My Life in Four Trades with Raoul Pal | The Best of RV

[00:00] Welcome back to Real Vision in our best of series. Today we got Raoul's episode from My Life in Four Trades. Raoul goes over the four most impactful trades of his life, gets into the how, the what, and the why. Make sure you check it out. It's as evergreen today as when we first released it. Enjoy. Hi Raoul. Welcome to My Life in Four Trades. Hi Sam. Can't wait for this, Maggie. Oh, we finally got you. >> [laughter] >> Um so, before we jump in, it's our
[00:32] tradition to learn a little bit about your background. So, let's start there. Where did you grow up and what were you like as a kid? Uh I grew up in England. Um outside of London near Windsor, where the Queen lives. Um and I I had that kind of an idyllic upbringing. We lived in a small cul-de-sac of 10 houses. There was 15 kids our age amongst those houses. We played on bicycles. It was kind of in the middle of the countryside as well, in a small village. So, I had a, you
[01:02] know, a perfect upbringing and then kind of uprooted and moved to India when I was 11 years old. It was a massive recession um in 1980, something like that. And um Dad decided My father's from India, that we'll try our luck and move there. We came back 18 months later realizing that we were never going to fit in there either. The grass isn't greener. So, did that disrupt things or did you slide right back into that same cul-de-sac? It set that pattern of me being happy
[01:33] outside my comfort zone. And also the experience of life itself as a journey. And travel. It's in my blood. My father traveled to England when he was 19, 18, uh and then traveled back to India overland with four people in a van. Ended up in prison in Turkey, then in Iran cuz their visas ran out. All sorts of drama and he wrote about it for a
[02:03] for an Indian newspaper. And so and my mom was a Dutch au pair and they met on a blind date in Birmingham. So travel, adventure, living outside my comfort zone has been kind of dear to my heart all the way through from being a kid. And maybe some early experiences with sort of overcoming failure because just sort of haul the whole family over and then 18 months go all right, that didn't work out and and head back. I mean, that has to have an impact on you. Yeah, I'm sure it does. Dad was a bit Indian kind of typically status-driven. He's
[02:33] probably more scared of failure, but I saw a lot of failure around me, so I was I would keep an eye on failure and then make sure it didn't happen was something that I learned. Um also, the other thing is like that group of 15 kids, they were all like captain of every single team, you know, swimming for the county, playing cricket for the county, playing football. And I was never able to compete with them. So I learned that the only person I could compete with was myself. So I I from a youth I was never a competitive
[03:03] person with others around me, just with myself. >> That's really interesting. Wait, did you know that at the time or are you aware of that looking back now? Yeah, I I knew I wasn't as good at as them and accepted that. But I don't know, somehow it gave me the intrinsic motivation for kind of life itself that yes, it is a team sport, but it's not really. In the end, the buck stops with you and you have to make your own success and luck, you know? And so yeah, I I don't know,
[03:33] but it's so badly ingrained in me that I can't even bear playing board games. Just can't stand it. Can't stand Don't play card games, none of it, cuz I don't like the competition. Do you not like the competition or do you not like losing? Cuz those are two different things. Oh, I don't mind losing. Um I just I don't know there's something about competition that doesn't competition against other people, you know, particularly people that you're, you know, friends or those close around you
[04:03] that I just it doesn't motivate me. I don't mind the competition of myself against the markets or whatever it is where it's kind of faceless and you're trying to figure it out and it's based on you, but yeah, I'm just not a competitive person which is people find hard to believe, but I'm not. Let's get some facts. 37% of you aren't subscribed to this channel. That's almost four out of 10 just freeloading the alpha. So, come on, hit subscribe and I promise to keep leveling up the show with the best guests and the juiciest insight. Go on, do it now. So,
[04:35] was career in finance a career in finance something that was on your radar from a young age? So, you don't want to compete with others, but you don't mind sort of there is a part of you that's competitive and wants to do well. So, did you did you know about finance cuz it sounds like your dad or your family wasn't necessarily in the business? My dad was in marketing. So, he was like European marketing director of Xerox. He was in the copy copying machine industry which at the time was the fast-growing sexy tech industry. Um,
[05:05] and so, he was in marketing, but I was a kid of the '80s, right? I grew up on my bicycle around the '80s and would see the rise of, you know, people with red braces and Porsches and champagne and the '80s thing happened, right? Uh, especially in the UK, right? >> Oh, yeah, really was huge in the UK. And you can't help but notice that this massive new wealth that accumulated the Thatcher the Thatcher years. And so, when I
[05:35] I was interested in finance. I was reading about it cuz it felt like it was cool to me. Uh, much like people might read about startup and entrepreneurial life now, you know, cuz you're you're dreaming about what your future self is, but I also liked marketing and understood it. And it was actually after university I did economics and law at university, but tried to do as much finance stuff as possible, but also was focusing on marketing. And it was the only university that would accept me, by the way, so it wasn't like I went to the best university. I went to the only one that would take me. Um and I um
[06:07] I was speaking to a friend of dad's at dad's birthday. And he said, "Well, what are you What are you going to do?" And I graduated in 1990, which was a recession, which is a terrible year to graduate. Um and I said, "Well, you know, I'm interested in marketing and I've been interviewing. I have actually I've got at home still got 100 rejection letters from all the companies I wrote to. So, many of who I worked for later, but you know, I I was interviewing at like places like Gillette and I wanted to do marketing. Um but and I couldn't get any interviews
[06:38] at banks, but that was the other thing. And I said to this guy, I said, "You know, I'm thinking about marketing or finance." And he looked at me and said, "Really simple, Raoul, cuz you can go and work for a great marketing company like Mars and they'll give you free Mars bars. Or you can go and work for a bank and they'll give you free money." And it was like Ding ding. Ding ding ding. It's like, "Yeah, it's the same job. Right? You're doing basically sales and marketing. And so, but one pays a lot more. Um and
[07:10] that's how I ended up. I just I'm a big believer in manifesting your own destiny. I kind of see it and then make it happen. And so, I just made it happen and I got there eventually. Fought my way in, went through circuitous routes, started in a company called Telerate, which was like Bloomberg at the time. In fact, it was the number two. Reuters was number one, Telerate was number two. I got a job in the graduate training program there. Um I then got promoted to a salesman really quickly. Um and then and then um focused on getting into a trading desk and I went to a
[07:41] company called James Capel, which was a very kind of posh brokerage house that was part of HSBC in equity derivatives. And then my boss resigned 6 months later and I became the boss. That was that. That's a shot right up. So, what was your impression of that investment banking world? Because you know, there was a certain sort of culture and a certain fitting in to that whole universe. Um both both here in the States and in the UK. It changed in my career. When I first
[08:12] started my career, the old boy network the English class system was very prevalent. And it was a very posh firm. So, there was a lot of very posh people who went to very posh schools. Um and it was kind of gentleman's club. So, when you got promoted to a certain level, you get a club membership paid for by James Capel. It was It was that kind of firm. Um and my impression of the dealing room was obviously overwhelming, but the the adrenaline
[08:42] you know, even when I look back now, it was like you're like a battery hen. You know, there was all of these very well-paid people with 1 m by 1 m of a next to each other. It was chaos, loud engaging, terrifying >> [snorts] >> and it was also foreign language. So, you'd sit there and I knew a bit about finance, but I was like, what the hell is going on? These things prices moving on the screen. You couldn't really focus. What did they mean? Why were they going up and down? And then, you know, eventually I actually discovered charts and charts were my
[09:13] visual cue. You know, some people are very visually driven and I'm very visual. So, charts helped me with that. But as I progressed in my career and I transitioned to NatWest and then eventually to Goldman it was a whole different world. It was yes, there was a bit of background element, but then it was about how smart you were. Mhm. And that was a very different environment. Um much more competitive. Much more uh
[09:43] ruthless, fast-paced, entrepreneurial. Um but also restrictive in different ways. Yeah. So, at some point you switched from you get in through sales and marketing. Were you Were you always in that but watching trading or did you actually switch to trading and managing money? No, so I I did my whole career in investment banks as a salesman. So, I rode the wave of derivatives and I was an equity derivative guy. So, you know, the S&P futures and all of that
[10:14] with the start, you know, stock options, index options, and then it grew and you know, I was one of the people who started the sector swap business in Europe. So, you know, we trade sectors in the US. That didn't exist in Europe and I and a couple of hedge funds got together and created a market for this stuff and I rode this huge wave and in the middle of that I started discovering that I spoke the language of hedge funds and that was the area I focused on and I really liked it. So, then I became the hedge fund
[10:44] [clears throat] guy in Europe. So, I became the kind of European hedge fund guy. And again, I just manifested it. I just That's what I wanted to be. And I was at NatWest and we just I was the head of the desk and I was moving a whole team from James Capel cuz they had failed to pay us a bonus when we had a great year and we're like, "Fuck that. We're off." So, the team was moving across and just as we were about to start work the new boss at the time said, "Big change here.
