In a recent interview, former Goldman Sachs executive Raoul Pal talked about the impending global economic slowdown and what he is doing to prepare for it, in particular explaining the rationale behind the interesting allocation strategy he has used for his crypto portfolio.
Prior to founding macro economic and investment strategy research service Global Macro Investor (GMI) in 2005, Pal co-managed the GLG Global Macro Fund in London for global asset management firm GLG Partners (which is now called “Man GLG”). Before that, Pal worked at Goldman Sachs, where he co-managed the European hedge fund sales business in Equities and Equity Derivatives. Currently, he is the CEO of finance and business video channel Real Vision, which he co-founded in 2014.
Pal made his comments during an interview with crypto influencer Anthony Pompliano (aka “Pomp”), who is the Co-Founder of investment firm Morgan Creek Digital Assets as well as the host of “The Best Business Show”; this episode was streamed live on YouTube on October 4.
As reported by The Daily Hodl, with regard to the outlook for the global economy, Pal said:
The work that I’ve been doing suggests that the likelihood is the economy, the global economy, slows down pretty significantly into next year. And again, we might see more stimulus and more fiscal stimulus coming as well. So I look at it very differently to what most people are seeing, but on the horizon because of the fiscal cliff, we’ve got like 3.5% of GDP coming off from the fiscal cliff. We’ve got all of the spending brought forward that everybody, including me, did up their houses over the previous year.
Pal also pointed to rising oil prices and daily living costs driving down the affordability of goods. Furthermore, he mentioned that rising prices would lead to slower economic growth than expected, which would result in “more stimulus.”
The Real Vision CEO believes that governments will respond to the downturn with a similar approach to the COVID-19 pandemic by printing more money, thereby potentially driving the prices of assets like stocks and crypto higher.
Governments have now realized, and the central banks, that they can’t let the collateral go bust. The asset side of the balance sheet is not allowed to fall in price, because if not, you get a big margin call on the economy. So it seems to be that debasement of currency to drive assets higher optically is the only answer they’ve got now.
Pal said there was “no way around” governments having to generate growth in order to keep the economy afloat. He pointed to a myriad of potential confounders in the pursuit of economic growth, saying the chances of the economy continuing upwards are “low.”
As for his crypto portfolio, Pal said:
“My current allocation is probably 70% ETH [Ethereum], 5% Bitcoin, and then a tail of others. So why that allocation? It’s nothing against Bitcoin, it’s not against anything else. It’s because I’m a financial markets guy and we use risk curves. So at certain points in the cycle, in the middle of a bull market, you want to take as much risk as possible. So you want to go to the more speculative end of the market.
“I isolated the fact I thought Ethereum was going to see further flows, it’s early in its adoption cycle and that would probably drive prices further than Bitcoin. And that seems to be playing out.“
The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, or other advice. Investing in or trading cryptoassets comes with a risk of financial loss.