5 Big Questions for a Double-Dip Recession

Published on
November 25th, 2020
Duration
40 minutes


5 Big Questions for a Double-Dip Recession

Daily Briefing ·
Featuring Haley Draznin, Ed Harrison, and Max Wiethe

Published on: November 25th, 2020 • Duration: 40 minutes

Max Wiethe and Real Vision managing editor, Ed Harrison, discuss Ed's outlook for a winter double-dip recession in the U.S. and the most important questions for determining the breadth, depth, and market implications of this prediction. How bad will the pandemic get before this wave can be arrested? How severe an economic brake will have to occur to get the virus under control? What short- and long-term impact will this have on businesses? What can policymakers do to mitigate downside risk and prevent worst-case outcomes? How will all of this feed through into asset markets? In the intro, Real Vision's Haley Draznin, examines the juxtaposition between the markets hitting record highs and the broader economy as initial jobless claims rise for a second week in a row.

Comments

Transcript

  • PP
    Peter P.
    28 November 2020 @ 03:15
    Comment made that it doesn't matter that restaurants are open at x% because people aren't going. Mobility data suggests otherwise.
  • JJ
    John J.
    27 November 2020 @ 16:51
    Max, as usual, did a great job. He is the best and should be the regular moderator.
  • PP
    Patrick P.
    26 November 2020 @ 03:04
    Ed ..You have to be a little more honest ... Pelosi ...yes 3 Trillion. Mitch McConnell 500 billion (not zero) Those numbers are out there and the GOP has never said zero..... C'mon Ed...
    • PP
      Patrick P.
      26 November 2020 @ 03:22
      Our system of government is built on compromise.... Pelosi was not going to compromise with Trump as president ...but she will be more accommodating if Biden takes over IMO.
    • EH
      Edward H. | Real Vision
      27 November 2020 @ 15:41
      It’s about compromise. Are Pelosky and Biden willing to go 500mm now? They weren’t in September. Maybe the depth of the problem (and the election’s being over) will change their calculus
  • AL
    Aaron L.
    26 November 2020 @ 06:08
    Ed, no harm in talking about positions you could take to express your view. Even if it's all wrong and it tanks completely, no one is going to shoot you as long as the ideas are well thought out (which they always are cause you are a clever cookie). So loosen up man, it's ok! :D
    • DS
      David S.
      26 November 2020 @ 23:28
      Mr. Harrison is smart enough to know his area's of expertise. He is being thoughtful in recommending others who he feels are better in other areas. I appreciate his candor. DLS
  • FL
    Fabrizio L.
    26 November 2020 @ 19:00
    Assuming vaccines are coming in December: How many people in the world will be vaccinated by June? Can someone give a projection?
    • DT
      David T.
      26 November 2020 @ 23:26
      500K-800K
  • JD
    James D.
    26 November 2020 @ 16:09
    I recall a RV video where Michael Green discussed the herd mentality as the final solution to CV-19. The purpose of the original shut down was to prevent overwhelming our hospitals with CV-19 patients. Originally, people thought CV-19 was certain death; now we have a much better understanding and treatments which explains young people defying government shut down orders. Even hypocritical politicians defy such orders! The mortality rate of CV-19 is extremely low especially for younger people. After the original shut down, cases of CV-19 did decline but the virus was not eliminated and nor will if be eliminated by shut downs. Frankly, the government will not be able to "stimulate" our economy to make up for the trillions lost, the number of suicides and overall destruction of our economy. I find Ed's discussion naive at best.
    • DS
      David S.
      26 November 2020 @ 23:23
      With a non-compliant population in the West, it is very difficult to fight the pandemic on the health and economic fronts at the same time. In America people with COVID believe it is their right to go to high risk area without masks. We live in an era of believing what we want to be true is true - no facts reqired. We have, therefore, failed on both the health and economic fronts. With a split Congress, COVID - a simple RNA molecule - will win again. Deal with it. DLS
  • CM
    Cory M.
    26 November 2020 @ 01:45
    One thing that I've noticed with all media is that we are entirely consumed with the Covid-19 related effects on the economy. There has been very little commentary surrounding the reality that we were seeing significant signs economic slowdown this time last year (pre Covid). Maybe I'm missing something obvious but it doesn't feel like the excesses of the past 10 years were unwound. Have governments papered over all of the weakness that we typically find peak cycle? I don't see clean balance sheets despite the pain... so assuming the vaccine is mass produced and highly effective, do we not just return to the economic conditions of Late 2019 but with 10% unemployment?
    • MC
      Michael C.
      26 November 2020 @ 23:19
