How Do You Outperform the Robots? Invest in Them - Transcripts

March 19, 2023

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"Let's make promises to our future selves and unf*ck our future." -- Raoul Pal


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Hi, everyone. As you know, one of the reasons we set up Real Vision back in 2014 was what had happened in 2008 and 2012 in Europe, when the issues of demographics came to the complete forefront of everybody's mind. And we realized we were stuck with a system creaking at the seams that's now broken. And it was a wake up call for all of us to take control of our own finances and our own lives. And that's what Real Vision was all about, democratizing that access to information to give us all a chance in a world where the middlemen had let us down. And now it's up to us to figure this out. And the whole idea here about this two weeks of content we're producing on Real Vision, it's something called How to Unfuck Your Future. Now, it's kind of a humorous title, but it's not. It's deadly bloody serious. We all know that there are some massive issues with the world economy today, particularly the Western economies. And they're dragged down by debt, aging demographics, broken political system, broken geopolitics, and a very complicated world. I've spoken at length about the issue average people have faced in society.

And the average real adjusted wages, for example, in the United States has not gone up since the 70s. So the American dream of everybody participating in a growing economy has just never materialized. And over time, I've shown and talked about the fact that what they did was take on debt to offset it. There's a whole thing that I did with Robert Breedlove on this, and it's on the platform about the whole history of how we got here. But what we got to was this point where wages didn't go up, asset prices kept going up, and to fund the difference, people took on debt to try and make their American dream of their happy retirement happen. And that was the baby boomers. The actual reason why their wages didn't go up was very simple. There was too many of them. They all came into the labor force at the same time and competed with each other for jobs. At the same time of the rise of the computer and technology, at the same time, well, actually later in the 90s, of the rise of globalization competing now with a Chinese and an Indian and a Vietnamese and a Pakistani and other labor forces. So wages went nowhere. People got angry, frustrated, and populism rose.

People splintered left, people splintered right, looking for people to blame. The reality was it was World War II and the rise of population that was the really big issue. And then we've got problems with the Federal Reserve and how they tried to deal with it and the US government and how they tried to deal with it. I'm not going to cover all of that today. What I'm going to talk about today is how to unfuck some of this. Where are the opportunities that we can invest? It's particularly important for younger people. Well, it's important for everybody. But the young have been dealt a set of cards almost unprecedented, which is expensive markets with limited returns. And I'll come on to why that's the case. Bond yields that don't really compound into anything, property prices that are unaffordable, and a jobs market that feels tight now, but it's very difficult with technology coming, and so many people in the labor force. The baby boomers plus the millennials and now Gen Z.

The baby boomers are coming out of the labor force. We'll talk about demographics the next couple of weeks in much more detail. And there is debate about is the baby boomers coming out of the labor force and retiring inflation or deflationary? My view is it's always deflationary because I've watched all of my parents and their friends all retire, and they end up spending a lot less. Somebody somehow argued, and I can't remember who it was. It was like the IMF or somebody, oh, it's inflationary because they spend their capital. They don't because they don't know how long they live for, so they throttle back their capital. And I've seen that firsthand evidence everywhere. Anyway, that's not the point I want to make. We're not talking about structural inflation here. We're talking about the big issue. So the big issue for me is how do you make GDP?

GDP is a magic formula. It's basically population growth plus productivity plus debt growth. Those three things make GDP growth. That's how economies grow. Population growth, well, I think you know by now that almost every single population in the Western world, including Japan and China, is now shrinking. So that is an unprecedented thing for us to have to deal with. Now, normally, you would have had immigration, but because we had so much immigration and wages hadn't gone up, people said, okay, we can't really take immigration at that scale to drive GDP growth. Okay, so that was the decision people made, and I understand why. And it's very difficult to import a large population of people when the wages of the existing population are too low. So we can't solve population growth. It is a fixed, we know what it is, and immigration is not going to solve it. So therefore, we've got debt growth.

Well, debt growth has been the engine of which we've driven everything. And we got to a point where debt is around, in the US, about 220% of GDP. That's private sector debts and government debts. So we've got to a very indebted world. Now, you can get more indebted, but I'll come into the debt side later, and it's something I've written up in great detail in macro insiders and global macro investor. But also, let's look at the productivity side. This is the only dial that I think we could actually move now. If we can't really move debt growth in any meaningful way, and we can't move population growth, then productivity has to be the answer. And that is the focus, I think, of where this is all going, solving productivity. So what is my thesis here? My thesis is that the debt service costs must be less than GDP growth. If not, it needs to be monetized.

I don't think anybody else has really talked about this. But I went back, and I wrote about it a lot in macro insiders, pro macro, and also global macro investor, in great detail. But basically, if the government is 100% of GDP and debt, and the private sector is 100%, let's make the maths easy. Say, if GDP growth, long term trend is, call it 1.75%, maybe lower, maybe a bit higher, but it's around that. So if interest rates on the debt burn, which is 100% of GDP just for the government, is more than 1.75%, then GDP, which is all of the earnings of the economy, don't service the debt. It has to come out of GDP itself, which means GDP shrinks, or the rate of growth slows. Now we've got an issue where we've got two sectors that are both 100% of GDP. This all broke when this started happening. So we've got two sectors now competing for GDP to pay interest. OK, that would be a problem where you'd have a continually shrinking economy. But the Japanese figured this out a long time ago. The answer was to monetize the government side of the balance sheet.

