The Law of Unintended Consequences 2

Featuring Raoul Pal

Raoul Pal returns with an update to The Law of Unintended Consequences, addressing some common misconceptions surrounding the ongoing dollar bull market, pointing out indicators of a weakening economy that scream “recession,” and outlining the knock-on effects the strong dollar will have on commodities, central bank policy, and oil.

Published on
29 July, 2015
Topic
US Dollar, History, Global Outlook
Duration
38 minutes
Asset class
Bonds/Rates/Credit, Currencies, Commodities
Rating
9

Comments

  • bk

    billu k.

    16 7 2016 20:17

    1       0

    Well, It's a very nice presentation !

  • sm

    sayit m.

    26 2 2016 01:58

    0       0

    No words, hands down. Keep on the excellent work,

  • MS

    Matt S.

    12 1 2016 05:46

    3       0

    Really wish I had seen this months ago - thanks for sharing your core views and reasoning. It has inspired my idea generation!

  • LA

    Linda A.

    14 12 2015 19:01

    1       0

    Raoul, hands down - u are the Macro King.

  • MJ

    Mike J.

    3 12 2015 01:19

    0       0

    If it werent for the FED who would set interest rates?!?!?!! The market.. lol we cant have that!

  • MJ

    Mike J.

    3 12 2015 01:18

    0       0

    I agree, the coming commodity crash will be bad for everyone. Root cause of the initial rally? Fed rates at all time lows causing a huge amount of mal-investment. Thank you FED!!!! we love u!!!

  • MG

    Michael G.

    26 10 2015 14:30

    1       0

    Currency is the main driver of oil prices...hmm, maybe we should think about geopolitical risk. mark up the oil chart with geopolitical events. It can trump currency.

  • JL

    Jordan L.

    16 10 2015 23:48

    0       0

    Dollar analyses is spot-on as well as the subsequent "knock-on effects". Robert Prechter would likely agree wholeheartedly. The corrective move lower in the dollar could still see 91 on the /DX.

  • JM

    Josip M.

    4 9 2015 19:31

    0       0

    Good videa..would like to see more evidence of your US recession - that's the most out of line comment you make..

  • JL

    Jason L.

    30 8 2015 20:12

    0       0

    Great presentation - agreed on most points except bonds. Bonds barely budged as equities collapsed Unintended consequences, less USD in commodity producer budgets means less USD to recycle into USTs.

  • TS

    Tim S.

    24 8 2015 14:30

    0       2

    Long USD index has been the wrong trade. Against EM currencies, sure... kind dollar rules. But the Euro, Yen and Pound are holding their own...

  • MB

    Matthias B.

    11 8 2015 11:14

    1       0

    after watching the video again (how timely on the Yuan devaluation), another Q arises: what if US treasury deems a rallying USD too harming, can it take actions without having a mandate from congress?

  • MB

    Matthias B.

    10 8 2015 15:21

    0       0

    Short & punchy, truly great, many tks to RVTV! but Raoul, you cited the 9.5 trl carry trade in your i'view with A Edwards already, has not part of it being unwound, can the amount be tracked s'where?

  • AE

    Aleksey E.

    7 8 2015 05:20

    8       0

    Would be good to have a RVTV Forum. Fantastic presentations like these leave me with more questions - how to balance between dollar, treasuries & gold & why?

  • AE

    Aleksey E.

    7 8 2015 05:08

    0       0

    Isn't Yellen scaring the market with her statements into rising bond yields to shift its economic impact to market participants & away from themselves? (As discussed in Koo's Balance Sheet Recession)

  • AT

    Ainsley T.

    6 8 2015 20:24

    1       0

    Some duration in EMD to ride the race to zero? I get the impression the AIIB will make another dollar squeeze in EM look very different from the 90s

  • MM

    Mike M.

    5 8 2015 14:37

    0       0

    Is it a coincidence that the 30 year dollar change in trend is happening as the US equity culture is at risk?

  • MM

    Mike M.

    5 8 2015 14:34

    0       0

    Hasn't TLT been more profitable than UUP?

  • SS

    Scuba S.

