Insider Talks – August 2017

Published on
August 7th, 2017
Duration
42 minutes

Insider Talks – August 2017

Featuring Raoul Pal, Julian Brigden

Published on: August 7th, 2017 • Duration: 42 minutes

In this wide-ranging conversation Raoul presents the second part of his research on the retirement crisis and also discusses the dollar and what would make him change his long bias. Julian cautions subscribers about the EM story and lays out a longer-term roadmap for protecting your portfolio from dangerous assumptions about correlations and liquidity.

Comments

  • DW
    Daniel W.
    20 August 2017 @ 17:12
    Hi Julien, thank you for your great work! For the first time in 10 years of actively investing money I really feel being ahead of the mass instead of following it. I have a question for Julien following the August Insiders Talk. Julien laid out his perspective on Bunds, especially the chance of a sharp correction in Q4 2017 or beginning of 2018. He also mentioned the DAX to be a potiential "victim" of a correction in Bunds. It would be awsome if Julien could lay out his analysis on Bunds and DAX for the next month, until Q4. Does he think it makes sense to already scale into these trades or does he see higher prices for DAX and Bunds until then? Appreciate your work. Kind regards Daniel
    • JV
      Jason V.
      31 August 2017 @ 01:34
      I am also very eager to hear more detail on Julian's Bund/DAX view and how best to play this.
  • KT
    K T.
    8 August 2017 @ 11:34
    Hi Raoul, In your thesis on the demographic secular cycle and this video you only account for BB's and Millennials, what about Generation X. I understand its a smaller population over a shorter time frame but surely we must have some impact. Your thoughts much appreciated.
    • JW
      Jim W.
      26 August 2017 @ 08:24
      I'm curious to see an answer to this, but my assumption as a Gen Xer is that we are going to carry the initial (confiscatory) load of the pension and government defaults, as we will be in prime earning years.
  • RI
    R I.
    16 August 2017 @ 18:44
    Julian/Raoul - Do you see any similarities between the current market and that of the mid-1990s that warrants further attention? There seems to be a reasonable probability that today's market mirrors that of 1993-1995 given a variety of similarities, including: S&P 500 P/E ratio (valuation) versus VIX (complacency); USD system liquidity transitioning to deficit from surplus; gold price technicals (likely continuation of bear market); etc. We have seen many of these data points presented in Real Vision (e.g. via Daniel Want, SentimenTrader, Variant Perception, Nautilus, etc). Have you investigated the mid-90s as an analogue? Thanks.
  • RA
    Robert A.
    7 August 2017 @ 21:28
    I'm playing the potential hedge against Equities and Bonds declining together with Cash and what I consider to be an "insurance policy" with Jeff Cole's Artemis Capital's Vega Fund. Being an early RV TV subscriber I watched his very first video with RV and decided his Vega fund would be a perfect diversifyer for my portfolio (he has done 2 RV interviews and think both are very much worth watching). To me the sizing of this "insurance policy" is critical. My take on what Jeff is doing is that he gives up the smaller VIX changes to fund his fatter tail positions which should pay off in more extreme volatility situations. My "insurance policy" does cost me money, albeit less, IMO, than some alternatives, but does allow me to keep some legacy Equities that have large tax consequences to deal with if sold. Jeff is an extremely bright guy and has the chops to trade VIX products on my behalf through his fund, IMO. If you will watch his 2 RV videos I think you can quickly see exactly what his strategy is. The Artemis folks have been very easy to work with as well.
    • NI
      Nate I.
      15 August 2017 @ 06:44
      I was thinking very much along the same lines with Artemis Vega. Sizing is my challenge. How did you size it? How many dollars in Vega per dollar of long US equity and how much damage would it likely mitigate?
  • JM
    James M.
    11 August 2017 @ 03:55
    Please, please consider only answering user questions towards the end of the broadcast video. I felt your answering questions at the beginning broke your momentum. I'd like to get your thesis out up front and then go from there. Thanks
    • RP
      Raoul P. | Founder
      14 August 2017 @ 18:51
      Thanks James. We'll take this on board.
  • DY
    Dmytro Y.
    12 August 2017 @ 07:27
    Dear Julian, Unemployment in south Europe is very high. Debt load is very high. How do you see this with your thesis of growth in Europe and rise in interest rates if I understand you correctly. Besides demographics in Europe are negative too which is perma deflationary (as per Raoul). Could you please answer to this here or in any next publication or video. Many thanks
  • JL
    J L.
    11 August 2017 @ 08:20
    Hi all, just a general question for the more experienced traders on here. I am looking at the 10y bund yielding 0.39 right now while DEC17 futures seem to be heavily backwardated to SEP right now, roughly 161.5 vs 164.4. Have I got anything wrong or is this a common occurrence in a bond market? Thanks
  • CS
    C S.