And what they're actually doing, and I think I've proven it in ProMacro and Globe Macroinvestor, that all of the QE is essentially monetizing the interest payments every three and a half years based on a cycle from the debt refunding cycle that starts when rates hit zero in 2009. And that has led these three to five year debts keep getting rolled. The economy rolls over because rates go up at the top of the cycle, the whole economy slows down. And eventually, you try and refund at the bottom of the cycle, and that goes onto the balance sheet. And the difference between the GDP growth and the size of the debt is actually what goes onto the balance sheet itself. And that seems to equate to the interest payments. So basically, government debt growth as a percentage of GDP is actually, or in total, is actually just to monetize the debt itself to pay the interest, i.e. you're borrowing more to pay the interest, and then that goes onto the balance sheet. That's pure monetization. That is pure devaluation of a currency without anybody really understanding it. And obviously, asset prices go up. So that's going on here, and that creates a real issue if interest rates are higher than GDP growth.

And right now, they're at 4.5%, 4.75%, and GDP growth right now is OK, but we're going to slow down in 2023. And we're going to find there's not enough GDP to pay the interest. Now that's not a debt default. What it means is there's a potential that the balance sheet has to come back into play. So it means that the economy slows down dramatically. So there's a lot going on here, but this is the problem with the debt side of the equation. So we're going to have to solve for declining population, declining productivity, and an issue with debt growth. And that's what we have to solve to unfuck our future. And for me, it's all about a secular thesis. I talk a lot about secular trends, and people don't really understand what I'm talking about. The business cycle is the predominant driver of returns over shorter observable periods of time, two years or so. But where you actually make money is once you're in a secular trend, when the tailwinds are behind you and then the business cycle is also in your favor.

And I've identified three key trends that I think will help unfuck your future. One is the exponential age. This is the investing in disruptive technology that is all coming together at a nexus. And I'll talk about the exponential age in more detail. But this is a moment in time human history has never lived through. This is the fastest change of technology in all human history, and it's all interconnected and all happening at the same time. This is going to solve our productivity issues. It will solve for the lack of population. But we have to get there first, and we're not there yet. So that solves productivity per capita, and per capita is the population problem. The next one, digital assets. Well, digital assets solve two things here.

One is the issue with debt in the broken financial system, and I've talked at length about why this is so important and why having a new parallel financial system we can transition across to, the Bitcoin life raft, as I called it, and the digital asset life raft, I think is incredibly important, and it's going to play a bigger and bigger role in our future. I won't talk at length about it because I think you all know my thesis on this. It also solves productivity because it is a very efficient way of transferring ownership and value, and brings new sources of value onto global balance sheets such as brand community and other intangibles. So it can be a step change for productivity and capital itself, and also for how markets work. All of the trapped capital in T plus two settlement markets all gets freed up. The trapped capital of the intermediaries in the transfer markets all gets cleaned up. So much money comes back into the system, becomes more efficient. More capital efficiency allows for more productivity, and that should help. It also reduces the issue of all of this debt because it offsets it. And I've proven to you over time that crypto outperforms the increase of the Fed balance sheet, and only two assets in the world do over time. One is technology, one is crypto, and crypto beats them all because it's a very fast adoption of technology. So that's that one.

The other one is, OK, if the world is struggling from high debt, slow growth, and an old population, well, let's look for countries that have the opposite. And I came up with this thesis about 2014-15, and it's called Monsoon, where India is at the center of the world, and the countries around it tend to have young populations, low debt, high growth. And India is by far and away the biggest one of this. And it's very interesting because it solves for population issues in the West. It's all for productivity issues, and it solves for debt because India is also going through its technological revolution at the same time as its populations at the average age of 28. The sweet spot for any economy is when the average age of the population is between 30 and 40. That's when things really explode. And that's when people start investing in their own financial markets. So it's all to come from India, and the foundation stones are being laid there, and debt is low. So we get the kicker of debt growth. As economies mature, they tend to increase their debt. So we get the kicker of debt, the kicker of population, the kicker of productivity.

Very interesting. The same is true of Saudi Arabia. I think the same is true of Iran. The same is true of many countries, particularly in the Middle East. And they're really on my radar screen, less investible, unfortunately. I mean, I'm interested in Morocco. It's a bit tied down to Europe. But the two big ones are Saudi and India, and India is the easiest investible one. So these are the secular theses. Now, why I'm interested in them right now, because these are long term trends, is because we're at the magic nexus. We're at the nexus where the cyclical trends driven by the business cycle have reached the bottom of the secular trend. And that is when things get really interesting.

Can markets go lower? Possibly. But we're in the zone where we should be utterly focused. My view is the bottom is in in markets. But I can be wrong. But the point being is, this is the time, the generational opportunity to buy into all of these things. And I'll run you through some of that. The big one is the exponential age. You've heard me talk about it, but people don't really understand yet what I'm talking about. And there's a lot of technology people saying, oh my God, valuations are too high. They says, I don't care. We are at a secular turning point in a cyclical turning point in a secular trend.