[11:15] Um NatWest had just hired 120 people from Morgan Stanley the equity derivatives team and this is the world's best equity derivative team. They're coming to NatWest. Um and I said, "Well, what does it mean for me?" cuz I've no idea what it means for any of us, but it's going to be a change cuz we're going to turn from being a British investment bank to an American one, and it's going to happen fast. Um and my new boss at the time, a guy called James Goldsmith, um who was pretty famous in the industry, has like, you know, he was the hedge fund guy.
[11:45] And I was already speaking to some hedge funds. I was, you know, built to start building a hedge fund business, but I was more of a generalist in my client base. And Rick said to me, said, "Listen, Raoul, your job of head of European um equity derivatives doesn't exist anymore." I'm like, "Great." He said, "What do you want to do?" I said, "Hedge funds." He's like, "Fine. Who do you want to meet?" And I gave him the list of the 10 largest hedge funds in the world. He said, "Come over to New York next week. I'll introduce you to all of them."
[12:15] And that was Paul Tudor Jones, Louis Bacon, um Long-Term Capital Management, all of them, the whole lot. And I met them all. And that was the start of my career. Which brings us perfectly to the to the trades, but were you terrified meeting them because you sort of No. >> you sort of >> lacked I've never lacked confidence cuz I'm confident in myself. That doesn't mean I'm arrogant or in any way think that I'm something special. I just I from a very young age, my father used
[12:46] to hold parties or whatever, and me and my sister would serve drinks and nibbles, and we would socialize with adults. So, I was never scared of meeting people. And you know, there were some pretty fancy people who come along to these things, and I would just treat them as equals, and they would treat me as equals, and I learned that. And then there was another trick before we get into the trade thing is I had a secret weapon. The secret weapon was my name, which nobody can really pronounce, including myself, and everyone pronounces it
[13:17] differently, however they feel. So, I would always just use my first name. So, I would call up Paul Tudor Jones, s- get to his assistant or the the person who ran the trading desk say, "Can I speak to Paul?" And they would say, "Who's speaking?" I say, "It's Raoul." "Sure, Raoul. Hold on." But nobody else did that. It's like, "Oh, it's Bob Smith from Goldman." But there was only one Raoul. And so the moment that assistant would call Paul or Sam or whoever it was, they would only use my first name. So
[13:47] they assumed we were friends. And those people felt I was a peer because they only knew me by They didn't know me as Bob Smith from Goldman. They knew me as Raoul. It was It was a genius piece of marketing. So it's so interesting that you're talking about all those legendary your sort of, you know, sort of in- the inside seat you had to those legendary hedge funds because um we're actually going to do something a little different for your four trades. Um for the best trades, we're actually going to talk about other people's trades that you saw
[14:20] that really had an impact on you or really like left you sort of impressed or after all these years stood out to you. So they're going to be other people's trades, but for your worst trades, we're going to do your trades. So you get to brag about other people but share the pain of your own trades. But we thought that would be that would be fun cuz not many people have had the sort of access to these folks that you have, okay? So are you ready? We're ready. >> [music] >> The first trade is one of the best and
[14:51] that is a trade that was made during the Asian financial crisis and it involved the South African rand. So tell us about this. This is 19- This is 1998. It was when I realized that the game that you see being played is not the game. And what you What you realize is the world's best investors think two or three steps ahead at a speed and
[15:23] understanding that is breathtaking and it takes a while to learn to be anywhere remotely as good. Yeah, it's the that's seeing around corners that that sort of certain people are able to do. Yeah, and this trade every time I describe it to people everybody goes they oh my god, really? And I don't once you know it, it's so bloody obvious. >> So, what's happening at this time? Like what's happening global markets? Where are you are you at Goldman still? Are you I was Goldman. I was a salesman.
[15:55] It was 1998. I don't know if Roger Hurst had yet joined. I don't think he joined me yet. So, he came and joined me as as my sidekick. Um and we were wildly overworked. I couldn't go to the bathroom during the day. It was so busy. It was like chaotic market. All of Asia was imploding. The European banks were imploding. The hedge funds were trading like crazy. You know, later long-term capital blow up. I mean, there
[16:26] is >> This is the Asian financial crisis, the beginning of the Asian financial crisis, right? >> this is 98. This is about 97 98 98, I think. So, the single and I would see the trades of Tiger Management, Julian Robertson, who sadly just died. I would see how they traded. I would see how Paul Tudor Jones traded. I would see how Stan Druckenmiller traded. And most of these guys, Long-Term Capital Management, all of them. But,
[16:57] the guy who was the most aggressive was Louis Bacon. Louis Bacon of Moore Capital Management. And I knew his I didn't know him that well, but I knew his team very well. They were [clears throat] my biggest client by a long way. And they were obviously very busy over the Asian financial crisis. but it's like hedge fund heaven. Everything's going on, the economies are imploding, currencies are collapsing. So, there is So, what's going on at this time is Thailand devalues its currency, and that
[17:28] starts tipping the world into this rolling sovereign debt crisis across Asia. And currencies are collapsing, stock markets are collapsing, bond markets are blowing up, and it's all happening, and the European banks are under stress because they've been lending money to Asia, and we kind of know that whole game. And we're kind of midway through this, and the hedge funds are starting to figure out what's next. Right? Cuz there's always a daisy chain when it comes to leverage. What's next?
