Tectonic Shifts on the Macro Horizon

Featuring Eric Peters

Eric Peters, CEO & CIO of One River Asset Management, joins Real Vision to discuss major changes he sees coming to the global macro landscape. He thinks U.S. equity markets are in the process of topping, and says both inflation and volatility will make a comeback. Peters also analyzes the problems with risk management and portfolio construction, and how they will likely be challenged during the next recession. Filmed on May 29, 2018 in Greenwich, Connecticut.

Published on
25 June, 2018
Topic
US Economy, Recession, Macro
Duration
33 minutes
Asset class
Bonds/Rates/Credit, Equities
Rating
31

Comments

  • FC

    Fran C.

    8 7 2018 12:22

    0       0

    Interesting analysis - especially on vol

  • JH

    Jesse H.

    4 7 2018 22:02

    0       0

    Should read “far better received.” Thanks for your consideration.

    • JH

      Jesse H.

      5 7 2018 09:11

      0       0

      Apologies for the various short messages - was typing on my iPhone and it seems there is a strict character limit for comments on the RV app.

  • JH

    Jesse H.

    4 7 2018 22:00

    0       0

    ...audience.

  • JH

    Jesse H.

    4 7 2018 22:00

    0       0

    ...that if you had aired this or something like it back in the earlier days of RV, we would have a more educated and thoughtful viewership and this video would have been dar better received by that au

  • JH

    Jesse H.

    4 7 2018 21:58

    0       0

    ...quality of thinking and character of the viewers. Sorry to be blunt, but that’s how we end up with 33 thumbs down on Eric Peters’ interview. I would be willing to bet...

  • JH

    Jesse H.

    4 7 2018 21:57

    0       0

    ...you have at this stage. Perhaps a spin-off of RV to a mass market audience would be more suitable. It is not just the products that make the market in the internet age; it is the quality of thinkin

  • JH

    Jesse H.

    4 7 2018 21:54

    0       0

    I am baffled by the fact that this interview has 33 thumbs down. How is that even possible?! Note to Raoul and RV management team: PLEASE reconsider the $180 per year mass media market vision uou have

    • DS

      David S.

      13 7 2018 21:21

      0       0

      I do not think that the thumbs down are a result of the lower price. I would like to get rid of thumbs down altogether. All the negative votes may be from viewers who rely on their pension funds and do not want to see them in trouble. IMO this interview was excellent which proves the point. I would prefer thumbs up and comments only. DLS

  • DS

    David S.

    1 7 2018 02:30

    0       0

    IMO Mr. Peters is talking about CPI inflation. The huge increase in money supplies benefited mostly investors and not consumers. The inflation from QEs can be seen in higher P/Es, lower bond rates (especially in Europe), property etc. For some reason, which I do not know, the inflation did not find its way into Gold. DLS

  • JH

    Jesse H.

    30 6 2018 00:06

    0       0

    After carefully listening to Mr. Peters, some kind of stagflationary dynamic moving forward in US over next 7-10 years makes a hell of a lot of sense. But of course nobody has a crystal ball.

  • JH

    Jesse H.

    30 6 2018 00:03

    1       0

    Would suggest 60-minute interview / exchange with Raoul, Mike Green and Eric Peters. That would be gold!

  • JH

    Jesse H.

    30 6 2018 00:02

    1       0

    ...to get Mr. Peters on with Raoul to discuss / debate inflation vs. deflation moving forwards. After listening to MacroVoices interview, I am firmly in inflationary camp for US...

  • JH

    Jesse H.

    30 6 2018 00:00

    0       0

    Just listened to this a second time, as well as MacroVoices in-depth interview with Eric Peters. Really superb and would be great...

  • JV

    John V.

    29 6 2018 02:13

    2       0

    Big picture brilliant!

  • PD

    Pat D.

    29 6 2018 01:45

    1       1

    Felt the presentation kind of stopped abruptly, or perhaps it was just me wanting more. Hope to see Peters back soon. Preferably interviewed by Grant Williams, Michael Green, or Tim Grant.
    Regardless, thanks RV, and thank you Eric Peters.