What is the exponential age? The exponential age is this combination of technologies that are all reaching adoption phase at the same time. So you're familiar with the Metcalfe's law effect in cryptocurrencies, but that is playing out literally across all technology at the moment. And it's going to create Reed's law, which is multiple exponential ages or multiple Metcalfe's laws added together. Everything is about to go exponential. I don't even think society can deal with this. It's going to create a huge amount of problems and a huge amount of opportunities. I can't deal with the problems. I'm not a politician. But I can deal with the opportunity. I'd rather invest in the future than ignore it because then I'm just going to be bitter and everything will have changed and I won't have made any money. If I can make money from it, I can kind of accept the change.

It's actually a Jedi mind trick. So the first part of this is what I call the base infrastructure layer. That is data networks, Starlink, 5G, 6G, stuff like that. So 5G is going exponential as we speak. It's rolling out across the world. There is still an issue with who owns 5G and Huawei in China was the big owners, but it looks like India is going to step into the fray with Reliance Technologies and their rollout of 5G. 5G is only going to get better and it's going to accelerate. You got to that first, that peak of optimism, then the slump of despair where people are like, well, it's not really happening. It doesn't really mean anything and then we'll come through the other side. Meanwhile, China is already rolling out tests of 6G, which is quantum faster. So 5G and 6G basically mean that anything anywhere, there's a mobile phone signal, has massive bandwidth speed. That means we can run any machine anywhere, every car, everything can run.

It's not about your mobile phone anymore. That's just old news. It's everything around us, the Internet of Things, all of this stuff that's coming. Starlink is an even bigger breakthrough because Starlink is then delivering this kind of experience, a Wi-Fi experience from space with satellites everywhere and disrupting everything. What's so interesting about Starlink, it's also outside of sovereign control because it's in space and I've talked at length about space and you should watch my interview with Leon Alkali about where that's all going and Starlink is a very key part of this. What Elon Musk has built there is absolutely astonishing and basically it's not about giving a bit of access to places that are off the grid. It's basically owning all data and in space so it's out of sovereign control. It's super interesting and it does change lives and there's so many people who've got Starlink and it's an incredible change because governments can't build and companies don't have the money. If you look at AT&T, they're so in debt, they can't build out the infrastructure needed to get 5G everywhere but Starlink can do pretty much all of that and it's only going to get more powerful. So anyway, the data, you need data to move around and you need massive speed for the exponential age.

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Download the app or go to, that's to get started. Computing power. Okay, we've now got the data. We need to create all this compute, AI, robotics, self-driving cars, which is AI and different guys, all of this, instead of things, massive amounts of data. Data consumption has been exponential and computing power, according to Moore's law, has been going logarithmically growing in scope with all of this. Now where does the extra, Moore's law, people are thinking, well, it's going to die off because we can't get silicon chips to process more data. What we found is we can get computing power efficiencies elsewhere, distributed computing, edge computing, and eventually quantum computing. Quantum computing is like a million X, the power of computing that we know today. And everybody like Google and foreign governments are building on this. The breakthrough is coming. I don't think the quantum breakthrough at scale happens maybe for another 20 years. I hope it doesn't because it is fucking terrifying when you put quantum computing with AI, but let's not go down to that rabbit hole.

We'll talk about that another day. But quantum computing is coming and we're already seeing new stories come out. People are going to realize that everything is changing. But meanwhile, distributed computing, edge computing, creates massive, more computational power than first thought. And it also moves away from all of the AWS or Microsoft Azure, stuff like that as well. Processing power. We're seeing changes in semiconductors as well that we didn't think was going to happen. We're seeing it from people like ASML. So semiconductors will continue to process more information. And then we've got the computing power on top and the data networks. These things are all coming together at the same time. The other thing, the big one here, is actually energy.

So energy is one of the constants in what we do. So we have to extract oil out of the ground, refine it, turn it into electricity to power the world we live in. So the oil price moving up and down is very cyclical. That's kind of where it is. But technology has meant that per kind of calorie of power, we can create more output. That is essentially productivity in a nutshell. What becomes really interesting is if that is not fixed. If the cost of energy is not fixed and it starts declining like the cost of computing power, OK, that is truly disruptive to everything. That is a quantum change to the world, much like quantum computing is. So what do I mean by that? What I mean is as you start powering up solar, wind, hydro, and nuclear, the cost of electricity will collapse because it's less fossil fuels needed. Now, yes, I understand there's a transition story we're not talking about today, but at the margin, it is eating into the use of fossil fuels.

And I don't care what your political opinions are about fossil fuels. The point being is that the cost of energy is coming lower because all of these are lower. Now, they can't meet the whole requirements for the grid yet. But if you put nuclear in, you can. But also, all of these technologies are becoming exponential in their efficiency and exponential in a downward cost. So over the next 10 years, we'll see a collapse of the cost of electricity. And over the next 20 years, the cost of electricity will be marginal, as opposed to a larger input cost. And that means we can use more computational power and more electricity for more things with less environmental impact as well. And that means we can get more productivity out of a unit of energy. And this is the big thing, because the cost of a unit of energy goes down and the productivity increasing from the exponential age and you get a double magnifier effect. So it is kind of Reed's law writ large. Okay, the next layer is the productivity layer.

