Insider Talks – July 2018

Published on
July 7th, 2018
Duration
43 minutes

Insider Talks – July 2018

Featuring Raoul Pal, Julian Brigden

Published on: July 7th, 2018 • Duration: 43 minutes

In the same room for the first time, Raoul and Julian don't waste any time and jump right into the macro vortex - "decoupling" stock markets, king dollar, risk/reward in bonds and just a little bit of politics. Filmed on 3 July.

Comments

  • DS
    David S.
    5 August 2018 @ 09:54
    Really good analysis. Two novice questions about the prior cross border capital flows that have set up this $ move: 1) How do you determine whether the flows have been hedged or not? 2) Are you just looking at asset prices to see where the flows have been going?
  • JM
    Jay M.
    28 July 2018 @ 08:03
    Really good piece! Made me resubscribe for another year. Thank you Julian and Raoul - also good to see that you are answering questions in this comments section - ty.
  • JM
    John M.
    10 July 2018 @ 21:24
    Given market outlook I wonder what should one do with URA investment?
    • DW
      Daniel W.
      12 July 2018 @ 08:16
      Dump or close eyes and hold tight for the next 10 years I guess.
    • sB
      sylvain B.
      26 July 2018 @ 17:40
      Wouldn't dump now. URA ETF is like a call option with no time decay, uranium market will get into a large unbalance situation. Pb it could take a while (1/2y) for it to play out. Currently there is a slight positive development as the spot price is slightly grinding higher at 24$. All suppliers are committed to make sure price increase as no one is making money currently. Japan nuclear plants have been slow to restart and its one of the main culprit. But one as to recall that the last two bear markets led to explosive bull market, the like were largest miners were up 1000%.
  • TA
    The A.
    8 July 2018 @ 18:44
    Dear Julian, I understand the framework you use for your opinion that we will see a stronger dollar. There is however one thing I don't really get. You state that a lot of dollars (hot money) left the US via the capital account which replaced the dollars that should have left via the current account. The danger right now is if these dollars get sucked back in, the dollar could go much higher. However, as people like Jawad Mian, Kiril Sokoloff and Michael Howell from CrossBorder Capital have pointed out, there has been an enormous concentration of international money in us assets over the past few years because of deflation fears. It seems to me that you agree with this because in your opinion us interest rates are suppressed because of the enormous money flows from overseas that came to the us bond market. So my question is how do you reconcile this enormous concentration of capital in us assets with the danger that us hot money flows will come back to the us? Isn't this concentration of capital in us assets much bigger than the us hot money that may come back?
    • MB
      Matthias B.
      8 July 2018 @ 19:01
      very good point, keen to hear Julian on it, especially as the ECB and BoJ and regional investors (EU, Jap) were recycling enormous amounts of dosh into US assets.
    • CS
      C S.
      9 July 2018 @ 06:11
      If there is a USD spike or a risk off period I think that capital would stay put, unless its needed to cover losses elsewhere.
    • BR
      Boyd R.
      12 July 2018 @ 10:45
      I think it’s a time period response. USD up in the short term - everyone agrees it’s lower for longer there after
    • JB
      Julian B. | Contributor
      19 July 2018 @ 20:19
      Hi Joeri Yes we've had two way flows in cross border capital. In the case of US investors we've seen outflows in search of yield, in places like EM bonds, credit and overseas equities. But the key thing is that because this money has to offset the low current account most of it by definition has been unhedged. That means that if these investors sell their assets then the $ rallies. When it comes to foreigners buying US assets. A lot of the inflow has been by foreign central banks and this money tends to slower moving. Another chunk has gone into US debt but in most cases that flow is hedged i.e. no FX implication. Therefore, at least initially the $ will rally hard especially against things like EM.
  • LD
    Len D.
    9 July 2018 @ 15:49
    Len D. Your new found realization that geopolitical risk is rising should temper your US dollar outlook. More countries that have been negatively impact by Washington's US first policies will be joining China and Russia in reducing US influence by dethroning the US dollar. Economic warfare is more probable than real war over the next few years.
    • JB
      Julian B. | Contributor
      19 July 2018 @ 20:01
      Len you are spot on and at some point we will move to a multi polar reserve world. But where is the dollar when we get to that tipping point? My bet is a LOT higher.
  • BR
    Boyd R.
    12 July 2018 @ 10:48
    What is the target range on the USD hitting its top
    • JB
      Julian B. | Contributor
      19 July 2018 @ 19:57
      We are thinking at least 1.05 in the Euro
  • JK
    Jan K.
    11 July 2018 @ 17:46
