Daily Briefing – April 21, 2020

Published on
April 21st, 2020
Duration
35 minutes


Daily Briefing – April 21, 2020

Daily Briefing ·
Featuring Nick Correa, Ash Bennington, and Ed Harrison

Published on: April 21st, 2020 • Duration: 35 minutes

Ash Bennington hosts Ed Harrison, Real Vision's managing editor, to break down the day's events. In today's episode, Bennington and Harrison continue their discussion on oil markets — and tie the broader macroeconomic fundamentals into technical market dynamics. The pair also discuss MMT, the structure of the USO ETF, and emerging market debt forbearance.

Comments

Transcript

  • WB
    Walter B.
    22 April 2020 @ 12:02
    Can we get Gabrielle to send us articles?
    • GH
      Gabrielle H. | Real Vision
      23 April 2020 @ 15:26
      Walter, we're looking into something that could provide links for you all!
  • DR
    Derrick R.
    22 April 2020 @ 21:11
    Roger's best guess on DXY at end of Q3? Will the oil crash be a catalyst for a big move before then?
  • ad
    alain d.
    22 April 2020 @ 20:50
    ECB confirms acceptance of junk debt as collateral ahead of imminent Italy downgrade. Will it impact the gold market?
  • FA
    Firas A.
    22 April 2020 @ 19:53
    Can you please speak about Saudi / GCC balance of payments and currency peg situation?
  • DS
    David S.
    22 April 2020 @ 18:43
    Sorry for the bevy of comments yesterday. One was enough. The news of yesterday about opening tattoo parlors, gyms, restaurants and theaters in some US states, the fact that the antibody test gives many false positives, the new outbreaks in Asia countries with good compliance, the report that hydroxychloroquine does not mitigate COVID-19 infections while increasing mortality rates, and the reinfection rate in Singapore is casting doubt on Sweden’s hope for herd immunity; I would suggest that my new US timetable for getting to a new normal will be closer to another year and a half. Two possibilities to end this crisis that I can think of - a drug that mitigates the severity of COVID-19 and/or a vaccine. We need some good news. DLS
  • CB
    C B.
    22 April 2020 @ 18:31
    Fascinating discussion of MMT and the inflationary implications - would love to see this subject covered in a full hour, with analysis of how it might affect different asset classes.
  • GT
    Guillaume T.
    22 April 2020 @ 18:23
    I do have an oil rack who can be filled up with wine! (Happy to help, we are all in this together!)
  • OC
    Otto C.
    22 April 2020 @ 16:42
    The Daily Briefings are great!!!! Ash, thank you for asking the right questions and for keeping it down to earth whenever discussions get too technical. Ed, you are a wealth of diverse knowledge that helps clarify many questions. Keep up the great work!!!
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 16:59
      Thanks, Otto.
  • JT
    Jayne T.
    22 April 2020 @ 12:22
    Shift in demand? Just an observation. In polling women friends (with money) and asking them what they will spend their money on when this is over and for the next 18 months: hair salons, spas, yoga/exercise classes, travel. Not included: more clothes, more jewelry, more luxury items, new car. So maybe demand will come back, but it may shift. Again, just a thought.
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 14:37
      Very interesting point. And demand may shift in ways we can't yet predict.
  • GG
    G G.
    22 April 2020 @ 03:08
    I work as a trader for a oil trading company. It's astonishing the number of people that have reached out to me regarding investing in $USO. Luckily I persuaded them not to. I can't say I was successful at explaining negative yield rolls.
    • DR
      Derrick R.
      22 April 2020 @ 13:30
      LOL at that last sentence..
  • FA
    Frank A.
    22 April 2020 @ 12:19
    The only one that would be advantaged by SDR’s would be the corrupt leadership and China being paid back for what they already lent not new investment. Under this view private creditors (which are not Chinese) take it in the shorts. Even the anti-free markets Treasury is against this SDR proposal.
  • AK
    Ado K.
    22 April 2020 @ 09:40
    SDR still has the same fundamental problem, the amount of human effort to create it is zero. Bitcoin and Gold require real time effort and investment of capital and human time to be created. This is a fundamental basis point for long lasting value. The notion to that we are going to 5 x the balance sheet to 25 trillion and not see hyper inflation is to me a rather interesting one. The outcome of hyperinflation is purely based of arithmetic and the one that we will avoid hyperinflation is based on narrative. In the long run narrative is just that, narrative and arithmetic is arithmetic.
  • EF
    EDWARD F.