    5 8 2015 01:46

    1       0

    Fantastic. Like many I would like clarification on Grant and Raoul's long gold stance in a dollar bull. Without putting words in their mouths I believe they're mostly long gold for tail risk events.

  • AE

    Alex E.

    4 8 2015 06:38

    0       0

    Commodity prices dropping, food prices rising and printing presses working overtime = BAD news for everyone...Hope everyone has their hedges in!!

  • AE

    Alex E.

    4 8 2015 06:36

    0       0

    The latest earnings #s coming out of the U.S. are declining, due to smaller sales, but also rising dollar. Fed has stated unequivocally that US rates will rise REGARDLESS of what that does to others!

  • AE

    Alex E.

    4 8 2015 06:32

    8       0

    1 of the smartest things I've ever done is subscribe to RVTV, and this video is 1 of the reasons why. I've just watched 1 of the smartest men on the planet present an absolutely superb presentation.

  • RN

    Rohit N.

    2 8 2015 23:35

    4       0

    Fantastic presentation and think the perspective it provides is exceptional!

  • LS

    Lorenz S.

    2 8 2015 16:40

    1       0

    Excellent video. Very educational! It is hard though to imagine Deutsche Bank going under. That would not only sink Germany. That would wreak havoc on a global scale.

  • MS

    Michiel S.

    2 8 2015 14:41

    1       0

    The political driver of a possible FED rate hike is not to underestimate. The USA wants the world to know they are still in charge and a strong USD will tell them who's dictating!

  • DC

    Dale C.

    2 8 2015 12:20

    0       0

    Raoul it is hard to fathom that the Fed would allow the dollar to fly above 100. Wouldn't that crush the economy and they would be blamed?

  • JO

    James O.

    2 8 2015 07:03

    1       0

    I don't understand how he can say the oil producers have lost $3T/yr of revenue because of $50/bbl drop in oil price. Math is 93MM BBD x $50/bbl x 365 days/yr = $1.7T/yr

  • g

    george .

    2 8 2015 02:42

    0       0

    found it, dec 4, 2014 . thank you regardless

  • g

    george .

    2 8 2015 01:56

    0       0

    cant find the date to part 1? help please. im a newbie, but I like the way this man's thought process works.

  • ml

    michael l.

    2 8 2015 00:53

    0       0

    Great presentation. Lots to think about. One of the first to make the case well that U.S. recession is looming - industrial equity stock prices over the past few months are hinting at the same outcome

  • PJ

    Paul J.

    1 8 2015 19:30

    0       0

    Thanks Raoul, clear thinking in a muddy world.... Your views on Germany and DB strike a cord.

  • g

    george .

    1 8 2015 04:45

    0       0

    forgot to include , I am speaking of gold futures in the open interest comment. hope its a good sign, but u cant hope a market one direction or the other.

  • g

    george .

    1 8 2015 03:07

    0       0

    not a biggie, but fri open interest and price movement coincided, and says bullish. a minor market influence, but a tell.

  • TM

    The-First-James M.

    1 8 2015 02:59

    2       0

    Would be very interested in a more detailed section outlining Raoul's views on the Gold and Uranium bear markets. In this preso, he gives the impression both will do well out of the coming mess...

  • g

    george .

    31 7 2015 22:50

    0       0

    but, that's not to say on the comex another washout Sunday night wont occur. If it does the market may respond differently this time, I don't know for sure, lol. h.a.g.wkd.

  • g

    george .

    31 7 2015 22:33

    0       0

    agree with $ view, but disagree about metals. a true bull market they rise against all currencies and could from these levels.

  • ii

    ida i.

    31 7 2015 13:56

    1       0

    since the comments here are better than on twitter, I wanted to signal Albert Edwards latest: http://www.zerohedge.com/news/2015-07-30/western-central-banks-have-set-us-youll-hear-printing-presses-mar

  • cd

    christine d.

    31 7 2015 11:51

    2       0

    He's always terrific, only ask he adresses the issue of oil and other commodity consumers. Yes demand/ and saving from the producers is hit but offsetting this is the real income benefit.of consumers.

  • HB

    Heini B.

    31 7 2015 10:14

    2       0

    The number would be too big for Central Banks to maintain any shred of credibility.

  • HB

    Heini B.

