You know, it's been one of the most interesting two weeks of programming we've ever done at real vision
I think it was really useful to come with a kind of theme and test a hypothesis and for me personally
I found it incredibly useful because you know what, I write and look at this stuff. I kind of operate in a vacuum where I
Don't try trying to filter down the noises and I try not to listen to too many people
But this comes to a point where you need to make a call and with that you do need to
Open up the filters a bit more and hear some more opinions
and the way to do that is get the people that you trust and
Again, as you can see from the from the two weeks program, it's not necessarily people with the same view as me
So I'm not trying to get confirmation bias in any of this
What I'm trying to do is have a nuanced understanding so I can somewhere right where I'm wrong
And how to play it
So I think over this week I've learnt that much like I set up a Twitter
Survey at the beginning of this which was to see what people thought the probability was of a recession in the next six months
starting and
It was split 50-50 basically
So of the I think it was five or six thousand people in Twitter who answered that short survey
Everybody was split and I think we've seen that from the programming over these two weeks that people aren't quite sure
Where it's gonna fall?
People who look at the data itself
Tend to have seen some sort of stabilization in some areas that has made people pause
I remember Teddy valet was saying that some of his forward-looking indicators might have turned up
But if we if we remember from a Korean lakshman, he wasn't so sure that he was seeing any pickup
He just didn't see the the more determined deceleration of growth
So it's not clear from those guys whether we're going to say anything weaker yet
But when I speak to people like John Burbank and I hear from people at Christopher Lee Ari and and others
They're more concerned and I think that that those are the people have been paid to have the view
And I think that's interesting that they're starting. So look the balance of probabilities is for something much bigger
for me, it's it's clear that
You're gonna make all the money from making this call and you see a few of these and sometimes you'll get them wrong and sometimes
You'll get them, right?
2015 was one of the times I nailed it all the way down and then I thought you know
This is gonna turn into a full recession
not just the collapse of the oil market and and
Kind of global industrial production and that didn't happen because of the stimulus but we've heard over this
this series of shows that
That kind of stimulus isn't there there's a real concern the Fed might be pushing on a string
As well much like the ECB have been that there's really nothing they can do that's going to generate the kind of growth that
We need to offset this and I think the aging population dynamics and other issues
Are really real and meaningful. But you know, does that mean that the equity market is a bad place to invest?
It's not clear yet. What's gonna upset that Apple car?
But I do think that the wheels have been set in motion. My view is always that
There is the general business slowdown, but then there's the one thing that's hips things over the edge
And I think that one thing was tariffs
I do think that they were much more
Significant in their impact on psychology of businesses than anybody appreciates. I also think that
the dollar is a big risk in this equation and I talked about it in a in the original expert view and
Other people have referred to it
The dollars been thrashing around in a very tight range
To me as we're shooting this. I have a feeling it's gonna break higher
I really do it had every opportunity to break lower
We had the Fed cutting rates the ECB cut about everybody cutting rates and everybody said the dollar will collapse in that environment
We've seen that we've seen some sort of pause in the trade tariffs for negotiation issues
That didn't cause the dollar to go lower. In fact, I can't see anything that's going to cause the dollar to go lower than here
we're going into the
Fed meeting and I'll talk about that in a sec
But the reality is is if the dollar is not going lower chance. It's gonna go higher it could get stuck in a range
But I don't think it the structure of the market to me feels like it's going to break higher if it does
We know what to do. That will tip the dynamics
Significantly towards a much faster slowdown of global growth a much faster deceleration of commodity prices a much faster
deceleration of
Emerging markets and I think that is the thing that would tip everything over the edge and I think it is coming
But as we come into this process now we need to think ok
How do we play this and the FOMC meeting that is coming out around the same time that you'll be watching?
This is gonna be a tricky one because some of the data has not been as weak people have been following employment data, for example
So the markets trying to grapple with is it gonna be 25 is it gonna be 50 s ago mean nothing?
