Daily Briefing – April 13, 2020

Published on
April 13th, 2020
Duration
33 minutes


Daily Briefing – April 13, 2020

Daily Briefing ·
Featuring Jack Farley, Ash Bennington, and Ed Harrison

Published on: April 13th, 2020 • Duration: 33 minutes

Ash Bennington hosts Real Vision's Managing Editor Ed Harrison to discuss the events of recent days as the coronavirus crisis grinds forward. Harrison and Bennington focus on the role of banks in financial crises as a transmission mechanism to the broader economy. The pair also consider risks to the high yield market and the role that exchange traded products play in providing liquidity in the global debt markets.

Comments

Transcript

  • VJ
    Victor J.
    14 April 2020 @ 20:45
    Couldn’t each of the hosts run an audio recording program (Audacity is free) in the background during the Skype session to record their own audio of their own voice, and then email that file to whomever does the video editing so they could sync it up and then the audio wouldn’t ever cut out even if Skype/Zoom/etc has issues?
    • mb
      michael b.
      15 April 2020 @ 05:51
      This is a helpful suggestion. Though typically a PC allows only a single app to use the microphone at a time. RV should consider something like this.
    • GB
      Gold B.
      15 April 2020 @ 06:24
      @Milton please consider!!!
  • RO
    Ryan O.
    14 April 2020 @ 13:13
    Has Raoul also shifted his thesjs from liquidation to hope? As of last week, Raoul was in the liquidation camp.
    • SK
      Shiu K.
      14 April 2020 @ 20:29
      It is end of the world, always, on RV and on FinTwit it seems.
  • SK
    Shiu K.
    14 April 2020 @ 20:28
    So is everyone disappointed that it is not the end of the world?
  • RM
    Robert M.
    14 April 2020 @ 18:31
    Couldn't watch this. Video too jumpy.
  • RM
    Robert M.
    14 April 2020 @ 18:31
    Couldn't watch this. Video too jumpy.
  • Am
    Alex m.
    14 April 2020 @ 02:01
    Does the Iceland death rate look low because they test asymptomatic people more often increasing the denominator?
    • TD
      T D.
      14 April 2020 @ 04:47
      This certainly seems like a reasonable explanation to me.
    • EH
      Edward H. | Real Vision
      14 April 2020 @ 08:02
      No. The death rate is deaths per million inhabitants. It's low because the overall numbers of deaths attributed to Covid-19 are low.
    • LS
      Lemony S.
      14 April 2020 @ 18:27
      And people are catching on here. Very rarely is anyone (if ever) given a death certificate due to seasonal influenza, mostly it is natural causes since technically that's what it is. But Covid19 isn't handled that way, and more importantly, the psychological impact of the virus creating bias, along with increased payments/reimbursements currently in America for admission, ventilation, and "deaths by Covid". Literally tens of thousands of dollars along that spectrum.
  • JD
    James D.
    14 April 2020 @ 17:59
    Very nice! Enjoyed the discussion and look forward to watching history unfold. Great stuff right here!!
  • ns
    niall s.
    13 April 2020 @ 22:32
    Is using the behaviour of people during lockdown as a basis for future trends a good idea ? Doubt it. Not an easy thing to judge but I'm hopeful that from looking at the country stats on worldometer that warmer weather will take Corona off the front page . The worst "warm weather at the moment " country seems to be Brazil with 23.400 cases and 1330 deaths and a death rate of 6 people per million , compared with USA 71 deaths per million , Spain 380 and Italy 340 .
    • AH
      Attila H.
      14 April 2020 @ 04:38
      Well, here in Singapore we have quite warm weather, yet the number of cases are growing fast.
    • DL
      David L.
      14 April 2020 @ 12:27
      Don't wish to be overly negative, but it's important to remember that mortality lags infection rates by a week or two. Consequently, it is risky to compare countries that are in different points in the curve. Mortality rate tends to take a while to "catch up" to infection rate. In terms of summer, another example is Ecuador. About 70-80% of total cases are in the region of the city of Guayaquil, which is an equatorial seaport and generally warm and humid.
    • ns
      niall s.
      14 April 2020 @ 16:47
      Attila , Yes Singapore is a very warm place I know Orchard road very well , but opinions are one thing facts are another and I see from the worldometer stats that Singapore has had 10 total deaths so far for a deaths per million rate of 2 persons per million , so in fact the Signapore stats underline my point the coronavirus is much less of a danger in warmer weather .
