A Lighthouse Amid the Fog: Clarifying the Macro Picture (w/ Raoul Pal & Danielle DiMartino Booth)

A Lighthouse Amid the Fog: Clarifying the Macro Picture (w/ Raoul Pal & Danielle DiMartino Booth)

RAOUL PAL: Danielle, good to see you. 
I was thinking, the last time you and I   chatted was in New York, like years ago. And 
both you and I are on the platform all the   time. DANIELLE DIMARTINO BOOTH: Yeah, no, no, no. 
That was probably right after I'd left the Fed.   I mean, a long time ago! I still [INAUDIBLE] PTSD 
there. I was fresh out of the Fed. RAOUL PAL:   You and I are on the platform all the time, and 
we've never actually got together chatting. And   I've– DANIELLE DIMARTINO BOOTH: Oh I know. 
RAOUL PAL: And there's so much going on   that I just wanted to pick your brains. But first, 
before we start, give people a bit of background   about yourself, what you're doing, that kind 
of stuff. DANIELLE DIMARTINO BOOTH: So I have   the strangest career path– probably not the 
strangest, but one of the most eclectic that   I've ever heard of. I came out a business school, 
MBA in finance. Went off to Wall Street. Worked at   a firm that's no longer with us called DLJ.

James, who recently– he retired from Blackstone,   he beautifully sold the firm at the very 
height of the internet dot-boom craze.   Some of the equity analysts that I worked with 
at DLJ made their mothers proud later in life,   they went and testified before Congress for 
all kinds of lovely shenanigans. We're way   back there. We've come absolutely full circle. In 
any event, I got my second master's at Columbia   at night after the market closed while I worked 
full-time because I was spending too much money   on Jimmy Choos and champagne. So I said, you know 
what? It's time to go back to school. So I sent   myself back to school. Writing was going to be 
my retirement plan. 9/11 happened. I landed in   Texas as a result, after doing this long-distance 
dating stuff and retired. Signed a noncompete,   sold my book of business back to those 
nasty boys we inherited from Drexel,   the junk bond desk, and agreed to leave the 

Called the publisher of the Dallas   Morning News. I said, I'll work for free. 
He said, that's perfect with my budget. And   two big phone calls changed my life, one from 
Warren Buffett and one from Richard Fisher. And   eventually ended up serving my country, I don't 
know why, at the Fed, as I'm the worst bureaucrat   in the world. I didn't do sensitivity training 
when I was on Wall Street, for heaven's sake.   I certainly wasn't going to do it at the Fed. But 
I was there for nine years throughout the crisis.   And I came out, and now I have a research firm, 
and I do exactly what I used to do for Richard.   He saw New York markets desk research as sell-side 
in nature. And they've typically got a guy from   Goldman running it, so it should read sellside. 
And he wanted to be unorthodox. He also did not   have a PhD in economics like me, which was rare 
for Federal Reserve presidents.

So he set up his   own markets desk in Dallas. So prior to every FOMC 
meeting, I would head up to New York, talk to the   trading desks, economists, strategists, pick 
everybody's brains– portfolio managers– and   present to him a markets briefing before he went 
off to Washington. Initially Timothy Geithner, and   then Bill Dudley, I was the biggest thorn in their 
side, because I came up with massively different   conclusions than what their desk was disseminating 
to the entire system. It was a lot of fun. But I   do what I do now that I did for Richard, I do it 
now for subscribers. And of course, if you're on   my Twitter feed, you know that I tweet about 24/7 
as well. RAOUL PAL: So what the hell is going on?   It is a confusing old world out there. I 
want to pick your brain to see what you're   seeing. I don't know where you want to start, 
but just– DANIELLE DIMARTINO BOOTH: I look at   the world, people call it k-shaped.

And I don't 
think it's that simple. I think that you have   a protected universe and an unprotected 
universe. Inside the protected universe,   there's no price discovery. Prices just go 
up. So whether it's residential real estate   in the United States, because the FHA lending is 
up and strong, Fannie, Freddie. People don't know   about this.

They're doing something called an 
automated appraisal waiver. They're even doing   it for 12% of purchases right now. We've got $50 
billion run rate of cash-out refinancings coming.   We don't even talk about that anymore. I mean, 
we had that your house is an ATM machine was so   passe, we never thought it would happen again. 
We're in the middle of it. So when the Fed is   buying– PETER COOPER: Sorry for interrupting your 
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can afford to be without it. DANIELLE   DIMARTINO BOOTH: coming. We don't even talk about 
that anymore. I mean, we had that your house is   an ATM machine was so passe, we never thought 
it would happen again. We're in the middle of   it. So when the Fed is buying up more than 
net mortgage originations, and FHA lending   standards are lax, and Fannie and Freddie are 
saying, drive-by appraisals are fine.

Just put   it in the computer system. We don't actually need 
a human being physically in the home. They've got   90% of cash-out refinancing volumes right now. 
They've got 80% of plain vanilla refinancings. And   all of this is feeding into this exodus to 
the exurbs and the suburbs, which is the only   fundamental thing backing residential real estate. 
But I give you all of these details because   this is the protected. Think of it as being an 
endangered species. And it's a place that the Fed,   the Fed's transmission mechanism worked. The 
same thing can be said for the corporate bond   market. Anything publicly traded, anything capital 
markets, Figaro, I mean, Legaro, a few days ago, a   company that will probably be filing, issued debt 
for 17 and 1/2%.

I mean, we finally have a high   in high yield. But as long as you have access to 
the capital markets, you're also in a protected   realm. Commercial real estate missed that boat, 
and we're seeing price discovery increasingly–   obviously, we've seen it in lodging. We've seen 
it in retail. Retail was a long time coming.   Lodging was something that crashed upon 
the commercial real estate industry. 50%   of lodging-backed CMBS is a full-service hotel. 
How many full-service hotels do you know of that   are running at 100% capacity right now? And that's 
the point. And that's why delinquencies are 27%,   28% in that subsector. And what's next is office 
and multifamily high rises in the middle of urban   centers. But again, that is an unprotected realm, 
and that is where you can see some movement.   The same goes with currencies. The same goes 
with volatility. The same goes with commodities.   And that's why you're seeing volatility where 
people feel like they can have an influence on   price discovery. RAOUL PAL: Yeah, fascinating. I 
mean, I've been following this story. I call that   the insolvency, which is one part of this economy 
that looks terrible, right? It's anything with   debt attached to it has impaired cash flow.

then, there's this other half, which is as–   it's like in la-la land, because the Fed doesn't 
allow price discovery in a bunch of stuff. I mean,   the credit market is ridiculous. 
We've got massive defaults going on,   and everyone's got impaired cash flow, yet 
junk bonds and everything else are just   absolutely fine, whistling past the graveyard. 
DANIELLE DIMARTINO BOOTH: Well, right now,   we're in a sweet spot in the credit markets. 
The high boil of bankruptcies has come off.   What we're seeing is very quiet demand destruction 
in the background. So you're seeing white-collar   professionals– and these aren't WARN notices. 
This isn't like Disney's firing 28,000 part-time   workers. It's KPMG getting rid of 100 people here 
and there. It's Deloitte closing down– and then   another big consulting firm followed them– 
their UK offices. It's a very slow grind into   higher-paying professions, which is going to be 
much more detrimental to the economy. But for now,   because the United States perceives the virus 
as being behind it, the credit cycle is taking a   pause. And because the market still thinks that 
there might be stimulus before the election,   there's still hope out there.

