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Stocks fell once again in trading following weak earnings news and political concerns.

Many market analysts were calling for the end of the Trump trade as investors digest new trade and immigration policies from the White House.

Additionally, many major companies reported weaker than expected earnings and guidance, adding to the dour mood on Wall Street.

The Dow Jones Industrial average and S&P 500 ended the day in the red, while the Nasdaq barely cracked into positive territory.

We've got all the major headlines, but first, the scoreboard:

• Dow: 19,863.51, -107.62 (-0.54%) 
• S&P 500: 2,277.75, -1.94 (-0.09%)
• Nasdaq: 5,614.79, +1.07 (+0.02%)
• UST 10-year bond yield: 2.451% (-3.2 bps)

1. Trump's top trade adviser went after Germany for its currency policies. Peter Navarro said that Germany was using the "grossly undervalued" euro an an advantage over the rest of the EU and the US. German Chancellor Angela Merkel responded that Germany has no influence on the European Central Bank, and thus the strength of the euro.
2. The Federal Reserve's Federal Open Markets Committee kicked off its two-day monetary policy meeting. The Fed is widely expected to keep interest rates on hold when it announces its decision on Wednesday. Check out the preview from Business Insider's Pedro da Costa.
3. Aetna's CEO said the insurer may dump all of its Affordable Care Act plans. After reporting slightly better-than-expected earnings, Aetna CEO Mark Bertolini told analysts that the company will likely not remain in the ACA's, better known as Obamacare, exchanges in 2018. The company lost $450 million on its ACA business in 2016.
4. Under Armour whiffed on earnings and the stock crashed. The sports apparel company missed on both earnings per share and revenue for the fourth quarter and slashed their 2017 profit outlook. Shares of the company fell by just over 25%.
5. Democrats on the Senate Finance Committee delayed a vote on Trump's Treasury Secretary Steven Mnuchin and Health and Human Services Tom Price nominations. The move prevented the two cabinet picks from moving on from committee and to a general Senate vote. Democrats said they wanted more information on business dealings of the nominees.
6. Apple is set to report earnings after the bell. Analysts expected earnings per share of $3.22 and revenue of $77.4 billion for the quarter.

ADDITIONALLY:

UPS fails to deliver on earnings

Chicago PMI missed

Warren Buffett has been loading up on stocks since the election

A whole lot of people are shorting Tesla

Trumpenomics according to Peter Navarro according to Business Insider's Linette Lopez

SEE ALSO: The weird way Susan Buffett found out her dad was rich

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Short sellers are setting their sights on Tesla.

Data compiled by S3 Partners shows short interest now makes up more than 35% of the float, or shares available to the public, and that it would take 8.23 days for shorts to cover those positions.

Traders have grown increasingly bearish on Tesla since the company missed its 2016 deliveries target. On January 3, Tesla announced its 2016 deliveries totaled 76,230, well below the 80,000 to 90,000 that Wall Street was expecting. 

"Our Q4 delivery count should be viewed as slightly conservative, as we only count a car as delivered if it is transferred to the customer and all paperwork is correct," the company said in a statement at the time of the release in an effort to deflect criticism surrounding the shortfall. 

Additionally, Tesla has been burning cash at a somewhat worrying rate. While the company managed to end 2016 with $1.2 billion of cash, it's something that Wall Street continues to pay close attention to.  

And while these worries have been swirling around Tesla's stock, it has so far been able to shrug off those concerns. Shares have rallied nearly 20% so far in 2017, and are up more than 30% since Tesla closed on its acquisition of SolarCity. Tesla is trading within striking distance of its April 2016 peak near $265 a share. 

S3 warns Tesla is setting up as a "potential squeeze candidate" if the stock keeps rallying into earnings, which are due on February 15. 

SEE ALSO: Here's what could save Chipotle

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Aetna, one of the five large public health insurers, said that it may totally pull out of the Affordable Care Act (ACA) exchanges because they do not know what the future of the law will be.

The ACA is better known as Obamacare. 

Asked about the insurer's future in the ACA's individual insurance exchanges beyond 2017, CEO Mark Bertolini said on the company's quarterly earnings call that the current move by Republican lawmakers to repeal the law has left the company will little choice but to stay away.

"We have no intention of being in the market for 2018," said Bertolini. "Currently, where we stand, we'd have to have markets worked up ... prices worked up for April 2017 to apply, and there is no possible way that we'll be able to do that given the unclear nature [of where] that regulation is headed."

Insurers must submit plans for their coverage offerings, including updated premiums prices, by April to participate in the 2018 plan year. With no cohesive replacement plan yet advanced by Republicans, Bertolini seems uninterested in pursuing the market.