  • DS

    David S.

    28 6 2018 20:12

    0       0

    The industrial revolution is a rare time in which labor could add a great deal to the bottom line through productivity. This is not true prior to the industrial revolution back thousands of years. The internet, robotics and automation does not benefit the employment of more labor at higher wages. In the developed world populations are angry, but incomes for labor will continue to fall regardless of governments. In addition, income for professionals will continue to fall. The social problems that this is generating need to be addressed from a realistic starting point. No one knows the answers, but we need to start with the facts. In developing countries, the people are more optimistic as millions see their lives improving as they started from low incomes. Increases in the standard of living are enjoyable, decreases in the standard of living are not. DLS

    • DS

      David S.

      28 6 2018 20:16

      0       0

      Excellent dialog. I watched and learned from this video more than a couple of times. My written comments help me to focus my thoughts. Sorry for too many comments. DLS

    • RE

      Renato E.

      30 6 2018 08:58

      2       0

      > The social problems that this is generating need to be addressed from a realistic starting point. No one knows the answers, but we need to start with the facts

      I think there is no answer to that, but it is indeed the right question: "How to solve these social problems". The political changes in Europe are just a symptom. The whole system is in severe stress:

      - We only have one planet with limited resources
      - The world population is constantly growing, competing for the same resources
      - Humans have weaknesses (hate, anger, jealousy, greed etc.)
      - Automation will kill a lot of jobs in the next decade. What do you do when too many people lost their jobs and get bored?

      Add that to the "Survival of the fittest" theory and you have a recipe for disaster. This will not end well. Most people don't think about these points, but they can feel something isn't quite right and the pressure is building up more and more. Eventually, they will blame others and vote for any politicians who "propose to solve the problem". There is none unless the world population shrinks significantly and even then comes the human weakness into play. Humans are intelligent when they are alone or in small groups, but dumb in large masses. I honestly hope my analysis is wrong...

    • DS

      David S.

      30 6 2018 19:53

      0       0

      Renato E. - Excellent comments. With problems this big, constructive dialog and working together will help. With bipolar politics in most of the developed world incited and encouraged by the bipolar press, this will be difficult. DLS

  • DS

    David S.

    27 6 2018 23:44

    0       0

    If the politicians are taking over for the central banks, there is little hope. In the USA especially where Congress and maybe the president can trade the market legally with insider information. DLS

  • FC

    FRED C.

    27 6 2018 15:29

    7       1

    hey milt......
    is it just me or would we be better off if the comments were reversed.....i.e. the first on the top and subsequent below so we would not have to go back and forth and it would lead to a better flow........tks

    • EF

      Eric F.

      27 6 2018 15:34

      0       0

      Makes perfect sense. It would flow much better.

    • TS

      Todd S.

      27 6 2018 20:45

      0       0

      Agreed...

  • FC

    Fractal C.

    27 6 2018 03:15

    4       0

    Who are these 28 people who did not like this presentation? Lol!

  • jd

    james d.

    27 6 2018 00:37

    0       15

    32 minutes of jargoned equivocation

    • PU

      Peter U.

      27 6 2018 09:04

      4       0

      fool

  • VP

    Vincent P.

    26 6 2018 13:08

    7       0

    Awesome delivery of views for anyone to understand.

  • JH

    Jesse H.

    26 6 2018 07:23

    10       0

    Clear, concise, articulate analysis. Would love to see an interview with Raoul, Grant or Mike Green. Please bring him back again soon!

  • PN

    Philip N.

    26 6 2018 05:39

    1       0

    I really enjoyed this. One situation where I could see rates rising significantly is if the Fed has decided it needs to defend the dollar. If that is the case they will raise until they have crushed the people they view as the dollar's economic competitors.

  • JM

    John M.

    26 6 2018 05:39

    3       0

    Not sure I follow his critique of the inflation forecasts of the 08-09 period anticipating much higher inflation due to aggressive monetary policy. True that CPI has remained muted but lots of asset inflation has surfaced in financial assets, real estate and collectibles? Debt certainly has inflated. If there is a problem in our understanding of inflation then there is likely a problem in our measurement of it too.