For me, that's AI. It enhances humans. Robotics enhances humans. 3D printing, it makes quick and efficient, effective manufacturing. And that's including in biotech itself. So you can 3D print cells, stuff like that, that's coming, autonomous vehicles, which means that we can get from A to B without needing drivers. Now, a lot of the productivity layer replaces humans, but remember, all the baby boom population is going to die off in the next 20 years. So we need to replace those humans. So this, there is going to create friction where AI suddenly disrupts a bunch of people, but also as population shrinks, this happens. And we've seen this at Amazon, Amazon warehouses, well, Amazon at large. So Amazon employs one and a half million people and has now on their employment, 500,000 robots. Now the robots work 24, 7, 365.

So therefore they're about three or four times more productive than the average human and they're a lot cheaper. And so what it means is Amazon's productive hours per unit is much more attractive for robots and therefore they actually have more robots in hours than people. And that's only going to continue. We're seeing that everywhere, fast food, manufacturing everywhere. Amazon is doing it and every major company is doing the same. It'll be the same for Walmart. So that is a big change and yes, all of the productivity layer competes with humans, but I think first it enhances the issues that we've got as society. After that is the digital value layer. This is digital assets, stable coins, CBDCs, NFTs, community tokens, DeFi, all of the stuff that's being built on top of the digital asset networks, Bitcoin, Ethereum, Solana, Polygon, and all of that. This is how everything moves around, all value moves around in the digital age. And also it's where things are, where trusted sources come into play, stuff like digital ID. In a world where AI can make as much content as possible, we need to have some sort of digital ID, whether it's got zero in all is proof.

So nobody knows who you actually are, but you can prove you are a person is going to become increasingly important. So the digital asset layer and the digital value layer is an important part. The other part is the augmented human layer, which is partly AI and some of the productivity layer. But on top of that, we've got a revolution going on in biotech and longevity sciences. So people are going to live longer. They're going to live healthier. And again, that should help with this population that's so old. It gives us more people around. So we have further productivity from humans, but also people just want to live longer. We're having those breakthroughs. It's happening everywhere. Wearable or implant technology.

Well, almost everybody's got an Apple watch or one of these Aura rings or all of that stuff. And that's helping us monitor our health. But this is the start of where this is going to go. We will see implants much more common. Now don't forget, people have had pacemakers for 30 years, 40 years now. That is a wearable implant. But now the pacemaker can link to the internet and we can update software. We can do other things. We can monitor it. So the doctor can monitor it. You could be on holiday and he could see something happening. All of this is wearable and it helps enhance us as humans, makes us healthier, can live longer, or understand various parts of the world around us and how we interact with it.

AR and VR. Augmented reality, virtual reality, the metaverse, these are all coming into our world. We haven't had the Cambrian moment yet, but I think it's coming really soon. We all kind of know about it. It's like AI, right? AI was the biggest fucking Cambrian moment I've ever witnessed in my life. And provably so, because it was the fastest adoption of any new piece of technology anybody ever seen. Crypto was the fastest prior to that by a long way. But this chat GPT went from zero to a hundred million users in a month or a month and a half. It is astonishing, right? People scramble to where they see something like this. Oh my God, this is so disruptive.

And we will see that with AR, VR, and the metaverse in different ways. We will see it in many of the other parts, robotics. You don't believe it yet. And then you'll see it everywhere. You looked at the Optimus robot by Tesla and you go, oh, that's rubbish until it's not. You think, oh, robots, that's rubbish until Amazon rolls out self-driving cars, as does Google, as does Tesla. And suddenly you're like, oh my God, this is a robot. And it's got AI. These Cambrian moments are going to hit us almost, I would say, on a six-monthly to annual basis going forwards. If we think about the Cambrian moment that started with crypto, and crypto's probably got a bigger Cambrian moment to come, we've just seen it with AI. And we only started that one yet. So imagine where that's going to go and then start layering on the full rollout of 5G and Starlink and then the move to 6G and layer on the rise of wearables and how that affects biotech and what we can do with genetic editing and how that's going to help get rid of cancer and other diseases, all of this stuff.

It's not in the distance. We've known about this stuff for 20 years. It's right now. So mankind has never gone through anything like this before. And the next 20 years, the next 10 years, and maybe even the next five years are easily going to be the fastest rate of change of technology and change to society and human life. We don't even understand. And we'll talk into a lot of the downfalls of some of this stuff in due course. But I'm not worried about this. I'm trying to unfuck your future. Some of this is going to really fuck your future in 20 or 30 years time. But we've got time to figure that out because it's unstoppable. But what we need to do is make sure we don't get disrupted.

And the only way of doing that here is investing in it. We've talked about this exponential age thesis, all of these technologies coming together all at the same time, that's going to literally change everything we understand about work, life, politics, culture, the lot, and human life, and disease, and all of this. And it's not some pie in the sky stuff. It's all happening. There's been decades of investment in this. And the products are going to start getting launched. So I've talked about the point where this business cycle has brought prices down to the long term trend. The easiest way to show this to you is here's the chart, the log trend of the NASDAQ. Beautiful uptrend. Here we are, two standard deviations oversold. So usually when you hit something like this, you're looking to accumulate here because the next phase is the continuation of the trend. You can try and argue with me that, well, technology, it's overvalued and there's inflation forever and it's going to stay low and it's going to collapse.

