The Pomp Podcast - #236 Raoul Pal - CEO of Real Vision Group Calls for a Potential Depression in the Next Few Years

Episode Date: March 5, 2020

Raoul Pal is the CEO of Real Vision Group, the world's premier finance and business video channel featuring exclusive in-depth interviews, research, documentaries, analysis and investment ideas from impossible to access guests and the sharpest minds in global finance. In this conversation, Raoul and Anthony discuss the current economic environment, how the coronavirus could be the accelerant to a global slowdown, why Raoul thinks we are unfortunately headed towards a depression instead of a recession, how Raoul is currently allocating his personal portfolio, why Bitcoin is so attractive to him, and how the pension crisis and corporate debt bubble will ultimately end. BLOCKFI-----BlockFi allows you to keep your crypto, put it up as collateral, and receive a USD loan funded directly to your bank account. They do loans ranging from $2,000 to $10,000,000, and they're perfect for helping you reach your financial goals of all sizes. Visit BlockFi.com/Pomp to learn more about putting your crypto to work without having to sell it. UNSTOPPABLE DOMAINS-----Make your crypto currency payments simple and build censorship resistant websites. Visit unstoppabledomains.com and purchase your blockchain domains today! TAXBIT-----Refund-maximizing, cryptocurrency tax software you can depend on. Visit taxbit.com/invite/pomp and receive 10% off your tax plan today by signing up for a free trial. -----If you enjoyed this episode and want to stay updated on everything Bitcoin, blockchain, and crypto. Check out Off the Chain newsletter by visiting offthechain.substack.com and join 35,000+ other investors currently subscribed to my daily investor letter.

What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to Off The Chain, simply the best podcast in crypto. Let's kick this thing off. Raul Paul is the CEO of Real Vision Group, the world's premier finance and business video channel featuring exclusive in-depth interviews, research, documentaries, analysis, and investment ideas from impossible-to-access guests and the sharpest minds in global finance. Raul Raul was also previously a portfolio manager at GLG's Global Macro Fund. In this episode, we discuss the current economic environment, how the coronavirus could be the accelerant to a global slowdown, why Raul thinks we are unfortunately headed towards

a depression instead of a recession, how Raul is currently allocating his personal portfolio, why Bitcoin is so attractive to him, and how the pension crisis and corporate debt bubble will ultimately end. this episode is an absolute monster. You got to listen. Please share it with all of your friends as well. Before we get into the episode though, I want to talk about the three sponsors. The first is BlockFi. They have three products. You basically can go in and deposit crypto, take a US dollar loan against your crypto. You can deposit crypto and they'll pay you very high rates of interest on a deposit account or an interest bearing account. And then also they've

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at Morgan Creek Digital. All opinions expressed by Pomp or his guests on this podcast are solely their opinions and do not reflect the opinions of Morgan Creek Digital or Morgan Creek Capital Management. You should not treat any opinion

expressed by Pomp as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his opinion. This podcast is for informational purposes only. All right, guys. Bang, bang.

Raul is here. you couldn't come on a better day i mean we have uh i'm not going to call it global chaos going on but i'll call it a global uncertainty um and we've got the emergency rate cut in the u.s 50 basis points yesterday so uh thanks for coming yeah it's good timing because i've been kind of slightly all over this i i feel like this is your super bowl and and now here you are um all right So, retweet first. Everyone who's on Twitter watching this, we're live streaming, please retweet this like, favorite, comment. Do whatever it takes to make sure that everyone can watch this.

This is going to be a really, really big episode. Just given Raul kind of calling a lot of this situation. I can't find anything to add. Here we go. All right. So for those that don't know you, the small few, let's start with just kind of a quick two, three minutes on your background and kind of what gives you the perspective that you have for kind of these types of events. Yeah. So my background is I started in the finance industry back in 1990, straight into a recession, scrabbled around to get a job, couldn't get a job at an investment bank, had a pretty shitty degree.

and so I got into a company called Dow Jones Tellerate which is an information provider and my first job was customer support teaching people no helping people that with a technical analysis product so I had to learn what technical analysis was because I had to train these guys I didn't know anything about them or about it so I started learning about technical analysis and realized that okay that was quite interesting I could figure out what was going on in financial markets with a few charts then I managed to talk my way into a company called James Capel which was part HSBC in equity derivatives and six months later I was running the desk then I went to another UK bank and ended up at Goldman where I started and managed

the hedge fund sales business in equities and equity derivatives right in line for the Asian crisis which was a incredible moment in time then after that I thought that the recession was coming in 2000 and I thought the better opportunity was to go to trade instead so I went to the started the global macro fund for the biggest hedge fund firm in Europe at the time called GLG Partners. Got that recession, traded all that whole period, and then decided to opt out of the rat race and retire to Spain back in 2005, where I started writing macroeconomic investment strategy research, because I'd been in the hedge fund and around the hedge fund industry

for longer than most people. My entire career was speaking to the most famous hedge fund managers in the world on a daily basis, whether it's Paul Taylor Jones, Stan Druckenmiller, Lewis Bacon, all of these guys. So I get to learn how they did things. I saw almost every trade every one of these guys did over the Asian crisis, which is phenomenal because then I really understood how they put together a macro view. And just to see them implement trades in different ways and across continents, across asset classes

and layer into it, all of that stuff was fascinating. The whole thing was reading like a picture for me. It's basically a crash course in what do the richest, most successful people in the world do when everyone else is running? how these guys are navigating these markets and how they're profiting in many cases when this stuff happens. Yeah. Because they actually counter to the narrative, the really big money is to be made at cycle turning points. And the most money of all is the down cycle. And the reason is, is because the up cycle can take 10 years like we just had, and the down cycle usually comes in 18

months. So the compressed amount of returns that you can get, if you can short things or take advantages of that move up in bonds, for example, is truly extraordinary. So I asked Mark Yusko, who obviously you know pretty well, one time I said, what separates the top five investors in each asset class from the really, really good ones? So kind of the absolute best at their craft versus everyone else. And what he said to me is they cut their losers faster than everyone else and they press the winners harder than everyone else. And I don't agree.

You don't agree? Okay, why? Like Nick Roditi, who people don't know, he's below the radar screen, was probably the greatest macro trader of all time. He didn't do that. Okay. He had enormous stomach for risk. What he had was his, he had a better understanding in his head of the outcomes. And therefore, he could ascertain the risk reward. So he would suffer more significant drawdowns than anybody else could suffer.

But he would make higher returns. So he made more returns than Stan Druckenmiller, more returns than George Soros. Really? When he was working for Soros. Wow. Most people don't realize that. But in general speaking, for most people, most people don't have that skill set. Of course.

So generally speaking, cut your losers, run your winners. Of course. And that's a very flippant statement because it's actually not that easy to do. Yeah, of course. It's actually difficult not to cut your winners. What is your current portfolio look like? Just so as we get into this, people kind of understand how you're actually allocating your capital right now. So my personal capital is allocated to bonds. I closed some of the position recently. It is dollars, it is gold, and it's Bitcoin. It's a pretty defensive portfolio.

And I don't think of it in those terms. I think of what I'm thinking of is bonds. I think you can make an extraordinary amount of money. And I've written on Twitter and I retweeted recently about the greatest trade I ever saw, which happened in 2001 when I was trading and how similar the setup was to today. Explain that story. That story is a story of a guy working for a giant hedge fund in London and the Fed cut. and it's almost identical the backdrop to today minus the virus right so we were going to an economic slowdown it was pretty clear the Fed had to cut the markets the bond market starts pricing and Fed cuts so the Fed then do a cut on

I think it was January the 3rd everyone still on holiday but this guy comes into the office of this hedge fund outside London and he goes limit long according his risk guidelines, Eurodollar futures expiring that year. Eurodollar futures are interest rate, three-month interest rate futures. So he was betting that interest rates were going to get cut significantly. And he gets on a plane and he goes to his house in Mallorca and stays there. Because he can't take any more risk, he's got one trade on, and his view is, we're going to recession, the stock market's in a bubble, the Fed are going to have to cut significantly,

the downside of the stock market bubble unwinding is the economy goes into recession. That was his call. So he didn't come back to the office. And eventually there was a pickup in rates as people started fading that narrative and thinking growth was coming back, which is exactly what we got in September, October, November. The ship's exactly the same. In fact, both charts map each other perfectly. The most perfect match I've ever seen is now versus them. So his boss, one of the most famous hedge fund managers in the world, one of the best risk takers of all time, calls him in and goes, so you've given back a load of money. You've made more money than any other trader at the firm, but you've given back a lot. What do you want to do? And he said, I want to double up.

Really? And the guy said, why? He goes, because my case is still valid and I've got profits. And it's my risk to run. And the guy said, fine, do it. Because he understood that the guy had the clarity. There's that moment in time when you have the clarity. And he had the clarity. And he went back to Mallorca. And the reason he was in Mallorca was simple.

He didn't want brokers to call him, his friends to call him, or anybody to persuade you to get out of the trade. And he then returned in November, closed the trade, and retired. Do we know what the return was? He made, I believe, for himself, $200 million. $200 million. It's not a bad day. But again, I don't know quite the numbers, and I won't mention his name because he's a private guy, but phenomenal.

And that was one trade. One trade, add, close. That was it. When you look at that trade to today, is the same opportunity available? We've just had it. I've been tweeting and talking and shouting and screaming to everybody about this because there's a moment in time when, look, this part of the cycle is what I do. I'm really good at this.

It doesn't mean I'm always right. It doesn't mean I don't fuck up. But I'm good at this. And I knew that the cycle was turning. And I had a shot in 2016 when we had almost a recession. We had the manufacturing recession, but it didn't follow through. But this time it looked like the stars were aligned and that they were going to cut. So I started that whole thing by May with the Eurodollar futures.

And then by August, I was pounding the table and screaming and shouting. I remember. And then basically kept it ever since. So we just went through a emergency 50 basis point rate cut. I saw a guy on television, I forget his name, yesterday literally saying in the next two weeks we could be at zero, which seems a little aggressive. Where do we go from here? Well, look, we were pricing in a recession, and now we're pricing in something else. So it's gone faster than we've expected.

So this is- And that's because your argument is the economic kind of macro situation was slowing everything that you had been talking about, et cetera. There was going to be a recession coming, right? Global trade, tariffs. And then you get this accelerant. You get an accelerant with the coronavirus. Well, we had two accelerants, right?

So we had the Fed raising rates back in 2017, and they'd gone too far. So you saw it because you start seeing the curve inverting. You start to see all of these signs that the Fed had gone too far, which was extraordinary because they barely raised rates, but that was the situation. So that was the slowdown. That was set. Then we had trade war. So trade war and tariffs, that was the kindling for the recession.