    10 August 2017 @ 05:06
    Thanks for the MI service Raoul/Julian. I'm not a sophisticated 'investor' (dont have much time for a multiplicity of markets/trading vehicles) so my main interest/value in the service is your impressions on whether things are likely to turn risk on/off, a little on timing etc. I'm more of Raouls longer-term mindset (I'd rather trade 1-3 times a year than on a weekly or even monthly basis). Im happy for you guys to get on with what you do knowing you share those impressions what the time is ripe. (The tools I use to 'leverage' those impressions is of course my responsibility/business.)
    • JB
      Julian B. | Contributor
      10 August 2017 @ 14:55
      Hi Hot M (really ???) Anyway we are aware there are a lot of people in your camp. Indeed, it was investors like yourself that we had in mind in our discussion on bubbles, EM and risk parity. These are topics that cover excesses created by ridiculous central bank policies and all look ripe for correction. Hence, our suggestion not to actively short but to start reducing some risks.
    • CS
      C S.
      11 August 2017 @ 02:11
      It was a handle i hurriedly pulled out of my proverbial when i was in 2 minds as to whether I would subscribe. Hopefully it sticks :D. Cheers!
  • RM
    Robert M.
    10 August 2017 @ 20:57
    Julian, What are your thoughts on the Biotech ETF (IBB). I feel like we are in the early stages of when the bulltrap starts rolling over. I tend to struggle with timing. I am more like Raoul in the sense that I get an idea, but I need a longer time frame for things to pan out. Is there anything you do specifically that could help me with timing trades in general?
  • ag
    anthony g.
    9 August 2017 @ 16:25
    We might be getting a war or something like it re North Korea. How does this change the macro outlook if at all ? And if it does change the macro outlook, what should we expect going forward ?
    • JB
      Julian B. | Contributor
      10 August 2017 @ 15:05
      Hi Anthony Well if do end up playing "thermos nuclear war" it may all be academic. However, at the end of the day it was going to be something that triggered a risk off event. Markets have simply become wound too tight and risk premium are none existent i.e. bond vol at 30 yr lows. Hence, our suggestion to reduce some exposures (see comment above to HOT M.) Personally, hoping that a risk wobble now sets us up to short some bonds but we will see!
    • ag
      anthony g.
      10 August 2017 @ 16:40
      thanks ..... it is getting interesting out there. Just read M. Lewitt's latest Credit Strategist edition dated 1 Aug. hmmm.
    • ag
      anthony g.
      10 August 2017 @ 17:04
      you might want to see George Friedman's ( GFS ) views on N. Korea. I get his stuff and might say it is very interesting. John Mauldin is a big fan of GFS for what that is worth. etc. best,
    • ag
      anthony g.
      10 August 2017 @ 17:07
      sorry - it should read GPF not GFS . Apologies.
  • PG
    Paul G.
    10 August 2017 @ 04:05
    Mention is made of buying a put on certain FAANGs and related and Bunds. What sort of time frame would you look at - Sept, Oct Dec? Cheers
    • JB
      Julian B. | Contributor
      10 August 2017 @ 14:58
      Paul G. Just posted in Twitter @julianMI2 a comparison between Amazon and Microsoft in 2000. Back then MSFT fell almost 50% in 5 months and most of that in 8 weeks. I think Dec puts are perfect as they give you time for the move without killing you on time decay
  • TJ
    Tay J.
    10 August 2017 @ 09:49
    'Sure would be helpful to show some simple charts to illustrate the points you are making, e.g. the shift to a rising yield curve ahead of a recession, or the manner in which, say, Euro/Singapore EURSGD might have moved in the previous risk-off episode.
  • SB
    S. B.
    10 August 2017 @ 08:23
    Raoul Pal, do you have any updated thoughts on the oil price? Especially since the Russell Clark interview? Thanks.
  • NB
    Neil B.
    8 August 2017 @ 23:24
    Two pertinent topics I am raising. I had posted some analysis and questions within the comments section of Raoul's "Decision Time for the Dollar" and Julian's "Emerging Markets" pieces last week. Have not seen any responses/feedback on those from them but I just raise them in this thread for renewed awareness. Shanghai Comp seems to be on verge of upside break out and EEM already experienced an upside break out which is sticking thus far. Additionally many are pretty bullish on Emerging and Overseas markets at this stage. One of them being Jeffery Gundlach who recommends shorting the SPY, going Long US Volatility and long EEM. I realize Julian makes the case in his Emerging Markets piece that the Eurozone behind the curve on inflation stance which will lead to rising rates and decline in European bonds will whack the emerging markets. But from a charting/price action stand point EEM is looking pretty strong having just broken to the upside of a 10 year downtrend channel. Is this a fake break in light of Julian's analysis about the ECB bind? Also Shanghai comp looks ready to have a triple top or a break out on third attempt at about a 3 year sideways to upwards consolidation. So again, will this be a fake move based on Raoul's comments about Shanghai Comp looking like it's topping out in his related piece? Food for thought based on recent price action and sentiment turning quite positive for emerging and Asian markets.
