Forward Guidance w/ Felix Jauvin: The Biggest Trade No One Sees Yet ft. Raoul Pal & Julien Bittel
🎯 Summary
Podcast Summary: Forward Guidance w/ Felix Jauvin: The Biggest Trade No One Sees Yet ft. Raoul Pal & Julien Bittel
This episode of Forward Guidance, featuring Raoul Pal and Julien Bittel (from Global Macro Investor - GMI), dives deep into a unified macro framework centered on global liquidity debasement and its profound impact on asset allocation, arguing that diversification is currently detrimental to returns.
1. Focus Area
The discussion centers on Global Macroeconomics, Debt Cycles, and Asset Allocation within the context of persistent fiat currency debasement. Key themes include the post-2008 structural shift in business cycles, the role of demographics, the impact of AI, and identifying the only assets that have preserved purchasing power against this debasement.
2. Key Technical Insights
- The Four-Year Metronome Cycle: Post-2008, the global economy settled into a near-perfect four-year refinancing cycle, driven by governments restructuring debt every 3-5 years following the effective “debt jubilee” (interest forgiveness) of 2008 and COVID-19.
- Liquidity Debasement Rate: Global liquidity (public + private) is rising at a consistent rate of approximately 8% per year, which the hosts identify as the true debasement rate of fiat currency.
- GDP Growth Formula Breakdown: Trend GDP growth is fundamentally driven by Debt Growth + Population Growth + Productivity Growth. Declining population growth (demographics) and slowing productivity mean that debt growth must accelerate to maintain nominal GDP, leading directly to currency debasement.
3. Market/Investment Angle
- Concentration over Diversification: Due to the singular, dominant macro factor (liquidity debasement), diversification across traditional asset classes (like the S&P 500 or bonds) now destroys returns relative to this debasement rate.
- The Only Performers: When assets are measured against global liquidity, only Technology Stocks (NASDAQ) and Crypto have successfully compounded purchasing power over the long term. Gold, while nominally performing, is shown to be essentially flat when adjusted for debasement.
- The Bizarre Allocation: The NASDAQ divided by Bitcoin shows the latter has outperformed by nearly 100% since 2012, suggesting that crypto is the superior asset within the only two viable categories.
4. Notable Companies/People
- Raoul Pal & Julien Bittel (GMI): The primary architects of the “Everything Code” framework, focusing on the intersection of debt cycles, liquidity, and demographics.
- Elon Musk: Mentioned in the context of solving physical problems (Mars) versus the unsolvable structural problem of global debt.
- Central Bankers (Besson, Yellen): Described as “Masters of the Universe bond salesmen” whose primary job is managing debt refinancing and finding new channels (like stablecoins) to monetize interest payments.
5. Regulatory/Policy Discussion
The discussion highlights that policymakers are actively engaged in financial repression—shortening debt terms and using mechanisms like yield curve control (historically, and implicitly now via liquidity injections) to manage debt burdens when GDP growth cannot outpace debt servicing costs. The ongoing search for new monetization channels (from the balance sheet to Fed liquidity to stablecoins) is framed as a policy necessity to avoid a “GDP doom loop.”
6. Future Implications
The hosts believe the current hyper-financialized, indebted refinancing world is the prevailing reality for the next five years (two more cycles). Beyond this, they speculate about the “Economic Singularity” (around 2030), driven by AI and robotics achieving near-infinite productivity, which would fundamentally break the existing GDP growth formula and render all current economic models obsolete. This impending unknown suggests investors should be highly concentrated in the few assets that preserve capital now.
7. Target Audience
This episode is highly valuable for Institutional Investors, Hedge Fund Managers, Macro Strategists, and sophisticated Crypto Investors who need a deep, quantitative framework for understanding long-term asset performance relative to monetary policy and global debt structures.
🏢 Companies Mentioned
💬 Key Insights
"Every job is a zero over time in the kinds of jobs that we have today. Things adapt."
"We are just going to make manpower and intelligence infinite, which is the single most deflationary event that has happened in all of humanity."
"I will say the one exception to that idea of no recessions is if they try to balance the budget or any form of austerity. So that is why like I started to get a little concerned in February because that is the thesis breaker to me is that if we go from a deficit of 7% to try to get it to three like they are talking about originally, like that would be an issue, I think. But it is obvious that that cannot happen."
"I do not think we can have recessions or certainly ones that can last."
"The business cycle is driven by the credit cycle, and now it is just the liquidity cycle because the credit side of the equation cannot go bust because they cannot allow it. The system is too indebted to allow the collateral to go down because everything is end over."
"Most recessions are basically credit events. And normally, it means the collateral has fallen, and it is getting called upon. So the collateral does not cover the cost of your debt. That is generally what happens. But once you have debased the currency, the collateral cannot—and I learned that lesson in 2020 when it all started to happen. I was like, what the fuck is going on? Where is the insolvency trade that I thought was going to happen? And then I realized we cannot have a credit event. We cannot really have a recession because of what they are doing."