A grim warning on the future of the economy from macro investor Raoul Pal is going viral.
The video, which was created by Pal in late 2018, blasted across crypto Twitter this weekend, with Pal saying it’s easily one the most popular he’s ever released.
Pal says he expects the Federal Reserve to continue to buy equities and pension assets, which will support the stock market – but prevent younger generations from being able to buy in at high prices.
“If you believe in free markets, the right answer would be for the baby boomer generation to pass their wealth on to their kids either via inheritance or by transfer of assets at a low price the kids can buy. That’s the accumulation of equities at lower prices than the baby boomers had in the 70s and 80s, particularly in the early 80s when they really started buying equities, P/Es (price to earnings ratio) were below 10, eight, seven, six – a lifetime opportunity.
The millennials, faced with the same investing set right now, have an all-time record level valuation stock market, an all-time record valuation bond market, an all-time overvalued real estate market. They have nowhere to invest that has a positive rate of return over the next five or ten years.”
The global macro investor predicts that restaurants will continue to take a hit as baby boomers find cheaper ways to eat, which he says will benefit fast-food chains. Pal expects boomers to sell their homes and buy trailers to free up cash. He also expects the automobile industry to suffer as people hold on to their cars for as long as possible to save money.
But Pal’s warning has a silver lining, and he says there are still sizable opportunities to be seized.
Rather than focus too much on the financial markets, Pal says young people should instead build businesses.
“But the real opportunities may lie with the future of the financial industry. Again, if you remember, this millennial generation is faced with the all-time record in valuations of equities, bonds, real estate, private equity, pretty much anywhere, there’s no opportunity for them to buy assets…
The right answer is for young people to build businesses. The start-up culture is exploding. This is incredibly important. This is the structure of the future economy. If you can shift from a financial economy to an entrepreneurship based economy, you’ll build an agile, nimble, and developing economy that looks for opportunities and generates GDP growth.”
The Real Vision CEO also, who has predicted Bitcoin could soar to $1 million within five years, mentions crypto and blockchain as a prime opportunity moving forward.
“The other thing is the crypto space and the blockchain space… If you think about that problematic allocation to all of the other assets, and you have something like a cryptocurrency or a set of cryptocurrencies or even ICOs – and I know that most of them are complete scams – but there are some that are good and the world will change and they will get regulated and there will be some amazing opportunities.”
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