    • CS
      C S.
      10 August 2017 @ 04:49
      Neil, Greg Wheldon had a similar view on the Shanghai Comp. I have a very simplistic view on things, but I see quite a few markets at junctures eg, Hang Seng index back around 28k (got to this level before a break to 18k early 2016 - which is not far off an all time high 32k 2007); AUDUSD at or breaking 77.2c/80c level; GBPUSD early to mid 30s. So Raouls by the end of the month comment is quite pertinent. One of the problems I find I have with myself is I cant wait to FFWD and find out which way things fall, and end up taking a position in no mans land and then having trouble taking positions (or closing them) when things do fall one way or another. Sounds like 'hang on' is the advice presently.
  • PG
    Paul G.
    10 August 2017 @ 04:06
    PS just listening today - post the "zuma" secret ballot in RSA and seems to have hit ZAR any future thoughts on ZAR
  • ML
    M L.
    9 August 2017 @ 00:50
    Thank you for another great video with excellent points, as always from you both. On a bond-stock sell of, possibly emanating from Europe: it seems difficult to envisage anytime soon in view of ECB bond-buying and relatively softer inflation expectations based on swaps (but, yes, they are higher than last year). Also, on a possible DAX correction, we now have a better and more broad-based economic backdrop in Europe providing support. Since the bund sell off in Apr 2015, we now have CSPP @ a EUR60bn per month clip to contend with. Yes, there could be another loss in faith in QE, as in 1Q 2016, but there is so much 'FOMO' still in markets that make it difficult to see how things pan out. The Fed's handling of its B/S is very interesting indeed and how markets react to this (EM in particular) will be a trigger to watch.
    • JB
      Julian B. | Contributor
      9 August 2017 @ 16:36
      Michael my works suggests MUCH more rapid inflation/growth picture into H2, which will blindside both the ECB and markets I'll discuss it soon in an In Focus
  • RM
    R M.
    7 August 2017 @ 13:35
    Would like to see some regular disscussion of whats happening in China, as the third horseman of the global macro environment, otherwise first rate discussion.
    • RP
      Raoul P. | Founder
      7 August 2017 @ 20:33
      Definitely. It will feature. It is not centre of our current thought processes right now but is always part of it.
    • RM
      R M.
      8 August 2017 @ 15:31
      Thank You! China is so difficult for a retail investor to evaluate, but China does have such a global impact.....
    • MM
      Michael M.
      8 August 2017 @ 19:01
      I hate to ask Raoul & Julian for their thoughts on a long transcript but if you have a moment sometime & think it is germane please share. From Anne Stevenson-Yang's podcast with Brian McCarthy as it relates to RMB & USD - https://www.jcapitalresearch.com/ TRANSCRIPT (90% of the conversation) as it is germane to the discussion at here. Quote BEGIN > Brian: China capital flows move inverse to the dollar. When the USD is strong the pressure on China's capital account is greater. When the USD softens the pressure on China's capital account lessens. The pattern has been evident the last few years. November/December 2016 (wake of US election) the USD sharply rallied for a couple of months and just like that the outflows from China picked up to $40 to 60 billion per month. Like 2016 China enacted policies to alleviate that circumstance BUT then the USD weakened. So we don't know which has reduced capital flows. Reserves Rising? …the foreign assets in RMB terms gives a better sense of the flow out of the reserves. It has been small single digit negatives for the last few months… better than it was late 2016… BUT the headline reserves rising now are a function of the revaluation of their USD assets to some extent (and some degree of fudge), such as the mark to market of their assets if the PBOC where to sell a fixed income that is at a premium and roll into a fixed income security trading at par, they can harvest that premium because the assets are marked at book value. Path of the dollar is key will determine how long the PBOC has… AND whether China itself will create a stress event by sanctioning some credit event which could unleash problems in the domestic credit markets. Now trying to unwind a $300B insurance company because of some mysterious political prerogatives could end up being that event. 1 [Anbang Insurance company] … Measures… in late 2015, early 2016 when China was under a lot of pressure they were intervening in the USD/CNH market . So they had to control both the onshore & offshore rate. The intervention in the USD/CNH market through 2016 was very expensive. Early 2017 they changed tact. So they are no longer using reserves to control USD/CNH they are allowing interest rates to do that. So there have been a couple of instances of 40%, 50%, 60% in overnight rates in CNH and this is not an environment where someone can afford to be short a currency where they are paying 40% to 60% each night. Further explanation… the first thing they need to do to make this new rates defense of CNH work is to cut off the flow of RMB from onshore to offshore. Because if onshore rates are at 1% or so and offshore rates in CNH are 10 times higher everyone in China will want to move money and take advantage of those rates, so that needs to be cut off by not allowing remittances from onshore to offshore. So when you disconnect the arbitrage from the onshore to offshore rate it is now very simple particularly in that the pool of CNH has shrunk dramatically in the last couple of years it doesn't take much for them to trigger a liquidity squeeze in CNH. They just have some banks execute short-term USD/CNH forwards which withdraws spot