So that's the recession we were going to get. And then the coronavirus comes, and now we're going to get something entirely different. Where do you think we're going? If we're not getting a recession, what is it? You know the answer. That's why you're asking. So listen, the reason why I'm so excited to have you here is because you have become,

you know what a storm chaser is? Like a tornado chaser, right? So basically they go and they try to find the tornadoes and they're the psychos that are driving on the road and they're filming the tornado. To me, you're a crisis chaser, right? Meaning that it's not that you want a crisis to happen because a lot of people get hurt

and it's a really bad situation, but you have the clarity to see them coming. And you've also lived through a number of them. Because I've seen them before. And I know, see, the point being- So you're the crisis chaser. Yeah, the point being is it's about human behavior. It's not about what's right, what's wrong.

And it's not about how you should interpret if the numbers are wrong. Nothing. It's like when it comes to a crisis, whether it was the Asian crisis, whether it was the bond market crisis in 94, the Asian crisis in 97, the dot-com bust, or the banking crisis, they're all human behavior. And once you understand that humans are about to panic, it's when everything moves fast. And I think that if you are a good investor, you actually slow down, right? You don't have to get caught up in that panic.

It's like having the emotional stability. No, the best thing you see, really what I did in this situation and I did in all the other situations was I doubled up ahead of the panic. when I saw that it was likely to lead to a panic, because my job is not to live in the present. It's everybody makes the mistake of living in the present saying, oh, the virus numbers today are X. That is not what you're doing. You have to extrapolate and you have to think of possible futures of which you don't know. There are no certainties, but it's extrapolating positive futures. When you see a path of events that seems much more probable than the market expects, and you can see a clear understanding of how people are going to react to that,

then you have something really meaty. With this situation, it was clear that the moment the virus spread outside China, it was clear that China had gone into total shutdown. Okay, we've never seen that in our lifetimes anywhere in any country. So this is important. Let's talk about exactly what's happening. So there's a virus, the Chinese government gets wind of, hey, this is spreading, this is a problem. And there's a couple of different ways to look at how they've reacted. There's the kind of medical reaction. So this is where you see quarantines and a building of hospitals and all that kind of stuff. But the economic impact of a lot of this is literally they just went into complete shutdown. Nobody go anywhere, do anything.

So the idea is, if you've got a really bad outbreak of a unknown virus, you can either take the risk and have mass death. Even with a death rate, the WHO today says it's 3.5%. So with a population size of China's, and it's an aging population, and it affects old people more, that is too much for the government to deal with. And you have unknowns, because you don't know the death rate at that point. You don't know the spread rate. What they clearly knew is spreading fast, very fast.

So I think what's known as the RO or the R was above anything from the common flu to the Spanish flu to any of the known pandemics. So they knew that it was extremely dangerous, hence why you go to the kind of economic lockdown, which is to quarantine parts of the population because the weird part of this virus is it's not detectable for two weeks and up to 27 days. So we can all have it here and we have no symptoms and we're spreading it around and we don't know. Right?

That is like a nuclear fucking warhead, right? You have no idea. You have one of the fastest spreading viruses we know of and it's undetectable and it has a high death rate. Even though people say, oh, it's not a very high death rate. When you actually impute the numbers, it's a staggering number of people that could die from this. The numbers that I looked at this morning, basically, anyway, I think it's 18 to 40 or

something was the bucket that they showed the flu death rate is 0.02 percent and the coronavirus death rate is 0.2 so literally a 10x now it's still 20 basis points yeah but when you start to look at that and again it's still scary don't think about the death rate because everyone will say well it's not that relevant it's two percent or three and a half percent and it only affects old people. It's not going to fit me. But it's the economic impact. It's the fact that when you impute the numbers, that it spreads fast in the Spanish flu. But let's assume it reached the same number of people as the Spanish flu. Let's assume nobody quarantines countries like China, which was the right thing to do. Then Spanish flu hit 27% of the entire

world's population. And at the time, that meant 500 million people were infected. And in the end, about 30 million people died okay if you look at 27 of the population now it's about 2 billion people if you have a death rate three and a half percent 68 million people would die so that's your base worst case scenario so then that's what you what that's the outcome if you don't do anything so every government's going to do everything they can because also it disproportionately affects western developed nations why because you've got old populations all of us right so you have a a significant problem also old populations who get a virus i mean the death rate of people who go into hospital is huge in this virus and there's a

large number of people have to go into hospital we have no ability to deal with this in the medical system so they have no choice but to start quarantining nations or at least large regions which has a ridiculous economic impact in terms of the slowdown the number like talk a little bit about the numbers that came out of china that you saw i mean china car sales fell 92 percent and this month they're down 80 something percent we when you look at that's fucking wild what i mean In the PMI, the purchasing managers index for China had the largest fall I've ever seen in any economic statistic I've ever seen. And that is in the second largest economy on Earth with the largest population.

It is mind blowing. And no wonder the oil prices collapsed. No wonder all of these things are happening. And that's just China. The point being to all of this is next, it was South Korea. South Korea is a great medical system, and they were on top of it fast. They're slowing the rate of the virus, but they've still got thousands of people affected, and the death rate is climbing.

And it's not going to go. And then it spread regionally. But then the next big cluster was Italy. Italy exploded, and it's still going. Because there's still, I mean, there's bloody flights every 10 minutes from Malpensa. I mean, are you crazy? It's now exploding in Spain, France, Germany. Iran.

Iran was truly extraordinary because it was, A, a different strain. They didn't know that it had come from China or whether it had come from China. And I mean, literally 10% of all government officials are infected. 50% or 20% of the entire government is ill. It's crazy. So back that out to what is about to happen, right? What's interesting is South Korea is testing thousands of people a day to get on top of where it is, where it's moving, what we have to do, who we need to quarantine. The U.S. up until last Friday had tested 500 people and they had only tested people that had come from China or Japan or a country that had the virus.

And I think this is where we get Washington state. There was the outbreak and kind of a whole group of people have now tested positive. They all are circulating. Either they worked at our patients at or I guess live at this nursing home. And I was reading this morning that in Wake County, North Carolina, actually where I'm from, there's a coronavirus confirmation case. And you start reading about, well, how the hell does that happen? The person went and literally went to that nursing home a couple of weeks ago, comes back to North Carolina. So the point being a couple of weeks ago, right?

So this, it's very clear that the coronavirus has been spreading undetected and uninvited in the United States for at least three weeks. there was a weird ridiculous situation where the cdc and the fda got into some regulatory mess where it got declared a national emergency which meant that only the cdc could do testing with cdc approved equipment of which there was only one place in atlanta to do it they eventually got it out to 40 different places eventually um but no testing went ahead because the kits were not approved and there were some malfunctions with the kids so there's been no testing in america so nurses and doctors and health care workers have been treating people without taking precautions there is no tracking of pneumonia cases yet because they're usually now they're

most likely to be coronavirus cases so the point being is when you look forward and boris johnson was good yesterday in the uk when he said listen 80 of the population could get this you know and this is going to be huge and we're going to have to we may have to shut down the entire country and he's right to get the narrative that far that fast to get people to understand the seriousness of it because in the u.s people don't even understand this they're still going it's the flu no it's not the flu the size of it and the speed the speed at which it spreads and the incremental increase in deaths worldwide is not something a government will take so they're going to have to close large parts of the economy and people nobody's going to fly and this will be the

last flight i take is the flight go back to the cayman islands and i think the cayman islands will shut and i've already been speaking to you know some of the doctors there and blah blah blah we haven't got any cases yet but they know it's going to shut yeah so when that happens um if it's not a recession if it's something worse yeah so it look the clear thing is we were going into to a recession. Could have been a mild one, could have been a big one. We don't really know, but we're going to recession. This just pressed the nuclear button for depression. Now, I say that not lightly. There is always a probability that it doesn't happen, but it's become my base case now because I do not see a world in which there is not an outcome that they have to shut down

whole parts of economies, whether that's travel, tourism, conferences, businesses, all of this stuff we're already seeing it it's already starting to happen right we're seeing conferences get cancelled we're seeing obvious slowdowns in travel and tourism wait when they quarantine people at home you know it's not long before you guys are going to be at home doing this self-quarantined it's going to happen because you're going to want to do that for your own sake and you don't want to be part of the spread of the virus yep because it's going to be your mother or grandmother that gets killed so your argument here is the virus itself is simply an accelerant on a situation that was already turning bad, right, in the economic kind of

recessionary period. And now what we're going to do is we're actually going to extend that into an actual depression. And really, it's the response to the virus. I don't deal in certainties, but I'm saying that the highest probability event now is a much larger event. And I think potentially, my base case is becoming, and we have to see over the next four weeks, my base case is coming that this will be the worst economic event of our lifetimes. So this is much larger than 2008. So let's hold that as the highest probability outcome. Let's switch to what the hell do people do if you're right, right? If that actually occurs. Well, at what level are we talking now? Are we talking personally, investment, or what?

So let's focus on the investment side. The personal side, there's plenty of information out there, but from the investment seat, what do people do in terms of, one, preparing for this, and then two, if it actually occurs, how do they act or think through the various opportunities that present themselves? So let's ignore profiting from it for now. We can come back to trading it. That's a different thing. The average person, there's going to be a lot of job losses, just because companies will not be able to afford it. This government's going to have to try and support companies. They're doing that in China.

