I sympathize with RealVision CEO/Macro Strategist Raoul Pal’s comments yesterday:

“We are so used to liquidity events — “market sold off, shock, panic!” — the Fed knows how to deal with liquidity events.

Slow solvency events are much more difficult, because they happen bit by bit.  

First it’s J.Crew, then it’s JCPenney, then GE’s price has fallen another 20%, then the 2-year yield’s gone negative, and then nothing. Then it’s a German bank, then it’s something in Japan, and then “oh look, mortgage debt in Canada is going up!”.

It’s slow, and it’s grinding, and it moves, and it gathers pace. And it lowers economic growth. I really am concerned that this is what lies ahead.

And, again, we’re all waiting for the flush out, the quick moment, the shock panic, and we won’t get it. And that’s the market nobody knows how to deal with.”

What Raoul is essentially describing is a world finally coming to grips with a corporate, and in many corners a government, debt bubble of historic proportions. 


In terms of a market “flush out”, while bear market history indeed maps out a slower grind lower beyond the first big rally (the hope phase), given the retail feel of our current experience, sharp moves lower wouldn’t surprise me a bit going forward:

“Bloomberg today laid out all the other ways that retail traders have taken over the market, including jumping “in and out of stock options, dabbling in complicated exchange-traded funds” and devouring trading how-to books by the dozen as “locked down and socially distant with lots of time and (apparently) money to spare, they’re leveraging zero-percent brokerage fees in new and surprising ways.”

Needless to say, with retail investors flooding the market as the so-called “smart money” steps back, “Wall Street says it will end badly.””

Feels too much like the early ’00s (tech craze)…