    31 7 2015 10:14

    2       0

    What amount of money printing would be needed to offset the unwind of a 9 Trillion carry trade in combination with a loss of 5 Trillion in revenues from the commodity producing nations.

  • SD

    Sara D.

    31 7 2015 08:36

    2       0

    This is great! More of these, please ....

  • JC

    Joel C.

    31 7 2015 03:23

    4       0

    wow. every investor should watch this vid. keep things simple, throw in boat loads of humility, add a touch of big picture, lateral thinking and stir with risk management. excellent. RVTV at its best!

  • RM

    Richard M.

    30 7 2015 22:59

    2       0

    Great stuff Raoul - extremely educational (one of the things I like most about RealVision)! Keep up the awesome work!

  • ii

    ida i.

    30 7 2015 17:10

    13       0

    Mr. Pal, if you think that a strong dollar will push down oil, then the same thing for gold? I mean if oil goes to 20$, then gold goes to 500? I'm asking because you say you are long gold,....

  • AD

    Anthony D.

    30 7 2015 17:06

    1       0

    Rivals the Malmgren interviews as among the best. A rigorous presentation from someone who thinks in probabilities, and realizes that he too is not infallible.

  • GM

    Gerald M.

    30 7 2015 14:50

    0       2

    Raoul, you said commodity countries are in trouble "especially Canada". Why single out Canada like that
    Please elaborate if you can. Many Thanks for this presentation. I will watch it several times.

  • GM

    Gerald M.

    30 7 2015 14:44

    3       0

    Really great presentation. Solid backing for your thesis. Something big is happening. The commodity boom was a mirage (like those Ghost Cities in China). The pain of the energy collapse still to come.

  • cr

    chris r.

    30 7 2015 13:23

    1       0

    Good Stuff Raoul

  • CR

    Carl R.

    30 7 2015 09:58

    1       0

    I like your views and you explained them brilliantly. Thanks.

  • JH

    John-Erik H.

    30 7 2015 09:34

    1       0

    If SK Won decreases (output factor) and commodity prices decrease (input factor)...shouldn't that boost the SK export economy?

  • TH

    Timo H.

    30 7 2015 09:08

    0       0

    I smell a lot of money priting in the end. USD included.

  • TJ

    Terry J.

    30 7 2015 08:42

    1       0

    Powerful and persuasive presentation full of potentially exciting investment opportunities. Thank you.

  • DF

    Dominic F.

    30 7 2015 08:25

    1       0

    The business cycle is no accident is it ;-)

  • sa

    santosh a.

    30 7 2015 06:21

    3       0

    What can go wrong with the USD bull hypothesis? In the Pomboy interview she noted that USD long is a trade with the majority of speculators on the same side.

  • CA

    Christopher A.

    30 7 2015 05:25

    2       0

    In a dollar bull market won't the currency translation postpone the pain in the Canadian oil patch for awhile? i.e. selling oil in USD while expenses are in CAD.

  • PD

    Philip D.

    30 7 2015 05:04

    1       0

    Raoul- Will like to see a video on Australian Property Market from your perspective & more importantly how investors can profit through a downturn using paper investments...products on your horizon

  • sa

    santosh a.

    30 7 2015 04:39

    2       0

    Thought provoking analysis. If we get a US recession, shouldn't that mean the Bernanke Helicopter Doctrine is nothing more than snakeoil? Shouldn't the Fed credibility be shredded?

  • DH

    Dale H.

    30 7 2015 00:22

    5       0

    Enjoyed this. Thanks. Got me thinking and doing more research to gain a greater understanding.. Can be watched several times. :)

  • DH

    Dale H.

    30 7 2015 00:19

    1       0

    What variables wd a thought experiment of the Fed influencing $ down have in it? + and - of? Impossible? If TPP passed, U.S. uncompetitive? Eg in NZ agric price halved + quality high + more rate cuts

  • RF

    Raoul F.

    30 7 2015 00:11

    0       0

    Curious about your logic re the US ISMs. Assuming a 1 year lag, the ISM hasn't yet dipped below 50. Also the U of Michigan US consumer confidence sentiment is higher now than in years. Thoughts ?

  • JS

    John S.

    29 7 2015 23:22

    2       0

    Outstanding presentation!

