im in pain now cause i laughed too hard for too long.
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DSI certainly agree with you on the defined pension plan liability cliff. When one of your big company's bonds are downgraded to triple C bonds - as you mentioned, the rules may just be changed so pensions can buy triple C bonds. This is the wrong thing to do, but it will kill the shorts who expect the old reality to continue and reward the inside traders who make the changes to the rules. This movie will not end well, but when will it end??? DLS
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HOThis interview seems a bit disingenuous because RP's doom looper outlook has been a money loser (except for E$ option). Everyone else is always wrong...need less commiserating and more intellectual honesty.
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GFAn entire Real Vision video without gold or bitcoin. Wow!
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dmProbably the best intro I've seen yet. Thank you.
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TWGreat interview. One of the best I have listened to.
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CJGet these guys together more often. They have great chemistry.
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RMRaoul/Keith, great interview, really enjoyed it. Hope you do this on a regular cycle (every 3 months or 6 months, whatever works for you). Milton, not really enjoying the new screen layout (reduced size of the video window to make room for the right side slide bar of other videos). You're wasting valuable screen space for a non-essential feature. You can get a list of the other videos by just selecting "videos" from the top bar. I know you can increase the video window to full size but that is, or was, really unnecessary in the previous layout. Just my 2 cents. Thanks.
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DPGreat interview - wish Raoul had dug a little deeper into Keith's view on the dollar having reached a longterm peak though - I personally particularly want to hear the counterarguments to the whole line of thinking on a dollar shortage, search for yield, dollar milkshake etc
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SSWhen Raoul and Keith get together, magic happens. The best interviews are when they are both talking with each other. Long Real Vision, Long Hedgeye, Short CNBC
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JTBrilliant. Just brilliant. Always learn so much from these 2 guys converse.
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AHgoing to ride quad3 (inflation rising, gdp slowing) until it changes, Quad3 is a stockpickers dream... month by month...,
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JEAwesome video... thank you. Just as pessimism can lead astray, so can optimism. And US stock markets have become psychotically optimistic.
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JKQuad 4... sounds ominous.
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CDFantastic interview, HE is great
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fcIf you are a Hedgeye subscriber, that should not be anything new to you, but he outline with details his views in the last Quads change. And is always a pleasure to listen to it
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MNOutstanding interview. Raoul did an outstanding job conducting this interview and making it into a high level conversation. His remarkable ability to recall narratives (sciver on real vision talking Tesla) and focusing on whats Keith position and trading against his viewpoint. This is the hardest thing to do but Keith uses his quad model to set a running clock on when inflation will slow and revert to quad4. This overall seems to relate to sokoloff interview that the last runs of the cycle can be the most asset inflated runs but the most difficult to trade when you see a giant storm on the horizon. Well done! Also a hedgeye subscriber and these 2 are always a must see!
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TJAbsolutely top notch discussion between two macro giants that I could have listened to for hours more! In all the years I have been lucky enough to be a RV subscriber, I have watched some invaluable videos and learnt so much, but this just might be the very best one of all. So many market insights and sound advice imparted! Thanks Keith and Raoul!
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JBFantastic interview as always! 2020 could be interesting?
RAOUL PAL: Keith, what the fuck's going on?
KEITH MCCULLOUGH: Let me tell you. It's easy.
RAOUL PAL: There is so much going on.
KEITH MCCULLOUGH: My political lens is always explicitly affected by my quad outlook. We're right on the screws. I'm not a believer that any politician central planner or otherwise can part the heavens and give us a new path underneath the seas of economic gravity.
Our framework doesn't really solve for rainbows and puppy dogs, certainly doesn't solve for a man in a tower tweeting or men from anywhere for that matter, tweeting.
RAOUL PAL: Hi, I'm Raoul Pal. Today, I'm going to sit down with Keith McCullough of Hedgeye and really, I've got Keith here for one particular thing because I want to ask him one pointed question. Keith, What the fuck's going on?
KEITH MCCULLOUGH: Let me tell you, it's easy.
RAOUL PAL: There is so much going on. I know that the market narrative is shifting, I see you guys are shifting around with which quantum and things are moving. I think people are struggling to make sense of it because they look at asset prices and equity markets, they see all-time highs, they're saying, well, everything's perfect. It is becoming a complicated situation, which is precisely why you're in business to do what you do and why you've got a framework. Talk us through a bit of how you see things and maybe we'll just kick it around from there and see where we get to.
