Insider Talks – January 2020

Published on
January 8th, 2020
39 minutes

Insider Talks – January 2020

Featuring Raoul Pal, Julian Brigden

Published on: January 8th, 2020 • Duration: 39 minutes

Raoul and Julian discuss that their biggest concern is the divergence between macro data and the price action in equities, whereby optimism is extremely high without much to back it up. Julian cites that since early September when the Fed started its repo facility, Apple has gone up 38%. As such, Julian argues for prudence and recommends value stocks over growth stocks in this environment. Raoul believes that liquidity provided by the Fed will not last past the first quarter of 2020 and that indicators will begin rolling back down again. Both Raoul and Julian agree that precious metals will do well going forward. Filmed on January 3, 2020.


  • WM
    Will M.
    10 January 2020 @ 18:53
    Lets see if Martin Armstrongs ECM is correct and we hit a top around Jan 18th.
    • DR
      David R.
      29 January 2020 @ 15:28
      That's for the DJIA.
  • ML
    Min L.
    28 January 2020 @ 00:49
    can you please add caption functions for these videos too? Thanx.
  • SA
    Sean A.
    20 January 2020 @ 02:05
    No "Download Audio" Feature for this conversation??
  • MB
    Max B.
    11 January 2020 @ 14:49
    Can anyone help point me to a good resource for getting forward estimates (forward p/e, forward EPS, forward revenue etc.)? Not my normal post but any help would be much appreciated....
    • PM
      Philip M.
      13 January 2020 @ 01:00
    • FM
      Fraser M.
      18 January 2020 @ 08:20
  • BA
    Bob A.
    9 January 2020 @ 07:20
    The Fed has already seen what happens when they try to shrink their B/S. While I agree that the Fed would like to withdraw the ever expanding amounts of their additional "NotQE" infusions I think the reality is the not so clandestine QE4 program will only continue to expand. When it gets to the point of it "pushing on a string" then helicopter money, negative interest rates or whatever the latest Hail Mary program will take center stage, rinse and repeat. All of this is leading IMHO towards a form of Japanification, American style. However, it could take a long time. Buy some gold.
    • DR
      David R.
      10 January 2020 @ 01:31
      The US is not like Japan. Very different situations. Japan's debt is entirely owned by the Japanese, not foreigners, and Japan does not have the evils of the US twin deficits. Seems the US is more comparable to Zimbabwe and Venezuala, except the US WRC (world reserve currency) status is holding US together for now but WRC status could fade before long (it's already begun).
    • WM
      Will M.
      10 January 2020 @ 18:35
      and its not really QE 4 either. Its short term liquidity demand......
    • DR
      David R.
      17 January 2020 @ 17:13
      Will, true that but in either case, the Fed balance sheet is rapidly expanding, currently at its fastest rate ever. It won't stop, but more likely will accelerate, as the Fed has taken on Weimer-like characteristics of funding the US gov't - the most bankrupt entity in human history. In addition, most of the huge, unpayable debts from pensions (public and private), healthcare, student loans, auto loans etc right through to the bloated US military the country can't remotely afford will all be "paid" by Fed money creation. We've seen this movie before numerous times in history, albeit never on such a massive scale. Let's watch!
  • BD
    Bryan D.
    14 January 2020 @ 09:42
    Even if the Fed do withdraw liquidity after New Years they will easily inject again and keep it flooded with bill purchases. With Williams being appointed to the NY Fed chair with no money market experience and then ousting some of his most experienced markets people before the September repo blow up this event sits with him. This should have been seen well in advance with the amount of coupon payments, tax day and maturities on that day as well as the combined effect of bank regulations over the last decade leaving it hard for bank balance sheets to intervene due to the various ratios they now have to abide by usually with internal limits setting these ratios even higher so they would have to breach a number of internal limits before they breached the regulatory limit. Williams will not let it happen again as he has eyes on Powell’s seat when his time is up so the easiest answer to that is just buy more bills. He’ll act in his own self interest here.
  • RH
    Rob H.
    12 January 2020 @ 19:22
    Raoul, I'm curious about what happened to all the RMD selling that never happened? Was is overtaken by buyback desks? Or did the RMD distributions find their way back into the market via taxable accounts?
    • YO
      Yoshitaka O.
      13 January 2020 @ 08:59
      Yes I am also curious about the above. Literally no effect in the market observed. Vix crashed to new lows
  • JK
    Jim K.
    12 January 2020 @ 02:13
    Great discussion guys and Happy New Year! Raoul, what is the best way to get exposure to Bitcoin for someone who has never bought/ traded it before? Thanks again.
  • KA
    Kelly A.
    11 January 2020 @ 17:40