Maybe, maybe some of that, maybe none of that. Maybe the relentless force and speed of this means you don't have any choice in a low growth world, but to invest in growth itself. And it doesn't almost matter how overvalued they are. And that overvalue relationship, I think people are misunderstanding too, but I have a very different thesis on this. So you can choose to avoid it and say it's expensive. It's going to trade sideways. It's going to trade down. We got another 10. This is 2001 all over again. Well, if you bought technology at the low in 2001, you did very well. At 2002, you did very well indeed. We've had the fault.

Most of this stuff, the exponential stuff is down 75%, 80% to the low and it's bouncing. Some of these things are up 100% this year alone. And that's just the start of where this is going. So we can have chop. We can have complications with interest rates, but really cost of capital, 5%, 6%, 4% makes no difference to things growing at 100% a year. Something that goes from zero users to 100 million users in a month doesn't give a shit about your cost of capital. It also doesn't care about your rates of inflation. It doesn't care about your opinions either. It just happens. And that is a staggering, staggering realization that you have to deal with. It's like, okay, this is all going on regardless of all of the macro doom and gloom, of all of the doom porn that's spread on Twitter all day. And they might be right, but technology is still going higher.

Just get your entry point. I think the entry point is here. I've used Scottish mortgage trust. I've interviewed them on Real Vision, part of the exponential age series, as like my benchmark for the growth end of tech. So NASDAQ is tech tech. This is the growth end of tech. I had a huge fall. It's always been cyclical. It went from two standard deviations overboard, which was the COVID bubble, and now it's two standard deviations oversold. Could it go lower? Could we trade sideways? Of course.

These guys, I think, are some of the best technology investors in the world. I like the bet here, and I'll show you why in a second. But that's interesting again. So exponential age, they fall on more, 80%, but they're down on the two standard deviations. NASDAQ fell, what, 37% on its two standard deviations. That kind of stuff is interesting to me. The other thing that I look at is I've argued for a long time that one of the reasons why shares overall, and most assets go up over time, has actually been the debasement of fiat currency via the quantitative easing, which I think is debasement. And I think it changes the value of the denominator, and it makes optically assets a higher. So if you devalue the purchasing power of the dollar, asset prices, scarce assets, look like they're more expensive, because the dollar is worth less. People confuse this so much with the dollar itself as a fiat currency versus the yen. Everybody's doing it at the same time. The world's reserve currency is the one that matters.

And when you devalue this, things that are non-scarce, like food, even to a certain extent energy and stuff like that, that doesn't actually move. What moves is things that are finite or have growth as part of the equation. So here is the NASDAQ divided by the Fed balance sheet. It's grown at 7% a year versus the Fed balance sheet. So it's outpaced the fall in the denominator or the debasement of currency, which is great. You need that. That is how to un-fuck yourself, is you have to outperform the Fed balance sheet. You might have a view that the balance sheet is never going to get used again. I think that's a pretty brave view, considering its linkages with demographics, the linkages with debt and interest payments. I think it's always impossible not to use it. We have to go through a very long period of negative real rates to make this all doable, and we ain't there yet. So I look at that chart, and you can see that the NASDAQ has outperformed well.

It kind of looks to me like it might be some sort of wedge pattern, and that maybe if it breaks higher, we've got another big move to come. It would not surprise me. I don't think anybody's even valuing stuff like Google or Microsoft right now, considering what we know about the technology that's embedded in those firms. I don't think the market even knows how to value this, but it'll come back and people will start thinking, attaching a future price on it, as opposed to the price of the business today, which is how most people are valuing those companies. Now, if we compare the NASDAQ against the S&P, well, this is the S&P in balance sheet terms. It's actually grown at 2% a year. It's barely grown. So basically, it's grown by dividends. So the S&P has traded sideways once you take into account the denominator. So you've made no money. That's pretty true of property. That's pretty true of gold.

It's pretty, in fact, gold is actually lower. But generally speaking, most assets have actually not outperformed the balance sheet at all. In fact, the only two that have are crypto and the NASDAQ, or technology stocks in general. So bear that in mind. Also, there's a lot of people on Twitter, a lot of people argue about, well, technology, it's all overdone. And this is the rise of value. And these companies aren't going to continue. I can't see that with the backdrop I've just laid out. And when you look at the chart, here's the chart of the NASDAQ versus the S&P. It's pretty bloody obvious, right? Are we going to reverse all of that? Because technology has changed, and suddenly people want to buy General Electric and AT&T and Occidental Petroleum?

Some of those can do fine. I don't have a problem with investing in any of that stuff. But I'm looking for the secular tailwind. The secular tailwind is this super trend of technology outperforming everything else. Now, you can see how technology got ahead of itself. It's corrected. It's back down to trend. Okay. Super interesting. Now, what's super interesting is when we look at the cyclicality here as well. So here's the NASDAQ year on year versus the ISM. Our forecast at GMI, Julian Bittle went through on ProMacro recently in detail, our forecast is for the ISM to get down to about 37, maybe 40.

