- Raoul Pal, the former hedge fund manager who founded Real Vision, believes that the effects of the coronavirus will have immense and far-reaching effects on the global economy.
- The duration and severity of the pandemic is something Pal believes has not been properly addressed.
- Pal believes a further 20% drop in inventory is in sight.
- In October, Pal called the Federal Reserve's key rate cuts to zero and the US called negative key rates. In late February, Pal said he wanted to buy bonds and the effects of the corona virus were "significant and real."
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"The whole world is done."
"The moment the spread hit Iran … and then Italy – it all happened over a three or four day period – I thought: & # 39; time to panic before everyone else & # 39;" , he said. "It's a human behavioral function. If the Chinese close every single border and city, everyone will do it."
To keep you up to date, Pal retired at the age of 36 after quitting his jobs at Goldman Sachs and GLG Partners. He lives comfortably on a 140-person island in the Cayman Islands and spends his days writing Market research, which is associated with a high price of $ 40,000 a year.
"I said, 'Listen, this is the greatest economic event ever – and it is coming,'" he added. "And in retrospect that was the biggest call I've ever had."
But this is not the first time that Pal has answered an anticipatory call. Already in October, he said the Federal Reserve must lower interest rates to zero and warned against it negative interest rates in the USboth of which have occurred.
When the market eased in late February, Pal expressed his affinity for bond ownership – a trade that would have immensely rewarded investors who followed his advice. He also warned that the effects of the corona virus would be "meaningful and real".
That was before things really fell apart.
Today Pal believes the corona virus will cause "the largest bankruptcy event in history". And given his recent track record, that's not reassuring.
"I think the balance of probabilities is that, in terms of economic impact, this is a much longer event than anyone is pricing in," he said. "I think it's a big social change that comes from all of this."
For Pal, the duration of the failure caused by the corona virus is the key factor here – one that he believes investors aren't paying enough attention to. In his eyes, those who expect a sharp V-shaped recovery in the third and fourth quarters are wrong in their assumptions.
"Isolation will be a real event for a significant period of time," he said. "You have a world that is becoming much more closed and complicating supply chains."
He added: "It makes people more local."
Pal & # 39; s forecast reflects billionaire "Bond King" Jeffrey Gundlach. In one DoubleLine webcast Earlier this week, Gundlach said: "We will be much more and less connected to globalization." And "we will bring manufacturing back and look at things in very different ways."
But the changes that highlight Pal and Gundlach don't happen overnight, which is why Pal believes the impact could worsen. Every day that the pandemic lasts is one day less without production and consumption. This in turn increases the risk of bankruptcy.
With that in mind, Pal positions its portfolio to survive a lower stock price. Ideally, he would like to get to the assignment below.
- 25% bitcoin
- 25% gold
- 25% cash
- 25% trading opportunities
"I now think we will still have about 20% downside potential before we get the 3-4 month glimmer of hope," he said. "For the average person, this is a very, very, very difficult world we're going to go to – and I can't gloss over it because there isn't a nice answer."