  • NI

    Nate I.

    26 6 2018 04:48

    5       0

    Great interview overall, but the so called tight labor market narrative is such a load of corporate claptrap. Everyone in the US, please spend some time on John Williams’ Shadow Government Statistics site and learn about how the U3 number has been rigged over the years to make both Democratic and Republican administrations look good, regardless of the true employment picture. US labor participation is at a 35 year low - even by the BLS figures. True US unemployment - if you properly accounted for discouraged workers - is probably north of 20%. There is a standing army of Americans ready to work if anyone wanted to hire (and heaven forbid - possibly train) them. Labor shortage my eye. Sure, maybe in a few select job classifications, but not overall. No way. Mostly there is a shortage of employers willing to hire or pay more than minimum wage for part-time work with no benefits. Hiring, continuing ed, and R&D would divert cash flow from long-term shareholder value creation like borrowing money for stock buybacks (more like short-term executive bonus value creation via financial shenanigans which are tantamount to fraud).

  • WP

    William P.

    26 6 2018 04:40

    6       0

    Bring him back!

  • MS

    Mark S.

    26 6 2018 04:28

    21       0

    Mr. Peters deserves a full hour Grant interview. Where is Grant these days anyway? We want him back doing Grant style deep dive interviews, please.

    • AR

      Abishek R.

      27 6 2018 06:03

      1       0

      Having withdrawal symptoms already from missing his podcasts.

    • DS

      David S.

      27 6 2018 23:12

      2       0

      I really enjoy Grant's interviews myself, but he has been working his tail off since the beginning of RealVision. Maybe he needs a well-deserved break, or maybe he is working on something big. In either case I am happy to give him time to recover and reflect. Grant needs to have a life too. Three Cheers for Grant. DLS

    • TB

      Tim B.

      29 6 2018 01:55

      0       0

      Podcasts? A gem in grass unfound...

  • CB

    C B.

    26 6 2018 03:29

    2       0

    My favorite part was when Eric described private equity as levered stocks. Eric stitched a lot of dots together for us viewers. And that’s the best part of RV is this creative thinking and story telling that helps us imagine how things could play out.

    • TB

      Tim B.

      29 6 2018 01:54

      0       0

      Well put. We come to the markets with a possible thesis, and watch what unfolds. Then we re-evaluate...

  • MM

    Mike M.

    26 6 2018 03:08

    5       0

    Very Good. please make Mr. Peters a regular.

  • JH

    Joe H.

    26 6 2018 01:41

    16       0

    Very good but wish it was longer. RV should have Eric on again later this year for a 60 min Friday slot being interviewed by either Grant or Michael Green. That would be great and could be one of the highest rated videos of the year.

    • MG

      Michael G.

      26 6 2018 04:02

      25       0

      Will work to make it happen. Eric and I talk regularly, would love to see an hour of discussion on camera.

  • rm

    russell m.

    26 6 2018 00:03

    3       0

    I would like someone, a government policy type person, to talk about whether the debt jubilee idea, the writting off of bonds held by the fed, is a possibility or not.

    • JM

      John M.

      26 6 2018 03:49

      3       0

      Agreed and digging deeper: currency scenarios, knock-on effects and other trade ideas that could play out under those circumstances.

    • MB

      Matthias B.

      26 6 2018 13:40

      0       0

      If I recall correctly, RV had an interview a while ago with Alastair McLeod who was a strong supporter of a debt jubilee and expressed his view that there should not be negative spill over effects (such as currency devaluation), but I fully agree, it would be great to have a refreshed view on this. Nonetheless because the latest prediction by the bipartisan US budget office and recent medicare/social security forecast were much more dire than before.

  • F

    Floyd .

    25 6 2018 23:31

    4       0

    Well described scenario of what the next chapter looks like from his perspective. Would have liked him to discuss which assets classes /inflation hedges might work in the market environment he described. Other than that, the macro investing climate he described could be tough to navigate if its a political manifestation!