There is going to be... So you've got a significant chance of job losses. That's the main thing. You have a significant chance of medical expenses in the United States, which is a big problem with the system here. So it is an economic event for most households and a significant economic event. Are you ready for that?

and that means and one of the best piece of advice i was ever given was given back to me in 1991 which was he who has cash in a recession is king i like to say he who has cash makes the rules yeah right um but the point being is whatever you do just have some cash at hand this is not a financial event where we have to worry about the banks sure it might morph into something and not making predictions on that but just have some cash because just make sure you've got the availability to deal with this and maybe i'm wrong what have you lost nothing but what are you what are you you're more prepared um so that's and you know and i've been and it won't be many of the viewers or listeners to this but if you are approaching retirement um i've again at real

vision we've done this screamed and shouted about the allocation people have in their pensions they are taking too much risk, hoping to reach that magic number. Well, if I am right, then the downside is enormous and it won't recover for a significant period of time over which period people are going to get laid off or retired. So in which case they don't get to buy the dip. So you have too much equity, you have too much credit, and you've never owned enough bonds because you've always thought bond yields of 1% aren't worth it. Well, this is why you learn that bonds are the greatest thing on earth. So you've been long bonds, obviously done very well there. We've seen treasury yields go to very low levels. Walk us through kind of your

current view of the bonds and in light of the treasury yield movement. Yes, I have been hoping for a sharp pullback. There will be a point where you get this gut check that usually happens in the middle of these and again this is from experience of trading these you get a movement against today because the central banks announced something and everyone thinks it's going to be safe you have to look through that and say well what are the central banks going to do to this situation nothing there's nothing they can do all they're doing is sowing the receipts of the recovery in due course that's what central banks do um and so any opportunity to buy bonds you buy bonds because rates are going to zero everywhere and they're probably going negative. Now everyone

goes negative bonds never going to happen. You tell me that when the stock market is down 50% and all the other assets are falling and the credit market's blowing up, I'll pay 2% all day to have my money back. People don't understand the value of getting your money back versus the interest rate. And it's the value of getting your money back that's so important. So I think bonds will go negative. They're negative all around the world and have been for years now. And that hasn't blown up. It's a death of the banking system over time, but it's not an instant nuke button. Is it fair to say that you look at bonds in this kind of depressionary type environment,

if that occurs, as the best opportunity out of the worst opportunities? Well, they're a call option. Because the Fed aren't going to raise rates. So bonds aren't going to move against you, I think, in price terms. if all hell breaks loose you'll get your money back in bonds but if all hell breaks loose and the bond price rallies which it will do you'll make a shit ton so it basically looks like a call option in an environment like this this is why people like Stan Druckenmiller makes all his money from euro dollars and bonds because they have such skewed risk reward also equities move

around human behavior. There is no anchoring to equities. That's why valuations go up and down. Eurodollar futures are anchored by the interest rate. Yeah, they can move a little bit away from where the Fed funds rate is or whatever. So basically, they have to reflect economic truths one way or the other. They can get a bit ahead of the truth or behind. They can get it wrong, get it right. But generally, over time, they have to follow where the interest rates are. the long bond is basically that plus future inflation. That's it. So, you have a clean macro variable to aim for. So, if you're just forecasting where rates are going, you can trade Eurodollars. If I say rates are going to zero, what you should be saying is, Ralph thinks Eurodollars

are going to 100. And therefore, they're currently trading at 99.40. Therefore, there's another 60 ticks upside. Therefore, can I buy the calls? That's how everybody thinks when you think of And I've spent the best part of a year trying to educate people about bonds, because the narrative driven by the investment industry is bonds bad, equities good. And it's wrong. And when you look in price appreciation terms, bonds have pretty much outperformed equities over the long run for a very long time now. Because in price appreciation terms, they're so phenomenal.

the little trick, the little hoodwink from the asset managers firms is, oh, look at the yield. Well, that's like just saying equity's dividend yield. No, it's the price. And the price appreciation on bonds has been truly extraordinary as this massive demographic wave of people, the baby booms, has come through and dampened inflation and dampened growth, means that bonds have exploded and bond yields have fallen. Anything that I'll continue? Yes. got it um how do you think about like that long bond position that you have um taking profits

doubling up just kind of directionally you're correct yes i doubled up and went kind of max limit long um and that's also the advice that i gave to um you know in global macro investor which is the kind of home research service and also in uh the kind of real vision pro stuff so i just said listen this is the time to take the maximum risk because i know the narrative i know where going, I've seen this before, everyone's going to panic. Be ahead of the panic and make money for it. So now we're in the middle of that where the narrative is caught up with the reality. You didn't shake my hand when we walk in, right? So that's narrative reality meeting. Not because I don't like you, just, you know.

No, but- I read from the CDC, I'm not supposed to shake hands. I've got my hand sanitizer, right? So that is the narrative catching up with where the markets are. So the market, we've got the cut, which is what the bond market was after as well. The bond market's telling us we're going to get another cut at the Fed meeting, so the Fed will go 100. I love it on Twitter now, because you can see where the narrative is. The narrative is, oh my god, the Fed, they're idiots, they're cutting, how's this going

to help? What they're not understanding is what the forward narrative is. The forward narrative is, this is not recession, this is a potential depression. You have to do anything you can do to stop that happening. And secondly, if you understand that the US is about to start testing for coronavirus virus in larger numbers over the next four weeks. We're going to go from whatever we are today, a hundred and something cases or 200 cases, and we're going to go to 2000 and we're going to go to 10,000 at an unbelievable rate. And in an election year, you are incentivized to panic as a

state, local authority, government, everybody. Same thing like war, right? Is anytime that um you can be the one in charge in a time of uh chaos panic uncertainty etc um there's a higher likelihood that you will stay in office because the transition scares people right yes although i do think that trump made and it's too early when the election but to understand what's going on we don't even know whether it's going to be biden or sanders or whatever but trump made a very bad error by the political error was uh was you know getting rid of half the cdc okay fine whatever that's politics when he had to stand up in front of the nation and say we've got a problem like boris johnson just did and i don't like boris johnson but i was pretty impressed with him saying

what he said except for he said he went to the hospital and shook everyone's head and he's fine because he's because he's an idiot but good but you know he's an idiot for saying it as well because that was the moment people did with HIV. It's like, this is not the same as HIV. This spreads by hand. Yeah, yeah, yeah. And so Trump didn't say anything apart from, I'm going to put Mike Pence to look at it.

It's not really important. They spread the flu narrative that still won't die down. And that was irresponsible. Because if we find out that in six weeks' time, we've got 50,000 cases, then all hell is going to break loose. And because of the freedom of travel that's still going on in the United States, it is not a small probability. Let's talk a little bit about the impact of coronavirus on the corporate debt situation. That's a great question.

One of the things that I saw in China, I was reading that these Chinese companies are levered to the fucking head with all this debt if there's an economic slowdown even a little stalling of the economy all of a sudden they can't pay the debt you have to have the government a bank somebody has to step in there's all kinds of ramifications how do you look at that um let's start with the u.s and then maybe global look so step back from a macro perspective define the bubble that the biggest part of the bubble that we're in now it's the corporate debt bubble okay So there is a mechanism behind that that is very important for people to understand. So where does this debt come from?

It comes from American companies issuing debt. Why are they issuing debt? They're issuing debt to buy back their own shares. It's an accounting trick. And to make it worse, they're issuing selves, the management team, stock options. Then at the board, they then say, right, and how many shares should we buy back today? Guess what? If you're removing the number of shares, your share price goes up in normal circumstances.

So they're making themselves rich by basically raping the shareholders. The shareholders have an optical illusion because the price is going up, but actually all these corporations are taking more and more debt. IBM has been a classic example of that. So that's that mechanism of where the debt comes from. Now, the buyer of that debt is the pension system because there's a bunch of these poor baby boomers getting close to retirement who don't have enough savings. So they look for any yield they can. So corporate debt has a bit more yield than government bonds, and it's deemed safe.

So we'll just buy as much of that as you can give us. And that is being driven by all of these pensions didn't have enough returns over the last 40, 50 years. So the states, these state pensions, the states have raised taxes and are putting the tax money into these pensions. And that tax money, is it comes in every month out of people's wages, buys these corporate bonds. So you've got this lovely environment where these 1% are getting extremely rich. The corporations are issuing more and more debt and buying back their shares. They are the only buyer of equities. If you look on aggregate, almost everybody else is a net divester of equities in the world. There's a bit of foreign buying, that's it. The entire pension system is trying to divest of equities,

but it's still switching to credit. But as every baby boomer leaves the workforce and eventually starts moving out. So the entire world is a net seller of equities, but the corporations are the buyers. And we've just had one of the biggest stock market bubbles of all time. Then on the other side, we've had the biggest credit bubble of all time. Corporations are now, because of this ridiculous tax rule, are now corporate debts, GDPs, the highest it's ever been in history. And the issue is there is only one buyer of that credit, which is the pension system, really, because even yields are too low for half the insurance companies.

But let's say it's insurance companies and these pension companies. When you go into recession, well, just the business cycle goes negative. Just a normal one. Forget the depression scenario. Just a normal recession. Because as a company, your cash flows go negative. And your earnings go negative, standard. Pretty obvious.

Yeah. Well, that means you stop buying back your shares, because you don't have the cash flow to buy your shares. So that means that the moment you go into recession, which is where we're going now, just when you need it the most in illiquid markets, the world's largest buyer of equities leaves. And there are no baby boomers buying equities. There's no millennials buying equities.

There's nobody to offset this. Would it be fair to say that the structure you just described- Hold on. Let me finish the other side of the structure. The other side of the structure is tax receipts are driven by the business cycle. So when tax retreats go negative, when the business cycle goes negative, and therefore there's no buying in the state pensions of the corporate debt either. So what you have is at the very same time, as soon as the business cycle goes negative,

give it a month or two of lag, basically the bar of credit leaves, the bar of equity leaves, and there's no buyers. At the same time, you have this huge amount of these triple B credits, which are huge Huge old companies that have issued so much debt that they've been downgraded and downgraded that could get knocked into junk. If they get knocked into junk status, they will leave these credit portfolios and have to go and jump on portfolios. Problem is, there's 4 trillion of these bonds.

So the numbers are too big for the junk bond market to absorb. So the junk bond market will just basically seize up. And to accommodate it, yields will have to explode. When there's no buyer, I need to get that across. there is no buyer of this stuff. And there is no buyer of equity, which means that the share price of General Electric, Ford, and all of these triple Bs get pummeled,

which increases the chance of a downgrade, which increases the chance of them being... So what you've got, I call it the doom loop. And I feel like we're just about to set that off and credit is the next big thing. So this structure that you just described, how we've kind of gotten here, there's two key components to it.

The first is the 1% got really, really rich during this run. We have seen an explosion of CEOs and C-suite executives walking through the door. They're leaving. And they're not leaving because they think it's going to get a better situation. They've kind of made a lot of money and now seems to be a good time. Even to the point of seeing somebody like a Bob Iger do it overnight, effective immediately. Right. This isn't a, hey, I'm going to leave in six months or in a year. This is I was going to leave, you know, in a year or two. Now I'm leaving today. Is that what it looks like? Is it that these executives understand kind of the situation you're describing and it's always better to leave at the top, kind of walk out with the championship trophy than than wait till it's a bad situation? yes and i was just chatting to a friend of mine last night he's just sold his business which is

an investment banking business he's just sold it now why has he held it on for 10 years why does he just sell it now another friend of mine sold his audio visual business why now and it's because they kind of know now's a good time now's a good time look we all think we can time and we can't but these guys kind of know that particularly at that level c-suite because it's overrun by baby boomers. So let's assume that most of these people are 65 to 70 or 60 to 70. That's the cohort of the C-suite of corporate America.