But the point being is the NASDAQ already discounted it. And oh my god, nobody wants to believe this stat. It's like, oh my god, we need another leg lower. But what about earnings, blah, blah, blah, blah, blah. It's a very clear relationship with the business cycle to me. I can be wrong, and that's okay. But the work that I've done over 32 years suggests that really, we should have probably put in the low already because it's forward looking. And it's expecting the end of the rate hike cycle and eventually the turn up of the ISM. My forward looking indicators gives me the turn up of the ISM somewhere around end of Q1, early Q2. We should see a lot of weakness before that. So the market is starting to discount it. So if we're at the cyclical turning point, maybe I'm too early, maybe stocks have another fall.

Okay, fine. But the cyclical turning point, let's say stocks fall another 20% from here. If I'm right with a secular trend, your downside is 20%, your upside is 10X over the next five, 10 years, maybe less, depending how fast this stuff happens. So the point being is in risk return, people are too short term at a time or it's not, oh my god, the market might collapse. You should be thinking, this is amazing. It's come back down to the secular trend. I can start accumulating here and this will unfuck my future because this will outperform the Fed balance sheet and it will generate me wealth. And if my job is getting disrupted, my life's getting disrupted, I will have made gains from doing it. That is how it works for you.

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and every Friday. If I look at the exponential age basket, so I put a big basket together for GMI of all of the component parts of this. And it's not a perfect basket, but it's just a broad representation. Basically that priced the ISM down at 35. So it's like a super negative business cycle. I overshot to the downside, like overshot to the upside. Okay. So they're really cheap. And again, they're on their two standard deviation trend. So here we go. Cyclical, secular, the points meet. This is how to get a good entry around here in a long-term time horizon.

So I don't care if it goes up and down 20% from here, and this is a way to un-fuck your future. And this is why I've been focused on this and I've tried to explain to people. Also the exponential age basket, it broke this downtrend. It's now consolidating in a flag pattern. This thing exploded from the lows. That doesn't look like a market that wants to go back down to new all-time lows. That looks like a market that wants to consolidate and then go higher. That's my thought process on it. What's in my basket? Again, this is not a perfect basket. It's the best I could do initially. I've had to learn a lot of stuff here.

I didn't know any of this stuff. I was a macro guy and I thought technology was evil. It was overvalued. It was bullshit. And then I realized I was completely wrong. And in fact, it was the only way in the equity market to outperform the balance sheet. So what I've got in the basket is Apple, which is VR wearables. And they equally weighted it as well, just to not have this big market cap weights of these giant companies. Apple. Apple's about to come with breakthroughs in VR, AR, wearables, internet of things, AI, ARK. People hate ARK. Yeah, great.

I love it now. It was down 80%. Why would you not love it? Even if she's half right, she can make a lot of money here. And I believe in her thesis. Is she the best stock picker in the world? Well, time will tell. Maybe not. Maybe it is. But directionally, she's absolutely right. And her thesis is absolutely right. Whether you believe her thesis on individual stocks or whatever, but overall, she's trying to buy the growth end of technology and says that we are in somewhat of an exponential age.

Get it? BBH, that's the biotech ETF, biotech. I don't know how to approach that space. There's so much going on. I don't really know. Just buy an ETF with a bunch of stocks in it. That kind of makes sense as the VanEck one. Coinbase. Coinbase got super killed. I think it's very cheap, I think, with the FTX blow up. And Binance has a good chance of actually being a very large part of the future here. And it's very discounted.

And I want an equity that has the digital asset trend in it. I've already got that bet on anyway. And a big part of this is I have the digital asset bet. We'll come into that in a sec. Esports. Esports is kind of like Metaverse. So there is an esports ETF, so chuck that in it. Google, robotics, AI, fully self-driving cars, biotech, wearables, internet things. I mean, they've got everything in Google X. And it's completely undervalued by the market. And so I want some of that because any of these breakthroughs, Google are going to be a part of this. Meta.

Very hated stock. Love it when it gets this sold off. I didn't hold it all the way down. And I started buying this exponential age basket in kind of May, April, May, and then added recently as well because the idea is a long term bet. And I don't mind a bit of volatility in it because I'm trying to capture the much larger upside. When stuff like Meta is down so far, it's either going to fail in its pivot or the market has wildly mispriced it. Its pivot is Metaverse, AR, VR, and also digital assets, the integration of NFTs into Instagram. Super interesting. They get the whole story. Microsoft clearly, they're just buying open AI. They have already AI. They've got massive amounts of data processing with Azure and all sorts of other stuff.

Really interesting. I think it's dressed up as a boring company. Galaxy. I just like owning gatekeepers and tolls and Coinbase is a toll for retail and institutions and Galaxy is more institutional toll into the crypto world. Usually makes sense. Reliance industries. You've heard me talk about this before. This is the Indian giant, the people that paid off, that basically took over the entire Indian telco market by underpricing data, took the entire market, ran up massive debts, and then paid off all of the debt in the fastest ever period of time by raising money from sovereign wealth funds, Facebook, everybody else. They're basically building out the entire infrastructure of this exponential age from a green energy grid to oil refining to 5G, probably 6G, and then the applications layer of internet businesses, everything they are building within India. India is incredibly fast going economy. You've got technology, the fastest growing economy in the world with a young population all wrapped up in this one stock. Why would you not?