      1) There has been very little commentary surrounding the reality that we were seeing significant signs economic slowdown this time last year (pre Covid). - yes, compare SPY to ZROZ (LT "risk free" asset), gold, or bitcoin, the SPY actually peaked Oct 2018. All outperformed in the time period. 2) Maybe I'm missing something obvious but it doesn't feel like the excesses of the past 10 years were unwound. -With WeWork, SPACs, zombie companies, etc and no real bear market with 35% or greater losses that last 18 months or more, I would agree with your assessment that excesses have not been undone and will accelerate....more CLO debt, more mergers, more IPO's, more SPACs. Don't worry about the horses, just load the wagon. 3) Have governments papered over all of the weakness that we typically find peak cycle? -papered over the March crevasse, yes. Is there another just ahead? TBD 4) do we not just return to the economic conditions of Late 2019 but with 10% unemployment? -yes, but IMO much, much worse. More debt (personal, corporate, and govt), many state and federal govt assistance programs coming to an end, valuations even more extreme (Shiller CAPE, Tobin ratio, Buffett GDP, SP500 P/S), massive food lines, undercounting of unemployment (discouraged workers give up looking). Per the book "Boom and Bust", need 3 things for a fire The oxygen of investing is marketability, or the ease of buying and selling an asset. Centuries ago, that meant carving up difficult-to-transfer corporate ownership into tradable shares. Nowadays it's carrying a stockbroker in your pocket. With a smartphone-trading app, you can buy or sell so-called fractional shares in increments anyone can afford. The second side of the fire triangle, fuel, is manifested in financial markets by money and credit. Low interest rates make investing with borrowed money cheaper, while paltry yields on safe savings compel people to invest in riskier alternatives. The third side of the triangle, heat, is supplied by speculation. When prices go up, more people buy, inflaming prices even more and attracting another rush of speculators. That lures in naive buyers who think making money is easy. But hedge funds and other institutions also chase those hot returns, fanning the flames even higher. Now for the "spark"
  • NL
    Nikola L.
    26 November 2020 @ 07:34
    Ed is so yesterday with his billions.
  • TS
    Tom S.
    26 November 2020 @ 05:47
    Always want to hear from Max. Great insights.
  • MC
    Michael C.
    26 November 2020 @ 02:41
    Pulling back for a 35,000 foot view. Vaccines My sources with FEMA have pointed out the following. 1) Efficacy of all 3 is unknown...none have been peer reviewed by scientific community and still have to be approved by FDA. What we've seen so far are PR releases and AZN is under fire for its work. 2) Distribution issues in handling and sufficient quantities in an acceptable time frame to achieve herd immunity Another source, mayor in small MW county seat spoke with the governor...expect vaccine to arrive Q3 at county level...that's July 1. Time to innoculate the population and develop immunity? Anti-vaxers? 3) Side effects/possible virus mutation Bottomline: I think the market looked at this past March as a one time event and with the heavy Fed/Congressional aid, thinks it's over. So this, in itself, may not cause a sell off but definitely driving with emergency brake on. And with the US health system nearing catastrophic failure, e.g. insufficient numbers to deal with waves, other illness/conditions untreated, long term demand on resources...got an elephant in the back seat. Economic impact In turn, I agree with Ed...some businesses will just say the hell with it, I'm done and toss the keys to the landlord. I believe Brian Livingston, Muscular Portfolios, did some work to determine that 8 deaths per million per day is the tipping point for either voluntary or involuntary action to dramatically reduce mobility/economic activity or quarantine. US population is 328 million so about 2600 deaths per day; one can model by state to determine more specifically, assuming accurate data as to cause of death is available. Fiscal/monetary response Cutting rates is not going to help the local pizza shop. And the banks aren't lending anyway. M2 velocity is decelerating rapidly...see FRED report on M2 from St Louis Fed. Hence JaPo's constant ask for fiscal policy; monetary policy bought some time which IMO was squandered. Dusting off Samuelson's Economics, fiscal policy would have greater, longer lasting impact such an infrastructure bill with a jobs multiplier effect....but it takes longer for it to take hold and that opportunity was blown after the 2018 midterms. Any stimulus bill is papering over the canyon again, not to say something shouldn't be done but the patient (economy) is not going to jump off the operating table and run the 100 yd dash. It appears speculation has taken hold of a bipolar market, value/growth, small cap/large cap, risk on/risk off, lock down/open up issues with rapid rotation on "news" and the belief that the event is over when it was really just the end of the second act, hope, per Raoul. But knowing when to jump from the train as it starts down a long, shallow grade might be a skill worth knowing...;)
    • MC
      Michael C.
      26 November 2020 @ 05:15
      Followup: I like hard numbers. And Raoul has given us the tell: the 10 year yield...the truth. Yields jumped 3X the average daily move on Nov 9, the PFE vaccine PR release, then coasted down. Jumped again on Nov 16 (less than before) the MRNA vaccine PR release, then coasted down. Jumped again on Nov 23 a little less, the AZN vaccine PR release and is hovering. Same yield as March 23. Hmm.
  • lf
    liam f.
    26 November 2020 @ 05:06