Well, you're about to go into retirement. You just don't want to deal with this. And because really there's an 18 to 24 month period, let's say that's a recession or a depression, right? It's really, really bad for most people. And then you'll get a recovery, similar to how we've seen in other situations. But that recovery, just to get back to the same level you were, could take years, if not quite long.

Well, it doesn't work if you're a retiree. So it's different if you're young. If you're young, it's like, okay, this is going to be one of the war stories that you will have, like I have, and come on a podcast in 20 years' time with the war stories, right? That's fine. And there are opportunities. There'll be opportunities to make money. I think there's a whole new financial system coming out of this, and we'll get into that later. But for the baby boomers, the problem is they can't buy the dip because they're retiring.

So you're going to, let's say, the average recession, not a really bad one, average recession, lowest share price by about 40%, maybe 50%. Well, you're incentivized to sell because you want to crystallize your losses. And I've seen this firsthand from friends of mine and parents, 2001, 2008. The thing is, oh shit, protect my pool, I will just make the wrong decision, but I have to sell. I cannot see my money go down even less, because then I'm going to run out and be bankrupt when I'm old.

If I'm bankrupt at 80 years old, I'm totally fucked. So that incentivized behavioral incentive is I have to sell. So that is inherently built into the system. The pension system is implicitly a short put as well, because they have to deliver returns to those retirees. Now, the problem is that if they've allocated too much to equity, and they're going to have to pay entitlements to these people in two years' time, well, somehow they're going to have to sell that equity to pay that entitlement. And the more yields fall, I mean, nobody's talking about this

yet, but this yield fall from 2% to 1% basically means you need twice as much money to live off the yield. As it goes to zero, you can never have enough money to live off yield. So you have to have capital gains. That completely screws up all pension calculations. Does this lead to the blow up? Do we see pensions blow up in major ways? Listen, I've been talking about this for a long time. Everybody's going to have to understand the reality that their pension is not what they think it is. What does that mean, though? It means two things.

Not what they think it is? Is that a zero? They think it's a promise. Okay. And a guarantee. What it's not, it is not that. Okay. You will not get, even if you're a fireman or a teacher or somebody who's worked all their life

and you've been told you'll get two-thirds of your final salary, that will not happen. You may be lucky and be one of the first ones. Your benefits may get cut later. We've seen it everywhere happen the same. So that promise is not real. So your dreams of retirement are dreams in terms of what you think. And nobody's got enough.

The other reality is nobody has enough to retire on. The numbers will not work unless you're one of the 1%. because the if you look at the average not the average the median baby boomer because the average is so skewed by the ultra rich if you look at the median baby boomer they got like two hundred thousand dollars i mean they're basically can last five years um what the hell what does that mean for so this is why i'm particularly worried about this confluence of events so going to the recession fine then the coronavirus no sorry let's go back going to recession fine you've always got the kindling of this debt issue, the massive corporate debt bubble. You've got an equity

market bubble. OK, we can kind of deal with that. But that's like 2008 and 2001. It's kind of a hybrid. When you put the coronavirus on top and you accelerate it all, and then you've got the pension issues with no pensioners being able to afford to retire. And think what that does to GDP coming out of a recession. It never recovers. And nor does the stock market, because there's no So we go into a very different world. Now, can we, again, extrapolate more concerning events to the financial system at the end of this? How do insurance companies survive the medical insurance stuff? What happens? And the point being is, in part of this, there's another story that is a story that I've talked about a lot is the shortage of dollars in

the world. And in this situation, that could become a problem as well. Let's talk about the dollar liquidity crisis. What does it mean by that and kind of why you're concerned? There's two dollar liquidity crises undergoing right now. One is the BIS, Bank of International Settlements, talked about the $15 trillion that foreigners have borrowed. The problem is, is when you go into a slowing economic cycle, the world trade is in dollars. World trade is currently negative. So therefore, they don't have the dollars to either pay back their debts or service their debts. And that becomes a problem. So that tends to drive the dollar higher in periods of stress because there's too much money. There is also a European banking

system that's starved of dollars. And because of regulatory differences, a dollar in the United States and the dollar in Europe is not the same thing. They're not fungible anymore. So we had something called the euro dollar market, which is the offshore dollar market and the onshore funding market and they were fungible. So Deutsche Bank could have a US operation and fund its European operations from it. That stopped. So basically, you've got two different currency systems, which has led to the shortage of dollars offshore, which is why there's this endless problem with the European banking system is there's not enough dollars to make that run because the world actually runs on dollars and not euros. Euros are a big part of it, but the dollar is what you

actually need. So if you then think of the other part of this equation is, OK, in a slowdown, stuff like the oil price falls. Well, oil is another bunch of economies that extract things out of the ground and get paid US dollars for them. You get less dollars. So you either have to pump more oil and what's the oil price fall, which is basically what the shale designs are doing right now. The Saudis did it in 2014 and the oil price went to 30 bucks. And they're reticent to do it again. Because basically what they're doing is they're flooding the market with supply and the supply demand imbalance leads to a lower exchange price, but they are trying to, on an aggregate basis, get the same number of dollars.

Yes. Because let's say you have to pay your costs of operational servicing debt and other stuff is $10 a year. Well, and if you get it all from oil and your income from oil is $40 a year, Well, if oil falls 70%, you can't service your debts. So they're incentivized to sell more oil to get the fixed number of dollars in, which is what the shale guys are doing to try and pay their debts because they're about to blow up. And it's the panic reaction. That's why they're pumping more and more and more because they're going to blow up.

It goes from a premium price play to a volume play. Exactly that. That's exactly the point. It's a dollar at any cost. Yep. So that is what's going on in the rest of the world. The Bank of England and all the central banks have said, this is a huge problem. It is uncontrolled now, and they don't know what the outcomes are.

This is the rise of the central bank digital currency, because they know they have to do something. Transfer mechanisms are broken. There's a whole bunch of issues of which I don't understand. But the central banks are clearly screaming that we need to move away, not from the dollar as a standard, because there is no other alternative yet, but even as a mechanism. So I don't even quite know what this means yet. But there's something big coming.

We'll talk about that later. So when you're sitting there- But sorry, onshore, there's a funding problem as well, because everyone's at the repo borrowing money. So it's telling you there's funding issues everywhere right now, and there's not enough dollars in the system. Even though the dollar is not going up per se, what you will see is it starting to explode against the things like the Brazilian real, the Turkish lira, the South African round.

All the weakest borrowers have the problems first. repo market like how does that fit in the answer is i don't really know because almost nobody knows we don't know what's actually happening or we don't know why it's happening we we partly know why and we partly know what but we don't know the whole picture okay but what i'm hearing is that again it's just changed again because the narrative was you know we've just supplied the repo market it was fine there was a bit of stress on a few hedge fund balance sheets and prime brokers, and it wasn't stressed, they couldn't get the right funding levels and various issues with the inversion of the curve, creating a shortness and some technical

nature. But it's just come screaming back again in the last few days with JP Morgan saying, well, we don't want to say, make it look like it's a bad thing, so we're going to borrow money. Next minute, every bank's, something's going on in the repo markets again. And I think there is liquidity stress with some of these larger hedge funds, and I don't whether it's Citadel, not meaning they necessarily are losing money, but they can't get the money that they need to pay, whether it's, it could be margin calls, but it could just be general funding requirements. So again, it doesn't have to be catastrophic. And I don't, I'm not one who

buys into the arguments that somebody's going under. It could be because it's clearly showing some stress. It could be that there's a problem deeper buried within, and I don't know what that is. And I don't think people understand how over leveraged even the hedge funds are, right? In terms of... Well, some are, some aren't. Okay, explain. So if you are somebody like, and I'm just using Citadel as an example because they're not even really a hedge fund any longer, but they use huge amounts of leverage to basically create price liquidity because they're a market maker in volatility, in price, in equities, in bonds, in whatever it may be. They're the marginal provider of liquidity, basically. And there's several other firms like them. They also keep in line all the

arbitrage, because the banks don't have capital to trade this stuff anymore. So they've basically done what the banks did, which is arbitrage the parts of the curve and keep the money markets in line with the euro-dollar market and the Fed funds market and all of this stuff. Problem is, is if suddenly their funding, which they need huge funding for, they could be 100 times levered, 100 times levered, and they are- RAOUL PAL, That's wild. RAOUL PAL, Yeah.

And they are, I don't know how many billion dollars Citadel is as a firm now. And again, I'm not picking on Citadel, I have no idea. But these firms have huge leverage because they're at very low risk. But all of these have that risk of picking up nickels in front of a steamroller that some things can go wrong. So there is a problem that could come from that. They're very smart people, have the best systems in the world, the best risk management, they're exceptionally good at what they do.

But if you just take the funding level up by a few basis points, it screws up all of their P&L. so it becomes a real problem and then they start tipping out risk yeah so you're talking about central banks a second ago and just mentioned funding levels um whenever we get close to these periods they've got two tools historically they can cut rates and they can print more money we've obviously seen them say that they're not printing money in the quantitative easing sense but balance sheets have expanded 400 billion or so over the last couple of months we obviously just saw the rate cut. If you were running one of these central banks, let's say the Federal

Reserve, for example, what do you do in order to at least mitigate some of the damage that appears to be coming, if not try to stop it? See, I am not a buyer in belief that central banks are evil. I think they're a function of the demographics that they've been presented. And yes, they've made some mistakes in terms of creating, for example, part of the equity market bubble. I also think most of it was driven by retirees or baby boomers trying to save retirement and the corporate tax break that allows corporations to buy. So I don't think it's just to do with interest rates are low. I think interest rates are low for a reason. I think growth has been the lowest this cycle than any other cycle in all recorded history. I think that as baby boomers

move into retirement, if you think the relative marginal buying of a 25-year-old and a relative marginal buying of a 60-year-old are massively different. So your marginal impact on the economy falls over time. And what happens is it tends to slow economic growth. And we've seen it all over the world. And the closer you get to retirement or into retirement, the less you spend. So it has a big lowering of growth. So inflation falls with it. Yes, and people will say, but my inflation's not. Yes, everyone's got a different rate of inflation. That's what people have to realize. You know? Yeah, okay. Explain that a little bit more, because I think when people hear that, they're like what the hell is he talking about i did this i wrote about it in in global macro

investor um i said i took a bunch of things and i said okay i'm going to take a pair of jeans i remember buying when i was a kid and i'm going to take the stereo that i bought around the same time and i'm going to compare like for like and then i'm going to compare a different rate of inflation for somebody else and i worked it out on a on a um you know hourly earnings adjusted basis just get like for like so the pair of jeans that i bought at the time and again i'm just i can't remember i wrote about this seven or eight years ago pair of jeans i bought in times 30 quid in the uk and they're expensive designer jeans you're styling i was you know i was i was so pleased i begged my mum for these jeans a pair of levi's is about 20. okay so it's a 50 premium to a pair of

levi's and levi's worth the standard gym so you cut to when i wrote the article i haven't checked this. And the stereo that I bought, I think, was 100 pounds. No, I looked at a high-end stereo. I looked at a high-end quad stereo. I looked at a couple of other things. Anyway, the point being is basic goods was exactly the same price or less. So the Levi's were basically inflation-adjusted less. The stereos were much less. What was interesting is the expensive jeans were like five times more expensive, or 10 times more expensive. And the high-end stereo was like 10 times more expensive. And what I'm showing there was that if you were slightly wealthier, your rate of inflation was about 15% or so, I calculated, while the CPI over the same period

would have been about like two and a half or three. So different people. Now, if I... You're saying different people is really... You and I would be different because we buy different types of goods, and those different types of goods actually, the price appreciation. And our relative, our fixed cost basis is the important matter within this. So healthcare is a huge proportion of some people's CPI, right? It's not a massive proportion of my CPI, but it's a huge proportion of somebody else. And so that's why when they see inflation, it's enormous for them. When they see kids' school inflation, university inflation, Why university inflation?