I think once we 
get past the election, how many days away it is,   companies that are on the brink, teetering 
on the fence, they're going to say,   if there's no money in the hands of small 
businesses and 20-some odd million– it was 23   million reported recently. Let's take 3 off for 
all the fraud, and the swings, and blah, blah,   blah– but let's say 20 million Americans still 
collecting unemployment insurance. If you're close   to insolvency, and you want to restructure 
something, A, you pay yourself a big bonus,   and then you file. If you know that Americans and 
small businesses aren't going to have anything   in hand until Valentine's Day at the earliest, 
you stop, you study the calendar, and you say,   so here we go.

So I think we're going to see the 
second wave of insolvencies and chapter 11 filings   come after the election. And it's determined 
that really, we're going to hang out a certain–   two certain cohorts, the unemployed and small 
businesses. We're going to hang them out to dry   until Valentine's Day. And if that's the 
case, then you'll see a resurgence here,   BCYGO function on your Bloomberg. RAOUL PAL: 
And also, we talk about the virus. And again,   I don't want to get involved in the shit fight 
over how people interpret it. But all I do know   is cases are rising everywhere around the world. 
And the fact is that the baby boomers, who are the   wealthiest cohort in the world, are going to take 
evasive action, regardless of whether governments   create them. So if Biden gets in, they'll have 
some more rolling lockdowns than they would   if Trump gets back in. Either way, people are 
going to take evasive action. So all I can see   is a renewed slowdown in growth. We're seeing 
it in Europe already. DANIELLE DIMARTINO BOOTH:   Right.

RAOUL PAL: Because they've got it bad. 
And so I don't know. I just wanted to see what   your thoughts are. My hunch is that we go through 
this– we've got a four-month window, as you say,   where we may have no stimulus, slowing growth, 
and a lot of these small companies, particularly,   on the precipice. How do you see this next four 
months play out? DANIELLE DIMARTINO BOOTH: So at   the risk of waking the demons on Twitter, because 
you mentioned the "case" word.

You mentioned the C   word. Don't mention the case word, because we're 
testing more. So the way I see it in terms of   curbing consumption is, if you know somebody, 
a relative or a friend who's in the hospital,   it's pretty simple. Either they're 
at home, and COVID is no big deal,   and they got over it in a few days, or, 
shit, somebody I know is in the hospital.   Right now, we've got 41,350 hospitalizations 
in the United States. That's what I'd look at,   because that is what is going to curtail 
somebody's consumption behavior. You've   got Republican governors in Nebraska right 
now doing partial shutdowns, New Mexico–   you don't have to have a change in the 
White House for the governors to say,   you know what? We're a low density, low capita 
state, and yet, our hospital system matches that   population. So they're going to do what they have 
to do to not overwhelm their individual systems.   So you'll see pockets, but right now, if you look 
at the R0, if you look at the transmissibility of   the virus, we're down to four states– one, two, 
three, four– with an R0 of not a less than one.   So the vast majority of the country is, call 
it, four weeks behind where Europe is.

So you've   got the European composite PMI this morning, the 
business outlook, and the differential between the   business outlook and the US PMI this morning was 
one of the widest gaps in the history of the two.   But again, if you want to connect the dots, look 
at hospitalizations and bring them together. And   that's where we're headed; it's just with a 
lag. RAOUL PAL: Yeah, and what I always have   a problem with– I guess you do the same– 
is people put their own biases on this. And   our job is just to look at the economy. DANIELLE 
DIMARTINO BOOTH: Right. RAOUL PAL: Right? So yeah,   is the economy going to pick up or slow down in 
probability terms? Well, if the virus comes back,   it's likely to slow down. DANIELLE DIMARTINO 
BOOTH: Right, I mean, you've got your top   two quintiles of earners in America, the top 
40% of income earners are responsible for 61%   of consumption. You get a similar picture if you 
look at people 55-plus, because they simply have   more wealth accumulated after living here for 
longer. So A, Gallup polling– and I don't quote   many polls at all– but if you checked Media Bias 
Fact Check– it's a fantastic website.

It shows   you exactly where on the spectrum your source is 
in terms of left to right. Gallup is smack down   the middle since 1935. They have no bias. They 
simply take the surveys and report the data.   People who have college educations or more believe 
in the efficacy of masks, meaning if they're in a   state where most people don't, and they're acting 
like cowboys, your most educated people are going   to be like, here I am.

I've got my Instacart. 
I've got my Amazon. I'm fine. By the way,   I'm in a bigger house. I've spent more. Furniture 
sales have gone through the roof. Home improvement   has gone– this is all a reflection of 
people saying, my house is my bunker.   But if you have people stay away from consuming 
who are either in a demographic cohort older,   or wealthier and more educated, you are going 
to put a governor on growth. It's as simple as   that. If you look at offices– excuse me– if you 
look at small businesses in high ZIP code areas,   Opportunity Insights is just a treasure trove 
of data.

But if you look at high ZIP code small   businesses, there's a higher percentage 
of them that are closed in high ZIP codes,   because people come out less, because they trust– 
they're educated enough to say, why is politics   involved with science? So they just step back 
from it and say, I'll be out when it's safe. You   let me know. RAOUL PAL: Yeah, exactly right. So 
why is the bull market not seeing this? It come   back up a bit.

