In a world where the financial landscape is constantly shifting, understanding the underlying forces that drive markets is more crucial than ever. Enter Raoul Pal, the renowned macro investor and founder of Real Vision, who, alongside leading business cycle analyst Julien Bittel, delivered a masterclass on his "Everything Code" framework. This multi-hour presentation, recorded on May 17, 2024, and published on May 24, 2024, is widely regarded as one of the most in-depth macroeconomic and investing masterclasses available online.
The "Everything Code" framework is a comprehensive approach to understanding how macroeconomics, demographics, debt, liquidity, and technology adoption cycles drive financial markets. Pal and Bittel explain that GDP growth is a function of population growth, productivity growth, and debt growth. As population and productivity slow, economies increasingly rely on debt, leading to higher government debt and eventual currency debasement.
GDP GROWTH = PRODUCTIVITY GROWTH + POPULATION GROWTH + DEBT GROWTH
Demographics are destiny, they argue, with ageing populations and falling birth rates being the root causes of slow growth and rising debt in developed economies. Governments shift debt onto their own balance sheets and use liquidity (money printing) to manage repayments, which in turn drives up asset prices but not wages or earnings, exacerbating inequality.
Liquidity, they assert, is the single most important driver of asset prices. Since 2008, liquidity has grown exponentially, closely tracking the price of assets like the NASDAQ and Bitcoin. The debasement of currency via liquidity pushes up the price of scarce assets (stocks, crypto, real estate) but not wages or earnings, exacerbating inequality.
The business cycle, as explained by Pal and Bittel, can be tracked using leading indicators like the ISM (Institute for Supply Management ) and PMI (Purchasing Managers’ Index). They outline four macro seasons: Spring (growth accelerating, inflation decelerating), Summer (growth and inflation both accelerating), Fall (growth slowing, inflation rising), and Winter (growth and inflation both slowing). Each season has implications for asset allocation and investment strategy. For instance, in Spring, risk-on assets like tech, discretionary, and crypto tend to perform well, while in Winter, risk-off assets like bonds and gold are more attractive.
Crypto, they argue, is both a technological adoption story and a macro hedge against currency debasement. Bitcoin and Ethereum have outperformed all other assets in history, with annualised returns far exceeding stocks, bonds, or commodities. The adoption curve for crypto is growing faster than the internet did, with projections of 1 billion active wallets by 2025 and up to 4 billion by 2030.
Pal and Bittel also discuss the "Super Massive Black Hole" thesis, where crypto is absorbing capital from other assets due to its superior risk/reward profile, creating a "black hole" effect in global finance. They argue that diversification is dead in this macro-driven world, and the best returns come from concentrated bets on the dominant macro trend, currently crypto and tech.
For UK-based investors, understanding the macro cycle, focusing on secular trends, monitoring liquidity, and being wary of traditional diversification are key takeaways. The presentation provides practical investment implications, including forecasts for the NASDAQ and Bitcoin, and insights into altcoins, NFTs, and other trophy assets. For instance, Pal projects that the NASDAQ could reach 27,000–30,000 and Bitcoin could reach $400,000 by mid-2025, although these forecasts come with caveats.
If you're in London or the UK and interested in macro investing, crypto, or portfolio strategy, this presentation is a must-watch. For further learning, you can access the full presentation slides at Real Vision, use tools like the Macro Investing Tool, follow Raoul Pal and Julien Bittel on X, and subscribe to Raoul Pal's Substack newsletter.