liquidity and they can push short-term interest rates wherever they want them as long as they have disconnected the arbitrage. Step one cut off flow of RNB from onshore to offshore and then whenever the CNH misbehaves instead of having to spend reserves to knock the market back in line they just engage in some open market operations via Chinese banks and drive the rates to the moon which cuts out the shorts. This is a unique situation in the classic currency defense situation. This is the sort of thing that is considered untenable. How did Soros blow up the pound in 1992? They were trying to defend the pound with 14% interest rates and he made the assessment that that was not going to be politically tenable for long. But in the CNH case there's no real domestic cost to that but there are costs though. The Dimsum market will be destroyed. It renders CNH unusable as a hedging vehicle so anyone who wants to invest in Chinese assets and wants a readily available liquid hedging vehicle CNH is not effective since rates can go to 100% you can't roll your hedge. If you have RMB rates in say Hong Kong at very elevated rates for an extended period of time say 10 -12% in a one month deposit a lot of people in China are going to be sitting in a 1% deposit onshore being discontented. So PBOC has only been willing to utilize this tool for 2 to 3 days at a time and then they back off, but it does allow them to push the CNH around without using reserves as they were doing last year. Anne: PBOC came to conclusion a year ago that offshore RMB market was a mistake and they want to retract it. The pool of offshore RMB has declined a lot. But there is still demand for regular old USD. Offshore RMB is not the only window on hard currency so if you eliminate the offshore RMB still why are you not getting more capital flight through property purchases & trade account… Brian: So this offshore RMB is one window that they have closed at the cost of destroying the CNH market and at a reputational cost of "RMB internationalization fantasy" which no one believes is going anywhere at this point. ONSHORE They have taken measures to reduce the need use reserves to control the onshore rate as well but they're extremely damaging. There is a lot of evidence that they have given the local banks quotas on the availability of foreign currency. Early in 2017 the quota was net zero. ICBC or Bank of China you can allow a client to buy USD after someone sells them. Anne: It's regional. There are some regions where it is net positive some where it is net negative. But nationally it is suppose to be net zero. Brian: So you end up with large institutions having the ability to regulator shop. You go around and find the city with positive quota and get a piece and you can move some USD. But to stress… this is a non-stress scenario on the USD now. So everything should be gravy for China now. Emerging Markets are ripping, everybody loves risk, the USD is weak, global liquidity conditions are very benign. It is a perfect external environment and still they are having to use these measures. I'm hearing stories of corporate treasurers of US and other multi-nationals in China who tell people they are literally in line at SAFE to get USD out. If USD isn't really appreciating against anything else you wait in line and don't cause a stink. If the USD starts strengthening the situation begins to matter. So I don't think the quota system will be effective in an environment where the USD is strengthening which increases the perceived need to get USD. This quota system has already done damage to China's reputation as a destination for inward investment. MSCI came up with workaround to let connect eligible stocks in… so China will get maybe $12 billion of inflows a year from now. The PBOC can spend that in a good day if USD/CNH and USD/CNY are under stress. It really isn't a dial mover. Prospects for the USD Anne: What is the likelihood of a stronger USD, considering that we probably aren't going to get another raise this year & maybe not next year. Brian: The last hope for China top avoid a big decline in the RMB while also trying to control this credit bubble that Chinese policy makers probably feel is getting out of control is to get to the next Fed easing cycle. RMB is an insanely convex play on USD strength. 2 Paths: - Post November - China could take some pain, reset the system, halt some egregious value destroying activity - Paths are so broken that they can't take any risks to put the economy on a sound footing so they'll fight everything, the weakness in the currency, any emergence of credit risk, any slow down in growth, Credit markets are compounding very large numbers at very large rates, if you tally up the implicit guarantee what is holding up the financial markets up is the pervasive belief that the govt will take care of it, that no matter what happens in the end the govt. will figure it out. But you tally up the size of China's credit market, the value of the residential housing market… it is too big to bail things out in real terms. They could do it in nominal terms if there is no constraint on the PBOC's ability to print. But the idea that they can close the capital account , print as much as they want, keep it all bottled up in ever increasing Chinese asset prices while still engaging in global trade to the tune of $2+ trillion in & out is impossible. Anne: Sounds to me like there are two paths: One, is to wait on what happens to the USD and ultimately the cycle returns and this is probably early next year when China's goose is cooked all other things being equal in the US. Two, is a slow deterioration in China's growth & quality of living, lesser exports & imports… wind down in activity. Which is something we have been seeing since 2014 or so. The thing