I mean, I think– as you are, as 
well– I'm bullish bonds, because I think the   economy is slower than expected. But the bond 
market's been backing up. What's your thoughts   about this? DANIELLE DIMARTINO BOOTH: Well, don't 
fight the Fed. Look, Jay Powell needed to create   a narrative out of thin air. And if you want to 
create a narrative out of thin air with really   high unemployment, you do two things. You have the 
leading sector for an economic recovery, housing,   roar back. And you buy the TIPS market. You buy 
the hell out of the TIPS market. You buy as much–   and then you have Hartnett and the Flow Show 
every week. And last night, they were like the   seventh biggest week. And retail investors, high 
net worth investors, people are smart enough   to read, every Thursday, the Feds, what their 
purchase is, the composition of the balance sheet.   And they're like, I'm following the Fed right into 

So the Fed and investors are painting this,   "Oh, god inflation is right around the corner" 
narrative by force. It's just exactly what they   did last year, September the 16th, when they 
launched Not QE. Because the inversion of the 2s   10s had passed the 30-day mark, and they're like, 
oh my god, history says that we're in recession.   Well, no kidding we're in recession. World trade 
was contracting for the entire year of 2019.   Lacy Hunt will tell you, you have to go back 
to the double-dip recession of the 1980s   or 2007- 2009, that era, before you had 
global contraction in global trade. Of course,   we were headed into recession. But it was 
very slow. But the Fed had to launch Not QE   so that it could come out, and buy the short end 
of the curve, and physically un-invert it.

Fine.   So they're like, hey, what do we do to create 
inflation so that we can say, we're going to   let inflation run hot, when, 11 months since 
January 2012, when Bernanke announced the 2%,   target they'd hit it– 11, God bless their souls. 
But they needed to create the narrative that they   were going to let it run hot, so they just– they 
made it. They've got the printing press. They just   redirected it into the TIPS market. Pretty 
powerful stuff. And you get the entire narrative   with all of the strategists going, real yields! 
Whatever. RAOUL PAL: But what you're saying is,   it's all an illusion. There is actually 
no inflation pressures right now at   all? The Fed are trying to– DANIELLE DIMARTINO 
BOOTH: How do you have inflation with– you do   have, I just finished a $400 run to the Sam's 

I mean, you do have inflation in food.   You have inflation where it hurts people the 
most. But you don't have inflation in rents,   which is one of the stickiest, stickiest parts of 
the CPI or PCE, however you want to measure it.   And that is going to hurt the Fed more. And 
that is what they're fighting against right now.   So inflation, where it counts the 
most, is through the roof in housing,   year-over-year 15% price appreciation, but the 
rental market is suffering. And that's also an   input. So there's a lot of crosscurrents 
going on right now. But in terms of,   if you think of inflation through the prism of 
pricing power, forget about it. RAOUL PAL: And so   the Fed started making noises about doing 
something further along the curve, further out the   curve, because obviously, they've seen 10s and 30s 
backing up a bit.

Not that they've gone very far;   it's noise, really. But do you think they're going 
to get back in soon? I mean, if there is this   window that you and I are talking about, let's say 
there is no stimulus agreed before the election.   Doesn't feel like anybody wants that to happen. 
So in which case, the economy gets sacrificed   for three months. Do the Fed step in? DANIELLE 
DIMARTINO BOOTH: Well, what the Fed is trying to   do right now is, If I could dig deep enough into 
what the Fed purchases are, you would probably   see that they're buying TIPS way out– tenors, 
maturities, way out as far as they can because   they want to see a 1% handle on the 10-year. They 
want to see a 2% handle on the 30-year, so they   can go, I give you a yield curve control. I'm just 
going to slap a ceiling on this puppy. And that's   what they want. They want for– I mean, Powell 
and Mnuchin are on the phone. That's a matter   of public record.

Powell and Pelosi have been 
on the phone. That's a matter of public record.   But I mean, the rebirth of the 20-year Treasury, 
it didn't pop out of Mnuchin's head. It popped out   of Powell's. So they want to be able to come in 
and have product to buy further out on the curve.   And so they're probably buying TIPS out as 
far as they can. RAOUL PAL: But if yields are   generally trending lower over time, 
what's the point of yield curve control?   Because we saw it in Japan. I mean, Japanese, 
yes, for a period of time, in a recovery, sure,   they end up buying a ton of bonds. But when 
it's not a recovery, they don't buy anything,   because the market trades beneath them. 

But again,   it's hard to understand the psyche of a central 
banker. The Hippocratic Oath is nowhere in the   Eccles building. They don't understand Do No 
Harm. They don't understand Do Nothing. They   can't. And the market and market participants, 
they need to know that the Fed is doing something,   because if they don't, they're just staring at 
a pile of insolvent crap. So they have to know   that there is something being done on behalf of 
them. And the reason that every Fed official has   been begging for stimulus spending is they want $3 
or $4 trillion of new product out there to buy and   continue to aggressively grow the balance sheet. 
But they need more Treasury issuance to go   there. I mean, god, the Treasury checking 
account right now is a trillion dollars.   And I think Trump thought that he could deploy 
some of that. And I think that the few lawyers who   are left in the White House who haven't left said, 
I'm sorry, but you really cannot do that. I mean,   he employed the FEMA for unemployment benefits. 
He employed the CDC to impose the rental eviction   moratorium.

If he had more toys to play with, 
he would in terms of executive memorandum. If he   could spend that 1.8 trillion, he would, that's 
sitting in the checking account. RAOUL PAL: So   what the hell are they going to do with it? 
DANIELLE DIMARTINO BOOTH: Well, eventually,   they will– I mean, McConnell, this Mitch 
McConnell, Senate Majority Leader, said at the   beginning of the week, we're going to be voting 
on deploying that extra 100, 150, 60-some odd   billion PPP funding that was never tapped. We're 
just going to do a piecemeal and release those   funds from the TGA. That didn't happen. Everything 
was about the Supreme Court justice and rushing   back to Kentucky, where he's got a tight race. 
So the thing that pisses me off so much, Raoul,   is that never in the history of the United States 
has Congress so blatantly put their interests   in front of small business. RAOUL PAL: Yeah. 
DANIELLE DIMARTINO BOOTH: Or people. Yes,   people. But 48% of landlords in America are 
small business owners. They've been hung   out to dry. They've got mortgages to pay on these 

So it's the chosen, it's the protected   versus the unprotected. I go back to my theme. 
I've been writing about it, and it's atrocious.   RAOUL PAL: And it still amazes me that it 
doesn't get more public discourse. I mean,   as you say, I mean, what you're doing 
is protecting the old guard. Everybody,   it's the 1% versus the 99. This is the 
core of the economy, the small shops and–   New York's being decimated, 
and nobody is there to help   them. DANIELLE DIMARTINO BOOTH: Yep.

mean, I think there's 170,000 restaurants closed   in New York. DANIELLE DIMARTINO BOOTH: Yeah, 
and I mean, to add insult to injury, you have   idiots like de Blasio going rogue and saying, oh, 
we're just going to get rid of bail, and we're   just getting– we're going to force the police 
to say, you must put the gun down. I'm not going   to use force, because I've been told I can't. So 
you have this massive wave of early retirements   out of the police force. And the White House is 
like barking like seals happy. They're like, burn   it down, burn it all the way down so we can blame 
it on politics. You're sacrificing the financial   center of the world right now between what is not 
being done for the national restaurant industry   and the national lodging industry. God, I mean, 
the Roosevelt Hotel just closed, for god's sake–   Things that have been around for much 
longer than our great grandparents were.   But there is so much economically that is being 
sacrificed on the funeral pyre of politics.   And what people don't realize is when you go 
this route, there's all kinds of excitement,   because the Census has released data that shows 
that applications to start new businesses have   never been like this.

