The True Tightness of Money

Featuring Raoul Pal

Is the latest sell-off a “false flag” – or have we entered the broader topping process for U.S. equities? Raoul Pal, co-founder and CEO of Real Vision, expands his “macro is back” theme, exploring rising rates, the shortage of U.S. dollars in the global market, and explosive U.S. indebtedness. Filmed on October 31st, 2018 in Grand Cayman.

Published on
7 November, 2018
23 minutes


  • bs

    bob s.

    14 11 2018 16:50

    0       0

    What do we all think of the silver stocks here?? Wow could be quite an opportunity

    Excellent Raoul

  • YB

    Yair B.

    14 11 2018 02:15

    0       0

    Raoul, as always, fascinating! I think one of the things that separate you from others, is knowing when to say "I was wrong". This builds a lot of credibility in what you say.

  • AH

    Alan H.

    13 11 2018 21:33

    0       0

    A brilliant analysis and presentation, Raoul. Thank you.

  • NR

    Norbert R.

    11 11 2018 17:08

    0       0

    How to you play the bond trade?

  • DF

    Dominic F.

    11 11 2018 12:25

    1       0

    Thanks Raoul.
    Great analysis as always.

  • JV

    Joel V.

    10 11 2018 00:46

    2       0

    Good presentation with helpful slides. One of the comments reminded me of something Doug Noland said. Any chance you or Grant could interview Doug Noland again? His interview in 2016 was really good - would love to hear a follow up.

  • Sv

    Sid v.

    9 11 2018 17:57

    0       0

    Great video. What about the Fed Put? Won't the Central Bankers come to our rescue?

  • SM

    Sarit M.

    9 11 2018 16:52

    0       0

    Always love watching your videos, Raoul! Great analysis with so many different data points.

    As a retail investor wanting to learn more about trading bonds, what's the best way to learn the basics... I've heard the bonds section of this video multiple times but still don't think I can explain it myself. I'd love to get to a point where i can understand and talk in the same language. So welcoming any pointers that the group here may have... Thanks!

  • AW

    Arthur W.

    9 11 2018 14:29

    0       0

    Great video, agree with almost everything here! One of the only things that makes me hesitate from going net short this equity market is the following: if we get into a substantial correction scenario, what stops the FED from turning QE back on in order to bring everything back? This bull market seems to have been mainly QE fueled, why does that stop now?

  • js

    jan s.

    9 11 2018 08:01

    2       0

    Man i love RV
    Thanks for this servace and i also need to watch this 3 more times

  • CM

    C M.

    9 11 2018 03:07

    0       1

    Technical topic: video screen is now too large in my Chrome browser (15 inch Windows laptop). Can't see the full graph unless I go to full screen. First time I have run into this formating issue on RV.

  • IM

    Istvan M.

    9 11 2018 02:36

    0       0


  • MS

    Mat S.

    9 11 2018 00:45

    1       0


  • AM

    Artur M.

    8 11 2018 19:17

    0       0

    I have a question - Raoul is talking about Libor 3Yo3Y% change (inverted) but on the chart, we see 2Yo2Y% (inverted) ( 12:40 minutes left )- which one is correct?

  • RE

    Richard E.

    8 11 2018 18:50

    1       0

    It is hard to argue with any aspect of this analysis. A couple questions I would have, which I think the more bullish prognosticators would suggest. First, in the US, companies lead consumers and not the other way around. The tax reform of 2017/18 was clearly targeted at companies and definitely not at consumers. It was a generational reform lowering US rates to inline with the rest of the world. Yes it has led to buybacks, but now that election uncertainty is out of the way and if trade uncertainty also goes, we could see an acceleration in capex. It has actually been quietly quite good. Second is China. China is a mess and has fallen quite substantially. However, they have also put an immense amount of stimulus in the system over the last 3-6 months. This acts with a lag, but couldn't we see this kick in at the early part of 2019?

  • KS

    Kathleen S.