    Really helpful overall, and REALLY compelling near the end with 1999 comparisons, today's liquidity, future MMT, etc. Thanks, guys.
  • CH
    Christian H.
    9 January 2020 @ 20:30
    As always, another great discussion. Julian mentioned growth/value ETFs - what are the symbols for those? Didn’t see them on the recent trade sheet. Thank you.
    • JL
      J L.
      11 January 2020 @ 09:39
      IVW / IVE
  • JA
    Joseph A.
    9 January 2020 @ 13:37
    Not sure when this was recorded. Seems to be before the latest news on the Iran retaliation and subsequent reversal in the AUD/USD trade and also the Silver trade while up had a big daily reversal (please could you always include the recorded date not only the published date). Wondering what thoughts are on those as the dollar index now up to 97 at time of writing which was a watch level and after snap risk off during the attack and subsequent uncertainty until Trump spoke then there was a big risk back on rebound. I agree with Julians assessment that repo/QE has not been used as intended and instead of adding liquidity it's just used to buy the hell out of everything especially growth/tech stocks. However I think there is a lack of transparency evident in what repo really is, what it does, who it's for and as mentioned how it is perceived to be used vs how it is actually used! This insight would be great for so many market participants and I wonder if seeing as even Raoul and Julian aren't 100% sure about how it's used and yet it is clearly SO IMPORTANT to understanding current market behaviour, whether this is a really important one for RV TV to find some people who can once and for all clarify the difference between QE and repo and provide an explanation for why the Federal Reserve think it's designed for one thing but market participants use it for another. This might help explain why for example at the last Federal Reserve meeting Powell made a statement along the lines of them not being sure why the repo had not 'fed' through (pun intended) to the markets the way they would have expected them to! I was screaming at the TV for a journalist in that room to push for a better answer to that statement. They never seem to ask the most obvious and glaring pertinent questions of the Fed and the Fed always seem to get away with fudged answers or they provide pre-rehearsed statements that don't really answer anything allowing them to get away with tackling the most fundamental questions about understanding of their own policy and its efficacy. Understanding whether their policies are working the way intended is critical for them to know. As far as I can tell, as per Julian's comment, it's merely crack to the addict and not really helping the wider economy. It's just an illusion. For example I don't think negative interest rates would ever get properly passed on to retail customers. Banks would still charge a positive interest rate on mortgages when they should in theory get paid to have a mortgage in a negative interest rate (NIR) environment although i did read somewhere about one scandinavian country experimenting with negative mortgage rates it isn't the norm as far as I know even in places where NIRs are prevalent. I also think that all this QE / repo has done is help banks in isolation it hasn't helped economies as a whole evidenced by all the sluggish data that is at odds with the stock market performance. Based on previous comments by the Fed I think they do just keep juicing forever even with record low unemployment and all time highs because sure as heck if those metrics were to turn that would give them another excuse to keep juicing so I see that they juice in all scenarios right now with no end in sight timed to coincide with any hint of tightening of conditions or stock market pull back in response also to the predictable pressure and hints from Trump on Twitter. However I do note that Trump recently also stated aside from lower interest rates he also wanted to see a weaker dollar supporting further downside pressure on interest rates and making it unlikely that rates will rise any time soon. I wonder if Raoul and Julian could suspend their disbelief for a moment and present the other scenario which is QE/repo forever? If all central banks keep doing this for decades to come, could they hypothesise what that would mean in a presentation or Insider Talk about that or find someone to talk about it and put it on RVTV? It may be that we are living in that new normal and because, relatively speaking, it's uncharted territory, it will by human nature take a long time for people to realise and even longer to adapt to that being the new normal within our remaining life times! One thing that seems to be normal is that change is a constant and market behaviour evolves over time even though I know you are all working to frameworks that you have used for many years. Have you considered the possibility that those frameworks might need to change and what those changes might involve? Not wishing to digress or get too esoteric here but I think there are insights to be had by exploring what a new normal could look like that might apply to any current framework. I know RVTV has explored this a bit but I am think specifically about the idea of QE/repo forever scenario and I suppose also add fiscal / modern monetary theory (MMT) to that.
