Daily Briefing – April 22, 2020

Published on
April 22nd, 2020
34 minutes

Daily Briefing – April 22, 2020

Daily Briefing ·
Featuring Nick Correa, Ash Bennington, and Roger Hirst

Published on: April 22nd, 2020 • Duration: 34 minutes

Ash Bennington hosts Roger Hirst for a discussion about governments' response to coronavirus and its implications for fiscal and monetary policy. The pair also cover the broader outlook for the global economy and the risk of structural changes caused by the pandemic.



  • PC
    Peter C.
    23 April 2020 @ 10:24
    The narrative that I hear Ash talking about and many others as well is that we more or less have the virus under control now so the next stage is the phased restart of the economy but the big challenge will be this fall when a second wave hits us. While the fall will be challenging due to the combined impact of COVID and the flu, there is no reason to think that there is any 'back to normality' in the mean time. The only reason we are keeping the virus in check now is because of the lock-down. Once we start the economy and as a result relax social distancing this contagious virus will swing back. We already know that the weather will not sufficiently slow it down, which means that the summer is not much better than the falll from that perspective. An other assumption is that we can now better deal with it compared to two months ago. I have my doubts. A very smart control mechanism needs to be in place to let a big part of the economy run in anything that resembles normality to the keep the R0 on average less than one during that period. The statistic of most Western countries show that even in lock-down, the R vallue is still 0.7-0.8. Anybody who understands control theory knows that we will likely fail without interrupting the system to reduce its amplitude. This is simply a result of a few dangerous aspects of the epidemic: massive exponential growth of infections, amplified by super-spreaders and asymptomatic spreading, and a huge delay between being infected and being hospitalized. I fear that any state that opens soon without the proper control system in place will need to close a few weeks later simply because the medical system will break-down. This looks to be the destiny of many US states. At an R vallue of only 0.7-0.8 this lock-down period will again take a long time (1-2 months) before a restart can be tested again, hopefully with better measures in place.
    • AB
      Ash B. | Real Vision
      23 April 2020 @ 14:55
      Hi, Peter. Interesting points. Thanks for the comment. I wouldn’t say we have the virus under control. Just that we’ve managed to flatten growth with Draconian social restriction. I’m with you: Very uncertain as we look ahead. PS Have you seen any interesting models for growth and control mechanisms that I might want to take a look at?
    • PC
      Peter C.
      23 April 2020 @ 17:07
      Hi Ash. I use an epidemic calculator (http://gabgoh.github.io/COVID/) to estimate the epidemic and use the hospitalaziation rate and cumulative number of deaths from the CDC to tweak it. Do not use the number of cases because this is not an accurate number. You can use the model for a second wave as well by using the number of infectious people on the date of the end of the lock-down as input for the model. Not all will go back to work so I would use a number between 60-80% of the infectious population as input. I use a high percentage because most infectious people are asymptomatic or do not feel much. For the second wave you also need a new value of R0, which will depend on the actual measures in place. It will be a number between 0.7-0.8 (lock-down like) and 2-3 (no measures). I do not know good references of how to map it out depending on the measures taken. However, it is easy to see that an exit from the lock-down in the next few weeks will be dramatic. We did not reach peak hospitalization rate yet. This means that the number of COVID positive people is still about 50% of the peak a month ago. It takes a bit more than one weak to go back to the peak if we relax all social distancing measures (so for R0 = 2.2). Let say we keep some social distancing measures and people adhere to it (so for R0 close to 1.5), even in that case it takes just 2-3 weeks to go back to the peak level.
    • AB
      Ash B. | Real Vision
      24 April 2020 @ 00:21
      Thanks, Peter. I checked out the website and played around a bit with the calculator. Very interesting stuff.
    • MR
      Michael R.
      24 April 2020 @ 03:13
      It would seem that starting in the fall and winter, the virus will be back in spades with containment no longer an option. I am in the camp that thinks the 2nd wave will be worse. Rolling shutdowns of supply chains with CB's and sovereigns in a more dire position.
  • CS
    Christopher S.
    23 April 2020 @ 04:02
    The take that people will start moving away from urban cities as a result of covid might be one of the worst takes I’ve heard since this whole thing started. This is a 1 year, at most 2 year event. Look at the long term trend of population growth by county. This is a hiccup in the grand scheme and comes across as a Simple Jack take of the highest degree.