that has surprised me the most this year is the really dramatic pickup in the materials markets and housing construction and housing prices. So we are back up to the kinds of level of 2014. There's been growth in the first half of the year. The property prices are higher & the property growth is higher. Its 100% policy driven. Policy directives that they double the pace of construction in Q1 and all the influx of money for building social housing. Brian: They can engage in this activity as long as it can be funded. Ultimately it is being funded by the PBOC via a policy bank to a local govt. It is this liquidity creation that is causing the currency stress. But we just don't see a lot of stress when the USD is weak. You have to be in really, really bad shape for your currency to be exhibiting weakness against a weak dollar. Although that said, we do see this. This is why they had to intervene, there was a big episode of USD/CNY intervention. A big spike in USD/CNH rates in mid-May early June. In mid-May we saw a series of USD/CNY official fixings that were much lower than they should have been based on what everyone was told the fixing methodology was going to be - So you look at yesterday's close onshore, what did the USD do over night, make an adjustment and that is your fixing. So they abandoned that methodology and in mid-May told the market we think the RMB should be stronger… so the PBOC every night was watching the USD weaken against the Euro & Yen… they would come in in the morning and say "we think the USD should weaken against the RMB too and they'd fix lower. Day after day the market would say "No thanks if there are USD available we want them." Problem with this quota system is you create a pent up demand for USD. If you are in line for USD you take them no matter when without regard to price. So the market was not responding to the PBOC signal that they were displeased with the optics of the RMB not being able to rally against the USD when everything else was rallying against it. So they said they were adding a counter-cyclical factor to the mechanism which means they are going to do what they want with the fixing again. But the market didn't really respond to that, but they responded to the increase in CNH rates to 50% overnight and caused a serious short covering in USD/CNH and the PBOC spent some billions of USD whacking USD/CNY onshore so they gave the mkt a little spanking that lasted 3 or 4 days around the turn of the month. Now we're right back in the same situation where if they're not actively managing the onshore exchange rate it just ticks higher. The market wants USD now irrespective of whether the USD went up or down against the Yen or Euro over night. Anne: They are using the USD scarcity to control the market rather than spending down USD. ...
    • MM
      Michael M.
      8 August 2017 @ 19:23
      Anne: What do you think is in the reserve… do they really have $3 trillion to defend the RMB? Brian: Our assessment is that something on the order of half is reasonably liquid in Treasuries, Bunds & JGBs, the rest is less liquid equities, private equities, dollars lent to other entities in the Chinese govt. who have on-lent them to people who are not going to pay them back. Most lending via China Development Bank to emerging markets in Latin America & Africa was ultimately funded out of the PBOC reserves… So those USD are not accessible. SAFE has invested in private equity… potentially round-tripped back into China. They give private equity such as Blackstone or Carlyle or PBG USD to do private equity and have them reinvest that money back into China. Signposts I - High profile credit event would unleash huge problems that would rapidly put pressure on PBOC to provide abundant liquidity. Anne: You think Anbang could be one of those, invested as it was in 12 large domestic stocks? Brian: I don't know much more than anyone, but I do know it must involve serious Chinese politics because this is not the kind of thing they would do just for the heck of it at this point in time. You already have Chinese inter-bank markets, money markets and credit markets very nervous simply because of the regulatory & monetary tightening in the pipeline. So to throw this sudden potential unwind of a $300 billion insurance company into the mix, they wouldn't do that lightly. Anne: HNA and WANDA Properties are now in the mix as well. I think it is simply about stealing money and bringing it overseas. You look at the hugely over-indebted entities like Evergrande and Longfor and the other property companies and instead of being sanctioned for their random or rampant money gathering, they're being encouraged to gather more capital and come onshore to list. It's just the insurance companies that are extracting a lot of assets and buying stuff overseas . Brian: A couple of issues with that theory… First the companies you mentioned have accumulated $15 billion in overseas assets over the last several years. This is peanuts in the Chinese credit system. So it isn't dial moving amount of money in terms of capital outflows … AND in terms of flow this was hot and heavy last year much more than this year … it has sort of subsided… There might be concerns that these billionaires have a parachute.. That could be the political imperative. I'm skeptical that this is policy driven… II - Next period of USD strength will create larger reserve losses. They spend $1.25 Trillion last stress period back to Aug 2015. The PBOC would have you believe that it was $750 billion but… Now stress periods will go to $50 -$100 billion per month . I think they could do that for another iteration but probably can't do two more iterations. III - Combination of fiscal & monetary policy at the end of 2017 …significant tax cut in US.
  • MC
    Minum C.