Why? Because we had the second biggest generation of people all going to university at the same time. Of course, it was going to be inflation. They drove it. You know, so different people have different inflation rates. And so I think the notion of a CPI is wrong. And I think, you know, the people who hate the Fed for hiding numbers, I think it's because

everybody has a different CPI. So going back to if you're sitting there and you're Jerome Powell, what do you do? So we go to zero. Do we go to negative? Do we print a bunch of money? I think there's a fair argument that whatever they do makes no difference now. I have a feeling that they will have to intervene and support the pension system at the end of this. Come a little closer than that. Sorry. I think they're going to have to support the pension system at the end of this.

So there is a lot of monetary printing to come, and it's a natural consequence of the aging population and the promises given to it. now just to clarify this is rate cuts to zero plus the money printing or are those two things separate i don't think they have a choice but to cut to zero everybody else in the world is zero so donald trump is right you know it's an anomaly and it's pointless so cut it to zero no it's not going to cause a stock market bubble because we're in the middle of something much bigger much more important so the issue is then what happens right and the only answer that we currently have in the system that we currently are given is fiscal stimulus funded by government, by central bank. There is no other answer. And this gets us into if that money printing

occurs, how does it get injected into the system? You're just giving a long story of how we get to Bitcoin, but carry on. Yeah, I'm dropping breadcrumbs the whole way. I can see them. So we just saw this in Hong Kong, right? For those that don't know, Hong Kong, um, just announced a 15 plus billion dollar stimulus plan. Um, and in that they're going to give 7 million citizens, give or take, uh, about 10,000 Hong Kong dollars, 1200 bucks us. Um, and what was interesting is, uh, I've never seen this. And again, you're, you're, you've been around much longer. Okay. Well, here's a, here's a trick I learned. You're not older than me. You're more experienced than me, but, um, literally in the headlines, cash giveaway,

The Hong Kong government is doing a cash giveaway. It sounds like a fucking lottery. But what they're doing is they're handing the money to the people rather than just injecting into the system. Because it's the people who really need it. I mean, they've locked up a home. Agreed. So, fine. And everyone says helicopter money.

Fine. Let me tell you a story. In Japan, back in 1999, 1998, the Japanese wanted to stimulate their economy. So, I think it was Paul Krugman who told them, Well, one of the best things to do was, I can't remember, I don't want to give it to him, but he was advised by Western economists, the Japanese were advised by Western economists that what you need to do is a cash handout. Because don't forget, the Japanese have been monetizing long before QE, long before we

even named it QE, right? It's not worked, never drove their economy, didn't help, just kept things at the margin ticking over and not imploding. So they decide to issue a voucher to, I think it was people of a certain age, can't remember exact thing, but they were given a voucher that had a time expiry on it to force them to use it. They saved it. Interesting. Wait, the people saved it or why? Human behavior.

Even with the time expiration, they still didn't cash it in? Yeah. Because they'd been driven by what had happened in the Asian crisis, whatever it was. So yes, it had some economic effect. Yes, obviously some people spent it, But a much larger group of people saved it than they ever imagined. And that's the other thing, is people talk about fiscal stimulus. I've followed this in depth in Japan, and the Japanese put this fiscal stimulus wave. Two quarters of GDP goes straight back down again. It doesn't work.

The only way you're going to get fiscal stimulus to work is completely rebuild an economy, which is why I take seriously the Green Deal, because that is a complete rebuild of economy that could produce more productive assets over time. So in which case you could do things like, you know, the dams in America were built, you know, out of stuff. That is intelligent use. A lot of fiscal stimulus doesn't go to intelligent use. So we saw this in the United States back in, I think it was 2008,

under George Bush. There was like a $450 credit to taxpayers as part of, I think it was the TARP bill or one of the bills. We see it in Hong Kong today. is that just a natural uh kind of milestone that we will get back to in the united states where um as we get cut rates to zero we print a bunch of money there will be we've always given kind of tax relief or tax credit so i don't think it's a big deal you don't think it's a big deal okay no what is a much bigger deal is when you say right we've got a depression on our hands

the the emotional impact on our population has been enormous how do we create a future so what are you going to do in that you know you're going to rebuild systems you're going to rebuild things and then you're going to spend huge amounts of money and you're going to print it to do it that's really the what happens now the the issue is is can the currency system survive everybody doing that my my guess is no um but if it maybe it can maybe i'm wrong right but the point being is that is a huge wave when everybody's doing that at the same time it's much bigger than a lot of the kind of bullshit stuff that went into tarp so that brings us to there's two groups of people who historically have always yelled and screamed about this um but yes it's

kind of like, uh, their dreams, not dreams, dreams is the wrong word, but, um, their predictions are looking more and more probable every day in terms of, Hey, you can't print money forever. Um, you know, it creates these bubbles. There's these huge, um, kind of negative cycles that occur. Um, and that's the gold and Bitcoin crowd. Right. And I'm going to, to start put them in the same crowd of just, uh, they have a very trusting, yeah, mistrusting. And they just have a very specific view of the world they actually agree on the problems for the most part they have uh different answers as to what the solution is um you told me that your portfolio uh you've got cash you've got bonds gold and bitcoin you're in that group walk me through kind of why so i think

okay that's a good question because it'll show you how i try and think about things so knowing this is coming because that allocation has been around for a while for me Knowing this is coming, my view was that interest rates have to fall. The dollar, because of the dollar issue, is going to rise. It is going to create a global wrecking ball. That global wrecking ball is going to cause everybody to both stimulate massively. And so this is pre-corona, right? It has nothing to do with coronavirus.

It's going to cause them to stimulate massively and bail out their pension systems across the world. And that the outcomes of that mean that usually in that environment, gold does relatively well because there's more fiat versus the value of gold. And it does work well. If you look at, I look at gold in a basket versus a basket of 27 currencies excluding the US dollar. So it's not the dollar that's a driver.

And you can see then gold as a currency, basically. And it does exactly what it's supposed to, it goes up, trade cyberspace, it goes up, and it goes up and it protects basically your purchasing value as a global currency. So it is a global currency and works well for that. And so the situation is, okay, so we're now going to the point where the dollar's a wrecking ball and there's a lot of printing money and gold goes up. That's a world we've kind of lived in the last 20 years. But with the problem of the excesses of this particular cycle and the aging of the baby

boomers and leaving the workforce and the retirement system, I think we have a chance of breaking it. Having gone through 1998- Breaking the system. Correct. The financial system is what I'm talking about here. And having gone through 2001 and 2008 and seeing what's left of the imbalances, the corporate credit being one, and then how the system doesn't actually function any longer

in a number of levels the outcome is going to have to be a move to something different you know if there was anything that was genius about the satoshi white paper which is basically predicting this whatever whenever that this comes right this is likely to be an event now so i think of bitcoin as a call option on the outcome as his goal is a a call option on an outcome. I think it has to be a change of the system we've got. And that means... The way I look at this is basically twofold. And I think you are hitting right around this, which is we're headed to a bad situation. If the bad situation hits kind of low to medium bad, then gold will do what it's always done. Bitcoin is likely to do similar to gold.

possibly yeah but just in terms of um at least the way that people are thinking about it today could change but but the way people are thinking today is kind of digital gold narrative if for some reason we don't hit the low to mid bad levels and we actually hit really really really fucking bad which is this kind of breaking of the financial system gold will serve as um kind of a base case protection bitcoin is likely to then be the thing that outperforms everything because it is a resetting of the financial system. Yeah, and it's also, aside to that, is a narrative that you'll be well aware of

that most people aren't really aware of because there's too much talk about just about Bitcoin or cryptocurrencies. There is a brain drain of people coming out of finance and coming out of technology and coming out of science that is beyond anything I've ever seen in my life. And they're basically creating a hive mind to rebuild financial custody, ownership,

transfer of everything world in parallel at the same time and i don't care what tribe you belong to whether you're ethereum or bitcoin or you know block one or anybody they're all doing the same thing it is the largest change that i've ever seen and what it's incredible is we and it's a hive mind doing it it's not being directed by one person or one thing everybody's working on different bits the defy guys there the transfer of money there that this have you know christ i mean It's basically taking the technology that we have available to us today and trying to literally rebuild a financial system for an internet first type world with, in my opinion, two key differences. The first is this idea of separation of state and money, and the second is the decentralization in a global manner, right? And so the reason why I put those two things there is I always think of it as like the base unit of account and then the infrastructure that is around the financial services around it.

Historically, when we've seen technology in finance, it hasn't been anything to do with the base unit of account, right? It's always been around infrastructure, around services, et cetera. That's happening now. And there's this whole wave of that occurring, which kind of fintech, so not even crypto really, just fintech and then also the crypto stuff. But this idea that the actual base unit of account could change and is actually having innovation around it. It's not only... Yeah.

I mean, the base unit of account is having true innovation, right? So I've talked at length about this, but the Facebook Libra thing was a really big moment. And we don't know how it's going to come out in what form and it won't come in full force immediately. But basically, it was a private company setting up an SDR based on all the currencies in the including the US dollar. So that basket, if you think of my gold basket of 27 currencies, this thing should move up and down by global money supply.