    22 April 2020 @ 09:26
    What time are these videos released?
  • PJ
    Peter J.
    22 April 2020 @ 08:56
    Great update yet again. My concern when this daily brief kicked off was that it may get repetitive and go over the same old ground. Not the case, fresh, new and relevant every day. Keep it going.
    • PJ
      Peter J.
      22 April 2020 @ 09:09
      Albert Edwards , yes please!
  • NK
    Nick K.
    22 April 2020 @ 07:54
    Ed, please can we see the fuller argument and discussion as to why the US debt explosion will result in a "Nothing burger". Raoul has been pretty bang on with this thesis so far. But the latter phases of it rely on their being a loss in faith in US debt securities and significant devaluation of USD. Hence he is buying all the Gold and Bitcoin he can afford. Why do you think nothing happens and everyone keeps swallowing USD price rise. Doesn't the US economy weaken if they become less competitive with the rest of the world in cost of production?
  • sc
    sung c.
    22 April 2020 @ 05:28
    Just an observation to share: This morning, I was driving on the 405 freeway and the 101 fwy junction; known to be the busiest intersection in the United States by volume of cars per hour travelled. It was 10am and I was able to drive at 80 MPH (usually bumper to bumper at 2 MPH). The only time traffic slowed was when I passed a section where CalTrans had closed down the HOV lanes on both sides to do some construction work. Imagine that! Construction work on HOV lanes, on the busiest section of the 405 fwy, on a weekday, at 10 am. Why was this happening? Because traffic was down by 80% of the usual traffic flow. What's even more amazing is that this week's traffic is higher than the previous week's traffic. The last time I saw traffic like this was on Sundays in 1970, when the population of L.A. was less than half what we have today. Just thought I'd put that out there.
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 07:48
      Very interesting. We’re seeing similar scenes in NYC.
  • PC
    Peter C.
    22 April 2020 @ 07:38
    What happened to US equity markets today? eg MAGA's leadership reversal
  • Ev
    Emiel v.
    22 April 2020 @ 07:31
    I miss Jack :(
  • MJ
    Matthew J.
    22 April 2020 @ 07:16
    Ed and Ash, thanks as always for your update. I am interested about the idea that Oil can be seen as a leading indicator here, it suggests, as explained today, that we could be entering the Insolvency Phase of Raoul's thesis is that correct? So if we are indeed at the insolvency phase faster than anticipated, how do we play that downside with respect to avoiding the fallen angel effect of the fed, it has been discussed, i'd like to clarify please. Am I right that Ed had mentioned there are plays to short non fallen angle junk. I recall a Russel index being mentioned in previous weeks that takes out the risk of being caught in the fallen angel trade, do i understand this correctly?
  • FG
    Flavio G.
    21 April 2020 @ 22:51
    To keep in mind: Car mileage has picked up in China to a HIGHER number than pre-Covid due to public transport disease-spreading concerns ( workdays ). Cars represent 2/3 of oil consumption. This tells me that the West and the rest of the world will have a LOT more consumption kicking-in in Q3-Q4. Perfect for now-depressed oil deliveries then.
    • RC
      Rich C.
      21 April 2020 @ 23:45
      Anyone can go to Tomtom and look at current traffic yoy. It will complete undermine your above assertion. Volume mildly down during work hours and gone during weekends. Pick a city...Any city
    • FG
      Flavio G.
      22 April 2020 @ 05:52
      Rich, please take Shenzhen and compare only working days to history. Cheers.
  • CP
    Cosimo P.
    22 April 2020 @ 05:47
    There's another way supply can collapse: military attacks on airfields. I think it's going to be higher and higher risk moving forward - if all it takes to get oil back to $100 is to wipe out Saudi oil fields, and USA leaves the gulf - who will stop Russia/Iran/...?
    • CP
      Cosimo P.
      22 April 2020 @ 05:48
      sorry typo: oil fields
  • MC
    Michael C.
    22 April 2020 @ 00:53
    Ed, EM countries need USD so if you are right and China can help EM you are saying China has access to surplus USD beyond their own needs. Begs the question how China is getting access to USD at the moment since the PBoC is not on the Feds Swap List of ellgible Central Banks and they can't get USD through trade. Something smells.
    • CP
      Curt P.
      22 April 2020 @ 01:01
      EM countries do not need USD. They can default on any debt they have. EM countries (all are different) need particular imports in exchange for their exports. If China can facilitate that and ensure their security (not being attacked by USA), they will sign up.
    • KE
      Kathryn E.