    • CB

      C B.

      26 6 2018 03:18

      3       0

      Vanguard released a white paper recently called, “from reflation to inflation”. You might like it. They talk about different asset classes and their historical correlation and beta to inflation. Gold was highlighted favorably, which is an interesting departure for VG.

  • SP

    Steve P.

    25 6 2018 23:22

    3       0

    Great interview RV. Thank you.
    Erics' observation re possible VAR effects in an unwind are the first time I have heard any commentary along that line. The VAR concept of reinforcing 'Risk on' in a low vol. environment thus lowering perceived risk even further is an interesting revelation. If the reverse is true in unraveling markets, then in conjunction with algo selling by ETF's in full redemption mode, the next downturn could well prompt the ultimate stock market bloodbath. Hhhmmm!!!

    • CB

      C B.

      26 6 2018 03:20

      1       0

      Reflexivity! You may also enjoy Christopher Cole’s interview as well

  • DS

    David S.

    25 6 2018 20:54

    2       0

    If the GMO (Boston Company) forecast is even near the mark for an annual negative 4.5% real return per year in the S&P 500, it will be hard for macro funds to do well also. Of course some will do great. I wish Mr. Peters the best. Pension funds are certainly in deep kimchi. DLS

    • CB

      C B.

      26 6 2018 03:24

      3       0

      I’ve seen Vanguard analysis that presented Schiller PE as the best predictor of future returns (though it was demonstrated to be a very poor timing tool) that suggested at 25x Earnings, future returns are 0 nominally. So that is consistent with GMO

    • DS

      David S.

      26 6 2018 08:30

      1       0

      Thanks. Good additional information. DLS

  • Sv

    Sid v.

    25 6 2018 19:51

    4       0

    one of the best presentations R V has provided. Thank you

  • LT

    Lucas T.

    25 6 2018 19:40

    2       0

    Great interview. Very clear and well articulated.

  • DR

    Daniel R.

    25 6 2018 18:55

    10       0

    Quite simply a 10. Please make Eric a regular RV contributor. Do it.

  • PG

    Petter G.

    25 6 2018 18:41

    1       0

    Loved it. Bring him back.

  • bm

    brian m.

    25 6 2018 18:22

    14       2

    I wish RV would separate the finance channel from the music channel

    • TB

      Tim B.

      29 6 2018 02:08

      1       0

      I know...it's an idea too, er, frivolous. But how about a toggle where the viewer can select the tone of their music?
      1) Caffeinated punk rock short-dated options trader.
      2) Classical macro Bach investor.
      3) Amazon rainforest sounds forex speculateur.
      4) Sound of silence zen garden bond buyer.
      5) Gospel gold bug believer.

      Regards

  • RA

    Robert A.

    25 6 2018 17:38

    4       0

    Having watched almost every RV video since inception—this Gentleman just succinctly articulated a synopsis of where the long line of RV guests have taken we viewers, IMO. I’ve followed GMO’s work for many years and keep their seven year Asset class prediction in the back of my mind when making ANY Portfolio allocation. If I have this right....their only predicted positive return Asset class (other than Timber) is Emerging markets. For those who are willing to pay the cost I highly recommend subscribing to Macro Insiders with two great Macro investors (Raoul and Julian) at the helm.

    • VS

      Valentin S.

      26 6 2018 06:59

      2       0

      what about EM debt and the likely strong USD scenario over the next few years?

  • TH

    Timo H.

    25 6 2018 17:30

    2       0

    Difficult to disagree with anything he said...

  • MC

    Minum C.

    25 6 2018 16:46

    0       0

    Thorough, coherent, and enjoyable.

  • YB

    Yuriy B.

    25 6 2018 15:00

    2       0

    Phenomenal interview - thank you Real Vision!

  • BD

    Bruce D.