  • ML
    Mark L.
    14 April 2020 @ 15:12
    I think Ed is incorrect when he talks about ETF's "Fake Liquidity". To be fair, I have heard the same erroneous descriptions of ETF liquidity from several others very knowledgeable folks as well. He seems to confuse the mechanics of an ETF with that of a MF. An ETF is more like a CEF with a built in arbitrage valve. When investor buys/sells a MF, the MF has to buy/sell the underlying, dampened by a possible cash buffer. When investor buys/sells ETF shares, nothing happens at the ETF, the investor has to be matched with a seller/buyer on an exchange, just like a stock or CEF. There are ramifications of this, in down drafts it is likely the ETF seller will have to entice the buyer by selling at a discount to the ~NAV. The arbitrage mechanism will keep this discount/premium from getting systematically too large, as institutional investors can create/destroy "Creation Units" in large blocks. With ETFs at discount, these investors could sell large blocks of these ETF shares (typ. 50K+ units) to the ETF in exchange for equivalent basket of the underlyings. The reverse happens if ETFs are at a premium, investor delivers the basket and receives the ETF shares. This is how ETF shares come into existence. This process also keeps the remaining ETF shareholders from having tax ramifications due to other investors selling. This process is also like the institutional exchange for physical OTC transactions in which a SPX futures long could exchange his futures position for a basket of the underlying 500 stocks at an agreed price to fair value. I executed an SPX futures exchange for physical once in the 1990's when I had a large (~$500mil) institutional customer liquidate a Total Return insurance product, which I had hedged with SPX futures. I was concerned with the futures selling cheap on such a large position, so I shopped a few dealers and found one that would do the exchange for physical at an agreed "fair value" futures price and sell the exchanged shares at a very low commission, saving my employer several hundreds of thousands of dollars.
  • GF
    Gordon F.
    14 April 2020 @ 00:32
    Good discussion, but I came across the following article that I found disturbing: https://uncoverdc.com/2020/04/07/was-the-covid-19-test-meant-to-detect-a-virus/ The conclusion of the article is that the PCR test that is being used to "test" whether people are infected or not does not give a clear yes or no result. Even Kary Mullis, who received a Nobel Prize for inventing PCR said that it should not be used as a diagnostic tool, i.e. to determine of someone is infected with a particular virus. PCR is designed to take a fragment of DNA and duplicate it until you have a large enough sample to run diagnostics on. Each duplication doubles the amount you have to work with, and there is no precise determination as to how many duplications you need to run to determine if someone is infected. At 20 duplications no one would show positive, and at 50 everyone would be positive. Typically 36-40 duplications are run, but the higher the number the more false positives you get and the lower the number, the more false negatives, i.e., infected people who slip through as not infected. Since we have no other way to test to date (antibody tests are still a work in progress), we can't even measure how many are false positives or false negatives. If you run the current test on large populations that show no symptoms, an undefined but large fraction of those who test positive will be a false positive, i.e., not actually infected, and the more sensitive you try to make the test, the higher will be the fraction of false positives. Thus, more testing will probably not guide us to making better decisions, unless or until we have better tests. At the same time, policy decisions are being made on the basis of data that is faulty. How faulty we cannot know.
    • CM
      Chris M.
      14 April 2020 @ 02:09
      Nice post and helpful to this conversation.
    • CL
      Cole L.
      14 April 2020 @ 15:00
      It doesn't seem like the above article was accurate. Kary Mullis was a longtime family friend (he passed away last year) and I passed the article on to one of his colleagues who provided the following response: "RP-PCR is the test, and if done correctly without contamination, it will be foolproof."
  • AW
    Adam W.
    14 April 2020 @ 13:54