Well what are people going 
to do in a LinkedIn world? They're going to apply   for a tax license, whatever they're going to– 
say, I'm Joe Q. I cannot get through my LinkedIn.   Every day, I get 10 solicitations from 
somebody who's CEO of their own company,   because they have to put something on their 
resume. But they're not hiring people, and they're   not generating revenues. So Raoul, I mean, there– 
but again, when you look at the stock market,   nothing appears to be wrong. RAOUL PAL: No. Here's 
another thing I want to talk about, is, I know,   since I've been basically shut in on a small 
island– DANIELLE DIMARTINO BOOTH: Bless your   heart. RAOUL PAL: –I've been spending money doing 
my house up, doing things that needs to do, blah,   blah, blah. And many of us have done the same, 
right? So, oh, god, the deck needs doing, those   windows need doing, and all of that stuff, right? 
So we've brought forward a ton of consumption   to do stuff.

I'm more concerned than others 
are about 2021. Everyone thinks it's a shoo-in   recovery year, and I'm like, well, I've never seen 
a recession that's lasted less than 18 months,   ever. So why this case? What do you think? 
DANIELLE DIMARTINO BOOTH: So I mean, right now,   I think if I'm at the National Bureau of Economic 
Research and it's my job to date the recession,   but let's say we see a 35% print. That's the 
best one out there when we get the GDP report   next Thursday. The question is, what's going to 
happen in the current quarter? If I'm in the NBER,   how do I date this puppy? Well, industrial 
production is still on the floor.

Your survey   data is really good. But if you look inside the 
internals of both the manufacturing and service   surveys this morning employment is not 
there at all. And temporary hiring has   gone through the roof, because companies 
aren't willing to make the commitment.   And CEO confidence, a few days ago, was reported 
from the conference board. It's a quarterly print.   It popped above the 50 line for the 
first time since 2018, like pretrade war,   because 68% are planning to either cut their 
headcount or freeze their headcount, and a ton   of them are planning to freeze pay. So CEOs right 
now are– they're like, this is amazing. I've got   this currency called my stock price. I can go buy 
whatever I want. In the process, I can fire a ton   of people, and I can get all the synergies that 
my consultants are telling me and my investment   bankers are telling me that I can get.

And that's 
all well and good, but in terms of productivity,   economic output, it's a nothing burger. It's not. 
It's financial engineering in a different way.   But the victim here is going to be employment.   So again, if I'm the NBER, I'm having a really 
hard time if there's a 1% or 2% print in 4Q   for US GDB, I'm still having a hard time saying 
the recession is over. Even if– RAOUL PAL:   So if you look at– DANIELLE DIMARTINO BOOTH: 
Quarters– RAOUL PAL: –because also, if you look   at year-on-year, if you look at– I look at a lot 
of the realtime data, and I"m sure you do, too.   It's all still down.

It's suggesting the 
economy is still down 5% year-on-year,   which is the biggest recession you and I have 
ever lived through. DANIELLE DIMARTINO BOOTH:   Right. RAOUL PAL: And that This. Is the recovery. 
This is the reflation trade, negative 5%.   And it's not clear, with COVID coming on the rise, 
the lack of stimulus, what's going on globally,   that you're going to get a pickup to above 0 
year-on-year. Obviously, you will do in March,   because we had this event, so the numbers get 
screwy again. But I– DANIELLE DIMARTINO BOOTH:   No, I mean, look, are our people going to be 
doing their decks when there's a foot of snow   on the ground outside? I mean, furniture sales 
could theoretically hold in there. And again,   interesting about housing, what's most interesting 
about housing is Richard Curtin at the University   of Michigan, he has the most granular data for 
a total dork like me.

You can dig so deep into   this stuff. The people who are most enthusiastic 
about their home prices rising in the next 12   months are in the middle. They're right smack in 
the middle. So we have this cohort of aspirational   consumers right now precisely because the average 
cash-out refinancing is $62,500. So you're seeing   the Home Depots of the world, and the furniture 
makers– and gun manufacturers– but you're   seeing certain areas of consumption that 
are so strong. But it's predicated on, A,   the 55% of Americans who own stocks, they're 
happy. I mean, Trump can't– he cannot stop   squawking about your 401(k) is so fat and happy. 
That's great. But for the 45% of Americans who   don't own stocks, big deal. But for the people 
who own stocks and own homes, in the middle–   and this isn't the haves and the have-nots. 
These are the people in the middle.   They're taking cash out of their homes, and 
their 401(k)s are bigger than they've ever been.   And they think that this is a genuine, bona fide, 
escape velocity, full-blown recovery.

RAOUL PAL:   So when you look at asset allocation 
of this very complicated world,   what do you think? I mean, how do you navigate 
this, right? Because– DANIELLE DIMARTINO BOOTH:   I mean, it's exceedingly difficult to 
even look at the stock market right now.   I mean, people don't realize the power of– 
I interviewed Mike Greene a few days ago.   Wow, I mean, shut-me-up brilliant. But he made a 
fine point. Because so much investing is automated   today, if investors have any kind of 
a drawdown in their stock holdings,   and they're in some kind of 
an automated targetdated fund   in their 401(k)s, March 23 came to his mind as a 
big day.

March 23 also is when Jay Powell pulled   out his double-barreled bazooka. But on that 
same exact day, there was a massive rebalancing,   where all of this passive money had to flow out 
of bonds and into the stock market. But again,   as a fundamental investor, how 
do you position yourself when   that everything you learned in portfolio 
management 101 is out the door?   I mean, for god's sake, fine, stock buybacks are 
down 66% year-over-year. Apple is still out there,   balls-to-the-wall nuts on buybacks. So are a lot 
of companies that can. And so between passive   investing, and that feeding this beast, I think 
it's just very difficult to position yourself   in the stock market. I think high-yield bonds are 
going to get interesting if spreads gap way out,   because the Fed will feel like it has to do 
something. And it's got these credit facilities   that it's not really using. Now, there's something 
to be said, there's a big caveat for any credit   investor out there, and that is that there is this 
presidential election coming along.