    8 11 2018 13:27

    3       0

    What about infrastructure projects in US??? And Trump has also talked about a middle class tax cut --- I think with the Democrates winning the house they are now more willing to come to the table and make a deal. Before the elections the Republicans had total control, thus the Democratic strategy was complete obstruction -- this has changed and I think for the Dems to get their big blue wave they need to do SOMETHING and infrasture and possible middle class tax cuts is the ticket. Big cities are dying and this is the Dems constituency - the infrastructure projects can put money into these cities. Face it, the US doesn't care about deficits - (and Trump knows the US$ days are numbered) so "go for it". These big projects can give another pump to the economy and keeps the game going longer and I wouldn't forget about the tax cut for the middle class. The people don't have anymore money to spend and they are in debt to their eyeballs, but that doesn't mean the US Govt can't spend and I think it will and big time.

  • BF

    Bret F.

    8 11 2018 10:12

    1       0

    2001 and especially 2009-10 consumer debt was huge. But anyone and everyone filled bankruptcy. Have to wonder? If that is the mindset now. Its not like you have to give up your home or car. Just credit card debt and such. Tighten your belt for 3 years and off to the races again . The "Bankruptcy cycle"

  • SB

    Samuel B.

    8 11 2018 09:59

    0       0

    I think what will be interesting is US manufacturing stock (CAT, HOG, DE), stocks that have rallied signficantly in the last 2 weeks since the sell off but are manufactured in a higher us dollar environment making them less competitive vs other international firms. I think CAT still has 43% or so of its core manufacturing in the US. Many of these stocks are also very much linked to commodity markets and in a predicted recessionary environment with high manufacturing cost in US dollars terms this cant be healthy.

  • PM

    Paul M.

    8 11 2018 09:57

    1       0

    Eur is falling against USD? Sure if you don't believe in maths: 1,0516 the low in '16 vs. 1,1425 right now, all in the face of 'positive' carry in USD. As to EM funding in USD and consequent shortage - yes they do fund in USD but they typically get paid in USD as well, especially commodity-based economies.

    Great overview of problems in US economy and stock markets, much appreciated.

  • NG

    Nick G.

    8 11 2018 09:09

    5       0

    There are some very reliable models out there which are finally beginning to agree with Raoul. One of the most remarkably accurate ones, with the best long term performance, comes from asset spread measurements and it indicates that we are in a very early stages of a topping process, analogous to mid-2007, when the market was still resilient but the asset class spread relationships were breaking down and indicating trouble ahead. By far the best is on

    Something that RV should cover: very little is talked about spread relationships between equity sectors and asset classes, yet they are the most reliable indicators of future risk demand and market trend.

  • JO

    John O.

    8 11 2018 07:20

    0       0

    Just a bit early on TLT in the previous video; still a good call. Seems to be in a final 5th wave down now; then should rally. Still expect USD up.

  • SS

    Steven S.

    8 11 2018 06:57

    3       0

    Very nice and extremely informative and valuable as usual, Raoul. I agree with almost all of your assessments (well, I also disagree with the Google story ...I would argue with the 'canary in the coal mine' view of Google), but I did have one question: I haven't seen the data on fixed vs. adjustable mortgage percentages since 2008. I would think that many homeowners and real estate investors have fixed rate mortgages and thereby aren't subject to this recent 30+% recent increase in rates. Hence, the macro impact from mortgage servicing expenses might not be as profound as you're thinking. Is there a good source for that you'd recommend on the percentage of adjustable mortgages in the US? Thanks again. I always learn a tremendous amount from RV and MI.

  • NI

    Nate I.

    8 11 2018 02:16

    6       0

    Thanks Raoul. Great piece. I agree with you on the long bond trade based on the economic outlook - it's pretty much textbook, but what worries me is simple supply and demand imbalance. Have you found any data as to whether or not there will be enough buyers to soak up the supply of bonds that will be issued in coming years? US debt is just exploding and neither party (D or R) seems willing to curtail any spending. Similar story in Europe. The whole damn world is awash in debt and I'm wondering if bond prices decline simply because there aren't enough bond buyers.

  • DS

    David S.

    8 11 2018 01:44

    0       0

    US baby boomers with money are spending on food, clothing and travel. Next it will be nursing homes and they know it. So back to the restaurants - no dishes to wash or house to clean - clothing and travel. DLS

  • RH

    Rick H.

    8 11 2018 01:16

    10       0

    Love to see these updates from Raoul. I originally was skeptical, but am now seeing the pieces of his puzzle fitting together. Speaking of regular updates...Really miss Grant's weekly commentary on AIF and wouldn’t mind seeing the occasional video update from him as well.