    When you talk about a shortage of USD, couldn't FED just supply those via swap agreement (has been in place since GFC, so to increase them, wouldn't be a big leap)?
    • JB
      Julian B. | Contributor
      19 July 2018 @ 19:57
      Yes absolutely and at some point they'll be forced to but when is the key Q. Typically they are late! Also its going to be difficult for them to deliver swap lines when they are tightening liquidity at home
  • CD
    Cheryl D.
    15 July 2018 @ 20:32
    Raoul, what is the stock in India that you are/were invested in? Is it just the India ETF? thanks Cheryl
    • CS
      C S.
      18 July 2018 @ 13:22
      MMYT
  • MP
    Mark P.
    11 July 2018 @ 14:41
    Great discussion and product. Building a wonderful community in RV. Raoul, how about a RV Conference in Cayman with some talks by some of the regulars and where we can all mingle and meet over drinks afterward. It could take the community to the next level. Just a thought/hope. Mark
    • LD
      Lance D.
      17 July 2018 @ 18:00
      OR Birmingham BUT if it has to be the Caymans then I'm dossing down @ Raouls place!!!! it looks awesome
  • AC
    Andrew C.
    15 July 2018 @ 05:47
    Is there, or will there be a transcript?
  • SS
    Stephen S.
    13 July 2018 @ 21:34
    Excellent discussion for the third month in a row! Thanks for another thoughtful overview of the key issues. The trade frictions with China appear to me to be just leverage to get what Trump wants more--removal of nukes from N. Korea. China probably wants that too, so success at some level looks likely, implying good things for CAT, BA, etc. Do you gents agree? Question: when you talk about shorting EM, do you truly go short, or do you buy puts? If puts, what recommendation do you have for the strike level--5% to 10% out of the money? Thanks.
  • RM
    Ritwik M.
    13 July 2018 @ 04:01
    cf
  • RM
    Rasmus M.
    10 July 2018 @ 19:03
    I have a question regarding Julians trade recommendation to short the EEM etf. My brokers, (IB), do not provide access to US-ETF for retail investor located in EU, (due to MiFID II), so is there any alternative way to execute this trading idea with a ETF that is available for EU citizens? Or should I open e different brokers account?
    • DW
      Daniel W.
      12 July 2018 @ 08:17
      You can still buy options on EEM via IB
  • JK
    Jim K.
    11 July 2018 @ 13:47
    A question for Raoul, if it about to hit the fan wouldn't you expect the yen to strengthen as a result of the risk off safe haven flows in to the yen as I noticed in The Distillery released last Friday that you saw a big move and a much weaker yen going to 125 vs. the USD. Thanks and keep up the great work!
  • DL
    David L.
    9 July 2018 @ 03:11
    I am a Canadian with businesses and investments in the US and CANADA I have capital sitting in both countries. Would you agree that taking advantage of the USD strength verses CANADIAN DOLLAR is a good bet for CANADIANS?
    • DB
      David B.
      9 July 2018 @ 12:29
      My guess is, USD will keep getting stronger especially against the Canadian. I live in Australia (very similar economy to Canada) and I see nothing but head winds for the AUD. Like Canada, Australia also has a HUGE housing bubble, which will not bode well for either currencies.
    • JH
      Jonathon H.
      9 July 2018 @ 13:30
      Yes in my opinion I agree with Teresa. USD is likely to strengthen and CAD will likely be weak, currently held up by oil. BoC will likely raise rates this week, might be a nice pop in CAD to sell.
    • JM
      John M.
      10 July 2018 @ 03:05
      It will be interesting to see if Canada & USA agree on a new free trade agreement and how that might impact Canada. Also to be considered is Canada's political environment. Next year brings another federal election - could be a minority government as more Canadians are disenchanted with Trudeau.
    • AM
      Alonso M.
      10 July 2018 @ 16:30
      If you have capital and investments sitting in both countries, you're in a much more flexible state than most. Meaning you can create natural hedges and leave the FX trading to speculators. Most of the Canadians I know are currently bearish on the Canadian dollar. These are the same people who were bullish on it when it was trading at close to par against USD. The more subtle point that may not be related to your question is the idea that the Canadian economy and Canadian stock market are not the same thing. So if your investments are in the Canadian stock market, you may already have a fair bit of USD exposure depending on what you own.
  • GS
    George S.
    9 July 2018 @ 21:27
    Top conversation and a great discussion on position sizing!
  • NH
    Neil H.
    9 July 2018 @ 01:17
    Brilliant as always. Sounds like it's time to go to the beach and come back in November
  • NI
    Nate I.
    8 July 2018 @ 20:28
    I've been wanting to short this insane bubble for a very long time. Please send an alert when you think it's time to pull the trigger.
  • MB
    Max B.
    8 July 2018 @ 09:18
    Excellent piece...you can hear the excitement around things starting to take shape. Absolutely loved the statement from Julian - "Just sell some f*cking stocks"....love it. Really good format.