So that's the most stable currency on Earth already, and it's issued by a private corporation. Now what we also know is every single central bank is building a digital currency. So they're building the digital- Some admit it, some don't, but they're all doing it. They're all doing it. It's on-ramps and off-ramps, they get it. So they're building the on-ramps and off-ramps, the ability for you to pay your taxes, the the ability for them to control your use of currency within the state function.

Cashless societies, the whole thing. Yeah, within the state function. But they also understand there is no way of stopping the rise of other alternative currencies. And Facebook have said, well, anybody can create currency now. So you're going into a different world. And currencies aren't what we know as currencies, because currencies can have contracts embedded in them. So that is a-

Programmable money. Yeah. That is a whole different world of everything. But again, I love the visuality of like, there's the old system and it's driving itself into its buffers at top speed. We don't know where we're going to hit that wall, but we're going to hit that wall.

Meanwhile, it's like there's a whole world being built. In parallel. In parallel. And one day, if there's a long enough time, you can basically just turn the lights off on one and go to the other. You of all people will appreciate this. And recently I described Bitcoin as a parachute that's masked as an adrenaline rush.

And it's kind of like when you jump out of a plane, right? And so it's exactly what you're talking about is that parallel world that's being built. Now, the part to me that really drives kind of my belief in Bitcoin is that this is not a technology problem, right? Because just like you said, every central bank in the world is going to have a digital currency. Every corporation that wants to is going to issue these digital currencies. We see JP Morgan, the banks, everybody's talking about doing it. So it's almost like you get the technology horizontal comparison will be very, very similar, if not almost exactly the same, to every currency in the world. Where the difference lies or the true competition is in the monetary policy.

All of the central bank digital currencies have the same monetary policy as their fiat counterparts, right? if you are Facebook, if you are JP Morgan, whoever, and you create your own digital currency, you're still pegging it to a commodity or to a currency. So in essence, you have a very big separation. There's basically Bitcoin, which has this disinflationary monetary schedule, deflationary kind of structure. It's decentralized, it's programmatic, monetary policy, kind of all the things that we know that Bitcoin brings to the table. It's a true separation of state money. And then you have everything else and everything else is a technology quote unquote innovation, but it's the same monetary policy that we already have. And so the competition

isn't going to end up being on a technology standpoint. It's going to end up being at that monetary policy level. And my bet is slowly. And then all at once, we are going to see people choosing the new monetary policy over the old, because they're going to see that old monetary policy for a lot of cases you described fail them and when they they see it fail them they're going to say well what else can i do and so far we only see one serious contender on the monetary policy competition and it happens to be one that you know looks like bitcoin is this kind of speculative asset today but structurally is very very different than what we've seen in the past yeah i think that's right i think uh it is slowly and then all at once and we're seeing it like

how many of our friends have got involved? How many people do we know? And the circle gets wider. And you're not a pariah now by saying I've got some Bitcoin. It's common. And it's not now a sign of a frothy bubble. Because even when the price has been doing not a lot, there are more people coming into the web. People start to get it. Also, I just realized is you saw that China was burning currency because of the virus. So I have not tweeted this because I don't want to kind of poke the the beehive but there is an element of the virus is showing that there is an advantage to a cashless society and i'm not going to go as far as to say it's going to accelerate the move there etc no but china is burning literally pieces of paper right to try

to kill the virus to spread the virus yeah and like six months ago if we would have said that people would be like you're fucking crazy and again you know we talked about macro before and how people look at today so people like it look it's painful to open an account it's still painful most of the applications are still not good enough but everybody knows that and everyone's working on it and there's a hive of hundreds of thousands of people of very very smart people all working on it so the bet you have to take is will they solve all of those things that make it such an inconvenience to you today because if if they will then the bet is it will go up of course it's like i wrote this thing but most people don't see that they go well bitcoin's not usable

that's not how you invest yeah i wrote this thing i don't know maybe a year ago now uh where i basically went back and i took screenshots of all the early web companies so amazon google aol you know all these things and that's exactly what you remember right i mean just atrocious user experiences atrocious user interfaces etc literally the aol dial tone like i put the the recording of the dial tone as you connected the aol and little man ran across like i was crazy stuff. Couldn't use your phone at home if someone was on the internet, right? All this stuff that at the time was just, that's how it is. But the internet was still powerful enough to get people to do this. Now what we're seeing is the exact same thing play out here with Bitcoin and

digital currencies and kind of the whole crypto. And the whole digitization. I mean, one guy came to my office the other day in the Cayman Islands, and he's building a decentralized data, which basically replaces AWS by using all of the data abilities for Internet of Things, people's mobile phones, and creating supercomputers out of distributed computing networks. And he's already got it working, and it's working, and it's low cost, and it's super efficient, and it means that all the universities can crunch massive data

and have computing power that they could never afford. It's amazing. And all of this is going on at the same time, right? I think that's what people don't understand. This digital revolution is not just about a cryptocurrency. It's about the whole fucking thing. Yeah. And part of the way that I think through this is what's going on is people are rebuilding

existing systems, but they're building it now for a global digital world. And what I mean by that is historically companies have, let's say you start in the United States, you basically grew as much as you could in the United States. And everyone went in the boardroom one year and said, next year is going to be our big international expansion. And you kind of went from the domestic market to now we're going to go international. And you spent a bunch of time and resources and hired people and opened offices and did all this stuff. That's not the world we live in today. What today happens is when you start a company, you're global on day one. And you're actually servicing users from all over

the world. And so it's a very different way of building a company. But what it also does is it drastically affects the growth rate of these businesses so if you compare you know we've invested in businesses that look very similar to an existing financial services firm but one of the old school way is domestic first and then international expansion these guys are global from day one they actually are going after a much larger market right in terms of the total available users that they could have and so on a percentage basis if you convert the same number of people the aggregate number of new users that you sign up is you know sometimes five seven eight ten times higher and so you get these growth rates where companies are going from non-existent to

tens of millions of dollars in revenue in two years three years and i think that's part of what people don't understand is it's not just the technology it's not that there's a lot of smart people it's that the opportunity to go from non-existent to something that is massive i mean binance is a great example right literally hundreds of millions of dollars in revenue within the first two years how do you do that in the old world you can't right in this world you can and now all of a sudden you've got a well-capitalized player that's global because also when you start something entirely from scratch there are a bunch of super normal profits right because if there's a huge demand so we saw the internet created super normal profits and then social media

created super normal profits and this will create super normal profits for some yep so i mean the opportunity is enormous i mean it's literally every single person i mean india india went fully digitized you know three years ago unbelievable so here's my uh my favorite story about india i was there when they did the demonetization they took the 500 bill out etc right after that um 18 months later india's uh rbi the central bank there uh banned they uh find the legacy financial organizations and banks from having any relationship with with cryptocurrency, exchanges, services, etc. So they basically said, look, your point of failure in the crypto world is you're still relying on a fiat traditional bank account, etc. If we cut that

off, we're going to really hamper your ability to build. The Supreme Court literally this morning in India just struck down that ban and said, you cannot discriminate the customer base of these financial services firms based on what industry they're in. And so now what just happened is Basically, the entire India population can start using those digital currency services, exchanges, et cetera, and also bring money from their fiat bank account into that system. And you've seen that India rebuilt its entire digital banking system, right? So I can now buy milk with a fingerprint. That's so that's how advanced it is, right? And they built, without using blockchain technology, their own technology for the UTIM, I think,

payment system, which processes 50 times faster than Bitcoin could back then when it came out, with no failure rates and no intermediary. I mean, they've got this thing called IndiaStack. And look, the whole world's going this way. There's quite a few smart Indians. I'm half Indian, so I'm half smart. But there is IndiaStack. India's stack means that you can add a digital layer.

Now, it's a governmental layer and not distributed. Okay, I get that. Some people hate that. Whatever. That's not the point. The point is all your KYC is in it. So therefore, for everything, you can now, I mean, you try opening a bank account in India or a mobile phone account. You know, India's bureaucratic.

It's gone. You can do it in minutes. You know, try and do it here. Cayman Islands, open a bank account. Sometimes it's taken people three months. it's so onerous um there you can do it in three minutes so india stack has all of your documentation if you die your medical records are there they know who you are just by your fingerprint a friend of mine from india just came here and when we checked in downstairs at security he pulled up

this app and he had his passport his driver's license all this stuff in there and uh he showed it to me and i was blown away by literally in the u.s it would be the equivalent of having your birth certificate your social security number your passport your driver's license every you know your insurance card all this stuff in a single mobile verify that's verified by the government that literally you just tap two buttons and you can show it to anybody they can scan it they can do everything yeah it's crazy all right i want to bring these two worlds together so there's the bitcoin crypto world and then there's the legacy issues that you described uh i have been pounding you've been pounding the table about bonds and everything for a while i've been pounding the

table that every public pension in the united states should have one percent exposure to bitcoin as a hedge depends on your age okay okay explain why age because the expected future return and the risk profile don't match for a 65 year old baby boomer because they have to divest of assets then they need to own bonds and they need to just understand that they've got what they've got don't speculate now now here's my argument or counter to that is they're not going to own 100% bonds, right? Because that's just the way that the investment mandates are of the pensions, et cetera. And so instead, what they can do is they can put 1% allocation to a non-correlated asset where the value drivers are different.

I get the theory why. I just don't think it is... If you're the 65-year-old, what would the allocation be? I don't think the risk profile of the asset is right for a 65-year-old because the risk profile of Bitcoin is the volatility of the asset. So they could probably take another asset with a potential future expected return that is maybe better. I would take, let's say, VC, because you can invest in this space. And I think you'll have a better expected return for those kind of people versus the volatility. The younger you are, the more volatile you want asset to be but isn't the illiquidity of vc not a good fit for a 65 year old as well

yeah i mean there was no i mean there's no right answer and look you know as you know i'm a huge fan of bitcoin so it's not it's not the issue of it being a fan i'm just a bit worried about putting giving it to my mom um even at one percent yeah but it doesn't really matter enough yeah um And not in the world we're coming in. But the real point is, is anybody who has 10, 20 years or less or more of working and saving life, and I've gone on about this a lot at Real Vision, is the answer to people's younger people's future pension is part of this, is you have to have. Now is the time to take risk when you're 30.

you think that allocation numbers is it one percent is it something else much larger much larger yeah 50 no um you thought about 50 for a second no i think kevin o'leary yelled at me on cnbc and he forbid me from 50 because he said that's the stupidest thing he's ever heard and then i had to ask him how much of his portfolio was in equities yeah yeah what do you think the I think realistically, if I think of the future expected return of it, let's say, and again, we don't know, but call the price a million dollars, right? Which is the paper I wrote back in 2012. So where is it today?