  • db

    don b.

    29 7 2015 22:39

    0       1

    Gasoline demand in the U.S. is accelerating due to lower prices Raoul

  • MC

    Matthew C.

    29 7 2015 22:13

    7       0

    WOW - "access a probability that I am right and act accordingly" You will not hear that from any other financial source. This is why RealVision is the real deal.

  • dd

    darrell d.

    29 7 2015 19:27

    5       0

    It would be great to hear what Grant thinks of this theme - strong dollar vs gold.

  • RP

    Raoul P.

    29 7 2015 19:18

    8       0

    Ali - crisis and causation. If you follow the global carry trade logic of now and the past bull markets then you realise that a strong dollar leads to crisis if there is too much dollar debt.

  • RP

    Raoul P.

    29 7 2015 19:17

    9       0

    Oil is at full capacity in terms of production. Thats the point, as demand is eroding due to the slow down and price falls. i.e excess production Don.

  • RP

    Raoul P.

    29 7 2015 19:15

    10       0

    I do not see a Fed easing as a catalyst for weak dollar as res t of world will be worse. I see that an an accelerant. However, when Fed eases with all other CB's then gold explodes higher.

  • db

    don b.

    29 7 2015 19:06

    2       0

    Gary Ross of PIRA Energy Group says the world has zero spare capacity of oil, & that 40% to 50% of the worlds oil is depleting by 6%-8% per year. I think the dollar bull mkt is smoke & mirrors.

  • TW

    Thomas W.

    29 7 2015 18:39

    3       1

    Alt view: Fed not blind. Sees what you do. Doesn't raise rates. $ swoons. Pressure off EM $ debtors. REFLATIION!

    Whaddya think RP?

    $ up not why AU down. Correlation problematic.

  • BL

    Bruce L.

    29 7 2015 18:00

    7       0

    3-5 Tril $ removed from economic activity is hugely important observation.

  • TY

    Tyler Y.

    29 7 2015 17:54

    2       0

    The clarify of good logic is rare. In the end, this requires a lot of dominoes to fall correctly but that's the fun of Global Macro. Excited about the potential for the well described Monsoon region

  • ET

    Ed T.

    29 7 2015 17:11

    3       0

    Super! If the big theme is a rising dollar and falling EM currencies and commodity prices putting mountains of global debt under duress, will the gold price always act like just another commodity?

  • GG

    George G.

    29 7 2015 16:53

    3       0

    Canada in trouble as oil heads lower plus very uncertain elections directly ahead... Like long USD... be great to hear Raoul talk on where Bitcoin is going

  • JP

    Jeronimo P.

    29 7 2015 16:50

    25       0

    A great and thought-provoking talk about knock-on effects. This is a great lesson for thinking in terms of probabilistic outcomes - Most people think trading ideas are hard predictions..

  • NF

    Nico F.

    29 7 2015 16:44

    7       0

    Great follow-up, Raoul! Long dollar + bonds is a great risk reward in the current environment. Also loved the uranium/crude spread idea.

  • JK

    Jon K.

    29 7 2015 16:39

    4       2

    Looks way too obvious.

  • KT

    Kevin T.

    29 7 2015 16:31

    4       0

    I like videos like this that argue in favour of a particular trade, it was very interesting. Global commodity bust outlook seems at odds with gold trade, I wonder what Grant thinks on this?

  • GT

    Graham T.

    29 7 2015 16:26

    9       0

    Raoul you are too modest. You know a lot of fuck about fuck.

  • TF

    Tom F.

    29 7 2015 16:23

    5       0

    Great work Raoul - logical argument backed up with sound analysis and fwd thinking. Being Australian I agree with the commodity nations (like ourselves) in trouble in the next decade so much excess!

  • AA

    Ali A.

    29 7 2015 15:41

    5       0

    Also on the Germany v Japan exporting topic, German balance of trade is much higher that Japan since 2008 and unit shipments to China far outstrip those of Japan

  • AA

    Ali A.

    29 7 2015 15:28

    3       0

    Dollar strength leading to a crisis - correlation v causation?
    Also, aren't all the other trades around this theme merely the same trade expressed differently - likely to be highly correlated?