Bertolini also expressed concerns about the current state of the ACA, saying "the intended goals of the ACA have not been achieved." He also said that changes would need to be made for a replacement to be sustainable. From the call (emphasis added):

"As the public exchanges enter their fourth year, it is clear that in the absence of a significant shift in regulatory policy, the risk pools for the ACA-compliant individual commercial products will continue to deteriorate. However, we remain optimistic that the next wave of healthcare reform will focus on affordability, quality, and addressing the needs of the millions of Americans who remain uninsured or lack access to affordable healthcare. To that end, we continue to actively engage in constructive dialogue with law makers and regulators and are committed to working towards preserving the positive aspects of the ACA and developing consumer-based approaches that deliver access to affordable quality healthcare to all Americans."

On the call Aetna executives said the company's pre-tax operating loss on ACA exchange products was $450 million for the full-year 2016. 

Bertolini later said Aetna may consider staying in some exchanges should they be profitable in 2018, but would re-evaluate for 2019 and 2020 based on the replacement plan advanced by lawmakers.

Aetna has threatened to leave the marketplace before. The insurer announced it would scale back their offerings on the public exchanges in August 2016. At the same time it was discovered that the company told the Department of Justice in a letter in July that if a proposed merger with rival Humana was blocked, the company would leave the ACA market entirely.

The merger with Humana was blocked by a federal judge on January 23. The judge, in his ruling, determined that Aetna's drawdown in the ACA exchanges was a ploy to get the Humana deal through the anti-trust ruling and leverage their participation in the Obamacare markets against the DOJ.

Aetna has said it will review a possible appeal of the decision.

SEE ALSO: Trump made a move that could help wreck Obamacare

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Chipotle has been struggling since the E. coli contamination scare started back in November 2015. 

The stock tumbled more than 50% and consumer perception of the brand fell to its lowest level since 2007, according to a survey by the YouGov Brand Index.

But a note published on Tuesday by David Palmer and Eric Gonzalez's team at RBC Capital Markets says the fast-casual restaurant should outperform over the next one to two years as the chain ramps up its digital ordering and delivery. 

The team predicts a full brand recovery could "take a while" and are trimming their near-term EPS estimates to reflect a slightly lower margin, including lower-than-expected fourth quarter EPS and margin guidance.  

They forecast significant EPS leverage over the next two years as the chain improves its digital ordering experience through a new interface that cuts wait times on mobile orders and incorporates the addition of a second assembly line integrated with digital ordering in all restaurants in Spring 2017.

"While bears will likely continue to say that long-term growth is going to remain muted, we believe that will depend on the success of new initiatives and ultimately the ability for Chipotle to restore pricing power," according to the note. 

RBC estimates that Chipotle's ongoing sales decline, food safety investments and traffic initiatives will result in trough earnings this year but they are "optimistic that margins can begin to recover in 2017."

In other news, Instinet analyst Mark Kalinowski warns that Chipotle could "bear the biggest brunt" of President Trump’s trade war with Mexico, as the proposed 20% tariff on goods from Mexico could pose a huge problem for chains that heavily rely on Mexican imports like avocados. 

The stock is up 0.39% on Tuesday afternoon at $419.56.

Chipotle is reporting 4Q earnings on February 2, 2017.

SEE ALSO: Chipotle could 'bear the biggest brunt' of Trump’s trade war with Mexico

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German Chancellor Angela Merkel responded to US President Donald Trump's trade adviser's earlier comments on the "grossly undervalued" euro.

"We won’t exercise any influence over the European Central Bank, so I can’t and I don’t want to change the situation as it is now," she said on Tuesday after meeting with the Swedish prime minister, according to Bloomberg News' Patrick Donahue and Arne Delfs.

"Beyond that, we strive to trade on the global market with competitive products in fair trade with all others."

Earlier on Tuesday, Trump's trade adviser, Peter Navarro, told the Financial Times that Germany is using a "grossly undervalued" euro to its advantage against other nations in the European Union and against the US.

"A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an 'implicit Deutsche Mark' that is grossly undervalued," Navarro, the head of Trump's new National Trade Council, told the Financial Times.

The Transatlantic Trade and Investment Partnership, or TTIP, is a proposed trade agreement between the EU and the US.

The euro jumped after the report crossed the wires. It is up by 0.8% at 1.0783 against the dollar as of 12:36 a.m. ET.

Last week, Ted Malloch, the man who is tipped to become the US ambassador to the EU, told the BBC that the euro "could collapse" in the next 18 months.

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Legislators in New Hampshire have filed a new bill that aims to clarify rules around digital currencies and money transmitters.

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Coach plans to use social media to boost its brand in 2017. On its second quarter earnings call, the company announced it is partnering with pop star Selena Gomez. 

"Of course, signing Selena Gomez as the new face of Coach will amplify the Coach message given her very substantial global following, especially on social media," according to Coach CEO Victor Luis in the transcript.

Gomez has 108 million followers on Instagram, and Coach is hoping the collaboration will help boost its social media presence as well as attract the millennial consumer. 

Establishing a relationship with Gomez is just part of the company's plan go win back its premium-brand status. Coach recently pulled out of more than 250 department stores and has been striving to elevate its brand image by revamping stories, offering personalized products and focusing on in-store customer experience. Coach also expects Stuart Weitzman's sales to increase at a double-digit pace this fiscal year.

