Daily Briefing – April 20, 2020

Published on
April 20th, 2020
37 minutes

Daily Briefing – April 20, 2020

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

Published on: April 20th, 2020 • Duration: 37 minutes

Ash Bennington hosts Ed Harrison, Real Vision's Managing Editor, to break down the day's events. Today, the pair take a deep dive into the chaos of the profoundly fractured oil markets. Bennington and Harrison also discuss the long-term prognosis for the eurozone in a post-coronavirus world. In the intro, Jack Farley discusses the teetering CLO market and analyzes a short play that has paid off big time.



  • PC
    Peter C.
    21 April 2020 @ 13:16
    I want to make a point about Europe because I do feel that there is too much fear (in particular by Ash) that Europe will collapse and that it could spark a major internal conflict. I am born in Belgium and living close to Brussels. I am a regular visitor of many European countries and I have friends and former colleagues in many of them. While we have cultural differences, in practice there is not that much difference in mindset. I am talking in particular about the large majority of generation X and millenials that are currently driving our economies and political parties. Obviously, Europe faces challenging times and the EU itself is still a young and a growing alliance (apart from brexit). It has failures in its design and somehow it worked enough to progress but brexit and the coronacrisis show again that major updates are needed (in particular a real fiscal union). I am confident that we will be able to work it out without an internal (hot or cold) war. The wars were a tool of the past to ensure that no European country dominated the continent and a for long time de facto the world but this does not reflect the world today. We need it each other. The wars, the struggles and the setup of the union did gave us relisience in the face of adverse conditions, diplomacy and the ability to compromise. These are three aspects that are now part of the European fabric. I believe it will move us to a better Europe that has a bigger role to play in the future. As a side note: you may notice in the COVID statistics that Belgium has the highest number of deaths per capita worldwide. It is serious but not that bad as you would think. Our governement decided to classify all deaths without a known cause as COVID. The number is 2x to 3x inflated. Also, more than half of the deaths are in elderly homes, a major problem in many Western countries but not always added to the statistics.
    • UJ
      Ulf J.
      22 April 2020 @ 04:59
      Yes, it must have a reason why they classify all deaths without a known cause as COVID in many countries they put COVID19 on the death certificate even if the patient died of a heart problem. Where I live they count people with symptoms like the flu as COVID19 it is not only confirmed cases. Is this a fact or rumor in the USA you get way more money if people are treated for COVID then other causes so it is a big reason why they classify people with COVID19 on the death certificate. I guess it is hard to know exactly how dangerous this virus is but we for sure know it is bad for the economy.
  • UJ
    Ulf J.
    22 April 2020 @ 04:44
    Great as always guys. Ed tell your sister friend instead of buying USO it is much better to go to the new monetary system. Positions of the Association of German Banks................... A stable currency is the basis for any economic system; ensuring one is a key element of state sovereignty. The stability of the existing monetary system must not therefore be endangered by the provision of crypto-based digital money. The German private banks rate programmable digital money as an innovation with great potential that can be a key component in the next stage of the evolution of digitalisation. The German private banks will play their part in establishing a sustainable and innovative monetary system. For this purpose, a programmable account and crypto-based digital euro should be created and its interoperability with book money ensured. The condition for this is establishing a common pan-European payments platform for the programmable digital euro. https://en.bankenverband.de/newsroom/comments/programmable-digital-euro/
  • DR
    Derrick R.
    22 April 2020 @ 03:02
    This was really an epic daily update worthy of the insanity that unfolded. I can tell that more time went into editing and splicing in clips from other segments was cool, also nice to see Jack is still absolutely killing it on the intros, is he getting more and more time in the intros? He’s gonna have his own show!
  • JB
    John B.
    21 April 2020 @ 20:42
    Great shirt today Ash!
  • DL
    Doug L.
    21 April 2020 @ 19:12
    OMG what alarmist B.S. about U.S. with highest number of deaths..... https://www.statista.com/statistics/1104709/coronavirus-deaths-worldwide-per-million-inhabitants/
  • SB
    Stephen B.
    21 April 2020 @ 17:50
    Having lived through the 2000 Argentine crisis, it seems to me that Italy is in the early stages of a similar default. After months (if not years) of denial, over one weekend Argentina unpegged to the US$ and redenominated all existing US$ (and even US$ denominated business contracts). Such a shift in Italy will be more complicated to implement but all the pressures all seem be there.