[17:59] Who's going to blow up next? And I remember looking at Stan's trades, Stan Druckenmiller's trades, cuz I could see them all at Goldman. And what I >> The flow, cuz you could see the flow they were putting through. That's it. >> the flow. I could see the positions in the in the in the futures booking system. And I could see how he had layered on bets, starting with FX, but then equities, commodities, fixed income. I could see how he weighted his bets. It was fascinating to see.
[18:29] Obviously, you know, it was all private information, so you can't discuss it, but I could see how Stan's mind was, and how he would bet in this very fast-moving dynamic market. And more capital, very aggressive, um very uh uh ama- amazing amazingly talented people. And Louis Bacon is one of the most incredible people. And I get the phone call from the head of trading, and in the market chaos,
[18:59] and they were always he was always really aggressive, but he was a good friend as well. He's like, he calls me up and goes, "Raoul, sell South Africa." And puts the phone down. I'm like what do you want to sell in South Africa? I'm an equity derivative desk, it's not the currency, it's not a currency desk, in which case you know. It's like huh. So what do you want me to sell? And how much do you want me to sell? And at what price do you want me to sell?
[19:30] None of those three were there. So I call him back and I said Chris, what do you want to do? He goes, just I think his words were just [ __ ] sell South Africa. And then he says, oh, stop. Just don't sell the futures contracts, sell the stocks. I said, do you want it to even look like do you want it to look at the index? He goes, I don't give a [ __ ] Hangs up hangs up. And then every 10 minutes he'd be like, how much have you done? I'm like, it's South Africa, it's not very liquid. Just keep going. This went on for five days.
[20:02] Five days. We just >> So all South African stock equities, any equities that you could Yeah, anything was liquid, we sold it. So >> [laughter] >> okay. The South African stock market collapses. About a month later, six weeks later the phone lights up again from Moore Capital. Buy them back.
[20:32] You know, and it was the same messy process. And three, four days later uh we finished it. And I work out the maths. I'm like all of that mess of the market collapsing, you moving the price, all of these crazy orders, blah blah blah, for 8%. And I'm like, you know, the position I can't remember what what it was, half a billion dollars or something, it was big. But it wasn't enough for Moore Capital,
[21:03] who ran 10 billion plus, to really move the dial. Considering that currencies were collapsing and all of this stuff was going on. So, at a quiet moment, I called back the head of trading and said, "What did Louis just do there? Cuz that seemed like a complete waste of time and effort." He's like, "What are you talking about?" I said, "You've made 8% on that big messy multi-day thing." He goes, "No, we didn't. We made 58%. It's one of the best trades we did all year."
[21:34] I'm like, "What am I missing here?" So, then he goes on to explain. The big trade in the Asian crisis was shorting the currencies cuz they're liquid. And they were moving enormously. But, the problem was the interest rate markets, they were raising interest rates to stop the speculators borrowing the currency. So, if you have to borrow the currency,
[22:04] it's now 20% borrow cost, it's expensive. And it was difficult to do. So, across Asia, this game had been if you were lucky enough to secure your funding, the borrow cost, you could do these trades. But, if you were too late, they were becoming marginal cuz there was 20% cost of capital just to do it, maybe more. So, South Africa had a really unusual situation. They had two currencies.
[22:34] The financial rand and the commercial rand. The commercial rand was fungible. You could trade it around the world. But, interest rates on that, cuz everybody wanted to short it, were like 20-something percent. Call it 27%. Crazy rates. As foreigners, we couldn't short the financial rand. I can't remember which way round it was. I I was the financial rand we couldn't short.
[23:04] And so, I'm like, "Okay, I understand. What were you doing here?" He goes, "Oh, it's pretty simple." He said, "We realized that when you short stocks in South Africa, your borrowing costs were half a percent. And you got short the financial rand, which nobody else could short. And he said it fell 50%. Nobody else had figured this out. It was a way round
[23:34] funding that nobody else had figured out. And they'd seen it and acted super fast before anybody knew what was going on. And so, what I thought the trade was was shorting the stock market. But that was just one of the tools to get the actual position, which was to short the currency market, which had fallen 50% and get round the issues of stock borrow, regulations between markets, all sorts of It was at that point I realized that the different people play a different level
[24:04] of game than I could. It's funny that you tell that story because we're now in a situation where we have a global crisis that's, you know, sort of unfolding, although we don't really know yet. It's not It's not rapidly Things not rapidly falling apart, but you have um rising rates. You have, you know, you have lots of people looking at different situations. You have policy diversions. Um can can you do things like that now, or was that particular to that time period?
[24:35] No. It just depends what it is. You know, you know, there's complexity. I don't know how the funding markets work, but somebody in the funding markets will be figuring out something to do. It's But it wasn't the complexity of that, of knowing the plumbing. It was the speed of which they processed the opportunity and went for it before anybody even understood what was happening. So, I saw it again from Moore Capital. Uh this is not one of my best two trades, but it was again amazing. So, in the UK, the 5G licenses
[25:06] were being issued. And the UK decided to auction them. Sorry, 3G licenses. They decided to auction the 3G phone license. And what happens was there is a massive bid cuz everybody outcompetes themselves saying, "We must have this ability to have 3G." And I can't remember how much it was, but it was billions of dollars. And the moment that hit the tape, Louis Bacon figured out this is going to
[25:36] bankrupt every single telco in Europe cuz every single country's going to do this. They're all going to extract as many uh as much revenue as possible by auctioning off 3G licenses, and everybody's going to go bust. Or bust you know, they're going to come under severe financial stress. And that's when we start the sector swap business in Europe. The guy from the trading desk calls me up and goes, "How the [ __ ] do we short telcos in Europe?" I'm like, "Well, there isn't index the Dow Jones um
[26:07] um index that's based on this stuff." He's like, "Well, is it tradeable?" I'm like, "No." He said, "Well, you're going to have to figure it out." And he said, "And I need you to go and find a friend of yours who'll make a market as well so I can get out of the trade without just relying on Goldman cuz I need to protect myself or I'm not going to get killed by you guys." So, I called up Jason Gherity, a good friend of mine at Deutsche Bank, and said, "Listen, Jason, we're going to start the sector business in Europe. This is the Dow Jones sector. This is the telco index." He's like, "Fine." So, we start it. And again,
[26:38] within probably about an hour of figuring out that we can do it and we said, "We'll figure out the details." He had sold like a billion dollars of telcos before anybody even figured out what the hell was happening. I made a fortune cuz he's just so fast to see the knock-on effects. It's like, oh, amazing auction. Wow, that was a lot of money to Well, everybody's going to every
[27:08] European country is going to do this to how are the telcos, the European telcos going to afford this to Well, this is going to absolutely kill them. Amazing. So, the guy was really good at doing that. is really fast assessing huge amounts of information and making the best expression of the view. So, you know, what lesson did you take away personally? How did you think about that as you especially once you started once you left Goldman and started managing money yourself and, you know, thinking
[27:38] about your macro framework? It was really about too many people do the obvious and there's another group of people who overcomplicate. What you're trying to look is for that sweet spot between seeing something that nobody else is seeing yet but still giving yourself a high probability of success. I've seen this my old boss at JLG, Norman Gottesman, would tell when I would get a little bit carried away by doing some kind of weird option structure. He'd say, "Listen, Raoul, if