    The population density in Sweden is 25 per Km2 The population density in Iceland is 3 per Km2
  • II
    IDA I.
    14 April 2020 @ 11:18
    Thanks Ed for answering my question! Ida P.
  • TN
    Tim N.
    14 April 2020 @ 11:15
    Great video RV. It really is timeless, very few care about the financial plumbing during the good times. However, when s*** starts to burst out, everyone is liable to get some on their collar. Where did I put that umbrella?? :):)
  • BK
    Bruce K.
    13 April 2020 @ 22:21
    I'm starting a GoFundMe to get Ed a better ISP. Everybody in? ;-)
    • EH
      Edward H. | Real Vision
      13 April 2020 @ 22:30
      Thank you! It’s not the ISP though. Everything works with Zoom for example. But the video quality on these chats makes me want to rip my hair out. We will get it fixed though. I promise you that.
    • PS
      Pavel S.
      13 April 2020 @ 22:33
      I would listen to you even if you broadcasted from a 1990s modem.
    • RA
      Robert A.
      13 April 2020 @ 23:25
      Don’t beat yourself up on the Video/Audio Ed as I know you guys will figure it out. What you brought today was just remarkable analysis and we just can’t get that anywhere else. Ash held you up today and I’m sure you will return the favor when you can. Just splendid material today guys!
    • GS
      Gerald S.
      13 April 2020 @ 23:59
      Wonder if you can record directly to your computer on your side and then merge the Q&A into one clip. The video isn't bad, but the audio cutting out is really tough to follow.
    • AB
      Ash B. | Real Vision
      14 April 2020 @ 00:02
      To echo Ed, we will absolutely get this fixed. And we very much appreciate your patience as we sort this out.
    • JV
      Joel V.
      14 April 2020 @ 00:21
      Yea, makes it hard to follow -- too many words cut out. can you please record the audio on your phone and then sync it? should be pretty easy for one of your tech guys at RV to do...
    • RD
      Rick D.
      14 April 2020 @ 06:36
      Are you having this problem with Zoom? This look more like Skype
    • MC
      Melvin C.
      14 April 2020 @ 10:31
      Different chat platforms use different video/audio encoding so could require different bandwidths.. which could go back to the ISP problem.
  • SM
    Stephane M.
    14 April 2020 @ 10:23
    We can't get the film date on other video but her we get the hour it was filmed!! ;-)
  • BM
    Brook M.
    13 April 2020 @ 23:33
    Testing? Can we please stop the comparisons between the US and Sweden, Denmark and Iceland? It makes no sense to me to compare any testing data between Iceland (population 364,000) and the US (population 331,000,000). You could test 10% of the Icelandic population in a couple of days. Currently the US can test roughly 100,000 people per day. Do the math. To test 10% of the US population it would currently take us about 9 years!
    • DF
      Diamantino F.
      14 April 2020 @ 09:09
      I totally agree Iceland has less population than my soccer club has fans!!
    • MC
      Melvin C.
      14 April 2020 @ 10:15
      Iceland has a lower population, but it also has fewer resources! If it would take 9 years for the US to test 10% of its population that is because it is under-resourced.. not because it is a large country.
  • JS
    John S.
    14 April 2020 @ 04:20
    You have a great point about GE moving to junk and the ability for ETF's to absorb their debt. I want to point out that the construction of the indices with all of the new fallen angels is a huge factor. HYG uses Markit iBoxx USD Liquid High Yield Index. JNK uses Bloomberg Barclays High Yield Very Liquid Index and you have several funds that use ICE Bank of America US high-yield index. I look like Jerry Tarkanian in a close game when talking about the HY ETF market. It's a powder keg. I put together several visuals on https://www.catfix.biz/credit-muni-etf
    • jc
      jonathan c.
      14 April 2020 @ 06:07
      Thanks John! If you don't mind, quick question to make sure I understand the numbers on your slides. "HYG Top Issues" for example under Communications, SPRINT CORP one branch is 7.13% 06/24 and the other branch is 7.88% 09/23. Am I looking at the Coupon % and maturity date respectively? I had a look at detailed holdings for HYG and that seems to be the case.
    • AH
      Attila H.
      14 April 2020 @ 09:52
      Very nice slides, thanks!
  • SK
    Shammi K.
    14 April 2020 @ 06:28
    Fix your audio video!!!!!!!!!
  • DS
    David S.
    14 April 2020 @ 05:53