Robo, robotics, another ETF out there, broad base of robotics companies. Are they the right ones? I don't know. Let's get direction in the right place. Semis. You've heard me talk about semis. It's got a mortgage trust because they're bloody good at this. They've been doing it for a long time. That's the growth end of technology and Tesla. Tesla is a bunch of these things from internet of things to fully self-driving to robotics. There's a lot there in Tesla. I buy into the long term thesis that this is a much, much bigger company than people understand.

I don't care. I understand that people have a different view. It's part of my basket. It's not my whole bet. You might take Umbridge. I don't like Arc or Tesla's a bunch of rubbish or whatever you may be, but directionally, this basket gets it right. You can choose your own basket. Again, I'm not saying I have any source of truth. I just want to get directionally right because I can't find an argument to say this is not going to work over time. It's really hard to argue that when you've just seen what we've seen in AI. I just want people to focus on that, drop all their preconceptions aside, all the bare fests that's going on right now and say, I need to unfuck my future 10 years out. What am I going to do, Rael?

This is what I'm telling you, the best thing I can do. The other one is digital assets. I've made this super clear. I think it's the best bet in the world. I think it's much better than the exponential age bet because it's exponential in its own right. Again, cyclical turning point on a secular trend. Very quickly, there's the chart Bitcoin. There's the logarithmic uptrend, two standard deviations oversold. This is where you want to be buying it. That makes total sense to me. Guess what? It's cyclical, because it's cyclical based on global money supply within a secular trend.

The ups and downs in that secular trend are actually driven by money supply. It makes total sense. All assets are the same. There we go, Bitcoin global money supply, Global money supply is turned up. Where is global money supply going to be in six months' time? Tighter or looser? 0.0 chance it's tighter, because inflation is going to fall just mathematically. So it either stays the same or it goes looser. So what it's saying is this is the point in the cycle. Crypto actually turned first. It turned first, then exponential age stocks, then NASDAQ, and everything else came in October. But crypto came, actually, ETH turned in June.

Forward-looking, and I've been flagging this to everybody as much as I can. So I really like this. Here's the secular uptrend, cyclical downtrend. This is the point. Every time that happens, usually it's like 10, 20, 30, 50X from here, depending what you have. Bitcoin's not my bet here. I would probably choose to have Ethereum. But we'll come on to that in a sec. This is Bitcoin versus the ISM in yellow. Fascinating. Every time the ISM peaks, Bitcoin peaks, because it's money supply and the business cycle that's driving some of this. It also bottoms before the ISM bottoms.

So in yellow or gold here is the ISM, and Bitcoin log trend is there. And you can see the peaks match up perfectly. Fascinating. I didn't realize how cyclical some elements this were in the log trend. And I think everybody confused it for the halving cycle. I don't think it's the halving cycle at all. I think it's actually driven by this global monetary cycle, business cycle, which is actually driven because rates got reset in 2009 at zero, everywhere globally. And everybody has to roll their rates. I think it's every three and a half years you get a peak in the ISM, exactly three and a half years. And then there's a low six months, nine months later. And that is pretty much exactly cyclical too. And it's driven by the refinancing cycle.

Mike Howells talked about this. And I think his work is really important on liquidity and the refinancing cycle. But I think it's a bigger deal than most people understand. And again, I urge you to read the article I just written in ProMacro, or the really full stuff I've written in GMI. Okay, so Ethereum, well, that's one hell of a chart. That's the log trend of Ethereum. We start breaking above a level there, which is about 2000. If we break 2000, then we've broken the whole pattern, and then off we go to the races. I think that's what's playing out now. Did we do that in one go? Or did we chop around? Who the hell knows?

Don't really care. I bought as much as I possibly can into the sell off. I kept hold of all of my position. And you know, I've got some other crypto as well. But this is my core bet. It's the easiest way of expressing the view. It's on the log trend. It's oversold. It looks like it's going up. The business cycle is turning up on a forward looking basis. It's exactly what we need. And also there's the chart of Ethereum versus Bitcoin.

That's at one hell of a wedge. If that plays out, then we should see ETH doing 1, 2, 3, 4, 5X Bitcoin in the next run. And ETH probably won't be the best performing crypto either. I don't know. I look at the chart of Solana, and it looks like it could outperform Ethereum, and could something else do? For sure. So I'm not saying what's what. I'm just saying this is where I think it is. Why? Because Ethereum is a broader basis architectural protocol of which we can build more stuff on top of. Bitcoin just doesn't do that. It has a different use case.

So it's unlikely to be as big. You know, is the internet worth more than gold? Yes. Simple as that. And that's basically the argument here. Okay. On to India. India, secular trend, and near interesting levels. Problem is with bloody India, it barely ever corrects. The last time we really got a correction was 2000, you know, from the 90s and 2002. And then this is in dollar terms. So it kind of rose quite a lot.