  • MZ
    Mark Z.
    21 April 2020 @ 13:53
    A bit of the echo chamber, The snap back in gasoline is real. People are done with the stay at home directives, people fear the virus less but what remains is the fear of not conforming to the social distancing and looking like am asshole. When orders are lifted,it will be one giant party, as people are itching to get out... Think about families with children at this time. the snap back of demand for things such as gasoline will be vshaped. Furthermore, the narrative for the deadliness of vivid will change: Some new studies are showing like 50xthe number of infected out there but didn't have serious symptoms , and covid as the virus will fade into the background of normalacy and a fact of life, look to antibody testing for confirmation. Politicians have what they need to keep the economy going, and they won't look back. If this is the case , Further rounds of shutdowns won't be like this one, and target the vulnerable.
    • LK
      Lauri K.
      21 April 2020 @ 17:49
      The study you are referring to, the Stanford study is statistically flawed, They used an inaccurate test and recruited openly for test subjects. The results are not accurate and should not be used in any regard.
  • DS
    David S.
    20 April 2020 @ 23:44
    Northern Euro countries could leave the Euro before Italy. While Italy is in the Euro, it has the hope of being bailed out. Norther Euro countries are already facing long-term low export demand in the US and China. If Brussels bails out all the Euro states that really do need to be bailed out, several northern Euro countries will face the same world of low exports with a tremendous increase in debt obligation to Brussels. In the populist world of Euroland, this is not a good option. Oh, what a tangled web we weave when we let politicians create a currency, especially without a sovereign. DLS
    • SB
      Stephen B.
      21 April 2020 @ 17:28
      I bet you a barrel of oil that Denmark is next ....Oh wait...
  • MT
    Mark T.
    20 April 2020 @ 23:10
    Great piece today. Although I don't share Ash's rosy view on American cohesion. We're really not one culture and the disparity is growing. Our Civil War may have ended 155 years ago, but the embers were never quite extinguished. Wish I had capacity at my house to take a barrel or two of oil.
    • AB
      Ash B. | Real Vision
      20 April 2020 @ 23:22
      I'm not sure I'm that rosy, either. The country is more divided than I've ever seen it. (Also. When I think back to the patriotic response to 9/11 in the NYC metro, I get a little sentimental.) Still, I'm more optimistic about our differences than, say, the policy divide between Athens and Berlin/Frankfurt. We're not quite at Fort Sumter yet... PS I wonder if we could store some oil in Roger's wine rack?
    • SB
      Stephen B.
      21 April 2020 @ 17:27
      I moved to the US in 2004, after having lived and done business in other multi-state, continental sized economies like Brazil, India, Australia and China. I was responsible for business development across the lower 48. My impression after a few months? There is very little binding this country together, other than Federal largesse. I have always believed that once the King Dollar story comes to an end, the US will fragment to its natural groupings (the PNW, New England, the Rocky Mountain States etc.). I hope I am wrong but states like California and Texas have so very little in common.
  • JV
    Jan V.
    21 April 2020 @ 16:16
    Private debt will become public debt funded by central banks (MMT or helicopter money). You wonder what would happen if we see strong inflation popping up in Europe (supply shock + overstimulus). Will they sell these government bonds on their balance sheet for price stability? Rates on government bonds would skyrocket. Governments will have to default on the debt. The asset side of the central bank balance sheet would take an additional hit. What would back the euro? Time to revalue gold? They better not overstimulate imo...
  • PG
    Philippe G.
    21 April 2020 @ 13:31
    Lookin' sharp Ed!! Keep up the great content!
  • MC
    Michael C.
    21 April 2020 @ 05:51
    Great daily updates guys. Thanks. Just on Europe, I have lived in central (and eastern) europe and have family there. Whilst europeans love complaining and arguing with each other they all believe they are stronger together than on their own. Eueopeans are used to living under oppression. Its normal to them and in their DNA unlike Americans, Australians etc. Fiscal union will be forced on them because they truly are too scared of the alternative. WWI and WWII are in burnt into their collective memory (reminders are everywhere of war and soviet oppression) and it actually binds them together rather than pushes them apart. They just need another catalyst to put the first fiscal building blocks together...probably extreme weakness in the Euro currency would be enough to do it.
    • GD
      Guv D.