    Ash and Ed, your daily briefing videos are great, and I value your insights and conversation. However, it seems like there are consistent glitches with Ed's feed. Surely this can be remedied and corrected. I want to follow what he's saying, but it's often a challenge as his feed cuts in and out. Kindly see what can be done to correct. Thank you!
  • OO
    Oliver O.
    13 April 2020 @ 23:29
    CNBC had a segment on titled: "Wall Street thinks worst may be over for stocks" which showed the following quotes: Goldman Sachs: "Unlikely to make new lows" Morgan Stanley: "Pullbacks should be bought" JP Morgan Chase: "All-time highs next year" Piper|Sandler: "Bear market has concluded" link here: https://www.youtube.com/watch?v=QFR0EZ84MiY How can the disconnect be so large here, when the real picture of the economy looks so grim? I understand they want clients to pile into the market again, but this seems a little egregious.
    • TD
      T D.
      14 April 2020 @ 00:28
      When that is what the media is posting, it sounds like a sell signal to me!
    • CM
      Chris M.
      14 April 2020 @ 02:07
      It is the same reason a stock rated "hold" means to sell it. They are in the biz of selling the market. And CNBC is in that same business. So your understanding is correct and if the market goes down, they will just tell clients to hang on because we will be at new highs in no time. This has worked well for this cycle over the last 30 years. If we ever hit a 1930 to 1958 cycle, their advice would be negligent for the client. The recognized that client's don't have an appreciation of financial history, just what they remember in their lifetime, hence buy stocks. It is the same reason my grandfather, who lived through the depression, would only buy bonds.
    • SC
      Sam C.
      14 April 2020 @ 03:21
      Perhaps they're sucking retail back in as they load up on shorts? Wouldn't put it past them...
  • TS
    Tamim S.
    13 April 2020 @ 22:17
    Ed is my favorite talking head on this site.
    • DB
      Douglas B.
      14 April 2020 @ 02:36
      Mine is Bryan Price ;-)
  • JK
    Jim K.
    13 April 2020 @ 23:19
    Quick question: Ed, do you really believe that the Fed refrain from going further down the quality spectrum to Bs and even CCCS if the equity market and high yield markets break the 3/23 lows for stocks and wides for high yield spreads. The Fed has been privatizing the profits and socializing the losses since 10/19/87 when the “Fed Put” was created by Greenspan. Every cycle the Fed goes further further beyond Walter Bagehot’s central banks should lend against the highest quality collateral and penalty rates. Greater stuff gents as always, thank you.
    • EH
      Edward H. | Real Vision
      14 April 2020 @ 00:19
      Ash put it well about lines in the sand. It’s the same thing we saw with Lehman though. At some point, they WILL put a line in the sand that they won’t initially cross. And then all hell will break lose. Then what?
    • CM
      Chris M.
      14 April 2020 @ 02:12
      From a political perspective, believe if Fed starts buying lower rated junk bonds, you will hear a lot more about saving Wall Street and not Main Street that will impact November elections.
  • JM
    John M.
    14 April 2020 @ 02:02
    Taiwan did not do a lockdown either (or close schools) but they are well organized. They wear masks to protect others! They test quickly, anyone with symptoms... Taiwan: 388 cases and only 6 deaths. https://inews.co.uk/opinion/comment/coronavirus-taiwan-lockdown-uk-2503495
  • Am
    Alex m.
    14 April 2020 @ 02:02
    Ash / Ed would you be able to talk about real estate on some of these briefings? Thank you
  • KE
    Kathryn E.
    14 April 2020 @ 00:29
    How can I get access to Ed's note?
    • JC
      James C.
      14 April 2020 @ 01:03
      https://creditwritedowns.com/author/eharrison
  • TD
    T D.
    14 April 2020 @ 00:34
    Great stuff, folks. Also, I noticed in some comments that you guys use Zoom. I imagine you may have now heard of the security and privacy risks it poses. Several governments and companies have banned it's use. I would suggest finding an alternative platform. I have had success with Microsoft Teams; I think that one is worth checking out.
    • AW
      Andrew W.
      14 April 2020 @ 00:42
      Teams has been really great these last couple months!
  • TS
    Tom S.
    14 April 2020 @ 00:20
    America has become a socialist state ... but only for the rich.
  • AK
    Adam K.
    13 April 2020 @ 22:29
    Man, Ed Harrison's internet connection is struggling in this one haha