Struggling around 8.5. 8,500, yeah. Yeah. Okay. So that's a pretty good risk reward, right? It's already been the highest performing asset of all time that I've ever seen, that I think I've ever recorded, not 100% verified. So that expected return on a 10% allocation is simply life changing for anybody.

It's basically a 1x downside, 115x plus upside. Well, it's not a 1x downside, right? It's probably... Well, okay. Well, it just went to absolute zero. Yeah. Even the chance of that... It's very, very low.

But maybe it goes down 90%. Okay. to make the maths easy. Yep. So basically you could lose all the money you put in. You could lose 8,500. 100x plus upside.

You could lose 8,500 and make 990 million. Sorry, 990,000. So that's if it goes up to a million from its current price. Which, do you think that that is something that is realistic? What would you put,

how would you handicap that? let's say a million dollar price point at this point given where we are today and kind of how this has played out well look in a portfolio it doesn't matter what it has is a high expected risk percent i think it could be worth much more than that and you know in 20 years time we're talking about sats and not about bitcoin because that's just how we work and actually the the divisibility of it actually works pretty well it's just changed our headset about using decimals all time but that's that's how it will be um so it doesn't really matter what the price is but you've got at least for an asset a 10x expected return at least um over what time period well even most

price projections would be you probably do it in 10 years so you know 10x over 10 years i mean that's astonishing for almost any asset price any asset class i've ever come across but it has a chance of a bigger upside so that's just how i think i also think my personal point of view is that everything that we know about investing is going to change in whether millennials will be doing it but the gen z will is i think the idea of a corporation goes and uh different parts of a because a corporation is to treat it as a single legal entity as a corporate as a person the point being is that is now old-fashioned once you've invented tokens because i can tokenize exxon into maybe 5 000 different income streams asset prices all of this so i can own any part

of exxon that i want what an extraordinary difference so you don't need to have corporations the complex legal structures um but you can have different types of tokenization of this i think the the biggest change i think is going to happen is for financial markets is everything's be tokenized yeah and to understand tokenization and the outcomes everyone's going to basically it's all going to be option theory and arbitrage and what we're going to be finding is we're going to be creating baskets of tokens and we'll be looking at value baskets and you know i was talking to mark yusko about this um a few weeks ago saying listen you know the value versus growth and all this you're going to be doing all of that in tokens yeah right now you know everyone's

discounted half these tokens they call them coins you know anybody who's an investor should should be saying there is diamonds amongst all of that yeah so i think this is a really important point 99 of them are the shit coins right because basically what you end up getting is like in the tokenization world uh so taking real assets and tokenize them for example the first people through the door are the ones who they can't find buyers in the traditional world they're not really sexy or they're sexy assets from a visual standpoint but the economics don't really make sense etc They're too high priced. There's all these issues, right? And so the first ones are always the ones that aren't the most attractive and definitely won't be the types of assets in the steady state. What I think people have to understand is you can't judge the movement to tokenization, the kind of whole industry on the first couple. Because if you do that, what you end up doing is you'll look at those deals or assets, you'll write off saying these are bad deals, these are bad assets, or they're not attractive assets for my portfolio. I just don't think anybody is going through every single token and doing the work and

going to see companies and say, right, what is the asset? How does it work? What is your future expected returns? What is the feature of this? Nobody's doing that. Nobody's doing basic on tokens. And that is going to be a revolution because that is coming. And that's what I'm saying is within all of this, as you say, there's a bunch of terrible

There's ones that may have a bet that there is worth taking and there's others that are the wrong price But there's too many tokens because people don't realize people are anchored on tokens or currencies. They're not they're like a replacement to equities What you're building is a new equity market from scratch, but based on tokens So the S&P 500 will be the a basket of point coinbase 500 token, you know, it's a different world and And they're not like equities because they have all the embedded components you want in it. It can be a convertible.

It can be a bond. They can be an income stream. They can be an asset. They can be a debt. We have no idea. That is the flexibility and the incredibleness of what is coming. So I don't think the existing financial system really exists because I don't think it needs to.

I think it can change. I don't know if you're comfortable saying, what's your percentage breakdown in the portfolio of cash bonds, gold, and Bitcoin? I've always been a very cash-heavy guy because I'm actually quite risk-averse because you take risk in your career, so you don't take risk in your personal life. So I've been very debt-averse always. And Bitcoin, I've never had a massive allocation. Over under 10%?

Under. Under? Under. Gold? Under 10? Yeah, just because it's not very racy. Bitcoin, I'll probably do more because I was quite early and so I didn't really know and then it came out and then got back in again and I'll probably do some more so I'm just

kind of eyeing it at the moment. Bonds I'll use leverage because I'm using them as a speculative trade and I'll go in and out of that. Got it. And dollars, I mean, this is how my head works, in 2012, 11, 12 maybe, 13, 13, I was living in Spain on the Mediterranean coast. I was billing Global Macro Investor in euros. I was living in euros.

My entire life savings were in euros. And I woke up and said, the dollar's going up. And at 148 and a half against the Euro, I switched my billing, all my personal savings. I then flew over to the US and I ended up buying a place in Miami and the place I did in Cayman to stop myself from trading to keep it in dollar assets. And I still have that position today. You sound like me and Bitcoin. Oh, yeah.

I just, you know, I knew it was the one trade. And bonds have been basically the one trade. I mean, you know, every pension I had, I just turned the whole lot to bonds years ago and just left it that way. You're one of the few people I know that you were very, very bullish on Bitcoin. At one point, you not lost some of the bullishness,

but basically said, I don't know, and then went back to being bullish. Walk us through just kind of mentally like that journey. Yeah, I mean, the journey is very simple to me. it's look and everybody has to admit it is you don't understand what this thing is we all think we understand we have no real clue what this thing is so when the fork started happening i'm like i don't know i don't know what this means and nobody did agree we didn't know the outcome was the outcome but we didn't know and i said look i don't understand this so i'm out

and i still i would have done the same had i seen the same situation every time again i would have said i don't understand this looks to me like you're diluting a currency by creating identical currencies. Now, what was amazing is the adoption didn't happen. So it was almost like the market was offered the ability to accept the dilution or not. And the market rejected it and actually became stronger entrenched in the original currency. Yeah, amazing. But yes, it did give birth to some other stuff like Bitcoin Cash and stuff that's out there.

An interesting different use case. But really, all of that forking didn't change. I mean, everyone just said, we don't care about the flaws of Bitcoin. We'll just work on that. And we'll work to get around the flaws. Hence, the Lightning Network and all of that. So that was that. And that was, I don't know, 2016, 17?

17, probably. 17, yeah. It was just before the price spike. I got out at $2,500 or something. And I bought it at $200. So it was not bad. And then I walked away. and then macro happened from 2017 i could see what was going on so i was very focused on that

bonds and stuff like that currencies and it was dan tapiero who kept pestering me he he has gone from i think not interested at all to absolutely a fucking animal on twitter pushing the narrative I know. So Dan said, we need to talk about this. I'm like, look, Dan, I'm too busy with all of this macro stuff. And Dan's a macro guy, right? So I really respect him. And we know each other well. And he's a great, great, great macro thinker. And so I said, look, we'll just do it on camera. We'll just do it on Real Vision. I said, that's the easiest way because I'm going to do that crypto week before the gold Bitcoin week. So I said, I'll do it then because look you know i'd hadn't had a conversation with barry silbert that had got me

very interested more in digitalization of stuff stuff online and how digital stuff can have value and i'm like i'm starting to think about the broader world again because i've always been thinking about it's not like i walked away from the whole concept i walked away from bitcoin for a bit because i didn't understand where it was but the whole broader digitalization world was moving forwards in my narrative good conversations with novo got me there so then i sat down with um dan and i just basically saw that the easiest way to play this big story was basically bitcoin um and so that was it i just got back in again yeah um what do you think about uh like decentralized finance ethereum kind of the whole uh programmable money yeah i love it all i just

think it's a different thing i think ethereum is silver to gold's bitcoin you know because ethereum has a somewhat of a precious you know commodity element but much more of a use industrial use element it's a slice silver so i i'm very bullish on ethereum i think got overly built beat up because literally everybody i know is building on ethereum um and again that will morph and change in different places we'll get different stuff and um but so yeah i'm extremely bullish on that before we get into what's going on with real vision uh presidential election does it matter who the president is for where we're going in the finance world i'm a fan of neatness and for the neatness of the narrow one of the narratives

that followed which is the fourth turning by neil howe i think it should have gone far left because the far left were most likely to break the system and change it but no change it like break corporatism, break how the healthcare system works, break how the financial system works. Within that, if you break the system, then you're creating the seeds of opportunity for all of the things that we think can come. It's an innovator's dilemma. You have to disrupt yourself in order to actually keep going. Yeah. And so I don't think that the current right of Trump is doing that. He'll disrupt up some of the world trade systems, but the actual destruction of the system itself is not going to

come out of him. So if I believe in that fourth turning narrative, somebody has to break it. And now when you talk about breaking it, is this the like anti-capitalism type left? It doesn't have to be anti-capitalism. It's anti-kleptocracy and oligarchy. It's how drug prices in america are literally 20 times out of spain it is fucking madness right it's illegal it's price gouging and it's wrong um it's how um it's it's the monopolistic power the banking system the pension system how you know they can have laws changing the pension system to make sure it works for the big financial services firms or the pension the asset management industry that's wrong there's people's money it's wrong it's wrong um the oil companies and what they

get away with and what they should do and don't do you know there's so there's a number of different things that i think people would be pleased to see the back of because everyone feels like we're being disadvantaged and it's not capitalism i think lives with warren's point is well taken it's nothing to do with not wanting capitalism. What I don't want is a system that gives an inherent advantage to another person. Got it. What's going on with Real Vision? Real Vision is amazing. So lots going on. We've just come off that retirement campaign because it's something really, really important for us because this entire retirement narrative is It's very big.