As for earnings, the company earned $0.75 per share on revenue of $1.32 billion in the second quarter, both ahead of estimates. Coach said quarterly profit jumped 17.4% as it limited promotions in the United States while selling more handbags in China and Japan.

The company's net income rose to $199.7 million, or 71 cents per share, in the second quarter ended Dec. 31 from $170.1 million, or 61 cents per share, a year earlier. Net sales rose to $1.32 billion from $1.27 billion, in line with analysts' average estimate.

Additionally, Luiz announced the appointment of Kevin Wills as Chief Financial Officer and Carlos Becil as Chief Marketing Officer.

The stock is up 3.17% at $37.12 a share in light of the earnings news. 

SEE ALSO: Handbag maker Coach's quarterly profit jumps 17 pct

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Coach plans to use social media to boost its brand in 2017. On its second quarter earnings call, the company announced it is partnering with pop star Selena Gomez. 

"Of course, signing Selena Gomez as the new face of Coach will amplify the Coach message given her very substantial global following, especially on social media," according to Coach CEO Victor Luis in the transcript.

Gomez has 108 million followers on Instagram, and Coach is hoping the collaboration will help boost its social media presence as well as attract the millennial consumer. 

Establishing a relationship with Gomez is just part of the company's plan go win back its premium-brand status. Coach recently pulled out of more than 250 department stores and has been striving to elevate its brand image by revamping stories, offering personalized products and focusing on in-store customer experience. Coach also expects Stuart Weitzman's sales to increase at a double-digit pace this fiscal year.

As for earnings, the company earned $0.75 per share on revenue of $1.32 billion in the second quarter, both ahead of estimates. Coach said quarterly profit jumped 17.4% as it limited promotions in the United States while selling more handbags in China and Japan.

The company's net income rose to $199.7 million, or 71 cents per share, in the second quarter ended Dec. 31 from $170.1 million, or 61 cents per share, a year earlier. Net sales rose to $1.32 billion from $1.27 billion, in line with analysts' average estimate.

Additionally, Luiz announced the appointment of Kevin Wills as Chief Financial Officer and Carlos Becil as Chief Marketing Officer.

The stock is up 3.17% at $37.12 a share in light of the earnings news. 

SEE ALSO: Handbag maker Coach's quarterly profit jumps 17 pct

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The Washington D.C. security camera network for public places was all but crippled earlier in January when ransomware was found to have locked up nearly two-thirds of all image recorders, each controlling up to four cameras.

Construct's open-source developer conference saw notable discussions, though talk of bitcoin's scaling issues was a persistent theme.

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Bitcoin first became prominent in 2013 when the price rose from $13 and to $1,100. However, a set of global events began a downward trend with the price bottoming at $177. A year and a half later, prices are booming and startups are flourishing. I spoke with exchanges around the world to learn why.

SEE ALSO: President Trump could mean economic policy via presidential decree

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Bitcoin prices are up more than 3% since the start of the day’s trading, climbing above $950 for the first time in weeks.

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Apple trades down 0.44% at $121 a share ahead of its fiscal first-quarter earnings that are due out on Tuesday afternoon.

Here's what Wall Street expects, compiled from analyst estimates by Bloomberg: 

• Revenue: $77.4 billion, up slightly from $74.9 in the year-ago quarter.
• Adjusted EPS: $3.22, down slightly from $3.28 in the year-ago quarter. 
• Gross margin: 38.39%, down from 40.1% in the year-ago quarter. 
• iPhones sold: 76 million, up from 75 million in the year-ago quarter. 
• iPhone average selling price: $688, down from $691 in the year-ago quarter. 

Investors will also look at Apple's future guidance to see if there's soft demand for the iPhone 7 ahead of the launch iPhone 8, which is expected to go on sale this fall. 

There will be questions around Apple's services business, its investment into Softbank Vision fund, iPhone demand in China, and its lawsuit against Qualcomm. 

 Apple reports earnings at 4:30 E.T. on Tuesday. Business Insider will cover all the news as it happens live.

SEE ALSO: Apple’s hidden multi-billion dollar business could be the star of today's earnings

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Apple trades down 0.44% at $121 a share ahead of its fiscal first-quarter earnings that are due out on Tuesday afternoon.

Here's what Wall Street expects, compiled from analyst estimates by Bloomberg: 

• Revenue: $77.4 billion, up slightly from $74.9 in the year-ago quarter.
• Adjusted EPS: $3.22, down slightly from $3.28 in the year-ago quarter. 
• Gross margin: 38.39%, down from 40.1% in the year-ago quarter. 
• iPhones sold: 76 million, up from 75 million in the year-ago quarter. 
• iPhone average selling price: $688, down from $691 in the year-ago quarter. 

Investors will also look at Apple's future guidance to see if there's soft demand for the iPhone 7 ahead of the launch iPhone 8, which is expected to go on sale this fall. 

There will be questions around Apple's services business, its investment into Softbank Vision fund, iPhone demand in China, and its lawsuit against Qualcomm. 

