Raoul Pal, the former hedge-fund manager who founded Real Vision, thinks the fallout from the coronavirus will have immense impacts on the global economy.
The duration and severity of the pandemic is something that Pal thinks hasn't yet been accounted for properly.
Pal thinks a further 20% decline in stocks is on the horizon.
In October, Pal predicted the Federal Reserve would cut rates to zero and the US would have negative rates.
In late February, Pal told investors to buy bonds and said the impacts from the coronavirus would be "meaningful and real."
"The whole world's f---ed."
That's what Raoul Pal, the former hedge-fund manager who founded Real Vision, said on the "Lindzanity" podcast while speaking about when he learned that the coronavirus was uncontrolled and spreading rapidly.
"The moment the spread hit Iran ... and then Italy — that all happened over the span of three or four days — I was like: 'time to panic before everybody else,'" he said. "It's human behavior function. If the Chinese closed every single border and every city, everybody's going to do it."
To bring you up to speed, Pal retired at 36 after quitting jobs at Goldman Sachs and GLG Partners. He lives comfortably on a 140-person island in the Cayman Islands and spends his days writing market research, which comes with a hefty price tag of $40,000 per year.
"I said, 'Listen, this is the biggest economic event of all of our lifetimes — and it's coming,'" he added. "And that was, in retrospect, the greatest call I've ever had."
But this isn't the first time Pal has nailed a prescient call. In October, he said the Federal Reserve needed to cut interest rates to zero and warned of negative interest rates in the US, both of which have materialized.
What's more, as the market was topping out in late February, Pal expressed his affinity for owning bonds — a trade that would've immensely rewarded investors who took his advice. He also said the implications of the coronavirus would be "meaningful and real."
That was before things really started to fall apart.
Today, Pal thinks the coronavirus will cause "the largest insolvency event in all history." And given his track record lately, that's not reassuring.
"I think the balance of probabilities are that this is a much longer event — in terms of economic impacts — than anybody is pricing in," he said. "I think it's a huge societal change that's coming from all of this."
To Pal, the duration of the fallout from the coronavirus is the key factor here — one that he thinks investors aren't paying enough attention to. In his mind, those who are a projecting sharp V-shaped recovery in the third and fourth quarters are incorrect in their assumptions.
"Isolation is going to be a real event for a significant period of time," he said. "You've got a world that's going to be much more closed, and that's leading to complications in supply chains."
He added: "It makes people become more local."
Pal's prognosis echoes that of billionaire "bond king" Jeffrey Gundlach.
"We're going to be getting much more less connected to globalization," Gundlach said in a DoubleLine webcast earlier this week. "We're going to be bringing manufacturing back and thinking about things in very different ways."
But the changes that Pal and Gundlach expect don't happen overnight, which is why Pal thinks the fallout could worsen. Every day that the pandemic drags on is one less day without production and consumption. Then that, in turn, heightens bankruptcy risk.
"So I'm now in the point of thinking we've got another 20% downside or so to come before we get the three-, four-month bounce of hope," he said. "For the average guy, this is a very, very, very difficult world we're going to go into — and I can't sugarcoat it because there is no nice answer."
"The moment the spread hit Iran ... and then Italy — that all happened over the span of three or four days — I was like: 'time to panic before everybody else,'" he said. "It's human behavior function. If the Chinese closed every single border and every city, everybody's going to do it."
To bring you up to speed, Pal retired at 36 after quitting jobs at Goldman Sachs and GLG Partners. He lives comfortably on a 140-person island in the Cayman Islands and spends his days writing market research, which comes with a hefty price tag of $40,000 per year.
"I said, 'Listen, this is the biggest economic event of all of our lifetimes — and it's coming,'" he added. "And that was, in retrospect, the greatest call I've ever had."
But this isn't the first time Pal has nailed a prescient call. In October, he said the Federal Reserve needed to cut interest rates to zero and warned of negative interest rates in the US, both of which have materialized.
What's more, as the market was topping out in late February, Pal expressed his affinity for owning bonds — a trade that would've immensely rewarded investors who took his advice. He also said the implications of the coronavirus would be "meaningful and real."
That was before things really started to fall apart.
Today, Pal thinks the coronavirus will cause "the largest insolvency event in all history." And given his track record lately, that's not reassuring.
"I think the balance of probabilities are that this is a much longer event — in terms of economic impacts — than anybody is pricing in," he said. "I think it's a huge societal change that's coming from all of this."
To Pal, the duration of the fallout from the coronavirus is the key factor here — one that he thinks investors aren't paying enough attention to. In his mind, those who are a projecting sharp V-shaped recovery in the third and fourth quarters are incorrect in their assumptions.
"Isolation is going to be a real event for a significant period of time," he said. "You've got a world that's going to be much more closed, and that's leading to complications in supply chains."
He added: "It makes people become more local."
Pal's prognosis echoes that of billionaire "bond king" Jeffrey Gundlach.
"We're going to be getting much more less connected to globalization," Gundlach said in a DoubleLine webcast earlier this week. "We're going to be bringing manufacturing back and thinking about things in very different ways."
But the changes that Pal and Gundlach expect don't happen overnight, which is why Pal thinks the fallout could worsen. Every day that the pandemic drags on is one less day without production and consumption. Then that, in turn, heightens bankruptcy risk.
"So I'm now in the point of thinking we've got another 20% downside or so to come before we get the three-, four-month bounce of hope," he said. "For the average guy, this is a very, very, very difficult world we're going to go into — and I can't sugarcoat it because there is no nice answer."
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