But dollars, it's sort of sideways trended. Still in an upslope. But really in dollar terms, I guess its peak was still in 2008. But it did get in the bloody pandemic to two standard deviations oversold, and I missed it. I'm so angry with myself. I've been waiting for that perfect entry for India. And it never happened because more and more young people start investing in the market in India, and therefore it keeps going up. It's kind of like the US was from the 80s onwards. But if I look at the short term chart of the Indian stock market in dollar terms, maybe we can test the breakout level. But we want to be buyers here because it's very hard to argue that India's not going to have a next leg up. Now, is it going to outperform technology? I doubt it.

And is it going to outperform crypto? No chance. But is it a decent bet? Yeah, I think so. Over time, I find it very difficult to argue India's not going to be. But India's upside might be a 10x, and crypto might be 100x, and technology stocks might be 30x, 50x over the next 15 years. So it's OK. It's nice. I like it. I love the story. If you don't like technology and you want to find something and you want to buy emerging markets because you think the dollar's going to be weaker, India's the one to own. There is other cyclical opportunities that I think come up.

And most of these are partly secular too. Copper. Copper is a hell of a story because basically the electrification of the world, the rollout of green energy requires more copper. There's a huge shortage of copper. The long term chart has won a hell of a pattern. And there's a good chance that copper goes a lot higher. And I'll be speaking, I think, D guests Anderson about this whole trend. So I think there's a mega trend. It's both cyclical because copper goes up in the business cycles. So here's Chinese credit impulse versus copy year-on-year. They're very correlated. So chances are, copper goes higher, but the business cycle goes higher, it breaks out of the wedge, and we end up with the shortage of copper.

And that's a secular theme that could go on for a decade. Who knows? But anyway, I like copper, really interesting trade. If you don't like any of the technology stuff, because you're more kind of commodity real assets driven, great, just by copper. Simple way of playing the whole trend. Chinese M2 is growing as well. And this is something that is changing that race of change of M2 globally. And China is a big driver of the common sea cycle. The other trend I'd love that we've talked about is with Lawson Steel. It's carbon allowances. Carbon allowances, that's a log trend, because it's pretty much exponential. We have a secular tailwind, which is the government is forcing the greenification of Europe, and they're using this carbon incentive system to force it to happen.

So we have a secular tailwind where you have forced buyers and a reduced supply. I mean, you don't get stuff like this in your lifetime. This is just a brilliant, brilliant trade. And so over time, should do very well, we've just broken out. So I really like that. Last couple of charts I'm going to leave you with is, where are we with bonds? And I'm not going to really get into the whole ship fight that everybody's having everywhere. I'm going to interview Jeff Moore from Fidelity to get his view, because he runs 1.3 trillion, so 1.5 trillion. So I quite fancy his view more than some random on the internet. But when I look at the log chart of yields, there is a clear trend that's driven by demographics that's driven by debt itself. And to me, when I look at it this way, we had the undershoot from the pandemic, the equal and opposite, which is happening now, I just think it reverts to trend. I know that's the least popular view in the world.

And I get it. If you don't believe it, we'll have to find out because I'm not saying anything here is a certainty. Technology over time is a certainty. Technology will not stop. So that is a certainty. Is bond yields coming back down to trend a certainty? No. But I think it's a better probability than the market's expecting. But how long does that take? What format does it take? I don't know. We'll have to wait and see.

But I'm not sure that that secular trend hasn't gone. And therefore, if it hasn't gone, is this an opportunity for capital gains, not for bloody yields, not for real rates? They'll be negative. Bonds are the way to the poor house to hold them over time. But to trade them back to trend? Interesting. But you don't even need to do that, because if I'm right, and this goes back to trend, you're going to be paying through the nose for growth stocks. And guess what? Crypto too. So that's why it's really interesting. And if yields go back down, we've slowed the business cycle and we've set the seeds for a new business cycle, which is good for commodities. So look, it's very interesting.

It's all to play for. Bonds versus the business cycle. So here is the bonds year on year versus the ISM. They're very dislocated because of the a liquidity issue in the bond market. It's not so much the stickiness inflation because this chart goes back for decades. It's the Fed signaling of we won't move the bond market believes it. So that's where we are with this. So I like all of that. But the point being here is, if we want to change the outcomes for this really screwed up world, where our wages don't go up, where we're being replaced by technology, where governments are massively in debt and we foot the bill via taxes, where we see debasement of assets, so we can't afford as many assets as we like. So the rich get richer, the poor get poorer. If we don't like to see the rise of populism based on this broken society, because the promises of the future have been broken, let's make our promises to our future selves come right. And that's by unfucking your future.

Thinking about what can I do today that will give me a chance to outperform the debt, the balance sheet, the demographics? How do I outperform the robots? Invest with them. Anyway, I hope you find it useful. I'm probably quite contentious in it. I tried to do it to get people to get outside of their narrative, because there's narratives out there that are all encompassing and they've become political. Ignore that. We're trying to solve our future. Anyway, good luck. Next two weeks, tons of really interesting people to talk about all of these things and dig in more. I hope you enjoy it.

Raoul Pal, Real Vision co-founder and CEO, setting the scene for this important two-part series our team is bringing you, along with some of the best-in-class minds in the fields we'll be touching on. Some of Raoul's outlook is stark, but don't lose sight of his optimism about the future. And you'll just need a few days of patience in this series for that. In the first week, we're exploring the ways in which we're all fucked, from debt and demographics, to monetary policy and geopolitics.