  • DS

    David S.

    8 11 2018 00:43

    1       0

    The short end of the US bond market may simply be showing huge-risk off buying from all over the world including the US. Where else can investors go as $US shortages continue to rise in FX markets. US rates across the spectrum are better than elsewhere for the risk. The normal gold spike is attenuated in $US now because of higher US bond yields and investors’ memories of losing money when gold got ahead of itself. US bond requirements are increase sharply because of tax and budget deficits. The Fed must keep US rates high to attract every buyer it can. DLS

  • AD

    A D.

    8 11 2018 00:36

    4       0

    If spending is rising in "eating and shopping" financed by credit cards it can last a while, since , at least here in the US, nobody told cc companies of impending risks- it's easy approvals and teaser rates galore. I have "fair' credit (in large part due to maxing out on 0% APR offers) and still credit is super easy to get. My housemates (Millennial vagabonds) get 2-3 ccard teaser offers per week each, in absentia. I am trying to be careful, but live and let live. Best, AD.

  • JF

    Joseph F.

    8 11 2018 00:26

    4       0

    Excellent perspective. The best, no bs financial web site ever!

  • VS

    Vasil S.

    7 11 2018 23:54

    0       0

    Strong, as per usual!

  • BD

    Brian D.

    7 11 2018 23:23

    1       0

    What does GMI stand for? How is the composite constructed?

  • SD

    S D.

    7 11 2018 23:07

    1       0

    Analysis on Italy is thin on the ground. I think it's because everybody hates the populists. But I think they have a pretty good hand to play, really. Do you agree? I would be really interested in how Realvision sees Italy playing out. People are now pointing to France, and its deficit, questioning where this ends. If the entire Brexit vote and Visegrad 4 actions are all predicated on resistance to the authoritarianism of the EU Commission, surely there's a story here that's much larger than the Italian debt. Italy seems intent of forcing through radical change on the EU and that changes everything. Doesn't it? Am I wrong? You've talked about Spanish banks, but surely Italy is far more serious but also politically significant? And nobody talks about how diminished the EU will be once the UK leaves. The UK supplies 20 percent of the EU budget. Anyway sorry for the rant, it'd just be great if somebody actually did some sensible reporting on the EU for a change.

  • JD

    Jeff D.

    7 11 2018 22:42

    3       0

    Super good. Thanks for the warning!
    I follow Stansberry research, mostly for a different perspective, and they are calling for a crazy "melt up!" and are selling subscriptions shamelessly. I never take their advice, and sometimes even trade the opposite of their recommendations. They probably don't even trade their own money anymore, because they make a fortune selling subscriptions.
    I'm planning on loading up on LEAP ( +2 years) put options as soon a volatility cools off, in the next month. That ( +2 years) should give my trades time to be right.
    Question: What might cause some kind of "melt up" and would it only happen in a few select stocks?

  • LP

    Lynn P.

    7 11 2018 21:02

    5       0

    This is the kind of of information that I look forward to in subscribing to RealVision. Most of the videos are interesting but too esoteric for my smaller portfolio. This video was a clear warning, along with cogent advice to "not get my face ripped off". I tend to lower my average cost by buying on the way down, so maybe this time I'll wait for what looks like a bottom and add on the way up.

  • CC

    Christopher C.

    7 11 2018 21:00

    2       0

    Very interesting development given your premise. Curious to see if it is one time aberration or continuing/growing trend. Suspect the former.

  • JL

    Juan L.

    7 11 2018 20:58

    0       0

    Gracias Raoul.
    Many large Spanish banks do have a problem with EM exposure, but it´s not on the news.
    Peolple is worried(entertained about a supreme court decission of who pays (client or banks) a tax related to mortgages.
    Almost nobody sees the storm is coming. IMO

  • MR

    Mark R.

    7 11 2018 20:50

    2       0

    *keeps powder dry*

  • MF

    Michael F.

    7 11 2018 20:39

    1       0

    Just a remark with regard to the RMB Chart - a cup with handle is not a bottoming formation, it requires a prior uptrend from which price builds a base. In this case it looks more like some sort of inverted head & shoulders formation.

  • KL

    Ken L.