    • HH
      Hugh H.
      9 January 2020 @ 17:03
      Wow! great comments. Thanks for sharing your ideas, Joseph.
    • CS
      Cameron S.
      9 January 2020 @ 19:58
      Filmed Jan 3rd. In the bottom of the video description paragraph. Great comment, I'm curious about QE vs. Repo as well and if it could just be QE infinity
    • DL
      Darryn L.
      10 January 2020 @ 01:43
      On the QE/QE forever-type questions I'd suggest have a look at a book by Richard Koo - 'Balance sheet recession and the QE trap'. There is an interview Grant Williams did with him a few years ago on RVTV. Also you can find videos of presentations he has given on you tube. The repo question is harder and requires an in-depth answer but I believe it is related to the Richard Koo view in addition to what I describe: Google to find out what a repo is but in essence it works like a secured loan. One counterparty gives cash and receives collateral and the other vice versa. Since the Basel 3 regulations and local interpretations basically (for practical purposes) banks can't lend to one another unsecured (They can do it but it hits their LCR and NSFR requirements - google for those terms). So pre regulation money could flow through the banking system to where it was needed. Now the banks need a 'middle man' such as money market fund to buy their unsecured commercial paper. In the past a bank with excess cash could just buy another bank's CP. They can lend directly to each other but only on repo, so repo is a more relevant rate than fed funds or Libor on how the money market is travelling. The other 'middle man' is the central bank. I think of it a bit like an atom, the banking system used to the nucleus with the other players: households, mutual funds businesses etc being the electrons. Now the banking system is another electron and there's no nucleus other than the central bank. A bit of a ramble but too much to put in a comment really. There are a few repo discussions on RVTV and there is one on real vision access as well.
    • WM
      Will M.
      10 January 2020 @ 18:47
      Not only do I want to shout at the TV and feckless financial reporters, but believe the repo issue is much more serious than anybody is saying. Without the Fed REPO support short term interest rates would soar. How long can this go on for?
  • ZW
    ZH W.
    10 January 2020 @ 01:31
    Julian, to play the Value / Growth theme, is there a recommended pair in futures if one can't trade ETFs?
  • df
    diamantino f.
    9 January 2020 @ 22:30
    Raoul, what is your take on the “The January EUR/USD Effect” that Peter Brandt put out ? thank you and a great 2020 to both
  • CS
    Cameron S.
    9 January 2020 @ 18:14
    Am I correct in assuming that the consequences of a surprising NFP to the downside would be: Equities down Eurodollars/Bonds up Dollar down Gold up What kind of number would we need to see for NFP to be a catalyst for the moves above? As always, thank you guys! Great conversation. Fascinating hearing Julian getting more bearish, with Raoul steering clear of equities. Nearing the top?
  • DB
    Daniel B.
    9 January 2020 @ 09:37
    Raoul, the comments Julian makes about repo liquidity fuelling the AAPL rise reminds me of the consequences Mike Green made to you about passive investing during your chat with him. Do you agree? By the way, this is a different outlook to what I’ve seen from you previously Julian. You’ve been supportive of reflation being a strong possibility, now you seem positively scared about the consequences - it’s making me really sit up and notice.
    • RP
      Raoul P. | Founder
      9 January 2020 @ 13:15
      Yes, the passive argument from Mike seems correct. Even talking heads on CNBC are now in disbelief over the rally but it goes on every day as passive flows just overwhelm anything else. How this turns around, I’ve no idea...
    • RM
      R M.
      9 January 2020 @ 18:12
      Also of note since the Repo "non-QE" QE, KWEB (Chinese Internet) has turned on the burners. It has had a positive 20/50 week cross (see Julians older pieces), has just crossed over the 3 year MA and is showing a good start to the new year. Would love for you guys to talk about China trends/liquidity intersecting with US liquidity flows. Not saying the KWEB correlation is from a specific cause, just noting it's rapid rise.....take a look!
  • MP
    Matthew P.
    9 January 2020 @ 11:36
    I wish julian would let raoul finish his thoughts without interrupting. Thx for content
  • NI
    Nate I.
    8 January 2020 @ 22:40
    Apple is the 5G play for funds with $billions. The run-up is crazy, but I think that's the catalyst. It reminds me of Intel, Cisco, Sun, Yahoo, ... in the late 1990s. Way overdone. It took over 20 years to breakeven if you bought those names at the top. Many Internet darlings never recovered. Apple is a good company but it will be a great short on valuation when the panic buying is exhausted. Tesla I just can't understand. It just makes no sense with so many competitors now hitting the market and government subsidies rolling off. Someone explain Tesla to me. I'm at a loss.