 Apple reports earnings at 4:30 E.T. on Tuesday. Business Insider will cover all the news as it happens live.

SEE ALSO: Apple’s hidden multi-billion dollar business could be the star of today's earnings

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The latest reading on consumer confidence from the Conference Board will cross the wires at 10 a.m. ET.

Economists forecast that consumer confidence slipped to 112.8 in January, according to the Bloomberg consensus.

Last month, the confidence index climbed to a post-recession high of 113.7. 

The report attributed the previous reading's uptick "solely" to increasing Expectations, which hit a 13-year high of 107.4.

Refresh this page for updates at 10 a.m. ET.

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Tadge Dryja, one of the developers behind a popular bitcoin scaling proposal, has joined MIT's blockchain and cryptocurrency group.

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Business activity in the Midwest is expected to have picked up in January, with the Chicago Purchasing Manager's rising to 55.0 from a downwardly revised 53.9, according to economists surveyed by Bloomberg. 

The report is scheduled to cross the wires at 9:45 a.m. ET. 

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The latest reading of the S&P/Case-Shiller home price index will be out at 9 a.m. ET.

Economists forecast that the 20-city index, which covers major metropolitan areas like Seattle and Chicago, increased by 5.03% year-over-year in November, according to the Bloomberg consensus.

The 20-city index ticked up by 5.1% in October.

Moreover, the October reading also showed that the national home-price index rose by 5.6% on an annualized basis.

Though prices are back at levels seen in the most recent housing bubble, economists contend that speculation and euphoria are not driving the market this time.

Home prices have been rising as a healthy jobs market and historically low mortgage rates have increased demand for homeownership since the financial crisis. Also, constrained supply helped to bid up the prices of existing homes, especially in desirable East Coast and West Coast cities.

Refresh this page for updates at 9 a.m. ET.

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Gold trades up 0.5% at $1,203.31 per ounce on Tuesday following comments from Trump adviser Peter Navarro suggesting Germany is taking advantage of the European Union and the United States by using a "grossly undervalued" euro. The precious metal held onto smalls gains ahead of Navarro's comments and spiked to its best level in a week shortly after the comments crossed the tape.  

So far, gold has not responded to a Trump presidency the way many on Wall Street thought it would. In a note to clients sent out in November, HSBC Chief Precious Metals Analyst James Steel wrote:

A Trump win would be decidedly gold-bullish, in our view, given the potential for increased protectionism, higher budget spending and geopolitical risks. Gold prices could jump to USD1,500/oz relatively quickly, and end the year at that level on a Trump win. This could raise our 2016 average price to USD1,300/oz. For 2017, gold could rise further to USD1,575/oz by year end with an average of USD1,410/oz.

On the evening of Trump's election win, gold spiked about $60 an ounce to more $1,334, putting in its best print since late September. However, it quickly reversed into the red and pushed lower into the end of the year. The precious metal bottomed near $1,122 per ounce just before the New Year and has worked its way higher into early 2017. Gold is up 4.9% so far this year.

SEE ALSO: TRUMP ADVISER: Germany is exploiting the EU and US with a 'grossly undervalued' euro

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UPS, the logistics and package delivery company, is sliding after posting weaker than expected fourth quarter earnings.

Earnings came in at $1.63 per share for the quarter, below analysts' estimates of $1.69. Revenue was also slightly light at $16.9 billion versus projections of $17 billion for the quarter.

Guidance also came in short of the market expected. UPS said it expected 2017 full year earnings per share between $5.80 and $6.10 a share, lower than the $6.17 expected by Wall Street.

"The International segment delivered another extraordinary performance, while the US managed through considerable changes in product mix," said UPS CEO David Abney in a press release accompanying earnings.

Shares of the company were down just over 4% in pre-market trading as of 8:19 a.m. ET.

SEE ALSO: Under Armour is crashing more than 20% after whiffing on earnings

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US President Donald Trump's trade adviser Peter Navarro told the Financial Times that Germany is using a "grossly undervalued" euro to its advantage against other nations in the European Union and against the United States.

The euro jumped after the report crossed the wires, and touched a five-day high of 1.0764 against the dollar.

It is up by 0.6% to 1.0763 against the dollar as of 7:48 a.m. ET.

"A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an 'implicit Deutsche Mark' that is grossly undervalued," Navarro, the head of Trump's new National Trade Council, told the FT on Tuesday.

The Transatlantic Trade and Investment Partnership, or TTIP, is a proposed trade agreement between the EU and the US.

Last week, Ted Malloch, the man who is tipped to become the US ambassador to the EU, told the BBC that the euro "could collapse" in the next 18 months.

"The one thing I would do in 2017 is short the euro," Malloch told BBC. "I think it is a currency that is not only in demise but has a real problem and could in fact collapse in the coming year, year and a half. I am not the only person or economist of that point of view."

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US President Donald Trump's trade adviser Peter Navarro told the Financial Times that Germany is using a "grossly undervalued" euro to its advantage against other nations in the European Union and the United States.