The Treasury   Department must agree to extending these Fed 
facilities beyond December the 31st. So if Mnuchin   is walking out the door, he's not going to agree 
to anything. They're going to let it burn down. So   I mean, "never" is a big word, but a lot is 
predicated on the outcome of this election.   Steve Mnuchin, Lael Brainard– wow, I mean, you 
couldn't– fine, Elizabeth Warren is a little bit   further out on the spectrum, but Lael Brainard, 
for God's sake.

So it's difficult. I mean,   when I listen to really Intelligent investors 
saying, I've never sat on 40% cash in my career,   and by the way, I'm a billionaire and 
I've been doing this for 40 years,   I mean, you have to listen to that. I know 
you're Mr. Crypto on Twitter. I see it.   But there's something to be said for people 
who do have gold holdings.


And by the way,   there are some– RAOUL PAL: I have gold. I mean, 
it just makes total sense. It's a great trade.   DANIELLE DIMARTINO BOOTH: It does make sense. 
And my municipal bond holdings in good states,   they're doing fabulously. And guess what? If 
Biden wins, they're going to do even better.   Because if Biden wins, they're going to do even 
better, and people are going to say, OK, there's   eight, nine trading weeks left in the year, 
maybe seven trading weeks if there's an extended   period of uncertainty in terms of who is going 
to be president. But if Biden comes in, and   you're sitting on all-time high gains in stocks, 
what are you going to do? Are you going to say,   well, I'll just roll the dice. And maybe 
my capital gains tax won't be 43% in 2021.   Maybe I'll just gamble on that.

No, that's 
it's not how it works. You're going to take   your gains before December the 31st, 2020. So 
there are just so many damn unknowns that I   don't think that there's anything– look, CMBS 
has got some really sweet, sweet spots. There's   still denial with office. There's still denial 
with multifamily. So there are places you can go.   There are pockets you can go. You can dig into 
these CMBS indices. But I mean, everybody knows   it's kind of there. Even though, again, in office 
and in multifamily, people are still in denial.

So   there might be money to be had there. But Raoul, 
when you think about what the Fed has done,   BBB is still 50% of the investment grade 
universe after record fallen angels,   because we will– by the time the year comes to 
an end, corporate America will have tacked on a   tidy $2 trillion of extra debt. So what we've done 
with this, we came into the year with debt-to-GDP,   nonfinancial debt to GDP holistically, including 
the corporate bond market and all other forms of   loans, at a record 78%. Great Financial Crisis 
peak, 74% So in an expansion, we came into 2020   with 78% debt-to-GDP non-financial.

I suspect by 
the time we get to the end of the year, it will   be closer to 90%. So with this great opportunity 
of this crisis to clean up our balance sheets,   we've made them uglier. And that's why you 
see great interviews with Howard Marks saying,   it is nasty in the restructuring pits. And we're 
in the mud, and I'm nobody's brother. That's what   he said, I'm nobody's brother. The reason 
that there is such a shit show in terms of   what's happening in restructuring– and there's 
tons of them going on– is because when you   tatter a balance sheet further, when you 
go to extract value, there's nothing there.   And that's why we're seeing more liquidations 
than we've seen in the past. It's because the   capital markets have been open for so, so long 
that you don't have a typical restructuring cycle   when you declare chapter 11.

There's just less 
for the creditors to fight over. RAOUL PAL: The   other thing that Mike Greene talked about when I 
chatted with him recently was the increase in jump   to default risk, because the Fed is supporting the 
bond markets, and the bond market is not a signal.   I've been using the equity market as a 
signal. Because we saw the same in Europe.   The European bank bonds hold up, but the equity 
doesn't, right? The equity goes to 0. DANIELLE   DIMARTINO BOOTH: Yes. RAOUL PAL: And Mike's like, 
this is a problem. Yes, equity may fall. We've   seen it in, let's say, GE and stuff like this, 
these big, indebted old economy names. The equity   falls; the bonds hold up. But if anybody defaults, 
you've got a real problem, because it goes from   BBB to out in one go. DANIELLE DIMARTINO BOOTH: 
That's the point, is it's not just that it's   over-indebted, it's that it's more over-indebted 
than a BBB has ever been.

from investment grade to gone. RAOUL PAL: Yeah,   and that– well, portfolios deal with that. People 
haven't figured this out. And the Fed is hiding   the price signal. DANIELLE DIMARTINO BOOTH: 
Oh, yeah. It's– RAOUL PAL: Everybody's deaf,   because normally, the bonds would sell off, 
[INAUDIBLE] would sell off, and you'd get out   of the trade. But this, your bonds are here, and 
then they're worth 0.

DANIELLE DIMARTINO BOOTH:   And here we are. RAOUL PAL: So another 
question I want to ask you is about,   what happens if the election isn't decided? What 
happens then with the negotiation? Does that just   absolutely, categorically stall everything in 
terms of stimulus or anything else? So let's   say we don't the votes, or, Christ, it's 
split? So the Republicans hold the Senate,   and the Democrats hold Congress? I mean, there 
seems like there's a lot of banana skins to slip   up here. DANIELLE DIMARTINO BOOTH: There are. 
And there's a lot more risk right now for the   GOP in terms of the Senate.

And they know 
that. So that, it's pretty amazing to see   that a lot of the GOP has thrown in the towel 
on the presidential race because they're so   desperate to hold the Senate. RAOUL PAL: Huh. And 
so let's assume that they got their way, right?   So let's say Biden gets in, the GOP holds the 
Senate. Well, then, there goes the stimulus,   and all of the big New Green Deal, and all of 
that stuff, right? You have to wipe the whole   out of markets, because they're never going to 
allow it to happen.

DANIELLE DIMARTINO BOOTH:   It's going to be gridlock at a very tenuous 
juncture. And the furthest that the Republicans   wanted to go was $400 a week. Pelosi was saying 
$600 a week additional unemployment insurance.   Where will the bank lobbies fall? Pelosi's 
plan has an another 12 months of forbearance.   So right now, you've got 7% of Americans with 
mortgages who are not paying their mortgage. And   that clock runs out on March the 31st. The 
CARES Act provided for 12 months of forbearance.   But if I'm the lender, if I'm Wells Fargo– 
Wells Fargo is a bad example in terms of lobbying   power on the Hill– but if I'm another 
big mortgage lender, and the bill says   another 12 months, so 24 months, March 2022 is 
the first time that I can, A, foreclose, or B,   say, send me a mortgage payment– 
you're asking a lot of lenders.   And the GOP is going to know it if they keep 
the Senate.