    8 August 2017 @ 18:35
    What would it take (from a data standpoint) to see the Fed back away from its recent comments about shrinking its balance sheet? How would this impact your view of the USD? Would this impact the ECB's path? Raoul hinted at starting to think about a steepening yield curve as a result of Fed rate cuts. What is the likelihood of seeing Fed rate cuts in conjunction a shrinking balance sheet? Lots of very good insight in the comments section here. Terrific thought process in these interviews. My brain is starting to hurt.
  • NB
    Neil B.
    8 August 2017 @ 17:52
    Hi JULIAN, One set of thoughts related to your Tech sector and bubble stock focus would love your views for the community here .... Just like to add to the overall theme you are focusing on when it comes to Tech sector and Nasdaq mega-cap money drawing "darlings" being a prime candidate for a meaningful correction due to over-extended nature. Specifically that is to keep an eye on the Semiconductor sub sector within the Tech sector. Very often I see this as a leading indicator of what the Tech sector eventually does. Thinking of Semi's as the "nuts and bolts" of the overall Tech sector since their wares go into all things Tech. Keep an eye on the SOXX index ( and various Semi ETF's like SOXX, SMH and XSD ). To me they all look like they are floating along potential break down territory with rising wedged in price action and negative divergences on various oscillator indicators. The setups look to me very similar to the period leading up to the last major selloff which occurred leading up to the mid 2015 time frame which is when the major correction occurred from running into the secondmonth of 2016. The ETF SOXS ( 3X leveraged inverse of SOXX ) would be a potential play eventually once we see a true break to the downside of this setup. This is the corresponding ETF to the TECS "tech sector" ETF ( also 3x leveraged inverse ETF ) which Julian pointed out may be a vehicle to participate at the right point. Just a general ADVISORY to all who don't know though ( I posted something akin to this on one of the other MI comment boards last week sometime ): As with all leveraged ETF's be careful though as they are "leveraged" and also suffer from "decay" over time if they either trade flat or decline against you ( due to the mechanisms the ETF must employ to replicate 3X inverse ). If anyone does not know about what I am conveying here just search the web to study up on risks or leveraged ETF's and the "decay" they can suffer from. Take a look as longer term charts of any of the inverse ETF's and you will see they constantly decline except for a few bouts of over performance to the upside. They are best used only as a smaller hedge against longs or if one is very confident at various carefully measured and tightly rules based trades to try and grab over-performance during specific market conditions one feels very confident in. Just be careful with them and understand them fully first and ahead of the time you may plan to use them. JULIAN ... bottom line ... what's your view on Semiconductors being a good leading indicator and also a prime candidate to participate in larger degree to any downside correction ... perhaps to an even greater degree ... than the larger Tech sector overall? Thank You
  • bc
    bo c.
    8 August 2017 @ 17:49
    Hi, is it no longer possible to download the audio? It is super helpful to be able to listen while commuting. Thanks for the great content!
  • HB
    Heini B.
    7 August 2017 @ 11:39
    I love the line "failed reflation" as this ties many of the discussion topics together. Some disparity with Weldon on RVTV with regards to USD, but he suggested TECS to play US tech weakness. Got put spreads on IBM and NFLX but want to add more exposure here. TSLA & NVIDA or TECS thoughts? Seems like the parabolic shape with necklines on these names are forming up perfectly to Julians original piece.
    • DR
      David R.
      7 August 2017 @ 13:58
      You might want to check out QID. I think they have a nice risk-reward on put spreads. But you'll need to watch out for the negative roll. Maybe put the spread on when Congress comes back from recess and the debt ceiling debate fires up.
    • JB
      Julian B. | Contributor
      7 August 2017 @ 15:34
      Heini B. I'll run the algorithm, which we use for classic bubbles and post the list tomorrow. I'd also like to make the following observation. Its very hard to catch the top in one of these charts. Sometimes you can get lucky with the break of the neckline but even then the only true test of a classic bubble is if after the break of the neckline to get a failed bull trap rally. PS. The one I'm watching most closely is AMZN
    • CY
      C Y.
      7 August 2017 @ 17:02
      I've been playing this Amazon "every other retailer is a zero" story with long call options on a basket of retailers. The vast majority are setting up the same types of charts. Very profitable trade so far and I owe Julian thanks for giving me the initial idea to start digging into this trade.
    • HB
      Heini B.
      7 August 2017 @ 19:14
      Thanks Julian, David & CY, this dialog excellent. I have plenty of battle scars already from trying to short these names too early. I subscribed to Macro Insiders in the hope, with your help, can win in the end. Didn't participate sufficiently in the rally but most powder remains dry :). Excited to see the results of JBs algorithm, thanks very much guys.