There's many people who think it should be. Nothing. The Fed should not be cutting rates
I think the Fed urbe hind the curve and they need to cut 50 and
50 again because of the number of factors that I talked about in the in the original program, but
what's what's important now is what are the outcomes from that meeting and how I look at it is this if the Fed cut
Zero, I nothing happens. I
Think that the dollar screams higher the dollar screams higher oil
Collapses commodities collapse global growth collapses and the Fed a cutting 50 and 50 again super fast
so I think if they don't cut
The bond market sells off very quickly and then rallies very fast along with the dollar
If the Fed go 25, I think it's a similar situation. I think
The market may or may not be pricing in 25 or 50 at that point
Let's say 25 and the chances are that
this moment you get the 25 card the mas gonna go what's next we have the price and probability of
another cuts because the Fed never cut once
So in that case the Eurodollar market the Fed Funds market and the bond market probably start rallying
It's the short end of the market that I really care about John Burbank laid out that case of why that trade is such again
I'll trade as I think rates go to zero, so I think that's setting up as a great trade
the other thing that I think is super interesting to me is when I look at the 2000 recession and the
2008 recession
The the dollar
played a very big part in that and the dollar rallied both times and
the reality is the dollar rallies as soon as the Fed cut and
particularly in
2001 in January 3rd 2001
the dollar had been selling off in the anticipation of the rate cut as soon as it cut the dollar just exploded higher and that
combination of the strong dollar into the
Cycle meant that the Fed were forced to cut faster
So I think that is coming in this whole situation if it's a 50 basis point cut
I think maybe the dollar says range-bound for a little longer
But remember the dollars based around a smile and that dollar smile is if things are really bad
Then the dollar goes up if things are really good
Then the dollar goes up and it's in the middle
Where the devil does badly and in this environment? I do think that if the Fed are going 50, and they're
communicating why
Then it's telling us the global growth is bad and the dollar should rally. So those are my kind of outcomes
I do think that you're gonna get the opportunity
Maybe before the meeting to start buying bonds again
Particularly the short end and I think there might be a chance to sell oil and copper
We looked at the chart of copper in particular in the first
Program and I think that's an interesting opportunity to look at the equity market. I've called it the vanity trade
we all want to short equities because you know
You sound like a hero because you sound like Paul Tudor Jones in 1987. The reality is is equities in a bear market
are
Not the best risk return and the reason for that is their volatility goes up and volatility in equities
very high volatility means that the reward you get out of that trade is
Less high-quality. The volatility doesn't go up as much in Euro dollars. For example
So the kind of risk rewarded the Eurodollar trade is far superior in every measure than the equity trade
Occasionally you'd nail it dead right in equities and things just freefall and it works in your favor
That's not the easy trade. I remember it
So well, I think I've recounted that story before of a good friend of mine in 2000
2001 who got it dead, right? He was like, I'm bearish I need to short the equity market. He shorted the equity market and
Because he he over sized his trades what he found was every time he should have been adding to a trade
He was getting stopped out every time he should have been taking profits
he was adding to trades and he just got chopped up and he lost 30% over that period from being right and that's the
Volatility of the equity market and how hard it really is to trade an equity bear market
Stan Druckenmiller told us very clearly as well as he says all of his monies to be made from the bond market and in particular
He's another euro dollar trader. So I think that is the key thing to focus on right now. The other thing is ok
Maybe I'm wrong and I think everybody told us we should see a resolution of this
over maybe August September and October
If we start to see the negative resolution over that period of time we know what to do
if it's a positive resolution, and this is another false alarm then it's pretty simple the
dollar should start to
Weaken, and with that emerging markets become the asset of choice
Commodity markets have we've heard from a few people are relatively discounted
So in which case you're kind of taking the lid off that market and we can see commodities rally strongly
So that's how I look at this so that there would be a reflation trade to be had
I don't think it's a great reflation trade. I don't think it's a high quality trade
but I
Understand how we could trade it if we needed to
But for me the balance of probabilities lies on
Getting that recession call, right?
This cycle has been as similar to the 90 cycle the other longest cycle in history
It has been incredibly that had those two false lows like this one had and then eventually it broke
It feels like we're there now
It feels that people don't want to trust
What they're seeing because the equity markets at its highest the equity market was at its highs in 2002
It was pretty much at its highs in 2007
so don't trust the equity market trust the bond market the
Bond markets the thing that tells you the story and it's been screaming to you
That the global economy is slowing down fast and the u.s. Is part of it
And I think that is the story that I think many people don't understand
most people watching real vision have not been historically bond market guys
It's been an equity world out there and to shift your mindset and to understand the opportunities across asset classes
Gives you the real edge that it takes
To make money in a really complicated situation like a recession. So hopefully you found this series of
programming as useful as I have
You might reach different conclusions. And that's fine again. I've always said there are no certainties in this world
All I'm trying to do is corral all the information you could possibly need to make an informed opinion
Because being ahead of the crowd
Taking the opposite opinion to what you think the market's thinking is where you make the real money you can jump on the trend
later
But first this the turning point that matters and I think the turning point or the returning point
With the bond market yields falling is upon us again
And I think the opportunity to make a lot of money is coming up rapidly. Thank you for coming with me on this journey
It's been a real journey of
Discovery and learning which is what I set out to do in the beginning and I wanted to bring you all with me
To come and find out about my hypothesis. Was it right?
Was it wrong where the weaknesses where the strengths and I think that's been the great thing about this whole two-week
Journey of discovery that we've all found things that we didn't know
To learn new things is really what we're in
Watching real vision for it's something that adds the value to our investing lives, and I hope you found it super useful