So little details are going to have   big economic implications if you have what you 
describe– Biden, the Senate stays with the GOP,   the Democrats keep the House. RAOUL PAL: Yeah, 
it just feels to me the market's not pricing any   different outcomes and they're of assuming 
that stimulus comes faster. All of this just   feels like a big, scary three-month risk 
ahead of us. DANIELLE DIMARTINO BOOTH:   You've got a little debt clock running 
out on December the 11th. So I mean,   something has to be done during a lame duck or 
you're going to have the government shut down.   So it's– Raoul, yeah, no, a contested election, 
I mean, that's why Michael Bloomberg poured   $500 million of his own pennies into the state of 
Florida, because so few swing states this year are   up for grabs.

Florida is one of them, and they're 
still running neck-and-neck. I mean, history's not   supposed to repeat itself, so god help us if we 
have Bush-Gore, and hanging chads, or whatever the   modern day virtual equivalent of a hanging chad 
is. But that's why so much money is being poured   into Florida right now. RAOUL PAL: And Texas? 
DANIELLE DIMARTINO BOOTH: It's interesting,   because more people in the state of Texas, where 
I am, have voted in total than who voted for Trump   in the entire state in advance. RAOUL PAL: 
Wow. DANIELLE DIMARTINO BOOTH: So I mean,   A, I'll have to move. I mean, because I mean, 
if they impose a state income tax in the state   of Texas, well, I think a good chunk of 
us would leave. We'd come to your island.   But if Texas swings blue, good god.

mean, that is a landslide for Biden.   Not a win. RAOUL PAL: But it's swung blue in 
the past. It's not always been a red state,   right? DANIELLE DIMARTINO BOOTH: '76. 
RAOUL PAL: I thought it was blue more   recently. DANIELLE DIMARTINO BOOTH: Mm-hmm. No, 
mm-mm. I know my state. RAOUL PAL: So I mean,   look, it's going to be a super interesting time. 
Right, I've got a bunch of questions for you,   if you don't mind. DANIELLE DIMARTINO BOOTH: Sure. 
RAOUL PAL: OK, from Dwayne. What is your view   of the claim that the Fed has no real mechanism 
for creating inflation and that QE is nothing more   than a signaling mechanism? Do you believe 
that the Fed is actually monetizing debt?   This argument's been going around, you've seen, 
on Twitter.

There's a big shit fight. DANIELLE   DIMARTINO BOOTH: OK, So Dwayne, you've not read 
Fed Up, because if you had read Fed Up, you would   remember the scene when Stanley Fischer was at his 
first FOMC meeting, and he stood up, and he said,   why don't you use the headline PCE? Here on 
Planet Earth, it's the closest thing you've got.   This is before the New York Fed quietly 
created an inflation metric that included   asset price inflation that they then put in the 
basement. But Stanley Fischer said, why don't   you use headline CPI? And some intrepid staffer in 
the back of the room raised his hand, and he said,   well, if we didn't use the core 
PCE, our models would fall apart.   And so Bullard– who, I'm not a big fan of 
Bullard– but Bullard, so let me understand this.   Monetary policy, this is how it's made– crap in, 
crap out? And that's basically the case. The core   PCE uses Medicare and Medicaid reimbursement 
rates to impute health care.

It understates   housing by a mile. And that is– again, I don't 
say that after Ben Bernanke got his inflation   target in January 2012, I don't say willy-nilly 
that the Fed's only hit that target in 11 months.   They've not hit that target by the design 
of the inflation metric that they use,   because it works with their models. It's the only 
thing that can give them cover to hide behind   so that they can keep up the QE ruse. And 
QE is– the reason that Fed officials are   begging for stimulus spending is because 
they know that they're a one-trick pony.   They know what the correlation is between the 
S&P 500 and the growth of the Fed's balance   sheet.

That's all they know. And a monkey could 
figure that out. But they do like to provide   the illusion that there are other things. But 
yes– and this is where Lacy Hunt and I depart.   Even if they don't reopen the Federal Reserve 
Act of 1913 to allow the Fed to buy Treasuries at   auction, which would require the law to change, 
what difference does it make if– and you see,   you see the ticks flow. You see foreign 
investors stepping back from our Treasury market,   meaning the Fed had to step in. So if the Fed 
is effectively absorbing Treasury issuance,   why wouldn't you call it monetization by any other 
name, if it's de facto? I mean, people are like,   well, we're going to reopen the Federal Reserve 

Congress doesn't have to do that. And by   the way, in the BlackRock fine print, in the 
BlackRock– RAOUL PAL: People say– the argument   goes, and I'm not wildly interested because it's 
too wonky- – but everyone says, well, the Fed   can only add to reserve assets of the banks. 
So if the banks don't lend, because we've got   N2 is through the floor, so therefore, you can 
come up with as much money– DANIELLE DIMARTINO   BOOTH: You're asking if it actually works. No, no, 
you're not forcing the banks to lend.

No, no, no,   in the sense of how they envision it? I mean, 
it's their senior loan officer data. It's a   Federal Reserve survey, for God's sake. They know 
that lending standards are going through the roof.   They know that things are tightening up. They 
know that banks are not extending credit because   banks can't do price discovery on their own credit 
books with the Fed where it is.

So no, you're not   creating, you're not generating economic growth. 
But did we– I mean, we had an entire cycle of   non-productive gains by building a bunch of homes 
when 4 out of every 10 Americans were indirectly   or directly employed in the housing market. 
And then we just flipped a switch and said,   you know what? OK, what's the next non-productive 
endeavor that we can embark upon for 11 years? Oh,   I know– finance. We'll just do financialization 
of the US economy– which is not productive.   So had companies been growing organically 
we wouldn't be in the mess we're in today.   But instead, they were like– I mean, Ed Yardeni 
himself– who's been a bull for as long as I've   been alive, — Ed Yardeni himself, his data showed 
56% of debt issuance– excuse me, 56% of share   buybacks were financed by debt. So again, it's 
not productive. But as far as QE actually working,   it's the signaling mechanism. RAOUL PAL: Yeah. 

It's the   confidence bubble that my buddy Peter [INAUDIBLE] 
talks about. That's what this is. This is all a   confidence game. But is it a confidence game if 
there's a blue sweep and we take $27 trillion of   debt and make it 40? That's when you go from 
disinflationary pressures to stagflationary   pressures. And that's a different ballgame. RAOUL 
PAL: So another question that relates to that then   is, it's kind of like the question that I 
asked. The Treasury curve has been steepening.   Do you expect that to continue? Or do you think 
it's gone too far now because of the reasons said,   and maybe steepens later for the other reasons you 
said? I mean, how do you see the bond market right   now? DANIELLE DIMARTINO BOOTH: So a buddy of mine 
tweeted out this morning a graph of the 30 year,   because everybody's out there on the long bond 
right now.