    7 11 2018 20:28

    1       0

    Can you please comment on oil? I remember watching "The Exchange" where you and the guests were discussing the sequence of markets to fall before the bubble finally pops and markets become 1 big trade.

    I made a checklist to track that sequence (Bonds -- EM -- Equity Markets -- Copper -- FANG -- Oil) and noticed only oil was remaining. I realize WTI is near a bear market, but would like to know your thoughts. Thank you.

  • LN

    Lucy N.

    7 11 2018 19:23

    2       0


  • SS

    Sam S.

    7 11 2018 18:56

    3       0

    Raoul looking sharp and sounding even sharper! Top Notch discussion what the data is telling us and what to be aware of. The "tell" is a real tool for us to understand. Terrific!

  • MH

    Manuel H.

    7 11 2018 18:43

    1       0

    Gracias Raúl!!

  • CQ

    Colin Q.

    7 11 2018 18:00

    4       0

    Hi Raoul. Appreciate this is macro and I appreciate the US is a leading group of indicators. Is similar available for UK? Could you perhaps build a “macro” picture for the UK? And help people position themselves?

  • BH

    Ben H.

    7 11 2018 17:55

    1       0

    Retail investor here. I've twice re-watched the section about how to play bonds and I'm still not clear. Should I be in short or long term?

  • HJ

    Harry J.

    7 11 2018 17:43

    3       0

    Please make a short comment on Gold
    Thank you

  • CC

    Chad C.

    7 11 2018 17:37

    0       0


  • rr

    rlw r.

    7 11 2018 16:52

    3       0

    A really comprehensive macro overview, thanks Raoul.
    Plus the many chart overlays were really super.
    An excellent presentation.

  • FG

    FundamentalAnalysis G.

    7 11 2018 16:42

    14       0

    Always enjoy Raoul's presentations, he needs to come on more often. Big fan of looking at lots of charts as well!!!!

  • JL

    Johnny L.

    7 11 2018 16:20

    0       2

    That closing comment is about all you need to take away from this presentation.

  • gg

    georgy g.

    7 11 2018 15:43

    2       1

    Raoul how does election change any of the key points?

  • AH

    Andrew H.

    7 11 2018 15:41

    1       0

    I am really interested in the U$D in this scenario. I realize that the U$D is a safe haven, but a further move would really crush EM. There is a long list of items that would be U$D weak: End of IR increases, further pain in EM, increased deficit/debt(especially w divided government). I can see a scenario where US equities underperform, U$D falls and the rest of the world does better on a relative basis, commodities could do better on an absolute basis. Time will tell, but I am in a holding pattern watching IR and U$D, for determining my future allocations(PM, EM, commodities, maybe zero coupon bonds if things really begin to unravel).

  • NH

    Neil H.

    7 11 2018 15:34

    2       1

    excellent as always but no comment about last nights election unless this video was done prior or the election does not matter. If the democrats are able to slow down Trumps fiscal policy initiatives, won't that give the Fed more room to stop hiking, and if so won't the dollar decline instead of rally.

  • HO

    H2 O.

    7 11 2018 15:17

    1       0

    Thanks very much for a great update. Agree completely that the investing herd in the US is pretty much oblivious to the cracks in the growth cycle, and the likelihood of a Fed pause after December. I am familiar with the core-periphery framework, but am confused at this point as to causality and consequences. By that I mean that the GFC was the first major crisis to be caused by the core in a long time, and the prospect of a major correction in US equity and bond (HY and gov) markets is an even bigger risk to EM than current USD liquidity tightness. At the same time, in the absence of an immediate central bank bailout in the event of a downturn - and the expectation should not be for reflexive QE - this means that foreign savers (predominantly from EM) are probably going to demand higher risk and term premia on US treasuries given the expansion of US twin deficits and/or because the dollar is going to plummet. In other words, the core-periphery model seems to have blown up like everything else. After an initial flow of USD funding back into the US (where we are now), it is unclear to me why USD assets should be attractive for ROW in the event of a major US market correction or recession. Couldn't guvy yields have to correct higher first, before stabilizing? Based purely on Fed rate hiking schedule, sometime early next month we should be buying the front end of the US curve. But, isn't it also possible that capital outflows from the US and US recessionary effects dominate rates, at least during the initial adjustment?

  • RP

    Raoul P.