      21 April 2020 @ 07:47
      quick note. thanks for the points and I agree europeans have an innate unity hardwired. however as a European born and bred I am certianly not used to living under oppression now or ever...
    • MC
      Melvin C.
      21 April 2020 @ 11:19
      Agree with Guv.. I'm British, live in Italy. What oppression? We are freer here than in the US (don't forget 0.7% of the population is in jail in USA versus 0.15% in most of Europe. It's relatively easy to end up in jail in the US for what would be considered a minor crime in Europe)
    • FS
      Florian S.
      21 April 2020 @ 12:38
      Hey guys, as a German living the last 10 years in the US and being married to an American, I can only agree with my fellow Europeans that already commented :) Let us hope we will see the union strengthen to become the United States of Europe! I think one of our core issues is that for too long we were complacent and too reliant on our allies (namely the US) and with the regime change there towards nationalism and isolationism, we are being left behind as a dismembered union without any clear geopolitical strength other than the size of our joint economy (lacking military and to a large degree technology strength)
  • OC
    Otto C.
    21 April 2020 @ 00:34
    I lived in Italy for almost 15yrs. and have traveled around Europe extensively. I have experienced how culturally compartmentalized are European countries even within their own borders. For example, Romans, Venetians, etc., place being Romans and Venetians before being Italians. In Spain, Catalanes, Madrilenos, etc., place being Catalanes and Madrilenos before being Spaniards. My point is that it's surprising that the EU has survived this long and I believe that the only reason why it has survived is because it was being held together by the stronger economies but now the true colors are emerging and it seems that it's getting more fragile rapidly.
    • SN
      Shmuel N.
      21 April 2020 @ 00:49
      This is a very interesting perspective, but keep in mind that even Romans and Venetians might have differences they are still the same nation, that is not the same with Romans and Catalanes. Some of the goals of the EU were to smooth these differences. The idea behind that was that nationalism causes all our problems. I think that the EU fails to deliver that, cause they based their solution that we do not need nationalism, while in real life nationalism is an important aspect in the strength of a country.
    • SM
      Stephan M.
      21 April 2020 @ 10:26
      From real life: Everything under Naples called "North Africa" (car number plate for Naples is "NA) by Italians.
  • MT
    Mike T.
    21 April 2020 @ 09:08
    Traders exiting their positions does not fully explain yesterdays move in the front month /CLK0 futures contract. I think a better explanation being positions in the front month futures /CLK0 expiring today were FORCIBLY liquidated yesterday by Clearing Firms & Brokerages to remove the risk to themselves of customers being required to take delivery remembering of course they are very few OIL traders in /CL than could actually facilitate receiving a physical delivery of the black stuff. Also the reason the price went negative in /CLK0 (May Contract) was due to the price had to get below the cost of storage and by way of illustrating the principle i.e. no one would take delivery of oil even at $1 a barrel if the cost of storage was $30 so hence the price had to go negative in the front month contract for there to be any chance of a buyer being tempted to step in.
    • MT
      Mike T.
      21 April 2020 @ 09:37
      and ...... I should have added the Traders who were forcibly liquidated were those that were long, BUT it's traders who are short /CLK0 that determine delivery and yesterday the mistake the longs still in CLK0 made was not to have rolled out into the June /CLM0 at least 7 days ago. They took the risk of taking it to the wire and then the management/exit of the positions in /CLK0 were taken out of their hands and they got burnt really bad losses in the Billions (sorry to be in-precise) but losses had to be a huge number as yesterday when /CLK0 opened for trading Sunday night the open interest was still in six figures. The lesson to be learnt for the June Contract longs, do not take it to the wire, don't wait until the day before expiry, roll out in time to the next month /CLN0 (July 20) at least 7days prior ideally 14 days before June expiry.
  • ML
    Mark L.
    20 April 2020 @ 22:49
    I stand ready to help traders with any storage shortages in gold for -$500.
    • JF
      Jack F. | Real Vision
      20 April 2020 @ 23:46
      Hah! Me too
    • BF
      Billy F.
      21 April 2020 @ 01:34
    • JF
      Jack F. | Real Vision
      21 April 2020 @ 02:09
      Sure Billy. In today's market insanity, traders were exiting their positions in physical oil at NEGATIVE prices. Mark is saying that if anyone wanted to sell him gold at a negative price, he is ready for that.
    • MT
      Mike T.