The euro jumped after the report crossed the wires, and touched a five-day high of 1.0764.

It is up by 0.6% to 1.0763 against the dollar as of 7:48 a.m. ET.

"A big obstacle to viewing TTIP as a bilateral deal is Germany, which continues to exploit other countries in the EU as well as the US with an 'implicit Deutsche Mark' that is grossly undervalued," Navarro, the head of Trump's new National Trade Council, told the FT on Tuesday.

The Transatlantic Trade and Investment Partnership, or TTIP, is a proposed trade agreement between the EU and the US.

Last week, Ted Malloch, the man who is tipped to become the US ambassador to the EU, told the BBC that the euro "could collapse" in the next 18 months.

"The one thing I would do in 2017 is short the euro," Malloch told BBC. "I think it is a currency that is not only in demise but has a real problem and could in fact collapse in the coming year, year and a half. I am not the only person or economist of that point of view."

SEE ALSO: What 25 major world leaders and dictators looked like when they were young

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The bitcoin payments company is looking to add customers amid expansion.

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Under Armour is tanking after posting weak fourth quarter earnings on Tuesday morning.

The apparel company missed on both revenue and earnings per share against analyst expectations. Earnings for the fourth quarter came in at $0.23 per share against analyst expectations of $0.25. Revenue also whiffed at $1.31 billion, lower than projections of $1.41.

"The current environment represents an inflection point to maximize our unique strengths by staying on offense — investing smartly in innovation, deepening our Brand connection with consumers and amplifying our focus on operational excellence — positioning Under Armour as a stronger company," said CEO Kevin Plank in a press release

The company also announced that CFO Chip Molloy is also leaving the company effective February 3 for "personal reasons" according to the company.

Following the news, shares of Under Armour sank by just over 24% in pre-market trading as of 7:47 a.m. ET.

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Raoul Pal comanaged the GLG Global Macro Fund for GLG Partners and retired at 36 in 2004. 

Since then, Pal launched Global Macro Investor and Real Vision TV, a sort of "Netflix for finance," according to the website.  His newest venture, Real Vision Publications, launched earlier this month and aims to bring independent financial research to the average investor.

Business Insider recently caught up with Pal to learn about his thoughts on the market going into 2017 and the launch of his new business. The following a lightly edited transcript of the conversation. 

Wadhwa: Towards the end of the last year, you predicted a recession and you were actually quite bearish on the market compared with a lot of other analysts. Now that Trump is President and the markets are rallying, do you agree with the market’s reaction, or do you think this is just the calm before the storm?

Pal: I think it’s almost impossible to assess the impact that the new Trump administration will have on the US economy or the global economy, and for the markets to extrapolate some future Ronald Reagan within a few days after he was elected is naive and somewhat dangerous. So the speculative positioning in many parts of the market, be they short bonds or long oil, and many of these things are now so far extreme that we’ve never seen this kind of positioning in the history of financial markets. So all I’m saying is the economy is relatively strong right now. It’s stronger than I expected. It was very weak at the beginning of last year and it’s stronger than I expected, but I think everybody is betting on it remaining strong and for the markets to be in a kind of low volatility, goldilocks state going forward. I think the probability of that is low.

I think the probability of the volatility coming out of the administration of which nobody understands what they’re trying to do or what the impacts are.

Nobody understands what the impact of higher tariffs on trade means for the US dollar. If it means the US dollar goes up, then global trade falls. There are so many linkages and I’m not sure they are all thought through. And I think that’s one of the issues we need to face, trying to assess the actual risk to these things rather than just assuming that a few tax cuts and fiscal stimulus will make America great again. It’s much more complicated and nuanced than what the markets are expecting right now.

Wadhwa: So are you long volatility? Do you expect it go up? 

Pal: The problem is, the market is record short volatility. And record short Vix ETFs and record Vix futures and their implied investment strategies are also short volatility strategies. So the market has taken a huge bet that volatility is not going to return. So there is a problem should the generalized level of volatility rise, it could cause enormous portfolio unwind and other stresses within the system. So we need to keep our eye on that right now. A small event could trigger a much larger event right now.

Wadhwa: Over 2016 the dollar index strengthened significantly.  What’s your view on dollar strength going into 2017? 

Pal: My view remains that Trump’s policies of repatriation of profits and restriction of free trade are very dollar positive. If we take into account the dollar short position offshore in the Euro-dollar market, ie the Euro dollar interest rate market, which is about $10 trillion, the balance of probability remains that the dollar goes higher.

It won’t do it in a straight line but it has been correcting recently and I think the dollar strength trend will continue. And I think it will go much further than people expect.

Wadhwa: What's your outlook for the European banking system, particularly in Germany and Italy? Given the political climate and key upcoming elections, how do you see this playing out?

Pal: Everybody expects something to happen in European elections. People expects Le Pen to win, people expect changes in Germany, so I’m not sure there are tradable events there. We also know that the European banking system is insolvent, we know the Italian system is insolvent, we know the Spanish system is relatively insolvent, we know Deutsche Bank is insolvent. All I know is that if we have a recession, then everything becomes unsustainable. If we don’t have a recession, everything can just about pull its way through, slowly. 

