Framework: Raoul Pal and Julien Bittel’s Macro Thesis (March 2025)

Frameworks, Uncategorised |

1. Core Philosophy: Understanding the World Through Macro

  • Objective: Empower investors to “unfuck their future” by mastering macroeconomic forces and seizing the greatest opportunities (crypto and tech) to counter currency debasement.
  • Central Idea: Everything is macro—liquidity, demographics, and technology adoption drive asset prices, with crypto now shedding its “scarlet letter” of skepticism due to proven fundamentals.
  • Evolving Narrative: Crypto’s reputation is shifting from speculative to fundamentally sound, bolstered by political support (e.g., Trump’s pro-crypto policies), institutional adoption, and macro data tying it to the business cycle.
  • Key Tools: Global Macro Investor (GMI), Real Vision products (Pro Macro, Macro Investing Tool, Exponentialist), EXPAAM asset management.

2. The “Everything Code” Thesis

  • Definition: A macro framework linking liquidity, demographics, and debt to asset prices and economic cycles, now explicitly tied to crypto’s performance.
  • Magic Formula: GDP Growth = Population Growth + Productivity Growth + Debt Growth
    • Population Growth: Declining (e.g., US working-age population growth from 8% to 1%).
    • Productivity Growth: Stagnating due to demographics.
    • Debt Growth: Rising (US debt ~370% of GDP) to offset slowing growth, driving liquidity.
  • Key Driver: Demographics fuel debt and liquidity cycles, with debasement (8% annual liquidity growth + 3-4% inflation = 12% hurdle rate) inflating scarce assets.
  • Update: Bitcoin’s cycles align with the 4-year debt refinancing cycle, historically peaking as ISM crosses 50 and marches toward late-cycle highs.

3. Liquidity: The Master Driver

  • Role: Liquidity, growing at 8% annually since 2008’s “debt jubilee,” is the backbone of asset price surges, now amplified by global M2 rises and a weakening dollar.
  • Correlations:
    • NASDAQ: 97.5% (tech adoption boosts outperformance).
    • Bitcoin: 85% (technological adoption + liquidity), reinforced by new data showing alignment with ISM cycles.
  • Mechanism: Central banks inject liquidity to manage debt (e.g., Fed Net Liquidity rising as Reverse Repo, TGA, and QT unwind), with Trump-era policies echoing 2017’s liquidity surge.
  • Update: Post-2022 easing of financial conditions and anticipated QE (post-rate cuts) create a “Goldilocks” environment for risk assets, with crypto as the highest-beta play.

4. The Business Cycle: Cyclicality and Forecasting

  • Framework: A 4-year debt refinancing cycle ( synced with Bitcoin halvings and US elections) governs economic and crypto trends, with ISM as the key gauge.
  • Key Indicator: ISM PMI (<50 = slowing, >50 = expanding; currently <50 but rising).
  • Cycle Phases (Macro Seasons):
    1. Spring: Disinflationary boom (e.g., 2023 recovery).
    2. Summer: Growth accelerates, inflation stabilizes (current phase, March 2025).
    3. Fall: Stagflation (late-cycle peak).
    4. Winter: Recession (liquidity withdrawal).
  • Forecasting:
    • ISM peaks ~June 2025 (projected at 58-60), liquidity peaks ~September 2024, turns negative ~December 2025.
    • Update: Bitcoin price targets tied to ISM levels:
      • Trend (~$215,000) at ISM 52.
      • +1 SD (~$420,000) at ISM 58.
      • +2 SD (~$820,000-$1M) at ISM 60, with potential cycle extension beyond 2025.

5. Asset Allocation: The Four Seasons Model

  • Developed By: Julien Bittel, via the Macro Investing Tool (MIT).
  • Purpose: Allocate assets based on growth and inflation dynamics, now with crypto as a core component.
  • Seasonal Strategies:
    • Spring: Long-duration (tech, Bitcoin, consumer discretionary).
    • Summer: Cyclicals (small caps, materials, altcoins) + tech/crypto (current focus).
    • Fall: Defensive (gold) + speculative altcoins.
    • Winter: Risk-off (bonds, cash).
  • Update: “Dips. Are. For. Buying.” in Summer/Fall 2025, with altcoins poised for an “Altseason” as ISM rises and risk tolerance increases.

6. The Supermassive Black Hole: Crypto’s Dominance

  • Concept: Crypto’s exponential growth outstrips all assets, driven by debasement and adoption, now supercharged by institutional and political support.
  • Performance:
    • Bitcoin: 139% annualized (20,000,000% total), with past ISM >50 cycles yielding 85x (2013), 46x (2017), 8x (2021 truncated).
    • Ethereum: 146% annualized.
    • Solana: 203% annualized.
    • NASDAQ: 17% annualized (best non-crypto).
  • Update: Trump’s pro-crypto policies (e.g., Bitcoin reserve, tax incentives) and institutional FOMO (post-$100K break) could push this cycle beyond historical norms.

7. Crypto Market Outlook: The Banana Singularity

  • Definition: An explosive growth phase (Summer/Fall 2025) dubbed the “Banana Singularity,” fueled by liquidity, rate cuts, adoption, and political tailwinds.
  • Adoption Curve:
    • Current: 2.5 trillion market cap, ~500 million wallets.
    • End of 2025: 10-15 trillion, ~1.1 billion wallets.
    • 2030-2032: 100 trillion, ~4 billion wallets.
  • Price Targets:
    • Bitcoin: Base case $215,000-$420,000; upside $820,000-$1M if cycle extends.
    • Ethereum: ~$20,000 (prior estimate).
    • Altcoins: Potential 20x (mirroring 2020-2021).
  • Timing: Peak between June and Q4 2025, with a possible extension into 2026; de-risking advised pre-Q4 to capture upside without missing a 15x post-correction move (e.g., 2013/2014 analogue).

8. Tactical Insights: Trophy Assets and Altcoins

  • Trophy Assets: NFTs, fine wines, luxury watches rise with excess liquidity and crypto gains, validated by Fed Net Liquidity trends.
  • Altcoins: Small-cap tokens lag Bitcoin but surge in Summer/Fall as liquidity filters down, mirroring small-cap equities and credit spreads.

9. Practical Tools and Resources

  • Global Macro Investor (GMI): High-level research since 2005 (www.globalmacroinvestor.com).
  • Real Vision: Media platform (www.realvision.com) offering:
    • Pro Macro: Lighter macro insights.
    • Macro Investing Tool (MIT): Business cycle allocation (Real Vision Plus).
    • Exponentialist: Tech investing.
  • EXPAAM: Crypto fund-of-funds.
  • Free Access: Full presentation and AI notes at realvision.com.

10. Key Takeaways

  • Get the Macro Right: ISM, liquidity, and financial conditions dictate crypto’s path—currently a “perfect setup” for risk assets.
  • Political Boost: Trump’s policies (e.g., Bitcoin reserve) and institutional inflows differentiate this cycle, potentially extending it beyond 2025.
  • Upside Potential: Bitcoin targets revised upward ($215K-$1M), with “MOAR COWBELL” signaling unprecedented strength.
  • Actionable Advice: “Dips. Are. For. Buying.”—hold cash for opportunities, but stay in the game to capture the Banana Singularity.

Background: Raoul Pal’s Expertise

  • Career: 31 years in global macro, including Goldman Sachs (hedge fund sales), GLG Partners (co-managed GLG Global Macro Fund), and founder of GMI (since 2005) and Real Vision.
  • Track Record: GMI boasts one of the best-performing macro research records globally.
  • Current: Retired from fund management at 36, resides in Little Cayman, Cayman Islands.