      21 April 2020 @ 08:59
      Jack F. if I may, but the wording used in your comment to Billy " Traders were exiting their positions ...." is not 100% correct. I think a better explanation being positions in the front month futures /CLK0 expiring today at 1pm CET were forcibly liquidated yesterday by Clearing Firms & Brokerages to remove the risk to themselves of customers being required to take delivery remembering of course they are very few OIL traders in /CL than could actually facilitate receiving a physical delivery of the black stuff. Also the reason the price went negative in /CLK0, was due to the this particular commodity had to get below the cost of storage and by way of illustrating the principle i.e. no one would take delivery of oil at $1 a barrel if the cost of storage was $30 so hence the price had to go negative in the particular front month futures contract.
  • AS
    Amit S.
    21 April 2020 @ 08:11
    Can someone enlighten me why retail investors are ploughing in to the USO etf, what am I missing?
    • AH
      Andrew H.
      21 April 2020 @ 08:58
      Same reason they pile into TSLA and SHOP.
  • DM
    Dominic M.
    21 April 2020 @ 02:15
    The Fed has turned the stock market into a Ponzi scheme.
    • ST
      Simon T.
      21 April 2020 @ 08:55
      Bernard Madoff or Alan Greenspan / Ben Bernanke / Janet Yellen - same thing - END the FED
  • DL
    David L.
    21 April 2020 @ 00:51
    Thanks, guys, another good discussion. Speaking of sovereign debt, Argentina is back on the radar. (With more on the way?) On a technical note, when comparing corona virus cases in different countries, wouldn't it be more appropriate to list cases per million people?
    • DB
      Daniella B.
      21 April 2020 @ 07:51
      these cross-country comparisons are futile anyway, taking into account that in most places there are no proper testing (or no tests at all)
  • JA
    Jordan A.
    21 April 2020 @ 01:56
    Since when has morality been considered by these central planners? We need Austrian economics and we need it now.
    • GD
      Guv D.
      21 April 2020 @ 07:48
      here here
  • GK
    21 April 2020 @ 06:21
    Please bring the oil experts back for a show.
  • DD
    Derek D.
    21 April 2020 @ 03:35
    Always appreciate the time you guys put into these conversations.
  • SP
    Simone P.
    20 April 2020 @ 23:16
    Ash, very true. As an Italian living in NYC for almost 10 years, I can tell you that the US states are more similar to the regions within each European country than to the countries themselves. Between countries, there are the same differences as among USA, Canada and Mexico, so to speak. It's just different countries, with no "real" interest of being together, besides a currency and easier trade and travel. The big cultural differences will take a very long time - if ever - to be streamlined.
    • SL
      Sean L.
      20 April 2020 @ 23:30
      I'd argue that linguistic barriers make Canada/US a significantly more favourable comparison - British spelling aside.
    • AB
      Ash B. | Real Vision
      21 April 2020 @ 00:58
      I want to be an optimist — but it really isn't easy here...
    • DS
      David S.
      21 April 2020 @ 02:30
      If the United States of America were forming today, it would probably not be successful. The US has been through a lot and still there are large regional divides. Forming the United States of Europe is much more difficult. There are certainly common interests, but not a common identity. Even the countries of Italy and Germany are nineteenth century constructions. DLS
  • VW
    Vernon W.
    21 April 2020 @ 01:57
    Ash that 420 remark made me lol. What companies are going to be floating this oil around?
  • JA
    Johnny A.
    20 April 2020 @ 22:56
    Which ETF holds shale debt? Google doesn't seem to have an answer to this question :/ Also, great chat! You two rule :)
    • JS
      Jim S.
      21 April 2020 @ 01:47
      Probably xop, but it’s been hammered
    • JS
      Jim S.
      21 April 2020 @ 01:47
      Sorry, misread your question
  • LA
    Linda A.
    21 April 2020 @ 01:28
    Nice! The RV boot camp twins! Love these daily updates. So hard to see the stock markets so high with oil, retail, the economy just collapsing. If u add on the cold war between US vs China, Russia & Saudi things are just escalating to a boiling point.
  • SL
    Sean L.
    20 April 2020 @ 22:44
    You guys nailed it here - this is proof of how quickly the mainstream narrative can deteriorate. I have a feeling this -$37 number today is going to look like a very obvious warning indicator for what was to come when we look back on all of this a decade from now.
    • AB
      Ash B. | Real Vision
      20 April 2020 @ 22:50
      It’s interesting to me to see how many folks are dismissing this out of hand as a trivial technical glitch.