    I realize I am not always the most positive commenter because I only feel compelled to comment when I really dislike a video. As such I need to take this moment to reiterate my sentiment about most Daily Briefings and Real Vision videos - this was excellent. Poised, coherent... presented with confidence by Max as always - clear, sharp and easy to listen to. A solid analysis from Ed Harrison. Ed's analyses blow my mind some days in terms of changing the way I have been thinking in a major way when he really gets on a roll. Today was 8 of 10 on the Ed scale - good considering the news is somewhat similar to that in days preceding. A 10/10 Ed breakdown at an economic turning point is something special to witness.
  • TW
    Todd W.
    26 November 2020 @ 03:13
    Max and Jack killin it
  • JH
    Jesse H.
    25 November 2020 @ 23:39
    Please have Ivor Cummins on to talk about analysis of the SARS-CoV-2 / COVID data. Always interested in your economic analysis, but with all due respect, you guys don’t have a clue about the health data, and are just repeating the common narrative, or that parroted by epidemiologists who do not understand either virology or PCR testing. Cheers.
    • TW
      Todd W.
      26 November 2020 @ 03:12
      Lol, we got a genius here fellas
  • JH
    Jacqueline H.
    25 November 2020 @ 23:51
    Terrific briefing gentlemen! Thank you and Happy Thanksgiving!!!
    • DS
      David S.
      26 November 2020 @ 02:46
      I agree. Well done. DLS
  • DS
    David S.
    25 November 2020 @ 23:43
    If Senator McConnell controls the Senate he will implement a scorched earth policy again. Do not fall for the headfake that he will work with President Biden. The successful attempt to lock pandemic funds shows the Senate races in Georgia will determine whether the pandemic can be addressed or used as a political bargaining chip. This is in direct opposite to compassionate conservatism. President Reagan would not fire everyone and hold up pandemic funds to businesses and citizens at any time. DLS
    • DS
      David S.
      26 November 2020 @ 02:39
      IMO the market will be markedly more affected by The Congressional deadlock; refusing to help citizens, businesses, and all levels of government who are already broke from the pandemic. We will recover from the pandemic. The market is not ready for a second steep recession. Everyone is so happy with the progress of the vaccines they are blind to the politics. The markets should be preparing for a major recession. Mnuchin has already started the ball rolling. McConnell is preparing to follow through if he has the majority. DLS
  • WM
    William M.
    26 November 2020 @ 02:21
    Ash and Ed are epic on-air talents, with astounding depth and breadth. However, Max and Jack have really stepped up lately. It's great to see them getting more prime-time opportunities, consistently rising to the occasion, and really nailing it. The RV bench is becoming super impressive. Great job all around.
  • IN
    I N.
    26 November 2020 @ 02:16
    Mark this down as one of the best RV DBs of 2020 as well. Hollywood and Max did very well this week. Great stuff.
  • JD
    James D.
    26 November 2020 @ 01:05
    Any chance of getting Ambrose Evans-Pritchard on the show, maybe with Roger?
  • CM
    Cory M.
    26 November 2020 @ 00:45
    Video get's a like for Max's 'shirt is for the turkey's' comment early on. Thanks again gents! Insightful and helpful dialogue as always.
  • TC
    Timothy C.
    26 November 2020 @ 00:09
    Great data from Ed today! One observation, especially with respect to PMI and lockdowns. There's correlation, causation and coincidence. Ed makes a point of that subtly about NY restaurant occupancy. My view (which could be wrong) is that early lockdowns simply act as a dampener. That is to say, the same behavior would eventually occur with or without lockdowns based on human behavior. We'll see when hospitals hit capacity. Second observation (which also could be wrong): Regarding Mnuchin putting the money back in the TGA. This is a bit of a head scratcher. The debt ceiling is currently suspended, which has allowed Mnuchin to already grow the TGA to a peak of $1.8T (now ~$1.55T)even though there was nothing to spend that money on. He basically just printed pristine collateral in the form of T-Bills. Putting another $400B+ in that account is a journal entry. That is to say, the TGA is simply the government's bank account. The Treasury needs congress to authorize spending from it. The bigger issue is the following: The Treasury has a surplus in its account. That means it could just spend it down on things authorized by congress w/o issuing more treasuries. But that has the potential to suck a ton of collateral out of the system that Mnuchin "snuck" in there while the debt ceiling was suspended. If the TGA gets bled down, it's going to suck a bunch collateral out of the system. From a practical standpoint, we need at least a $1.5T stimulus package to keep collateral neutral (or suspend the debt ceiling again).
  • JB
    Jeff B.
    26 November 2020 @ 00:03
    It's been nice having a variety of thoughts and personalities on the Daily Briefing, lately. Great job, everyone.
  • JL
    Jason L.
    25 November 2020 @ 23:28
    Great one today again, thanks RV team. Haley’s recap is a great kickoff to each RVDB.
  • RN
    Richard N.
    25 November 2020 @ 23:17
    Max, nice use of the word autumnal!
  • RN
    Richard N.
    25 November 2020 @ 23:17
    Max, nice use of the word autumnal!