    25 6 2018 14:23

    15       0

    A Fantastic explanation of where we stand in this very manipulated market. The best global macro thinkers are all making similar comments.....NONE of what we have today is sustainable. The best idea is that if it worked over the last 10years, it will not work moving forward. It’s time to rethink your portfolios and prepare for no returns in bonds or stocks over the next 5-10years. It’s impossible for a rational thinker to believe that the US is so special, that we’re the only country that will not return to normal long term profit margins....and reversion to the mean. The pendulum is swinging away from capital, and more towards labor across the developed world.....time to regroup and evaluate new tactics to make money, like using commodities, that are at lifetime cheap valuations vs the S&P 500 index. Thank you for this awesome sober outlook.

  • PU

    Peter U.

    25 6 2018 13:00

    0       0

    great interview

  • RK

    Robert K.

    25 6 2018 12:51

    2       0

    Amazing stuff. Thanks.

  • AL

    Andrew L.

    25 6 2018 12:35

    6       0

    I keep coming back to if everyone sees it (recession) coming what are the knock on effects of their actions in prep for it? Do these delay or blunt the coming recession?

    • MC

      Minum C.

      25 6 2018 16:45

      0       0

      You should ask Roger Hirst.

  • NG

    Nick G.

    25 6 2018 12:03

    8       0

    Very thoughtful. A long term trend of redistribution of wealth towards labour from capital is indeed what is needed. However, technology makes it constantly harder to achieve. It will indeed be an interesting decade ahead. Overall, an excellent interview.
    As Eric says, there are so many cross currents at work that vol is unlikely to remain suppressed forever.

    • CB

      C B.

      26 6 2018 03:36

      0       0

      Richard Duncan talks about this idea that the common man is a somewhat poor allocator of wages. That he is more likely to consume his excess production than invest it into productive endeavors that create the possibility of growing out of the debt.

  • MM

    Mike M.

    25 6 2018 11:17

    7       0

    Hopefully what is coming takes the Plunge Protection Team with it.

    • PU

      Peter U.

      25 6 2018 13:00

      1       0

      and twice over!

  • DS

    David S.

    25 6 2018 10:06

    10       0

    If everyone is using VAR, then we are in trouble. The risk of the portfolio is based on stopping out at a certain price. If there are no bids at the stop, do they chase the stock price down? The risk is a lot higher than current calculations. In addition, they will have to sell their winners to cover the cash flow for losers. If you add in the ETF risk of redemption and algorithm trading, the market can go down dramatically before any recession appears. I feel for the professionals who must invest in this market. DLS

    • BM

      Beth M.

      25 6 2018 12:47

      7       0

      Nice observation..." the market can go down dramatically before any recession appears." That's what makes this all so troublesome. The comments from Paul Tudor Jones and many others are daunting indeed.

    • CB

      C B.

      26 6 2018 03:41

      2       0

      Wasn’t it Jean Claude Junker who said, “When things get serious, you have to lie”. Maybe the cb’s can string this out a little longer with a few more years of stealth QE. They’ll say they are tightening but really they’ll just pay more on excess reserves, not reduce the money supply and buy equities and short vol off balance sheet.

    • DS

      David S.

      26 6 2018 08:40

      1       0

      I think the CBs endgame will be to just keeping all the debt on the balance sheet and just hope they can pay the interest forever. DLS

    • AE

      Alex E.

      27 6 2018 02:12

      2       0

      During the last several crashes, the retail investor stops were filled at the daily low because ALL the dealers had there hands full filling the Elephants stops...in other words, if your stop was a trailing 5%, too bad for you. You were stopped out at the Daily low whether you wanted that price or not...something to think about when the Financial System enema is finally administered...

    • DS

      David S.

      30 6 2018 20:00

      0       0

      A separate endgame for CBs is to give the sovereigns zero coupon 100-year bonds. The politicians will be happy with no interest rates and they will be dead before the bond payment is due. DLS

  • JE

    Jos E.

    25 6 2018 09:42

    12       0

    Absolutely loved this video - particularly the VAR comments. So simple yet so important

    • SK

      Sung K.

      27 6 2018 05:37

      1       0

      Would be great to hear from Micheal Green before we heading into the Fall/September/October timeframe.