When Raoul Pal, the former hedge-fund manager who founded Real Vision first learned the coronavirus was spreading rapidly, he thought, “The whole world's f—ed,”.
“I said: ‘Listen, this is the biggest economic event of all of our lifetimes — and it's coming. And that was, in retrospect, the greatest call I've ever had,” said Pal on the “Lindzanity” podcast while recalling how in a span of three to four days the spread hit Iran and then Itay.
Pal who quit his jobs at Goldman Sachs and GLG Partners and now writes market research for his Global Macro Investor also predicted in October that the Federal Reserve needed to cut interest rates to zero and warned of them falling into negative territory.
A crisis like no other
According to Pal, the pandemic will cause “the largest insolvency event in all history.” He added,
“I think the balance of probabilities is that this is a much longer event — in terms of economic impacts — than anybody is pricing in. I think it's a huge societal change that's coming from all of this.”
The isolation will make people more local and lead to complications in supply chains, he said. Bond king Jeffrey Gundlach is of a similar opinion who recently said that we are going to be “much more, less-connected to globalization.”
Last week, Kristalina Georgieva, head of the International Monetary Fund (IMF) also said that it is a “gigantic” problem and a “crisis like no other, (…).” Never in the history of the IMF have we witnessed a situation in which the world economy came to a standstill.”
“This is either zero or it’s millions”
Already, the norovirus caused the Dow and the S&P 500 to have their worst first quarter. But those projecting sharp V-shaped recovery in the last two quarters of this year, in Pal’s opinion are incorrect in their assumptions. He is expecting another 20% downside before “3- or 4-month bounce of hope.”
As coronavirus drags on without production and consumption, it heightens the risk of bankruptcy and deflation. Under these circumstances, Pal suggests allocating 25% of your portfolio to Bitcoin, gold, cash, and trading opportunities each.
While the world’s leading cryptocurrency dropped over 40% in line with the stock market, it has recovered 84% of its value since then.
Social Capital CEO Chamath Palihapitiya, an early Bitcoin investor who back in 2013 owned about 5% of the entire BTC, believes “This is either zero or it’s millions.”
A former Facebook executive, he said currently it is still a speculative investment but “the path dependence for Bitcoin is if it looks like [debasement] is likely, it will really emerge as a flight to safety,” Palihapitiya said.