Wadhwa: What’s your outlook for China?  Do you think a devaluation of the yuan will solve China’s problems?

Pal: This is something that most people are expecting, and something the Chinese themselves are expecting, so whether this devaluation comes quickly or slowly, it’s not new news for the market. We’ve all been following this story for the last five years or so. All I do know is that it continues to add pressure for the US dollar to rise because the Chinese want to get their assets into US dollars and out of renminbi.

Wadhwa: What do you see as the biggest risk to the global economy in 2017?

Pal: The biggest risk always to the global economy is recession. The biggest question is whether or not we get a recession in 2017. All I do know is that after a two term government has changed and a new government has come in, regardless of which side of the house they’re from, there’s a 100% chance of recession, dating back to 1910, within 12 months. That doesn’t mean it’s definitely going to happen, but there's a very high probability of there being a recession.

Wadhwa: Given that forecast, what risks should investors be taking and what they should avoid?

Pal: They should avoid group think. Don’t do what everybody else is doing. If everybody else is short bonds, long equities, long oil, long copper, then don’t do those things, is the simplest answer. Look for other sources of return so they’re not so crowded as everybody else's because those are the ones where the maximum risk lies. It may just be a short-term reversal, but the reversal can be very painful if too many people are involved in a certain trade.

Wadhwa: You’ve talked before about your frustration with the poor forecasting records by the Fed and Wall Street economists. What do you think they are doing wrong and how can they improve?

Pal: People within the industry are incredibly concerned about the Fed using economic models that don’t work in the real world. Model based economics is proven not to work. It’s one of the reasons we got in trouble with the financial crisis.

It's one of the reasons we have this enormous balance sheet that the central bank has, one of the reasons why rates went negative, it’s all theoretical model based economics. And the real solution I believe is with the advent of big data and the development of behavioral economics, we could be much better in truly understanding how economies actually work by looking at the data and not models. That’s a big shift that needs to come. Aside from that, the other key thing the Federal Reserve forgets is that there is a business cycle. Economies do ebb and flow, and their models never forecast that which is why they are always wrong. 

Tina Wadhwa: Can you tell me more about this expansion of Real Vision TV into the publishing arena and what you are trying to achieve?

Raoul Pal: When we started Real Vision TV, we realized that it was a great opportunity to disrupt financial television. Financial TV was going towards sound bytes and advertising, and they were losing the seriousness of the finance business in it. They treated finance as entertainment. And it wasn’t fair to people to treat their own life savings as entertainment. We knew we could do something better and different, although we knew absolutely nothing about the media industry.

When we started that, we also realized how low quality much of the research publications were for the average guy. They were all getting spammed to death, given sensationalist headlines by numerous newsletter writers and they weren't get access to the best quality Wall Street research or the high-end research providers like myself. So we thought there was a real opportunity to do something better, to give people the quality of information. Just because they are the average investor, doesn’t mean they should get average research. So that was the idea behind the publication, and we spent nine months developing it, building a platform out for it and finally launched it about a month ago.

Wadhwa: Who’s your target audience?

Pal: The target audience is basically anybody involved in financial markets. Professionals are generally well catered for already, but a lot of it is the bulk of the average investor, the RIA in America, the guy who invests from home, people who invest their life savings, the average guy from those 100 million brokerage accounts in America. They deserve better research. They deserve better trade ideas, they deserve to understand the world better. So that’s why we started the publication. And we’ve gone about it in a really unique way. We’re showcasing 30 of the world’s best writers, and giving people examples of a fantastic array of people. Some charge up to $40,000 or $50,000 a year for their research, others charge maybe $300 a year per research. Combined, you’re never going to get that depth or breadth of information in one place, and it’s only $300 a year. Basically for someone to replace one of their existing newsletters, they can get 30 of the best people in the world for the same price. We think the value proposition is ludicrously good.

Wadhwa: How does it work exactly? What are you offering for the subscription price? 

Pal: What happens is once you sign up, you can visit the site whenever you want. We release something like two pieces of research a week, plus some bonus editions. They are all on this beautiful engaging platform where you can take notes, you can comment on it, exchange views with others, rate the quality, and actively engage with the content.

Wadhwa: You touched on this a little bit with the bias and sensationalism you see, but in your opinion, what’s wrong with bank research and why?

Pal: Having come from that business myself and understanding what it’s like, bank research is very cautious in how it is written. The inherent bias in bank research is that they don’t really want to be negative because it doesn’t play well to investment banking customers, where a lot of their revenue comes from. You can’t really say things that you mean.  You have to be very cautious of the vested interests, particularly out of the M&A business. So what you end up with is research that doesn’t really play its purpose, which is to get the smartest people in the bank to tell you what’s going on in the world.  It tends to get slightly watered down. And so there’s an opportunity, which is why I have an independent research publication called Macro Investor.  I can speak differently in a different way and I can be free in my thoughts.