    • JB
      Julian B. | Contributor
      8 August 2017 @ 14:52
      Here's the latest list of names that have the makings of Classic Bubbles. As I said before you really only know once you get a failed bull trap rally. FYI DiB = Deep in Bubble. AMZN - Deep in Bubble NVDA – Unclean transition from Mania to parabolic, with some intermediate lower highs NFLX – broke Mania TL ATVI – Deep in Bubble NTES – Deep in Bubble IDXX - DiB ALGN - DiB CGNX – DiB TTWO – DIB good neck line at 80 MKTX – DiB, some fakeouts COHR – DiB, aggressively gappy ABMD - DiB OLED - DiB PEGA - DiB FIZZ - DiB HA – DiB, may be seeing preamble to bull trap, but parabolic move has been noisy TREE - EBIX – DiB, may be seeing preamble to bull trap, parabolic move is noisy and has plenty of gaps ATSG - RGEN – Dib, may be near top of bull trap PATK – More of shift in trend lines than a clear bubble, either mania hasn’t properly started or it’s all mania PLUS - DiB MGPI - DiB HSKA – DiB AXGN - And everyone’s favorite: XBT Curncy - DiB
    • NB
      Neil B.
      8 August 2017 @ 17:36
      Hi Julian, THANK YOU for this list of bubble tickers which you extracted from your scanning mechanisms. Just like to note that such content is exactly what would fit very well into what I noted above ( in a separate comment thread ) as a suggested improvement ( i.e. a section which allows you, Raoul or your Team to post more detail, charts or current thoughts worthy of sharing at various junctures ). Thanks
  • NB
    Neil B.
    7 August 2017 @ 22:36
    Hi Julian and Raoul, Just want to pass these ideas along to you. Something that's occurring to me now that I've been interacting with MI. Can you and your MI Team possibly consider adding a slightly more tactical element to MI which would provide some more incremental engagement in terms of current observations and/or actionable updates? Similar to how Julian had mentioned he had conveyed to institutional clients to sell EUR/USD recently? Not sure how you could fit in something more tactical in nature to MI. I don't believe the comment boards which are all independent of one another and reside underneath each posted content piece/video. But perhaps a separate section within the MI main page where you or your Team could post during any given month your charts of interest and/or current observations ( when applicable ) which you feel worthy to pass along geared towards a some incremental tactical thoughts or guidance? The content could render most recent posts first. Fully realizing this is a "Macro" service, what I am suggesting I think would help fill some of the gaps in the minds of many here in between the once per week content deliveries and enhance overall engagement and member to member interaction as well. Additionally, one aspect of the comments sections I have thought thru. There is no way for us to know whether there are new comments or any comment we have posted has received any new replies without going into each and every separate content related thread and scrolling thru scanning for new content or replies. Might it be possible for MI to add some ability to visually signal us within each content graphic on the main MI page as to whether there has been any new comments and/or replies to any comments we have posted within that content's associated thread which would then allow us to drill directly into that comment section directly? Thank You for considering these ideas!
    • JL
      J L.
      7 August 2017 @ 23:20
      The only pro solution in my opinion is to do away with the comments section altogether and create the usual online forum where threads that receive a reply move to the top, creating a thread for every official update and allowing users to start their own, as done by sites like macrovoices and TIP
    • JL
      J L.
      7 August 2017 @ 23:21
      adding an advanced search feature and email alerts and all the goodies
    • NB
      Neil B.
      8 August 2017 @ 17:35
      Hi Julian, Thanks for your list of bubble tickers below which you extracted from your scanning mechanisms. Just like to note that such content is exactly what would fit very well into what I noted above as a suggested improvement ( i.e. a section which allows you, Raoul or your Team to post more detail, charts or current thoughts worthy of sharing at various junctures ). Thanks
  • NB
    Neil B.
    8 August 2017 @ 17:32
    Hi Julian. THANK YOU for your reply to my questions about the commodity complex below. One follow up QUESTION line of thought... does your reply imply that you also agree we will or should see a relative "catch up" ramp up in the commodities complex ( I know you prefer the food related stuff ) as part of this equities bull market cycle before any longer term downside pressure is placed on this massive bull run? Realizing also that you see the growing potential for some sort of meaningful correction in the meantime? Point being, relative risk/reward might imply that the commodities complex offers better reward potential as compared to equities. On the flip side, if the USD Bull case is still in tact and the USD turns that would imply renewed pressures on commodities complex. Finally, I think under your current thesis you are essentially saying that any measurable upcoming decline in equities should be "bought up" since you don't see a major burst unfolding just yet? Any particular sectors you feel would be better over others to focus on buying during a meaningful dip? Better to go for the previously over performing sectors like Tech and Cyclicals? Or better to go for the ones that are already suppressed like Commodities, Energy and Precious metals. All subscribers I believe would be interested to see what your more tactical oriented viewpoints and strategy on this might be. Thanks
  • gg
    gurdeep g.
    7 August 2017 @ 20:32
    Nice discussion. As a retail investor still trying to figure out how to use MI, hopefully be clearer in next couple of months.
    • RP
      Raoul P. | Founder
      7 August 2017 @ 20:33
      Yes, there is lots of information for you to get accustomed too but you'll get into the rhythm and understand how best to apply it as we go...