    7 11 2018 14:42

    19       1

    ok, who gave me the downvote? ;-)

    I bet it's one of the Real Vision gang...maybe Milton himself...I cant trust me.

  • KC

    Keith C.

    7 11 2018 14:21

    0       0

    Like it, especially on the last part about reducing shorts in sell-off and loading up shorts in rally. Just out of interest, Raoul, is the credit market something you look at as a potential forward indicator for stock market please? Thanks!

  • CD

    Chris D.

    7 11 2018 14:16

    4       0

    "I'm a seller at zero - that's how bearish I am" - B.F.

  • JM

    Joakim M.

    7 11 2018 13:57

    0       0

    found this fixed residential investment chart extremly interesting .Where can I found that? Or a proxy on it.

  • EP

    Eli P.

    7 11 2018 12:21

    1       0

    we love raoul !!!! -he is the man-pleaser keep update us as much as you can .

  • PC

    Philip C.

    7 11 2018 12:06

    3       0

    Nice, well argued piece. You don't say a lot about USD, but I presume you are still bullish. It would be nice to get Luke Gromen back in and hear the two of you duke it out.

  • TJ

    Terry J.

    7 11 2018 12:06

    1       0

    A timely reminder Raoul, and serious food for thought. I have long since agreed with your thoughts on US Treasuries, but been less sure about your dollar and equity market views. The excellent charts you showed here now make the latter argument much more persuasive for me. It has also reminded me that I must rewatch your excellent video on the baby boomer crisis that will almost certainly unfold over the next decade. Thanks again.

  • WM

    Will M.

    7 11 2018 11:38

    6       0

    It feels like there is a general refusal to look at the facts and deny the raft of issues facing economies. Add to Raoul's comments the escalating pension crisis which has DIRE consequences for the retiring baby boomers and consider the impact of falling stock markets on pension funds and retirees. The private, public and social security crises are all going to hit us within the next few years in addition to another financial crisis. The FACT that there is now more debt risk than in 2007, the FACT that China represents a massive banking system bust in the wings, the FACT that Brexit is now at hand, the FACT that Italy is so close to precipitating another Eurozone crisis....... and it goes on and on. Are we actually underestimating the magnitude of the coming crisis and the likely extent of government intervention to address it? Feels that way to me.......

  • OS

    Oliver S.

    7 11 2018 11:19

    3       0

    A useful update. It's been interesting watching the story unfold.

  • JM

    John M.

    7 11 2018 10:25

    7       0

    Once Again Raoul, WOW!

    In addition to the many excellent points you listed, Leverage, IPOs, M&As, Corporate Buy Backs also indicate we have been building a massive top. Additionally, with due respect to Dave Floyd, Elliott Wave analysis indicates near term potential for a "third of a third" event.

    This correction is different. "Buying the Dip" isn't as strong as it was earlier this year. But complacency seems to be at a high. We have broken major trend lines in most markets and no one seems concerned, possibly as you mentioned, because interest rates haven't inverted.

    In my humble opinion, manipulation of unemployment and inflation data has also caused the vast majority, including the Fed, to misjudge where we are in the cycle. The average person can't afford new homes, cars or major appliances. So they spend on small luxuries such as clothing or a meal out and of course, use a credit card.

    And you are right, Schlumberger is a tell. I've been involved in the oil industry for four decades and have seen many boom and bust cycles. I am also concerned that the recent run up and fall off in prices indicates a risk of recession immediately ahead.

    Since the debt around the world is higher than it was in 2007, I also expect that the problems ahead will be worse. I hope we are wrong, but fear we are not.

    Thank you once again.

  • BM

    Bruce M.

    7 11 2018 10:17

    9       0

    Pithy, well evidenced and very well presented in Raoul's incredibly logical fashion. Bravo!

  • VD

    Viknesh D.

    7 11 2018 10:09

    7       0

    I love Raoul’s analysis a lot. And your presentation is so clear. I agree that this is super spot on.
    I just still slightly differ on the time horizon. Whilst Q1 2019 is caveated to be a probability , I think the first wave of bomber attacks would unfold by Christmas 2018.
    Thanks Raoul in any case for the warning on the difficulties in trading an unfolding downturn!

  • AR

    Abishek R.

    7 11 2018 09:50

    9       0

    Spot on. Superb.