Real Vision publication is not really for the bank research business - it’s for that newsletter business, which is huge, but below the radar screen.  It’s virtually unregulated and you can make a 1000% return in a month. We think people deserve better. You need to treat people with respect and dignity, and I don’t think it’s being done right now. Those newsletters are the way the average guy gets his research, and they’re not really good research services. The people who write them don’t have a track record in the industry, they kind of come out of nowhere and start writing stuff. We think people deserve better than that.

It’s been one of the most incredible launches we’ve ever had. 40% of the Real Vision client base for Real Vision television signed up to the publication in three weeks. It’s like there was a desperate pent up demand for this type of thing, so it’s been astonishingly well received.

SEE ALSO: A hedge fund manager who retired at 36 says stay away from the industry

Join the conversation about this story »

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Raoul Pal comanaged the GLG Global Macro Fund for GLG Partners and retired at 36 in 2004. 

Since then, Pal launched Global Macro Investor and Real Vision TV, a sort of "Netflix for finance," according to the website.  His newest venture, Real Vision Publications, launched earlier this month and aims to bring independent financial research to the average investor.

Business Insider recently caught up with Pal to learn about his thoughts on the market going into 2017 and the launch of his new business. The following a lightly edited transcript of the conversation. 

Wadhwa: Towards the end of the last year, you predicted a recession and you were actually quite bearish on the market compared with a lot of other analysts. Now that Trump is President and the markets are rallying, do you agree with the market’s reaction, or do you think this is just the calm before the storm?

Pal: I think it’s almost impossible to assess the impact that the new Trump administration will have on the US economy or the global economy, and for the markets to extrapolate some future Ronald Reagan within a few days after he was elected is naive and somewhat dangerous. So the speculative positioning in many parts of the market, be they short bonds or long oil, and many of these things are now so far extreme that we’ve never seen this kind of positioning in the history of financial markets. So all I’m saying is the economy is relatively strong right now. It’s stronger than I expected. It was very weak at the beginning of last year and it’s stronger than I expected, but I think everybody is betting on it remaining strong and for the markets to be in a kind of low volatility, goldilocks state going forward. I think the probability of that is low.

I think the probability of the volatility coming out of the administration of which nobody understands what they’re trying to do or what the impacts are.

Nobody understands what the impact of higher tariffs on trade means for the US dollar. If it means the US dollar goes up, then global trade falls. There are so many linkages and I’m not sure they are all thought through. And I think that’s one of the issues we need to face, trying to assess the actual risk to these things rather than just assuming that a few tax cuts and fiscal stimulus will make America great again. It’s much more complicated and nuanced than what the markets are expecting right now.

Wadhwa: So are you long volatility? Do you expect it go up? 

Pal: The problem is, the market is record short volatility. And record short Vix ETFs and record Vix futures and their implied investment strategies are also short volatility strategies. So the market has taken a huge bet that volatility is not going to return. So there is a problem should the generalized level of volatility rise, it could cause enormous portfolio unwind and other stresses within the system. So we need to keep our eye on that right now. A small event could trigger a much larger event right now.

Wadhwa: Over 2016 the dollar index strengthened significantly.  What’s your view on dollar strength going into 2017? 

Pal: My view remains that Trump’s policies of repatriation of profits and restriction of free trade are very dollar positive. If we take into account the dollar short position offshore in the Euro-dollar market, ie the Euro dollar interest rate market, which is about $10 trillion, the balance of probability remains that the dollar goes higher.

It won’t do it in a straight line but it has been correcting recently and I think the dollar strength trend will continue. And I think it will go much further than people expect.

Wadhwa: What's your outlook for the European banking system, particularly in Germany and Italy? Given the political climate and key upcoming elections, how do you see this playing out?

Pal: Everybody expects something to happen in European elections. People expects Le Pen to win, people expect changes in Germany, so I’m not sure there are tradable events there. We also know that the European banking system is insolvent, we know the Italian system is insolvent, we know the Spanish system is relatively insolvent, we know Deutsche Bank is insolvent. All I know is that if we have a recession, then everything becomes unsustainable. If we don’t have a recession, everything can just about pull its way through, slowly. 

Wadhwa: What’s your outlook for China?  Do you think a devaluation of the yuan will solve China’s problems?

Pal: This is something that most people are expecting, and something the Chinese themselves are expecting, so whether this devaluation comes quickly or slowly, it’s not new news for the market. We’ve all been following this story for the last five years or so. All I do know is that it continues to add pressure for the US dollar to rise because the Chinese want to get their assets into US dollars and out of renminbi.

Wadhwa: What do you see as the biggest risk to the global economy in 2017?

Pal: The biggest risk always to the global economy is recession. The biggest question is whether or not we get a recession in 2017. All I do know is that after a two term government has changed and a new government has come in, regardless of which side of the house they’re from, there’s a 100% chance of recession, dating back to 1910, within 12 months. That doesn’t mean it’s definitely going to happen, but there's a very high probability of there being a recession.