[28:08] you want to scratch your ear you don't put your arm all the way around your head to scratch your ear, you just scratch your ear. So, if you want to go long the euro, buy the euro. Why have you got the stupid struct" And it was the keep it simple, stupid idea. That I see so many people still to this day do and I hear them on Real Vision overcomplicating stuff. So, there is a balance between being too simple, which case it's too bloody obvious for everybody or too complicated that it the trade never works anyway. And I've so many people have
[28:39] lost their entire careers doing that, particularly option guys. They just they always overthink everything. So, it's that sweet spot between being fast, not overthinking it, but thinking it through further than most people do in a shorter period of time. Which is easy to easy to say that is so incredibly difficult to do. And when you see it done like that, it's awesome. It's just, you know, it's just like it's like watching a grandmaster play chess and doing it really fast. It's like wow, okay, do that again? That was magic. But it also then you know it's possible. So you're like,
[29:10] crap, if you can do it, like theoretically we all should be able to do it, but it's just it's so so hard. >> [music] >> So this next trade, the second trade, is one of your worst, it's one of yours. In 2009, you ignored your macro framework and you overrode it with emotion. So set the scene for us, like what's happening in your career, what's happening in your, you know, in your life? Have you been successful trading at this point? >> I have basically retired from the hedge
[29:40] fund business. I didn't I didn't make the fortune to make the richest man in the world, but I'd done well from it. Um and my last year I didn't do great, but you know, we were up for awards for some of the years. So, you know, I had a decent shot, but I didn't want to do it. I didn't like managing money for other people, and I didn't like being forced into a shorter term time horizon um than than what I thought macro should be. I think that macro should be higher volatility, longer time horizon,
[30:11] but the pension industry and the fund of fund industry was forcing people into shorter term time horizons, less volatility. So it became about gathering assets and not about performance. I'm like, I can see where this is going, I want out. And I was dead right, I saw it in advance and got out. The hedge fund industry has it slowly imploded its way through lack of performance. Um so I was living in Spain, writing Global Macro Investor, which is my institutional research service. And I was I had seen the financial crisis coming.
[30:42] And I'd written about it and done extremely well and made money trading myself. Made a lot of money for my clients, made made my whole reputation on that. A lot of the people from The Big Short were clients of mine. A lot of the most famous hedge fund people in the world became global macro investor clients back then and are still with me today. Um and then it came so I've been using the business cycle framework, which is the
[31:12] ISM that people have seen me talk about on Real Vision, using um the business cycle to predict where asset prices go. Fine. Got all that right. You know, covered most of the financial crisis, got it right. And then the markets have been imploding, so it's now kind of March 2020. No, call call it April, May. They've started bouncing from the low. And I'm thinking the financial system is going to completely go.
[31:42] Because that was the sentiment. That we're going to go to the logical conclusion. I see people doing this now. The logical conclusion is the complete wipeout of the financial system. And whether that leads to a sovereign crisis, whatever it is, but it's the next step. It's the depression. Right? That's in the back of everybody's mind is that 90% downside and the whole thing going. And this is this is around this is after you probably would see into that because this is after we see Lehman
[32:13] go. I mean it was like dominoes. Like firms that had been around that had weathered all of that were just falling. I mean it was it was a it was a crazy time. I mean there were you're right that people thought it was the world was ending. I mean it was not a joke. I mean the wheels were coming off. You know, Hank Paulson's throwing up in the White House in his memoir he tells us because he's so freaked out by what's going on. people >> understand that an entire system that commercial system of which we live is based around finance
[32:43] and banking. And the entire banking system become insolvent. And that was probably the pension industry as well. And anything to do with housing and I mean it had all stopped. And the terrifying thing is if you're not careful you go back to barter. And it happened in Argentina in 2004. We'd seen it. People knew. So somewhere in the back of my mind was holy [ __ ] this could be Argentina 2004 where it
[33:16] went to barter. Or this is 1929 1931 1932 1933 all over again. Which means that even though the market's down 50% it can go down another 50% and another 50%. Because what is the resolution? Now the resolution ended up being quantitative easing. None of us knew what that really meant. So I see the quantitative easing, I see the massive fiscal stimulus, the top
[33:47] policy, all of this stuff. And the market start rallying. And you're used to short squeezes. So of course you think it's a short squeeze. My economic indicators had bottomed. They got as bad as they were going to get and they'd started to rise. But my emotion was telling me this is not over yet. We're going to go to the logical conclusion. It's when you kind of impose
[34:17] your will on the markets. And you see it I see it now, I see it I I've seen it in different periods of time where people impose what they think it should be, not what it is. So I'm like this is the comeuppance of the financial system. This is the big one. And it was a big one, right? It was catastrophic, but I thought it should be more. Down 50%, that's nothing. We need total wipeout here. This is what You know, this is what we're going to get punished for the leverage that we've
[34:47] taken. And so, my indicators were picking up to say the business cycle had bottomed. And I had constructed a narrative in my head that the business cycle would roll over again and create another new low. I had no evidence to support that. What it was was emotion telling me that's what I wanted. I just had a huge success of 2008. I was now feeling hubristic. I thought I was invincible.
[35:18] Of course, I would nail this. And imagine the glory if I got it right again, that the market rolls over and that it didn't mean revert and that we went through decades of of markets not going back to the highs. And if I called that, then I would be amazing, right? Every time I've done this, every time I've started to believe my [ __ ] smells of roses, I've had my nose rubbed in it. Um I remember when I was at GLG, I remember the difficult conversation with
[35:48] Noam Gottesman, who's still a mentor and a very close friend of mine, um about a pay rise, uh being compensated for, you know, we'd had some good performance and I I wanted to get a a percentage a better percentage of the performance fees. So, Noam very graciously agreed. Uh you know, we debate all this stuff and obviously I then had a terrible year afterwards. Of course. >> [laughter] >> Well, actually, to be Noam To be fair to Noam, he's like, I was like, "Noam, I'm going to leave." And he said
[36:18] I said, "Look, and I'm not going to get a bonus anyway, cuz I negotiated this and I stand by that. If If I'm not making money, I shouldn't get paid." He's like, "No, no, I'll pay you a bonus regardless cuz I want you around." I'm like, "I can't do that cuz I'm not honoring my part of the deal, but uh thank you." That was the kind of guy he was. But so uh hubris I've learned is when it creeps in you start to you should your spidey sense should go up. I completely got this wrong. So, all of the work all of the economic work that I taught myself how to look at the
[36:48] business cycle all said the probability is that the worst is behind us. My emotional side was screaming other things. Everybody around us was screaming other things. And so, I didn't close out my short positions. Mhm. I said, "It'll be fine cuz it'll roll over again." And then I added. And and I was recommending it as well. there's a bunch of people 2009 was a mixed year. You either got you either did really well
[37:19] or you got absolutely nuked. And I got absolutely nuked. I don't think I saw I think well, it was easily the worst year I'd ever had in the history of Global Macro Investor. Uh easily the worst year I'd had personally. And a lot of clients got murdered by it as well. When you had such success with that bear call, is it easy to get sucked into that again? You know, that you're in that bearish framework and just hard to to make that pivot when it worked so well? It's very hard and you've you
[37:51] begin to self-identify. All macro people self-identify with bear market but bear markets. >> Mhm. Because generally speaking if markets are a string of positive returns and negative returns bull markets tend to take time. Bear markets happen super fast. So, if you get it right, you make a lot of money very quickly. So, macro guys love bear markets. We use leverage. We go for the kill. Then you walk away.