We have done a lot on this. We've been very early on this coronavirus, the economic impacts, the volatility stuff. We've been looking at a lot of this. And we don't drive that narrative per se, it's our guests driving the narrative. So people have been coming well in advance, and that's usually how it works with Real Vision. People go, oh, God, those guys are bearish, and then, oh, they were really right. And it's not, again, I don't drive that narrative, I'm just one of the contributors that appear

on it. So that's going on. And then we've just launched membership tiers, which has been a great thing for us because it was a confusing journey where we had a different product like Macro Insiders and one called Think Tank. And then you get the emails for that. And so anyway, we've got this beautiful journey now. You come as a Real Vision member and you go to Real Vision Plus where you get a lot of

these live broadcasts. We get much more to the timeliness, more access to our guests. Then we go into something called Pro, which is much deeper, more access. And then we have something called the Blacklist. blacklist yeah and the blacklist is like a super high-end kind of concierge membership club which we have members all around the world and we do these incredible events um i think yusko's hosting one in napa next and next couple of weeks um for a bunch of these people so that's a that that's been really good so that whole journey has been fantastic and then we also launched as many people

know we've now got a free version that's on um both our website realvision.com and on youtube And we launched that. I mean, we got 5 million views in our first month when we kind of went, we were like, wow. 5 million views on YouTube? Yeah. And it's now settled at the moment about 2 million views. A month?

Yeah. We're like, wow. That's a lot. We haven't promoted it. It just came from nowhere. Yeah, yeah, yeah. And were you just taking the interviews and putting them on YouTube? We were taking, yeah.

Once we started actually doing a bit of effort with it, but it's the same content. And we found that our long-form deep dive interview content. So actually, that's just about to change. Our benchmark interview is going to be our free show. So that interview, we'll have two of those out a week because we do a number of different formats. We have expert views, blah, blah, blah.

But the interview will be free. Then we've built a widget to embed on third-party websites, financial websites. We're just trying it on Zero Hedge right now where they embed the widget and Real Vision videos are on the site, the free videos. So to give us enormous scale in distributing free videos Because on the other side, we're working with corporate partners, whether it's JP Morgan, Thompson & Reuters, Refinitiv, a whole bunch of asset management firms and fintech firms, creating videos for them and distributing videos.

So we're doing a lot of that work as well. And that's really, you know, a really exciting business. We've got a live events business going as well, a whole bunch of stuff. So, you know, a lot of people just know us for the video channel, but we've got a whole bunch of stuff going around it where we're basically looking at the entire world's, financial world's pivot to video. Everybody's moving to video.

It's a revolution that's going on. Even your podcast has gone to video. You know, everything goes to video. Every financial services firm has to go to video. Everything that gets consumed is moving to video. Video is like the spinning wheel of death that's sucking everything into it. and we're the only people who really do what we do and you know have a lot of experience doing it so all the financial services firms have been reaching out to us whether it's that it's very

high quality i'm a subscriber i i actually won't even let you guys give me a comp the membership i tell them i'm fucking paying stop trying to give you the free one yeah it's not expensive is it let's face it boy you get yeah it's 180 a year the price is actually about to go up to 240 my guys always got a always got a pitch i love it all right so 180 dollars uh what is the realvision.com yeah right and so dollar for a month trial right now so no brainer it's a no brainer yeah all right what um what's the one thing that you want people who's the average uh investor the person who's hey look i have a personal portfolio i've got you know my savings a little bit of investment capital etc what's the one thing you think they should just tell

themselves over and over and over again for the next 18 to 24 months cash is king cash is king just for the average guy right don't over complicate it don't try and be stan drucker miller don't try and be the hero if you've got a bit of speculative money that you want to bet on the side to learn how this all works fine do that there's some opportunities and we've gone through them at length here the reality is the best thing you can have is cash yeah and the other thing other piece of advice that helped me my whole life is if you ever get in a situation where you afford to pay off your mortgage um do that first amongst all things because then nobody can take anything away from you you have a house to live in you can still work a bar job you can do something

and your life is protected and working from a position of strength is always better than working from a position of weakness a lot of people in crypto don't like warren buffett but he uh he's probably one of the best if not the best investors in our lifetime and uh right now he's sitting and $140 billion in cash, about a third of their assets. That's telling you something, right? Well, here's what I joke about all the time whenever anyone brings them up. I mean, he's long treasuries, therefore, right?

Yeah, well, and here's the way I look at it is forget the Bitcoin stuff for a second, right? And I've ad nauseum talked about how like you probably shouldn't take technology advice from a guy who doesn't use technology. So I just put that aside for a second. Going back to your idea of doubling up and getting super aggressive

and having that risk profile, et cetera. Guys like him, they salivate over situations that we think are about to play out because he's sitting there with a bunch of cash. All of these asset prices are going to drive down. He's going to make the rules and he's going to most likely be able to drive incredible deals for himself and for his shareholders. And the average person doesn't necessarily have to be Warren Buffett. But I think your point about cash is king. There's a protection element to it. But there's also a lot of people right now who say, you know what, I've got enough cash where I want to buy an investment property.

I want to do this. I want to do that, et cetera. It's probably going to pay off to be patient. Yeah, because things, and even if you don't have a lot of money, you'll say, well, what's the point of my 10 grand? What can I do with that? Well, guess what? Buying S&P 30% lower is going to help a lot. Well, that's going to help a lot.

The other thing is maybe you want to go on that trip around the world. Well, by the time coronavirus goes, those flights are going to be a fraction. It might be free. Well, that's right. So, you know, whatever it is, the ability to have money when nobody else has it is extremely powerful, even at a small micro level. Yeah, I think it's very fair. Realvision.com. What's your Twitter handle?

At Raoul, R-A-O-U-L-G-M-I. I'm about to go back. I need to write this. I wrote a tweet this morning, got the maths wrong because I wrote it too early in the morning. I'm just about to put it out. quite a shocking tweet about comparing the virus to the spanish flu so watch out for that as soon as i go back to my hotel i'll do that and then i need to go to the office and uh and actually go do real work do some work oh this has been good all right you've been here for an hour and 45

minutes you're you're a legend um i'm a huge fan of uh real vision obviously you uh you nailed the uh the bond uh call there and uh that was probably the best call of my life you think so i'm gonna give myself that pat oh you know what a question somebody had yeah i got two questions for you before i let you go what is the worst investment decision you've ever made and what did you learn from it oh fuck there's too many of those no but like either you can qualify worst as the stupid like you're just like i can't believe i did that or the amount of money i've got one of the good ones because i bought i was in london 2003 and uh three four and i decide that spanish property market looks good i've already bought home that i'm a house so i have a house but i start thinking

that i want to buy an investment property and on a golf course because apparently that's what people want but i fucking hate golf it's one of the worst things in earth with the worst cultures i've ever come across so i hate golf so i buy two apartments on a golf course off plan because it was near the house and of course now not thinking through that really when people come to the mediterranean coast of spain the key is in the word coast and not in a golf resort you know five miles from the coast and so i bought them and i thought yeah i'll just rent them out because there's all these golfers that do that obviously everybody thought of doing the same thing at the same time in spain and by the time the apartments were completed in about 2006 great timing i

couldn't rent them no so 2005 maybe i couldn't rent them so the the implied yield i had in my head i was like look at me smart i'm a hedge fund guy i've just bought this but you know i'll get a five percent seven percent yield anyway i'll just carry it and it'll be fine and then over time the price will appreciate I just couldn't rent them at all and then I ended up selling both of them for the same price I paid one of them because I just lost because I just wanted to get rid of the damn things because I hated them so much because I didn't like golf their apartments that I would never use myself they were but that's gonna happen a lot I think over the next 24 months yes and

And because the idea about that is I made an investment in something I shouldn't have made an investment in. You know, there's certain things I could have, there's other property I could have invested in that I wouldn't have made such a stupid mistake, but something I couldn't rent and couldn't sell. It was on the market for three years trying to sell it, four years trying to sell it, when the whole of Spanish property was offered only. Most important book you've ever read? And luckily I didn't have a mortgage. Because if I'd had debt, then I was screwed. Most important book you've ever read? Most important, Bonfire of the Vanities.

Why? Because it is the, that's just an answer I'd say today, and so a different answer tomorrow. Because it is, it shows the humility that we all have to have when we all think we're geniuses or amazing for whatever reason that we do. that narrative that we have our vanities everyone has to realize they're not real that's that humility in all things um is actually what you should strive to achieve for without it being your defining factor oh he's so humble because usually that's fake last question that

you could ask me a question we're done aliens you believer if i if i believe in probabilities then of course why well just because permutations and combinations are infinite so therefore there's infinite outcomes so of course that's fair just a math equation it's just a math equation i agree you know it's it's not difficult the question all started i've asked over 200 people this now because uh i was laying in bed one day and i thought everyone always asks about aliens but you know there's intricacies to life and so here on earth we have pets so there's humans and animals do you think there's like alien pets you think that they're walking around and they've literally like domesticated other but are pets pets or is this a symbiotic relationship where

they're using us you're going down the rabbit hole that's exactly why i asked the question what question you got for me to finish up when is the next time you're going to get on a plane oh man so all right when do you actually think you'll fly again okay so you'll love this last year i did 120 flights i think um and uh told myself i'm not going to travel this year i had to go to a board meeting in san francisco in uh i think it was january end of january uh i've never in my life bought a mask i've never worn a mask i've never done anything i got on the plane and i couldn't find the n95 masks they were all sold out here in new york so i literally was like what else can i buy well i'll just buy a fucking dusk mask i guess whatever i can get doesn't really do

anything put it on had a hood pulled it real tight and i literally sat there with like my hand sanitizer in my hand i was like the germaphobe of the year right because i was just freaked out i just didn't understand it whatever flew back i have since taken uh two more trips so i'm on three trips for the year i'm supposed to go uh at the end of march back to san francisco next week supposed to go to dc right all these things i'm seriously considering just saying i'm not going anywhere i'm not i'm going back to cayman and i'm not this kind of guy i'm not yeah i'm just saying i'm just not the guy right i'm usually a risk taker when it comes to this don't really give a i like going to war zones you know i really i don't mind i'm going back to cayman

and i'm not i was supposed to be going to napa valley to the to something in march not going I have my Global Macro Investor Roundtable in Mallorca, I've cancelled it. I'm supposed to be spending a month in the summer in Italy and Spain, how are we? Just because I don't know. And the outcomes are quite, I don't want to be, it's again, being ill, it's not the thing that I fear. It's being suddenly then not being able to get home. That's one serious issue, right?

If you get quarantined, the other thing is I live in a country as a foreigner. They might not let you back. They might not let us back. They might throw us out because the medical system can't deal with us. There's a whole lot of unknowns that is really complicated. So, yeah, I don't know the answers. Realvision.com. Go subscribe.

Honestly, it's happier than that. It's not always like this. Raul is a legend. Thank you so much for doing this. I thoroughly enjoyed it, although it was a bit apocalyptical, but it is what it is. Hey, everyone. Pop here. If you like this episode of Off The Chain and want to help us take crypto to the top

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