KEITH MCCULLOUGH: Yeah, for the last year, I think that it was a relatively easy environment to understand. You had basically both growth and inflation slowing at the same time. Everyone agreed to agree at the all-time lows and bond yields and I think it's pretty clear that growth was slowing in China, EM, Europe. Then of course, the US joined that. As we went through that path, you've had this Trump thing, like the tweets and the Trump and the deal and the non-deal and extended, it's so hard to keep track of it.
You have so many people that have now entered the game, so to speak, saying well, as long as we have a resolution to that, then it could all be rainbows and puppy dogs. Our framework doesn't really solve for rainbows and puppy dogs, certainly doesn't solve for a man in a tower tweeting or men from anywhere for that matter, tweeting. What it does is it solves for these four quadrants. What we have, the only change we've made is that we're going to see a return of inflation, or the rate of change of inflation accelerating, and really only for six months.
If you think it's confusing now, wait till we get six months from now and we start to make the turn again back into what we call Quad 4. Q2 of next year is where we have the US economy finally slowing towards the slowest point. You can go Quad 3, Quad 3, Quad 4 for the next nine months. Quad 3 is economic stagflation, which always is a precursor for the end of the economic cycle which is Quad 4 which is when you have both growth and inflation slowing in at the same time and we're going to be right on the screws ahead of the US election. It's going to be pretty intense.
RAOUL PAL: With markets looking forward, so they started sniffing some of this out whether it's from the tweets or other things, during the what you would refer to as Quad 4, are we likely to see the markets looking towards the end of the Quad 3 phase earlier, let's say in Q1 as opposed to Q2?
KEITH MCCULLOUGH: Well, the markets been very good at sniffing out every single move and front running the Fed, I might add, on every single move. Anytime the market saw a Quad 4 most intensely in the fourth quarter of 2018, and again in Q3 of 2019, the market was very quick to cut interest rates for the Fed. Don't forget that the yield curve steepened because the market basically said, if you don't cut rates at the next meeting, we're going to have another little meeting with you.
I think that that's the interesting part, is that all of that fully loaded cowbell from the Fed, fully priced in Fed cuts into the most recent meeting, and the idea that we could see demand change and rate of change terms. Like give me another 10 cents for the next person that tells me the ISM has bottled. With 100% of those 10 cents coming from people that never called it topping to begin with are 100% sure this is it. It's a very dynamic point but we're going to get inflation accelerating anyway because the base effect of what happened last year, which was highly deflationary is an easy comparison.
That's going to happen anyway. I think people are confusing that demand can accelerate at the same time that inflation could go up. It's quite the opposite actually, economic stagflation is when your cost of living goes up, and your real consumption slows.
RAOUL PAL: I think that's the key point. This year on year effect from this point last year is enormous now. It's going to skew everything and you're going to have, as you said, some very hot looking prints and a number of things. Then as soon as you start getting into January, because the markets all completely rebounded, you're going to see it completely unwound almost immediately. It's going to be a fascinating period.
Meanwhile, I look at the background of stuff, the rate of change of stuff, and I'm looking at the rate of change of the increase in price of copper is rolling over again. It looks like the increase of the rate of change in or even more so, emerging market currencies are now starting to fall in absolute terms again, quite sharply and we saw the Chilean peso today, stuff like that, just like okay, it feels that the weaker things in the background are starting to already transition.
KEITH MCCULLOUGH: Yeah, the weakest thing is China. When I look at copper, I see China. When I look at the Shanghai Composite Index or Shenzhen and for that matter, I see copper. They're all the same thing. They are not the US formal. They're very different things but under the same assumptions, people are expecting Chinese acceleration and demand. Meanwhile, the Chinese themselves, the locals won't buy it.
It's an amazing thing to watch now. At the same time, you can see I see big divergences in the softs, or on egg, on long cattle for God's sakes, Raoul, this is getting out there. I'm long cocoa, actually, to make it even worse, because we're actually seeing some of the supply shortages that we did see with commodities being so oversold with the dollar at a 20-year trade weighted high. That's actually just a simple pivot to reflate from anyway. It's not one that I think is going to be sustainable and I don't particularly care selfishly, I just want to make money trading the pivot, but in no way shape or form do I think that this is the signal broadly and macro to your point that we're going to see a Chinese acceleration in demand.
That's the easily the ugliest thing that we've seen in rate of change data this week, which is the October Chinese data. You're either staring at Macro Tourist and somebody's unfortunately getting shot in Hong Kong and thinking markets are trading on that or you actually paid attention to the rate of change data, which was a new high in inflation in China, a new low in the producer price index at the same time and a 15-year low in loans in year over year demand. It's quite alarming to see an economy of that size, and of that order of magnitude in terms of expectations, slowing against easing comparisons, that is as damning as it gets for an economy and that's what's happening in China right now.
RAOUL PAL: I think one of