    • gg
      gurdeep g.
      8 August 2017 @ 15:46
      Thanks Raoul, I like reading some of these questions and answers you and Julian put up here. I know it will be difficult to answer all, but please keep it up adds tremendous value
  • RM
    R M.
    8 August 2017 @ 15:31
    Thanks for the list!
  • JB
    Julian B. | Contributor
    8 August 2017 @ 15:14
    Hi Neil First off. Think you need to be careful which commodity index you watch. I personally, think the GSCI is too oil weighted. I like the CRB spot, which hasn't declined as far. Within the commodity space I really like food as my work suggests we are getting 4-5% inflation. As for equities I'm not in the massive top camp. At least not yet. What I am worried about is a sharp reset driven by Europe as bond yields reset for much higher growth/inflation. Given the market set up with super low vol, heavy retail investment may look more like 1987 than 2000.
  • jm
    joeri m.
    7 August 2017 @ 21:15
    Hi Raoul and Julian. Both of you seem to think that the fed reducing its balance sheet will be very important in the future for markets. However, Raoul, you stated that you attach a higher probability that rates will rise when the fed reduces its balace sheet. Julian, you explained a few weeks ago on RVTV that rates could very well decline during this inverse QE. I am in the investment sell side and most reports I read from business banks, they seem to think that the fed reducing its balance sheet will lead to higher rates. Personally I think rates will decline for the simple fact that QE lead to higher rates during the actual QE programs. (contrary to popular opinion but as Julian clearly showed) It would be interesting if you could discuss this in the next video.
    • JB
      Julian B. | Contributor
      8 August 2017 @ 14:58
      Great idea
  • NB
    Neil B.
    7 August 2017 @ 20:38
    Raoul and Julian. Thank you for the in depth discussion. Some questions and thoughts which have been in my mind and I believe dovetail well into your joint discussion and would really like to receive feedback on. In observing commodities charts ( using GSCI Index primarily ), despite equities markets being strong globally, emerging markets and China breaking out ( many well respected market observers have become quite bullish on overseas and emerging markets I might add ) and USD weakness ... commodities are weak. In prior market cycles, it seems, equity markets have not really topped out until commodities markets have heated up and pressured global economies thru inflation rises and subsequent "bubble pin prick" CB raise rises. How do you feel about the thesis that equity markets will NOT have a chance to top out until we get commodities really heating up first? And, if so, is the real "undervalued" macro long play within the context of the current bullish run in markets generally actually residing within the commodities complex? In other words, rather than attempting to squeeze further profit out of the current equity market bull run, perhaps the higher reward vs. risk is in the commodities markets as they will eventually catch up to the equities markets and pressure global economies and equities eventually to the downside? I realize Julian is calling for inflation heating up in Europe due to his described ECB mis-steps keeping things too easy in the face of declining and low oil and energy prices which will lead to higher "behind the curve" catch up rate rises that, presumably, would pressure commodities even further? But with commodities still suppressed at this stage relative to previous market cycles is there room for commodities to run faster to the upside than equities before the plug is pulled on the equities bull? Commodities are in a consolidation trading range it seems and quite "unloved" at the moment. So really interested to understand how you see commodities playing into your overall thesis and views at this stage. Also how precious metals fits into all this for you? with USD declining hard recently yet precious metals not responding very vigorously to the upside in response, I feel that this is a "tell" on the notion that precious metals still have further to go to on the downside and or sideways consolidation before they have a chance to really break out of their bear market and heat it upside. Finally, is I look at a chart of USD/EUR ( I realize most quote and look at EUR/USD but there is a reason I refer to USD/EUR for the different perspective it offers ) ... it seems to me a case can be made that there was a large inverse H&S pattern between 2003 and 2014 ( LS 2003-2006 , Head 2007-2010, RS 2011-2014 )with a break out to the upside in 2015 and that the recent decline in USD/EUR "may" simply be a "back test" within context of the sideways break out pattern running from 2015 to present of that large inverse H&S pattern break out. Again, really interested to see your comments back about that and all the other points I've raised here. Thanks!
  • N
    Norman .
    7 August 2017 @ 19:49
    Good piece. Raoul, can I ask on EDZ8, I believe you're recommending buying a call spread which often makes sense if the top part you're selling has some value and is higher in vol. I believe it was a 98.75 - 99.25 call spread but if I look on the screen, you're onliy getting one tick for selling the 99.25 call. Why not just buy the 9875 around 4 ticks? If you're really right this could pay off nicely.
    • RP
      Raoul P. | Founder
      7 August 2017 @ 20:32
      Sure... I just like lowering the cost and the time decay a tad.
  • JV
    Jason V.
    7 August 2017 @ 11:05
    Brilliant work. A privilege to listen to and immensely valuable.