      22 April 2020 @ 02:07
      I believe what they mean is that does dollars are debts to China which they can negotiate with the EM countries by getting real assets in return. However, I do think that money they lend doesn't come from thin air and China doesn't have enough $ to absorb that type of deal on a big scale when they need to fight bankruptcies at home.
    • FG
      Flavio G.
      22 April 2020 @ 05:44
      China may provide USD denominated treasuries so EM can liquidate those to cash in USD or use them for interest/coupon payments.
  • sc
    sung c.
    22 April 2020 @ 05:15
    I have two thoughts to share: 1) What would happen if holders of gold futures decided to do exactly the opposite of what WTI oil future holders did; that is, instead of refusing to accept the oil and selling it at a loss, what if the gold future holders decided to accept the physical bullion and asked for gold delivery? With the current difficulty in receiving physical gold, it would shoot the price of gold to sky high levels resulting in exactly the opposite of what happened in the oil market. 2) In the last two days of stock market loss, -1100 point down in .DJI so far this week, Bitcoin has been holding steady with very little movement. Could it be that weak holders of BTC have been washed out from the March panic and BTC is starting to prepare for upcoming halving with long term hodlers now in control?
  • UJ
    Ulf J.
    22 April 2020 @ 05:05
    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/
  • DS
    David S.
    22 April 2020 @ 04:04
    Governors cannot hide behind the folly that you should still keep social distancing while reopening theri states - tattoo parlors? This is passed hubris and to the nest level of Ate. Only one level left retribution. The Furies are ready. They have my permission. DLS
  • DS
    David S.
    22 April 2020 @ 03:32
    As an aside. I am still under the influence of Bacchus. I have discussed with Dante – direct line - a new special place in Hell for souls who mislead people on Coronavirus. It is not as bad as the place in Hell for the governors who said the Black Death was just the flu – 50% mortality - but similar. I leave the punishment up to Satan. Maybe being on a ventilator for eternity. That was cathartic. I will watch the presentation now. DLs
  • DS
    David S.
    22 April 2020 @ 03:21
    Sorry for the crudeness of these comments, but I do believe that governors should be held responsible for their decisions that impact the citizens of their states personally. I am glad I came back from my walk with a few beers too many at a friend"s house so I can be honest. If I were sober I would have been more discreet. I find this unacceptable so there it is. Sometimes being discrete is insufficient. Off to bed to sober up before dinner. Life outside of Georgia and Florida is good. They should not be able to hide behind " I told you do have good social distancing.." DLS
  • DS
    David S.
    22 April 2020 @ 03:12
    I find it impossible for me to believe that governors will risk the lives and accept no responsibility. They may be right, but put your John Hancock on the line. Man up. DLS
  • DS
    David S.
    22 April 2020 @ 03:09
    We are moving from the hope phase to the denial phase. Look how the proclamations from Georgia and Florida. Let' these governors put their personal promise on the line.. It will not happen as they know many will die. All the people who will die should be able to sue them personally. There is not reasons that they should be off the hook. Allow people to die, and not take responsibility for. DLs
  • DS
    David S.
    22 April 2020 @ 03:02
    It is important for all the ambulance chasers need a direct quote from the Governors of Georgia and Florida that there are not risks to open everything. Please make a statement if you really believe that there is no problem,. Iconoclast need to show that they really believe that there are no risk and that they will accept all the responsibility of any deaths personally. Man up. DLS
  • Am
    Alex m.
    22 April 2020 @ 02:56
    Love the haircuts! Do either of you have a view on gold in an inflationary vs deflationary environment you could share? I have a barbell with cash and gold but would appreciate your views. thanks
  • DR
    Derrick R.
    22 April 2020 @ 02:53
    The content in these daily updates is so good, and the intros are awesome as well. Enjoyed listening to Ed explain the MMT / deficit question in particular. I hope we can hear from Roger tomorrow on whether he thinks DXY is potentially going to surge sooner than expected now, with the destruction of so much US dollar generation thanks to the unprecedented oil crash.
  • DS
    David S.
    22 April 2020 @ 02:52
    I am tired of this. It great that some states are opening early. We need more data from stupid places to see what is happening when you reopen. Thank you Fox News for your help in opening when risk is still high. I think that Fox should stop at home working , come together and show us there is no problem. You can be around each other, touch each other, go to to bed with each other and there is not problem. Thanks for being our eyes and ears that Coronavirus is stupid and nothing to worry about. You are great. D:LS
  • DM
    David M.