Wadhwa: Given that forecast, what risks should investors be taking and what they should avoid?

Pal: They should avoid group think. Don’t do what everybody else is doing. If everybody else is short bonds, long equities, long oil, long copper, then don’t do those things, is the simplest answer. Look for other sources of return so they’re not so crowded as everybody else's because those are the ones where the maximum risk lies. It may just be a short-term reversal, but the reversal can be very painful if too many people are involved in a certain trade.

Wadhwa: You’ve talked before about your frustration with the poor forecasting records by the Fed and Wall Street economists. What do you think they are doing wrong and how can they improve?

Pal: People within the industry are incredibly concerned about the Fed using economic models that don’t work in the real world. Model based economics is proven not to work. It’s one of the reasons we got in trouble with the financial crisis.

It's one of the reasons we have this enormous balance sheet that the central bank has, one of the reasons why rates went negative, it’s all theoretical model based economics. And the real solution I believe is with the advent of big data and the development of behavioral economics, we could be much better in truly understanding how economies actually work by looking at the data and not models. That’s a big shift that needs to come. Aside from that, the other key thing the Federal Reserve forgets is that there is a business cycle. Economies do ebb and flow, and their models never forecast that which is why they are always wrong. 

Tina Wadhwa: Can you tell me more about this expansion of Real Vision TV into the publishing arena and what you are trying to achieve?

Raoul Pal: When we started Real Vision TV, we realized that it was a great opportunity to disrupt financial television. Financial TV was going towards sound bytes and advertising, and they were losing the seriousness of the finance business in it. They treated finance as entertainment. And it wasn’t fair to people to treat their own life savings as entertainment. We knew we could do something better and different, although we knew absolutely nothing about the media industry.

When we started that, we also realized how low quality much of the research publications were for the average guy. They were all getting spammed to death, given sensationalist headlines by numerous newsletter writers and they weren't get access to the best quality Wall Street research or the high-end research providers like myself. So we thought there was a real opportunity to do something better, to give people the quality of information. Just because they are the average investor, doesn’t mean they should get average research. So that was the idea behind the publication, and we spent nine months developing it, building a platform out for it and finally launched it about a month ago.

Wadhwa: Who’s your target audience?

Pal: The target audience is basically anybody involved in financial markets. Professionals are generally well catered for already, but a lot of it is the bulk of the average investor, the RIA in America, the guy who invests from home, people who invest their life savings, the average guy from those 100 million brokerage accounts in America. They deserve better research. They deserve better trade ideas, they deserve to understand the world better. So that’s why we started the publication. And we’ve gone about it in a really unique way. We’re showcasing 30 of the world’s best writers, and giving people examples of a fantastic array of people. Some charge up to $40,000 or $50,000 a year for their research, others charge maybe $300 a year per research. Combined, you’re never going to get that depth or breadth of information in one place, and it’s only $300 a year. Basically for someone to replace one of their existing newsletters, they can get 30 of the best people in the world for the same price. We think the value proposition is ludicrously good.

Wadhwa: How does it work exactly? What are you offering for the subscription price? 

Pal: What happens is once you sign up, you can visit the site whenever you want. We release something like two pieces of research a week, plus some bonus editions. They are all on this beautiful engaging platform where you can take notes, you can comment on it, exchange views with others, rate the quality, and actively engage with the content.

Wadhwa: You touched on this a little bit with the bias and sensationalism you see, but in your opinion, what’s wrong with bank research and why?

Pal: Having come from that business myself and understanding what it’s like, bank research is very cautious in how it is written. The inherent bias in bank research is that they don’t really want to be negative because it doesn’t play well to investment banking customers, where a lot of their revenue comes from. You can’t really say things that you mean.  You have to be very cautious of the vested interests, particularly out of the M&A business. So what you end up with is research that doesn’t really play its purpose, which is to get the smartest people in the bank to tell you what’s going on in the world.  It tends to get slightly watered down. And so there’s an opportunity, which is why I have an independent research publication called Macro Investor.  I can speak differently in a different way and I can be free in my thoughts.

Real Vision publication is not really for the bank research business - it’s for that newsletter business, which is huge, but below the radar screen.  It’s virtually unregulated and you can make a 1000% return in a month. We think people deserve better. You need to treat people with respect and dignity, and I don’t think it’s being done right now. Those newsletters are the way the average guy gets his research, and they’re not really good research services. The people who write them don’t have a track record in the industry, they kind of come out of nowhere and start writing stuff. We think people deserve better than that.

It’s been one of the most incredible launches we’ve ever had. 40% of the Real Vision client base for Real Vision television signed up to the publication in three weeks. It’s like there was a desperate pent up demand for this type of thing, so it’s been astonishingly well received.

SEE ALSO: A hedge fund manager who retired at 36 says stay away from the industry

Join the conversation about this story »

NOW WATCH: Here's how to use one of the many apps to buy and trade bitcoin

The number of bitcoin accepting merchants in Japan could quintuple this year.

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