[38:21] And the lesson everybody learns is they when do you walk away and when do you not? So, the really good people, the Paul Tudor Joneses and the Louis Bacons and the Stan Druckenmillers, know I remember writing to Paul in fact in 2001. And I wrote to Paul, I said like you know, I'm really bearish and blah blah blah blah blah blah and it was like in the middle of the 2002. It was after 9/11. And he just said yeah, I agree well just be careful. Don't outstay your
[38:52] bearish welcome. I remember the email really well. And he was warning me obviously that he could see that we were getting close to the reversal. Um and I I probably did out I I certainly did overstay then. Wasn't the worst. Um but in 2009, I just overstayed it. I just overstayed it because I wanted to be right as opposed to not realizing. And that's very different to being early
[39:22] or getting a trade wrong. These are very different things. This is the emotional overwriting of your macro framework. Sometimes, you can be like I'm currently really quite wrong on bonds, but my macro framework tells me that this is the best risk reward position and this is what you should be doing. So, it's not an emotional position. It's very different. Yeah. And And you can see all over Twitter that people are very emotionally tied to the narratives they have in their head across a range of issues.
[39:54] What What is How do you recover from something like that? So, you went from being the the sort of best and most respected and suddenly you're just you're you're losing money, you're losing clients' money. How do you How do you bounce back from that? First, you need get back to the point of intellectual honesty and that takes a while. To get back to yeah, screwed up. And then then your head is not normally right. So, the first thing to do is try not to take a lot of risk and just
[40:26] just calm down. Your thesis was wrong. Find a new thesis, but don't force it cuz often you try and get the next big trade, right? And I've seen that. Kyle Bass, bunch of these guys make a ton of money in one trade and try and force a narrative and it doesn't work because they want to be done caught. So, I I think 2000 and 10 was kind of okay. Um but I was gun-shy.
[40:56] 2011 I think was pretty decent. And then 2012 was a great year cuz I got the European crisis. Uh and I didn't overstay. So, you build yourself back up. You build yourself back up cautiously. You can't help it. You're scarred. And you feel unconfident. I mean, it's happening to me now. You know, you just feel like, [ __ ] I can't get anything right right now. And it's makes you feel you know, just insecure generally about
[41:26] what you're doing. And the answer is is to do your work. Is to do the analysis. Set yourself aside from your emotions and saying, "Today, what would I do? Would I put this trade on or not put this trade on?" You know, okay, you've got the trade on. Do I do I just stick with it because I over the time horizon, the risk reward still works or am I fooling myself? And it's quite it's it takes a while to do all of that um and it's pretty horrible. And I remember even in 2001, 2002 when I was
[41:57] at GLG running a big book, there'd be periods of time where it just didn't work. And we'd been making money. And And what we'd tend to do is just close everything out. Just close everything out and just stop. And so, fine. Look, let's just take a day out of the office, go and do something else, and then we can rebuild up. So, a quick break in your regular programming. If you're serious about your future, grab my free report called prepare for 2030. I think you've got 5 years to make as much money as possible, and this guide
[42:27] will help you navigate what's coming. The link is in the description. Download it now. So, the third trade is one of the best that you saw, and it's a hedge fund trader who bought Eurodollar futures in January of 2001, and then went to his house in Mallorca to wait. So, So, what what is this about? So, between this trade and that Louis Bacon trade, this is really how to trade macro. Right, these two are
[42:57] the best macro trades I've ever seen. Yeah, George Soros and the pound, but I wasn't involved in that. I was directly involved in Well, not directly involved in the second one Soros because I was doing the trade similarly. So, there was a trader at Tudor, and I won't mention his name privacy, and we get to hear by one of the sales people. I'm at GLG now, and I am So, we get to hear of this story, and it unfolds over the course of the year.
[43:30] So, I think it was January the 2nd, uh 2001, the Fed cut. The ISM across 50, growth was weakening, and the markets had started pricing in cuts, but this is the first. So, this is how macro people think again. This guy went, "Well, we're in the middle of a stock market bubble. We've got debt problems.
[44:00] They're going to have to cut a long way, and the Fed never cut once." So, it was simple hypothesis. They never cut once. The market's only pricing in 75 basis points of cuts. Most likely they're going to have to go three or 400 basis points. So, that little bit of understanding, he sees it's it's on January the 2nd. I think it was January 2nd or or December 28th, something one of these kind of really illiquid times. He rushes into the office.
[44:31] Beginning of the new trading year, goes limit long euro dollar futures for the end of the year. So, euro dollar futures are a bet on where interest rates will over period of time. And he's betting to December 2021. And many of us in the euro dollar markets, we were super involved over that period cuz it was all about this rate trade which made it very easy cuz rates tend to be less volatile, but tend to move a lot. So, the risk rewards get very good and get a lot of leverage in
[45:01] these things. So, anyway, so he goes limit long. And then he has the understanding. So, first he's seen the path, right? This is the future path that I talked about before, the knock-on effects. Then he also understands his time horizon. Which is what How long does this take to play out? Well, a recession's usually kind of about a 1-year 18-month process. And they're going to have to keep going.
[45:31] The stock market already peaked at that point. So, so he realizes that, okay, the best single bet in the world is to bet the rates are going to go down, not to short the equity market, which is the lazy trade. It was to bet the stock market goes down. Uh the the the bond yields go down. And euro dollars were the best expression, best leverage, best risk-adjusted return. So, he figured all this out. Massive irresponsibly long position in this. And he He on a plane
[46:01] and goes back to where he came from, which was his holiday home in Mallorca in Spain. Cuz he had that much confidence. Well, normally you would be sweating and biting your fingernails cuz you've got record risk. It was the beginning of the year for him, so he had new risk limits, so that helped. And he went and the trade starts working almost immediately for him. And he does nothing. And his his colleagues at the office are like,
[46:31] "Are you coming back in?" I mean, this wasn't work from home, right? You're working for one of the most famous hedge funds in the world. You're running a big book. It's not work from home, do what you want. They're like, "Are you coming into the office?" He's like, "No. What's the point?" He goes, "I've got one trade to do. The absolute clarity there is only one trade to do, and I'm in my trade." He said, "There's nothing I'm going to do. The Fed are going to cut several hundred basis points, and I'm going to clean up, so that's it." Okay, so he's now he's he's decently in profit very quickly cuz he saw the trade fast.