    22 April 2020 @ 02:22
    I think its interesting when the average retail investor looks at USO, I don't even think they know what they're getting into. My suspicion is that I don't think they understand what it is, and the reason I say that is because when I first started investing, I didn't know either. I just thought it was like an etf of oil companies or something. Little do they know that USO is buying mainly futures contracts which is a whole different world, and they don't understand the ramifications of what's happening in the paper market.
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 02:45
      Indeed.
  • MR
    Michael R.
    22 April 2020 @ 02:18
    Expectations are high for Ash and Roger to discuss and display recommended wines for Quarantine. Please do not disappoint us plebes. We could use a nice glass of good wine these days. ;)
  • MR
    Michael R.
    22 April 2020 @ 02:09
    PPP, MMT, UBI. Sooner or later you are talking about real money - haha!
  • MR
    Michael R.
    22 April 2020 @ 02:08
    Shit, if Kim Jong Un is dead, it will be a jailbreak for the Chinese border, considering that the South Korean border is so heavily mined.
  • MR
    Michael R.
    22 April 2020 @ 02:05
    Ed it locked on. China's Belt & Road initiative to assume ownership of ports worldwide to control supply chains. If China faces default, they will start a war.
  • JD
    James D.
    22 April 2020 @ 01:16
    Love your work. Thank you both. When CV-19 goes away, I see a road show coming. Make sure Sacramento is a tour stop; bring your road bikes.
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 01:56
      Love that idea!
  • OO
    Oliver O.
    21 April 2020 @ 23:56
    Amazing that creditors keep lending to Argentina after multiple recent defaults. Paul Singer must be licking his chops...
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 00:18
      I was actually thinking about mentioning Elliott...but we were running short on time. There's a lot of interesting context there.
    • CP
      Curt P.
      22 April 2020 @ 00:56
      Argentina is the world's best defaulter. They are able to do this so many times because they are self sufficient in pretty much everything they need to survive, and so it is near impossible to put a boot on their throat. They also are a very strategic geography which can play off the big powers for advantage. Singer only got paid out because Argentina borrowed more money from some new suckers, and paid off Singer in the process. Otherwise he would have been zeroed. Never ever lend money or make investments in Argentina - they have millions of ways to make it sound great going in and zillions of way to make sure you never get it back.
  • RM
    Russell M.
    21 April 2020 @ 22:54
    5 year plans? The U.S.S.R had 20 5 year plans before they collapsed. If they don't have a market economy, they will not get very far.
    • AB
      Ash B. | Real Vision
      21 April 2020 @ 23:00
      That’s an interesting point. China’s goal, in theory, is a hybrid state capitalist model. We’ll see.
    • TS
      Tom S.
      21 April 2020 @ 23:05
      Yet China has brought more people (and a greater percentage of population)) out of poverty in a shorter period than anyone else in history. Doesn't mean I like or support their methods.
    • CS
      Charles S.
      21 April 2020 @ 23:11
      "out of poverty" -- much to do w/ leadership's ability to attract foreign capital ? -- what happens when foreign inflows slow (likely going on the past few years ?)
    • TS
      Tom S.
      22 April 2020 @ 00:21
      I don't know Charles S., but my own limited experience in China suggests 1) they play the long game exceptionally well - positive, 2) they are ever pragmatic - positive, and while not unique 3) they are abusive of power - extremely negative.
    • CP
      Curt P.
      22 April 2020 @ 00:50
      The existence of 5 year plans is irrelevant to them being successful or not. USSR died because it was economically choked off by the USA, who had control of the three most productive zones of the planet while the USSR had the marginal heartland. China is not the USSR in any way. Unless something very drastic is done in the USA, China will easily win. China is a fascist state run by extremely competent leadership.
  • JS
    Jim S.
    22 April 2020 @ 00:47
    I would really like to see Ed interview Richard Duncan on MMT, our deflationary spiral, and possible inflation. I think that back and forth between you two would be awesome for us to understand how all these macro pieces come together.
  • CP
    Curt P.
    22 April 2020 @ 00:46
    Good discussion on MMT. Only downside it has is that it allocates the money creation function away from the entities who are most plugged in to the real economy (regional banks). Current system where NYC money center banks are in command of money creation function no good though. China playing the long game - nice example by Ed. Worth mentioning that it is also about security. EM states want to be confident that if they get tight with China, that a US CGB isn't going to attack them.
  • VB
    Vincent B.
    22 April 2020 @ 00:24
    Great interview Ash. Ed brilliant as usual :)
  • DL
    David L.