    • HJ
      Hendrik J.
      20 April 2020 @ 23:13
      Right, just like the SEP repo glitch
    • RA
      Robert A.
      20 April 2020 @ 23:47
      Kind of like those “tiny little” Repo problems in September 2019 Ash.
    • AB
      Ash B. | Real Vision
      20 April 2020 @ 23:58
    • DL
      David L.
      21 April 2020 @ 01:02
      Yes, as discussed, the level of demand destruction this indicates is astounding.
    • AB
      Ash B. | Real Vision
      21 April 2020 @ 01:26
      Here's a fun white paper from BIS. https://www.bis.org/publ/qtrpdf/r_qt1912v.htm There conclusion is pretty blunt: "Besides these shifts in market structure and balance sheet composition, other factors may help to explain why banks did not lend into the repo market, despite attractive profit opportunities. A reduction in money market activity is a natural by-product of central bank balance sheet expansion. If it persists for a prolonged period, it may result in hysteresis effects that hamper market functioning. For instance, the internal processes and knowledge that banks need to ensure prompt and smooth market operations may start to decay. This could take the form of staff inexperience and fewer market-makers, slowing internal processes. Moreover, for regulatory requirements - the liquidity coverage ratio - reserves and Treasuries are high-quality liquid assets (HQLA) of equivalent standing. But in practice, especially when managing internal intraday liquidity needs, banks prefer to keep reserves for their superior availability."
  • co
    carlos o.
    20 April 2020 @ 23:45
    How does this translates into bankruptcies in the oil sector? how would it play out. Im from Mexico and PEMEX was already struggling as it is, but what are the secondary and tertiary effects?
    • DL
      David L.
      21 April 2020 @ 00:58
      Probably the shale companies go bankrupt followed shortly by difficulties in export dependent countries (Ecuador? Mexico? Iran? etc.)
  • SN
    Shmuel N.
    21 April 2020 @ 00:44
    Thank you for addressing the opposite point of view and explaining the equities rally we experience.
  • JS
    Jim S.
    21 April 2020 @ 00:20
    Anyone think you can see similar thing happen to Brent in the coming month?
  • GP
    Giorgio P.
    21 April 2020 @ 00:02
    Where can I find Ed's article about sovereign/nonsovereign debtors? Great show as always guys ;)
    • AB
      Ash B. | Real Vision
      21 April 2020 @ 00:09
  • TW
    Thomas W.
    20 April 2020 @ 23:51
    A series of debt crises played key roles in the develop of the United States as a union. American cultural identity came with time. There have been iterations of European unity over a much longer history. I don't think it would be any less surprising than the US in coming together. The EU was unfortunately constructed by what was easiest first rather a logical chain of dependancies. The point that it is fiscal union or breakup is seems very accurate. Those are technical challenges though. The difference is that at every stage of American development someone was able to step forward and articulate a common idea. That doesn't seem forthcoming for the EU.
  • OT
    Omar T.
    20 April 2020 @ 23:38
    Raoul "oddly prescient" :)
  • SS
    Shanthi S.
    20 April 2020 @ 23:20
    Great show. Thank you both :)
  • FG
    Flavio G.
    20 April 2020 @ 23:14
    This negative price is going to freak everyone in the oil biz. Expecting serious output pull-back. Expecting a steep drop in WTI supply soon rather than later. Short at your peril.
  • TS
    Tamim S.
    20 April 2020 @ 23:07
    "It's 4:20pm on 4/20, like what are these guys smoking?" -Ash
  • DS
    David S.
    20 April 2020 @ 23:06
    The Fed cannot be the ECONOMY. Only higher oil prices will bail out shale. This requires the reemergence of oil demand and OPEC pricing, not the Fed. The Fed will have its hands full just bailing out the US government with no tax revenues and oceans of expenses. President Trump knows low revenue and high expenses are the fastest way to bankruptcy. He is trying to open the country for business to restart tax receipts. The problem is the earlier you open, the longer it will take to stay open. Absolutely no easy solution. DLS
  • RB
    Ron B.
    20 April 2020 @ 22:49
  • PM
    Philip M.
    20 April 2020 @ 22:37
    There seems to be a hidden message in these hair cuts... Time to "go short"? Hmm...
    • AB
      Ash B. | Real Vision
      20 April 2020 @ 22:42