[47:03] And by about June, he's really up. You know, he's now got the most profitable trade of anybody at Tudor. And euro dollars back up 75 basis points as the market starts saying, "Is this over? Is the worst over? The Fed not going to cut anymore?" Right? These narrative shifts you get a lot. And the you know, stock market's bouncing, blah blah blah blah blah. And
[47:34] he gets the phone call, the big phone Paul Tudor Jones phone call. And Paul's like, "I'm in London, and I'd like you to come in talk to me." So, he gets on the plane, flies to London, goes see Paul and um Mark Hortonberry, um who runs the London office, and a bunch of others. And they call him in, and they're like, "Okay, we you had the biggest P&L so far this year. You've got huge risk on. You're just giving a whole ton back.
[48:06] What do you want to do? Because your P&L is, you know, your end of year bonus here is going out the window and it's only June." >> [laughter] >> And he looked at them and said, "I need to double up." And they went Paul went, "Fine. You know what you're doing. You know your risk limit. I'll I'll double your Um but you're playing with your own bonus here and you know, if you get back to flat, you're out."
[48:36] Whatever it was. And so, he gets back on the plane and goes back to Mallorca. So, he's traded once beginning of the year. He's then doubled the entire position size and he's gone back on a plane. He does not trade a single other instrument. This is a hedge fund, guys. No more trading. Just doesn't do anything. The one pure trade. And then he it's about November and the trade has played out extremely
[49:08] well. And he gets back on a plane, closes the trade, takes his profit. Again, before he's kind of before it's reached its end, it actually goes further cuz 2002, things go further. Um he could have just kept the trade on, but he didn't. He took his money off the table. He then quit his job and retired. Now, he's set. >> [laughter] >> That is pretty epic. And I wrote about this on
[49:39] Twitter and it became the basis of the buy bonds where diamonds trade in 2019. Because that was a situation where that know knew the Fed had over-tightened. We knew that the economy was weakening. We didn't know about the pandemic. And therefore, the trade would be the moment they cut was to buy bonds. And they they started backing away in 2000 the the pivot 2018. So, there was the trade setup. Buy bonds
[50:09] wear diamonds or buy bonds and go to the beach. It then plays out a second time cuz that's playing out, but then we get to this period where the economy is kind of stabilized a bit. The ISM's bouncing and we're kind of in this no man's land in 2019. And a lot of people are getting frustrated with the bond positions. Some people are closing it out. And I'm like, you know, really if it's right, it should continue lower because the economic forward-looking data is still weak and it should be going down. So,
[50:39] again, I'm not trading with my emotion here. I'm using my stuff. And then, I see the pandemic. I see it in 2000 in 20 January, and I figure out immediately what it meant. Just by chance. And I just remember the moment it went to Italy. I just wrote a note to Global Macro Investor, which is was titled panic.
[51:10] And you just knew what had to happen is there is no way we were going to get through this without massively cutting rates. Um and and that was all the extension of the learning of this one trade is how take the purest expression of the view when you know that the probability is so far in your favor that you have to be greedy. So, do you think that this is about skill or luck? Both. The skill is knowing and George Soros
[51:42] writes about this. Stan Druckenmiller, they all talk about it. Is knowing when to be greedy. You won't get it right every time. But when you get it right and you're in the groove, Paul is one of these people Tudor Jones is, he knows when he's trading well. And he'll back himself. George Soros, the Alchemy of Finance, talks about this a lot. You back yourself when you know you you've got it. You're you're you're feeling it. Um your trades are working, you're with the flow of the market. Um that ability to choose that moment
[52:14] a lot of people chase that moment their entire careers cuz they get it once and they want to do it again. And I Yeah, that was kind of 2009 for me a bit. You You have to be really careful cuz they're super alluring when you get it right. It it is the greatest feeling in finance. When you get that moment in time where clarity comes, you see it and you are really greedy with the opportunity. Um but God, chasing that thing, if you if
[52:45] you're not careful, you will go bankrupt earning that. I think Sergio uh Silva was talking about a different asset market, but I think he said um being prepared for when luck comes your way. So, the skill is being prepared and ready, and then you can sort of know what to do or optimize that when luck when luck strikes. See, I I don't think there's a lot of There is luck, but generally with a something like that, there's not a lot of luck.
[53:15] Because that was preparation, understanding, homework, assessing what is the best risk to take and everything else. The luck is usually the speed at which it happens. Mhm. Like a pandemic hits and then Yeah, because that allows you to stay with the risk. If that guy had come in from Tudor and the whole thing had moved 50 basis points against him, he would have been stopped out and he would never have done the trade. So, the luck was the speed of the initial move. Because then any retracement never took
[53:46] him to a negative P&L. So, he could handle it. The luck in this kind of situation is that. >> [music] >> Your last trade is one of yours and it is it's one of your worst and it's probably well, it's Bitcoin trade back in 2013 to to present, I guess. I don't know. I was going to say currently, although I think you're you're more ETH than anything else. But why why does this count up as one of
[54:17] your worst? So, we talked about trade construction. We talked a bit about time horizon. We've talked about when to be greedy, all of these things and this is a story of me learning other things as well and trying to put it all together, doing the right thing and still getting it wrong. So, let me try and explain what I mean. So, after the European financial crisis, the sovereign crisis in 2012,
[54:47] and most people have heard the story that you know, this is out of this became the the reason we started Real Vision because people got destroyed by but I also wanted to start the world's safest bank because I knew that we didn't own any assets. Cyprus had taken all the money out of the banking system. You know, it was a terrifying time and I knew that debt burdens hadn't gone away. So, that's when I got introduced by a good friend of mine, Emil Woods, another I think he's ex-Goldman who ran a large hedge fund in New York and
[55:18] he's like, you need to look at Bitcoin. Forget the bank. Here's something interesting. And so, 2012 I first look at Bitcoin properly. I write the first macroeconomics strategy paper on Bitcoin in about I think it was March 20 Yeah, March 12 or 2013 and I do the analysis and say, well if it's like gold, then we know kind of how much gold is above ground and we
[55:48] know how much how much gold is probably below ground. We have an idea. That's called a stock to flow and I could probably back that out in Bitcoin to give us some idea what this bloody thing's worth. Cuz we know it's interesting, but we don't know what it's worth. So, the macro guys were in interested, but didn't know. And it already done a decent, you know, cycle already it performed extremely well. So, it was interesting. And so at the time Bitcoin was at $200 and I
[56:18] thought the maths worked out that it was worth a million dollars. That's with the equivalent of gold at around 1,300, which is not a million miles from now, right? Gold's actually gone nowhere over that period of time. So, it's worth a million dollars and it's at $200. So, learning the lessons of humorous, I'm just like I'm just going to discount myself by 90%. And I like to do this periodically. Is I just said, well I think it's worth a million.