    21 April 2020 @ 23:55
    Another good discussion, thanks. Interesting idea about China providing predatory debt relief to EM, although if I understand Kyle Bass correctly, they may be strapped for hard currency now, which would make it difficult. Clearly a wave of EM defaults would be a negative for already stressed developed economies. Do you think the Fed would be motivated to provide EM relief as a way of indirectly boosting the U.S. economy?
  • RK
    Robert K.
    21 April 2020 @ 23:46
    Regarding MMT: brilliant, let's give the idiot savants at our financial institutions even more power. While arguing all the quantitative aspects of MMT we are perhaps forgetting the qualitative damage all these "tricks" do to markets and society. We've witnessed a more than a decade long pump driven by central banks preventing any attempt of the market to clear itself. What we have now is a fragile over-financialised distorted economy where price discovery is totally annihilated. After we've declared we have the "best economy ever" the government now needs to step in bailing out companies that are unable to survive few weeks of lost revenue!
  • HC
    Hahns C.
    21 April 2020 @ 23:35
    Should Argentina defaults - look for an assassination.
    • FG
      Flavio G.
      21 April 2020 @ 23:39
      Markets have discounted Argentina defaulting.
  • HC
    Hahns C.
    21 April 2020 @ 23:22
    Normal barrel of oil refining meets the transportation fractions - diesel, Jet Petrol, and other Heavy Petrol distillates. The gasoline fractions are cream on proof. The demand destruction of the consumption sector originates demand destruction of transportation sectors. This is a sad situation for those in this business. We doomed to MUCH higher priced fuel in the coming years.
    • HC
      Hahns C.
      21 April 2020 @ 23:23
      ....cream on profit ^ ------sorry!
  • DC
    Dominick C.
    21 April 2020 @ 23:12
    On the oil side... the problem is demand far more than supply
    • AB
      Ash B. | Real Vision
      21 April 2020 @ 23:14
      Yes. I think so too.
  • CS
    Charles S.
    21 April 2020 @ 23:04
    SDR & Rickards: I've heard him talk about SDRs for perhaps 10 yrs -- he has at a couple of times made it clear that he considers the SDR a stop-gap at best.
  • CS
    Charles S.
    21 April 2020 @ 23:04
    ? US too isolationist to counter China's resources-deal-making abroad ? Perhaps Trump's taste for deals will lead to some US-advantageous plays abroad -- Trump is against the BAD deals abroad, not deals bc they're abroad. Recall his businesses are all over the world, famously including interests in Russia. This comment is intended to be apolitical !
  • OT
    Omar T.
    21 April 2020 @ 22:39
    can you add thoughts on possible trades to take advantage of different setups you are talking about. Thanks!
    • TS
      Tom S.
      21 April 2020 @ 23:02
      Personally I appreciate the current format, providing great background rather than a 'trade by numbers' prognostication.
  • BS
    Brian S.
    21 April 2020 @ 22:59
    Where is USD going from here?
  • FG
    Flavio G.
    21 April 2020 @ 22:59
    Funny and unusual thing happened with USO today: USO longish-dated options price was more stable than USO itself. How come? Price drops on the underlying was being compensated by significant increase on implied volatility.
  • PB
    Paul B.
    21 April 2020 @ 22:55
    EM are in a very good position to dish out cents on the Dollar...The US cant afford to smoke the debt and Sky Rocket the USD...30 cents seems about right ED maybe even less
  • PB
    Paul B.
    21 April 2020 @ 22:51
    I tend to agree with the SDR story....I wouldn't like to bet on it however. ED is spot on here...If the SDR doesnt bail the EM then China will, and for this reason I think the SDR will have more weight
  • MC
    Mark C.
    21 April 2020 @ 22:48
    You need to round out the information about the correctional facility with the # deaths [zero]. While its early days the total mortality rate across all inmates tests in Ohio is 0.25% (source: https://drc.ohio.gov/Portals/0/DRC%20COVID-19%20Information%2004-19-2020%20%201305.pdf) . Michigan's mortality is about four times lower over a larger data set. The challenge with ALL of the initial models was that we have never known the denominator (ie the number of asymptomatic cases).
  • MT
    Mark T.
    21 April 2020 @ 22:44
    Good segment again. I look forward to 3pm everyday so I can watch this! (West Coast time)
  • ns
    niall s.
    21 April 2020 @ 22:28
    Why to I think of Toomstone when I hear the cheerful intro gingle and no shortage of budding cowboys.