And it is still– I mean, a few days   ago, it bumped out of its 200-day moving average. 
But you can look back 52 weeks and see 2.24.   We're not talking about a dramatic move here. And 
again, it has to do with the fact that even though   the Fed has tried to dictate through policy the 
fundamentals don't matter, the last market you're   going to convince of that fact is the bond market. 
Because the stocks, the stocks will buy the Fed's   narrative all day long and on Sunday. RAOUL PAL: 
Yeah. DANIELLE DIMARTINO BOOTH: But the bond   market is always going to be more skeptical. 
So I mean, I'm personally in the long bond–   own it.

DIMARTINO BOOTH: But I'm not even talking my book,   saying could we see it? I mean, the trade is 
so crowded right now. RAOUL PAL: And the short   Treasury trade, I mean, that's– I checked it. 
It's four standard deviations short. I mean,   it's the biggest short I've ever seen. DANIELLE 
DIMARTINO BOOTH: And the same exact investors are   all short the dollar. RAOUL PAL: Yes. DANIELLE 
DIMARTINO BOOTH: But did I mention that Europe   is four weeks ahead of us in terms of their 
service industry beginning to contract again   and their hospitals filling up 
again? Again. There's only so much   latitude that I think– I mean, unless the bond 
market has lost its mind, there's only so much   latitude that the bond market gives you when 
the fundamentals are staring you in the face.   And that's why we haven't seen gaps.

haven't seen 2% on the long bond. As long   as this steepening trade has been going on, it has 
been painful to watch, basis point by basis point.   RAOUL PAL: So do you think– question here about 
stimulus. So let's assume we've got this blue   wave, and there's a bunch of new spending coming. 
Does the Treasury market choke up on it? And when   does it happen? Because I mean, it never really 
happened in Japan. It's; never really happened   in Europe. Does it happen in the US? DANIELLE 
DIMARTINO BOOTH: But remember, Raoul, it's not–   you're talking about it didn't happen in Japan 
when China was coming of age, and the global   economy was this massive support system, and the 
Japanese bond market is held inside the country.   So it occurred in a vacuum against a backdrop 
of a global expansion, and a big one,   led by China being the marginal driver of growth. 
I mean, I do have sympathy and we are guiding our   clients right now to focus on beneficiaries of the 
China narrative.

But I'm good friends with Leland   Miller, and I know a lot of it is narrative, 
and a lot of it is infrastructure spending. But   there's going to be some direct Asian, emerging 
market Asian countries that are going to be   beneficiaries, but also because they're not going 
to be hit by a second wave at the same time.   So you're going to have two things working for 
them. But again, my point is when the Japanese   experience occurred, Japan got out of QE. 
They did quantitative tightening in full   and extricated themselves from the policy. They 
went back in, but right now, we're all doing it.   Every single country is crazy QE. RAOUL PAL: Hence 
[INAUDIBLE] DANIELLE DIMARTINO BOOTH: Lagarde   just said two days ago, she said, well, 
the virus is back earlier than we expected,   so we're going to have to go do something.

that's what central bankers do– they have to do   something. So Lagarde is going to go do something. 
But your question is, if the whole world is   blowing up stimulus spending– and we know they 
are; we know Merkel's going to give however long   to keep people technically employed. You know that 
these furlough programs in the UK and everywhere,   you know they're going to be extended. So 
we're all spending money like drunken sailors.   But in the United States, we're going to take 
it to a different level if there's a blue wave–   a whole different level.

And you could envision 
easily $2 trillion of infrastructure– which,   by the way, we need. So that actually is 
productive. Why we've managed to come through   the sharpest slowdown from the Great Depression 
and not put Americans to work, when we don't   need to build the Hoover Dam, We need to repair 
the bridges, I don't know. That shows you how   dysfunctional Washington, DC is. But there will 
be some productive stimulus spending if there's   a blue wave, because Republicans don't want 
infrastructure spending because they don't want to   give the Democrats a win, and Democrats don't want 
infrastructure spending because they don't want to   give the Republicans a win. That's how policy 
is made. But if one party can take credit for   all of it, FDR-style, they'll do it.

So that will 
be a couple of trillion. And then we know that the   HEROES Act was 3 and change. And then, he's going 
to start his Green Deal immediately, because it's   going to create jobs. He didn't explain in 
the debate how it was going to create jobs,   but he promises that this Green Deal is going 
to create jobs. So you could easily get to $5,   $7 trillion immediately of stimulus spending. 
Then you start to worry about stagflation,   because China has its eye on the eventuality. 
I'm not one of these people- – trust me,   at 3:00 AM on my Twitter feed, they're like, we're 
losing our reserve currency status at 5:00 PM   tomorrow.

I'm like, dude, go get some sleep. RAOUL 
PAL: [LAUGHS] DANIELLE DIMARTINO BOOTH: Seriously!   But China does have its eye on that. And 
China does have 1/3– Huawei itself has 1/3   of all the telecommunications equipment in the 
world, and they are the next generation of AI,   And if they see this as an opening– right? 
They came out a few weeks ago and said,   we're going to strategically take our 
Treasury holdings down to $800 billion,   and we're going to keep them there unless 
there's a military conflict. I'm like,   somebody just said that out loud in China, and 
nobody paid attention to it. So they're actively,   proactively– because they know the Fed's going 
to buy everything– so they're stepping back   from our Treasury markets like the tree 
in the forest that nobody hears falling.   If there is an opportunity in the future for– 
if we don't get enough out of our stimulus   spending, if we throw money at people, if 
we launch universal basic income, if we   slide into a socialist-lite state, that will 
open up the door for the country that has been   acting like a capitalist system, China– except 
with an iron fist, and guns, and full control   the financial system.

Sorry, Kyle Bass, but 
sorry, they've got control of it, I'm sorry.   But if they see our stimulus spending be 
nonproductive and just tack on, tack on, tack   on to the balance sheet, then you start to see 
an opening for a switch in the reserve currency.   RAOUL PAL: Somebody's asking about– and 
this is everybody's worst nightmare–   do you think this debt boom 
can keep going beyond 2021?   I mean, is this not the pin that pricks the debt 
bubble? And if not, what the hell does that mean?   [LAUGHS] DANIELLE DIMARTINO BOOTH: I 
mean, look, the stimulus spending I just   described is going to be Hoovered up by the 
Fed. So– RAOUL PAL: How does this finish then,   Danielle? Where does it finish? DANIELLE 
DIMARTINO BOOTH: Well, it finishes if and when,   again, there is a perception– no, no, it 
finishes, Raoul, based on fundamentals. RAOUL PAL:   But what fundamentals? Debt growth 
keeps going, governments keep spending,   the Fed monetize it, it goes on that balance 
sheet. They peg the yield curve. So inflation's at   3%. They don't care, because the bond yield, they 
just keep buying every bond like the Japanese did.   When does it stop? DANIELLE DIMARTINO BOOTH: Well, 
that's when yield curve control truly comes in,   because then the Fed would be fighting a war. 
RAOUL PAL: Yeah, I mean, they'd have to buy every   bond.

have to buy every single bond, because what you're   describing is a good portion of the US workforce, 
as companies automate, as layoffs continue in the   background, I see the initial claims data. I 
get it. But they're still automating at the   fastest rate they have So there's going to be 
a massive drag on the labor force for years. So   if you pay them to not work long-term, and if US 
productivity is– not in theory, but in practice–   crumbling, and if we continue to– and that's 
the thing. That's, again, where you get to   a Biden win versus a Trump win, a blue wave versus 
not a blue wave.