[56:49] Let's let's rate the Roule is an idiot factor by 90%. We'll turn up the idiot dial 90%. It's still worth 100,000. So, that's the best risk reward I'd ever seen in my entire career and any of us had ever seen. So, I'm like well, we've got to buy this, right? It could go to zero, but it's an option. So, I I probably got quite a few people in it. That article became famous, got circulated around Silicon Valley cuz nobody looked at macro um Bitcoin in a macro way before.
[57:19] So, I buy it and my thesis, my time horizon is so I've done my homework. I'm now onto the time horizon. The time horizon is, well, this is probably at least a 5-year bet, probably longer. And I should just close my eyes and see where it ends up because it ain't going to a million dollars overnight or a hundred thousand dollars overnight. So it goes up 5x in it goes up a hundred percent in in a week after two weeks after buying
[57:50] it. I'm like, "Shit, what the hell's this?" It then goes up 5x from where I bought it. And I'm like, "Clearly I'm just George Soros. I'm just a god, you know, I can't get it you know, I'm just so amazing." I you know, no, I wasn't that hubristic about it, but I was like, "Wow, okay, this is something I've never seen before." It then falls 85%. But it goes back to 200. So okay, I've never lost money in it.
[58:20] Never lost a penny. In fact, I've never lost a penny earning Bitcoin at all. And I just forget about it. I've opened an account at an exchange called Itbit, which is now Paxos, which was owned by Emil Woods and Chad Cascarilla. They built this exchange in Singapore and I kept it there and I forgot about it. I don't even know the password. I just you know, and I keep my eye on the Bitcoin price cuz I was interested. We launched Real Vision 2014. It's in
[58:50] the first ever video on Real Vision. In fact, in that little Genesis video that I shared recently, there's the Bitcoin logo, right? So I knew where this was going is the macro crypto we're going to meet in the next recession and I've made that clear and tried to bring as many people on the journey as possible. >> [snorts] >> I don't trade it at all. 2017, I'm now quite vocal cuz it's it's spilled onto Real Vision. There's a lot of emotion going on. People are really involved. I'm um I still own it.
[59:20] I'm kind of quite vocal on Twitter. So I'm going to talk about this. And it's now back to two and a half thousand dollars. So, I'm now up 10x. So, 10x that's a great bloody trade. You don't get those many in your lifetime. And so, I start thinking actually that's quite a lot money now. And I'd also um just got divorced and I needed to pay my ex-wife half of that. And
[59:50] the forking wars happened. So, this is when they they replicate the Bitcoin create a new one that has some different attributes. And I didn't understand this stuff. And so, when you don't understand it you should close it. Now, I shouldn't have because my thesis was longer term and that I should let it play out, but it becomes really hard when you're up a lot of money. And you owe half of it to your ex-wife.
[60:20] It's become very hard is when you then see go back down. Right? Um and it's it's hard to do if the forking wars had been a thing. And it meant that the Bitcoin chain failed and everyone was on Bitcoin cash or whatever it was going. So, I take profits and I think anything of it. I'm like, great, it was a great trade. It goes up another 10x. Goes to 20,000.
[60:50] And I am observing it. I have no feelings. People are like, you're an idiot on Twitter. Look at you, you're an idiot. I have no real emotions either way. I'm like, I've done fine, happy with it. Let's see where this goes. And then, you know, I do a few people piece on Real Vision around December about December 20 um 2017 saying like, I think it's a bubble. I spoke at the Consensus Conference the day before the bubble popped saying like, I think it's a bubble. Fine. So, you know, I'm feeling quite
[61:21] good about myself. I bought it, I kind of got the top pretty much right in terms of telling people I sold that too early. Fine. All well and good. I then observe it. We have like Bitcoin week on Real Vision. I'm seeing what's going on. There's nothing really happening. It keeps falling. So, it's 2018, 2019, keeps falling. But, Dan Tapiero, who hadn't been in Bitcoin beforehand, and was a long-term global macro investor and old friend of mine,
[61:53] kept pestering me uh about Bitcoin. And Dan's an amazing thinker. Um he's really one of my really trusted go-to macro people. And he kept pestering me on Bitcoin. I'm like, "Yeah, I'm just not interested yet." cuz the price was falling, and I I didn't have anything to base an investment off. Uh and we had no real thesis yet. Yes, the economy was slow, but there was no real understanding of what was going
[62:23] to drive this. And anyway, I eventually get him on Real Vision cuz I'm like, "The only way to shut you up is to interview you publicly on Real Vision." So, we have an an amazing conversation. He completely opened my mind to things that I had not understood about Bitcoin and cryptocurrency overall. And my thesis was that the next recession, Bitcoin's going to be something. So, I've been watching the price like a hawk. And it'd been wedging slowly in this triangle formation. And what I really love to see, and that reminds me of yeah, several times in the
[62:54] past I've traded, is something that comes up, forms this wedge, and they kind of touch it once, down to the bottom once, up to the top once, down to the bottom once. It kind of goes up to the top once, and then it pulls back into the middle of the range, and then explodes higher. This little flag pattern is a really great pattern, and I was expecting this to be happening. And so, March 2020, there it goes. It plummets right from that wedge, top of the wedge, straight into the middle of the range. I'm like, I have to buy it.
[63:25] And so, I put in all available cash. Yeah, I had some other positions at the time. I had Euro dollar futures and I had some other stuff, gold and other stuff. But anyway, I bought it. I made a big thing of it. And that was at around 6 and 1/2 thousand. And it explodes higher. And it goes up to 68,000 and back down to where it is now. And I switched into ETH and made, you know, that was a great call cuz it made a lot more money from it. And this bet in March was the
[63:55] was by far bigger than my original bet. Massively bigger. So, I just put everything in. Yeah, irresponsibly long. Yeah, that's where the t-shirt comes from, right? That's right. And so, I'm like, okay, so I bought it really cheap. I sold it 10X. I then bought it again. But at a much higher price than I sold it. Cuz I sold it at 2 and 1/2 thousand and I bought it at 6 and 1/2 thousand and maybe a bit up as well as it broke through 10,000. And now it's at 20,000. Okay.
[64:28] I thought nothing of that. I thought, yeah, I've done well. I'm a Look at me, I'm a good macro guy. I traded it, did all right, made money out of it. Not that many people have done well out of crypto like that. And then I went back back and did the maths. And it only happens to me recently after I set up the exponential place the digital asset uh asset management business. I And I was writing for macro insiders as well for Real Vision Pro. I thought, I want to know how I actually did compared to if I just held onto my original thesis.
[65:01] So, I went back and looked. And I remember how much money I put into Bitcoin when I started with and it was a decent amount. It was a decent bet. And but not massive massive, but you know, it was quite a big bet for me. And if I'd have just held that bloody position and not done anything, not any of the queue I'm a macro hero, look at me, I can beat Stan Druckenmiller. I would have made five times as much money. Mhm.
[65:31] But and here's the big learning is I hadn't understood exponential trends logarithmic trends and adoption, Metcalfe's law, all of these things that subsequently came to me. And that tells you if a technology is about to be adopted at scale then it doesn't revert back to the mean, it reverts back to this logarithmic channel, the bottom of that.
[66:02] And so you should buy unless something completely changes your trade thesis, you should just buy the bottom of the channel. When it gets oversold. So I figured out if I just added the same amount every time as my original bet in the couple of times that it got to the bottom of the channel I'd have made 25 times my money. Oof. But that's a that's that's having to learn, right? That's a little bit different because of the nature of this
[66:32] the tech or is it? The technology and the nature of this newer asset than what you would have your prior experience had led you Because we should have done it with the Nasdaq as well and we didn't do it. We should have done it with Amazon, we didn't do it. None of us did. Because we're all mean reversionists because we think boom equals bust and it does not in technology. Even when you go back and the tech crash of 2001 that so many people still think about on Twitter, see see technology, it's a bubble. Go back and look at the chart on the Nasdaq.
[67:03] It was just noise. It was noise and an adoption trend of the internet that happened. So, it's so interesting because you say this and you, you know, look at your charts and you're sort of applying this sort intellectual framework to this. And yet, you know that there is such tribalism around this conversation and you have a massive public following now and people get really heated about this. I mean, for every person who says, "Yes, that makes sense to me." There's somebody who's attacking you for
[67:33] shilling shitcoins. And so, how do you how do you deal with that when in your mind you're just operating on and and kind of fine-tuning the framework that you've always used? It's been really interesting. It's the >> [clears throat] >> outside of crypto, which is fine. It's kind of tribal, but this whole exponential age thesis which is saying, "Okay, I cannot see a world in which this probabilistically does not play out."
[68:03] There is no way, and I've just done an interview with a good friend of mine, Emad Mostaque, on um about artificial intelligence. There is no way that this is not happening faster, at a bigger scale, than anything you've ever seen in your life before. And that's the same with robotics. That is the same with space travel. That is the same with the internet of things. That's the same with genetic sciences. It's the same with blockchain technology. I mean, these things are happening. They're not going to stop.
[68:34] There's nothing that will or can stop them. Not, "Oh, the Fed raised interest rates." Oh, you know, oh, the the the the the natural rate of interest rate's going to be higher at 4%. It's not going to stop. And these things are exponential. These things are doubling, quadrupling every year. And so, I'm trying to get people to understand that I understand that you might fear it. I understand that you know of the world
[69:06] in terms of the things that you know. You know, the Federal Reserve bad. Um oil good. Markets go up and down. Boom equals bust. Right, these things are so put into us that money printing equals inflation narratives. That most of these are And I'm like, okay. You can either invest like the gold guys for a long time said the great inflation is coming.
[69:41] And they bought gold. And they said quantitative easing, debasement of currency gold. And they're going to confiscate your assets, gold. All of those things have happened. And gold is still nowhere in real terms, but it's negative. In fact, gold mining stocks that have been every newsletters tip for the last 40 years are all-time record lows in
[70:11] inflation-adjusted terms. So, but people have this belief and I'm I don't want people to miss an opportunity. Because we can fear change or we can use it to help ourselves. You may fear AI. Christ, I do. But what am I going to do? Am I going to own gold or do I just buy AI? Yeah, this is mindset that you have to
[70:42] go through. So, that you have to have that big picture, but this is where you can't get We know not every company will make it, right? Like this is where it gets tricky cuz you can you can believe in the trend, but we know from the dot-com bust some of them didn't get through. Although now a company that pretty much does what they did, that just timing wasn't right or their revenue didn't come quick enough. So, that you can you you can get you can believe the bigger narrative, but you have to get be careful. Okay, so what was the right answer? Is the answer
[71:12] I learned from the crypto investment. You buy the massive sell-off. So, I bought a whole basket of this exponential age stuff, not at the highs when I started talking about it, but after it was down 70%. Cuz I kind of have a rule of thumb, anything down 70% or more that is not going bust, you should own. Particularly if it's part of a secular theme. So, the trade still in arc, I think overall it's down about 15%, but you know, I'm like down 30, don't really care cuz
[71:42] probably it's going to be up 10x. So, you know, it's the risk-adjusted reward is what you're looking for, you know, down down 30% up 10 times, you'll take that risk reward all day. Even if I'm wrong, let's discount me. Discount me by 50%, it's up five times, okay? But still an amazing bet. Three times is still a 10x. So, that's how I look at these things and I just what I did was spread across a
[72:13] basket of different stuff. So, even though I talk about arc, people think I just own arc. Arc is one of the positions that I have. I have a whole bunch of ETFs on robotics and all sorts of stuff, plus some single stocks like Reliance in India and a whole bunch of stuff to spread that risk out a bunch of names because of the point being as you say, we don't really know. But I know probability is better if I buy the sell-off. That's the Bitcoin lesson. Also, as you say,
[72:43] we don't quite we know the direction of travel, but we don't know which ones are going to travel there. So, let's get some diversification. You set your time horizon, which is okay. This is probably a 5 or 10-year bet, and it's going to be volatile. Okay, so those are the premises. It's pretty straightforward. Um, and that all comes from the learning of stuff like what happened in Bitcoin, how to express the trade from the guy in Mallorca who's like, you see the trade that's the best risk-reward. Like I've always said,
[73:13] crypto has been the is and will remain the best risk-reward. But for equities, these are interesting, too, and I just think it's intellectually important to participate in something so disruptive that even if it may not make as much money as you might make in crypto overall, I think it's just really important to be involved. Because if not, you will my I can see on Twitter, you'll drive yourself mad by rejecting it. Like I remember Amazon. I've talked about this in part. I
[73:45] Amazon bookseller, great. Amazon Kindle, great. Love this, right? Now it's worth more than every other bookseller in the world added together. This is stupid. This is insanity. Uh trading at a P of 800, this is ridiculous. I'm a macro guy. This is the most ridiculous thing. I want to short it, short it, short keeps going up. It's like Tesla. People have just gone through this whole experience with Tesla. It's like cuz it wasn't a [ __ ] bookseller. It was a network. And once you understood it, wouldn't have made the mistakes.
[74:16] And it's it's that clarity. Once you get the trade, you stick with it, get the time horizon, get the trade expression, and that's it. So, last question. Do you think your best trade is still ahead of you? My best trade is always the same. It's in quality of life. And that quality of life is everything from friends, family, how you live, not where you live, not in material
[74:46] possessions. it's how you live your life. Having a lust for life, a cur- curiosity, enjoying being outside of your comfort zone. I've talked about this before. There's your comfort zone and there's where the magic happens and they don't overlap. It's It's that experience of life itself is the best trait. And the game is to accumulate as much quality of life. And that can be a walk
[75:17] in nature. Or it can be It doesn't have to be anything. It's not material. It's a quality of life. And if you've got that and your bank is full, your bank your account is full of quality of life and quality of life experiences, that's the greatest trade on earth and I'll continue to do that trade until the day I die. So, you obviously like this video enough that you've got to the end. That's quite a big task. But listen, do me a favor, hit the like and subscribe button and also check out what video's next cuz I think you'll love it. But if you want
[75:47] even more, and when I'm talking more, I'm talking about member generated ideas, incredible alpha research, everything there to help you in your journey, just head to roversin.com/join for the best financial intelligence out there and the pure alpha that's within the platform.