You might have more anti-trust   with the blue wave. RAOUL PAL: Yeah, 
agree. DANIELLE DIMARTINO BOOTH: But   I read a really good report a few days 
ago that said that retail is going to be–   that what we used to term as big box is 
going to be the survivalists next time,   and they're going to be badass. And they're going 
to have rock solid balance sheets, cash flow,   because they're going to put all the 
small businesses out of business.   Because retail is not coming 
back as we know it.

So   I mean, it's very difficult for me to conceive, 
a year from now, having this same conversation.   But if there is a blue wave, and 
Jay Powell gets enough product,   and the world starts to lose faith in the 
direction that the United States is going,   and if we just decide to say capitalism is not 
theoretically dead– that the Fed's been killing   it for a generation– capitalism is dead, and 
we're just going to support a bunch of monopolies   through Fed policy and then pay everybody 
else universal basic income to not work,   then you will see the Fed actually have the 
ability to execute on yield curve control,   because nobody else will want the paper. RAOUL 
PAL: And at that point, that might be the thing   that turns the dollar lower. I mean, I still 
think it goes higher first, but I don't know   what your thought is on the dollar as a final 

DANIELLE DIMARTINO BOOTH: I mean,   that would send the dollar lower finally. Again, 
but what people are talking about, people don't   understand that we're coming up on the 40th 
anniversary, right? 1981 was the last time we   saw appreciably rising bond yields in the United 
States. I don't think that cycles can go– this   cycle, A, it's gone on for longer than most, going 
way back in history. But if we decide to recognize   socialism in the United States– and I hate to 
use such a political term- – but if we decide to   recognize it by allowing the oligopolies to take 
over, and be the haves in the credit markets,   and stay alive by virtue of the credit 
markets, then I think that we do have to see   rising bond yields.

I think the bond vigilantes 
will wake up from their long, long slumber.   RAOUL PAL: But I've always wondered 
this, is there's a lot of talk about,   we're getting socialist, right? Some 
social policies, different stuff. OK, fine.   So if that were the case, then why hasn't Germany 
got 7% inflation? It's not inflationary. It's a   red herring. DANIELLE DIMARTINO BOOTH: OK, 
2005, Germany launches a skills program to   re-skill their workforce. They have the 
lowest youth unemployment rate in Europe.   Vocational training is not a bad word.

doesn't need a four-year liberal arts degree.   And so should they've been able to stay above 
the fray, plus they have control of the currency   by trashing every other country in Europe with 
it. They use it as a weapon. Where Germany is   vulnerable– what I'm trying to say, Raoul, is 
that Germany got a return on its investment for   the money that it put into its economy. RAOUL PAL: 
But others didn't, right? So even southern Europe   can't generate inflation. DANIELLE DIMARTINO 
BOOTH: Oh, gosh, no. RAOUL PAL: Sweden doesn't.   So I'm just not sure the social policy– DANIELLE 
DIMARTINO BOOTH: Southern Europe has god youth   unemployment rates that are 15%, 19%. RAOUL PAL: 
And that's the question. I'm still not sure,   I understand it's inflationary as it 
happens, right? It's a fiscal stimulus.   And I think, like you, $7, $10 trillion, whatever 
ridiculous number, that's what happens. Yes,   that's inflationary temporarily, but I'm not 
sure it changes the structure of inflation   because of demographics, and because of 
technology, and because of all of these   things.

I say "stagflationary." I'm not saying that–   I'm seeing rising bond yields and stagnant growth. 
RAOUL PAL: Yeah. DANIELLE DIMARTINO BOOTH: I mean,   there's no– look, when we were 
coming into the financial crisis,   Joe Q Baby Boomer was like, fine, 70 is 
the new 60. I'll stay in the workforce.   That ain't happening. That's not happening 12 
years later. They're not. They're leaving the   workforce. And they will rotate out of their 
stock holdings and their risky asset holdings.   It will happen. RAOUL PAL: Yeah. DANIELLE 
DIMARTINO BOOTH: They will sell their homes.   Not as many will sell their homes, because 
they're going to– we're becoming Italy in   the United States. We're going to have multi 
generations under the same roof. That's going to   be a saving grace for the baby boomers. The kids 
are going to– RAOUL PAL: Saving grace for the   millennials. It helps the millennials. It helps 
the baby boomers. DANIELLE DIMARTINO BOOTH: It   does. RAOUL PAL: It's a no-brainer, really. 
DANIELLE DIMARTINO BOOTH: They're just going   to switch places .

Their kids are going to come 
up to the top floor so that they can procreate,   and they're going to throw their 
parents in the basement. RAOUL PAL:   [LAUGHS] DANIELLE DIMARTINO BOOTH: And it's going 
to be a demographic win-win. But it's not going   to generate the same as if the kids had gone 
off and established their own house and home.   It's not the same. There's not the same kind 
of economic dynamism as you would normally see   with one massive generation 
handing off to another. RAOUL PAL:   True. Danielle, listen, amazing. Lots, lots 
to think about. I'm sure people have loved it.   Lots to go over, and let's see how the next, A, 
two weeks plays out– DANIELLE DIMARTINO BOOTH:   Yes. RAOUL PAL: –and then, the next three 
months after that. Because I think it's–   you and I have– DANIELLE DIMARTINO BOOTH: Just 
one thing to keep in mind right now– if nothing   can be done, then we're looking at money in hand 
on Valentine's Day.

Just think Valentine's Day.   And that's where you should have your short-term 
view in terms of where the economy is headed.   Again, and follow hospitalizations. Go to the 
covidtrackingproject.com. Forget the cases, just   follow hospitalizations, because that's what's 
real to people. RAOUL PAL: Absolutely. Danielle,   as ever, fantastic to see you. DANIELLE 
Take care. NICK CORREA: Thank you for watching   this interview. This is just a taste of what we 
do at Real Vision. To learn more about the complex   world of finance, business, and the global 
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