    • RH
      Roger H. | Real Vision
      23 April 2020 @ 06:08
      Hi Christopher – it’s not covid, but the heavy handed economic response that may impact the re-urbanization flows of the last 20+ years (this was not a comment on rural-urban migration of developing nations which will continue, but of the re-urbanisation trend witnessed by many developed economy city-centres). This is the trend that was kicked off by the economic changes of the 1980’s and accelerated by globalization. We’re not going to wake up one day to find that urban centres have become a ghost town (As The Specials famously described Britain’s inner cities of the early 1980’s). But, if we expect to see a move away from globalization, an understanding that people can work efficiently from home and we see the hollowing out of independent companies that contribute to the vibrancy of many inner urban areas, then the marginal utility of paying exorbitant prices for living in these areas will decline. It will be an attritional process, but peak re-urbanisation for many of these centres (e.g. London, NYC, San Fran etc) may already have been in the rear view mirror prior to coronavirus.
    • RK
      Roger K.
      23 April 2020 @ 20:52
      Funny enough most of the ppl ( specially non techies) has started to realize now that they could work from home more effectively. So why commute and expensive commercial and residential real states at all !!
  • RK
    Roger K.
    23 April 2020 @ 20:45
    Roger is spot on! these CBers are f******* us left and right ;-(
  • ca
    carlo a.
    23 April 2020 @ 20:37
    daily briefing is the best.
  • VP
    Vincent P.
    23 April 2020 @ 18:26
    Ha, Roger wanted no part of any "polly pinky rosey" ending to today's call. These are pretty good briefings, so to keep them that way, it'll be nice to hear comments following today's news of how $GILD's remdesiver drug seems to have failed phase I trial. Market's seemed to absorb that news reasonably well for now...Thanks!
  • JJ
    John J.
    23 April 2020 @ 16:54
    I enjoy the Daily Briefing very much. I would like to hear Ash and Roger address what effect the enormous debt/deficits will have on the economy and whether it will trigger inflation or deflation.
  • DM
    David M.
    23 April 2020 @ 16:52
    Roger was right on the money at the end there. Well said.
  • AH
    Allan H.
    23 April 2020 @ 00:28
    I guessed Meursault! Well done Roger. Great Briefing thx.
    • DS
      David S.
      23 April 2020 @ 02:18
      It is a Burgundy Chardonnay glass for wines aged in oak. Very good guess on the Meursault. DLS
    • PC
      Paul C.
      23 April 2020 @ 12:14
      Hears Meursault, and licks lips..
  • JE
    J E.
    23 April 2020 @ 11:07
    Exactly right about something needs to be broken. The avoidance of pain here in regards to central bank interventions, has reached ridiculous proportions — bigger than the problem itself. What’s wrong with letting shitty companies go bankrupt and junk debts default? There’s really nothing wrong with that, and the Fed is now standing in our way, the future, and progress.
  • NL
    Nicholas L.
    23 April 2020 @ 09:31
    Super clear, super informative, more Roger Hirst for the UK/European perspective please!
  • AT
    Alun T.
    23 April 2020 @ 09:24
    Another great discussion. Loving these Daily Briefings
  • MP
    Matt P.
    23 April 2020 @ 08:40
    Very much enjoying Roger Hirst's thinking... everyone on RV, but especially RH!
  • JW
    Jeff W.
    23 April 2020 @ 00:33
    There was no follow-up on yesterday's discussion about Argentina and possible default today. I am presuming it didn't happen otherwise it would have been mentioned
    • EH
      Edward H. | Real Vision
      23 April 2020 @ 07:30
      At the time of taping, European market close, it wasn’t known if Argentina would default. One has to wait out the full day to know. They have done now. They missed the payment.
  • BB
    Bob B.
    23 April 2020 @ 01:55
    For heavens sake STOP calling it liquidity!!!!!!!! It's debt and debt being transferred from corporate vampires to the public! Whole really expects this 'liquidity' to be repaid????? Inflation of default - that's not liquidity options - that's DEBT! Take off the those cloured glasses!!!!!!!!
    • SM
      Sean M.
      23 April 2020 @ 03:04
      Is liquidity defined by prices going up or the fact that many shares (or any product) change hands? When prices are going down but volume is going up, doesn't that mean there is more liquidity?
    • RH
      Roger H. | Real Vision
      23 April 2020 @ 06:20
      Hi Bob - I think of it as liquidity from central banks (monetary) and debt from government (fiscal), though its all swings and roundabouts. The public are being saddled with the debt over the long term to provide corporates today with liquidity (in order to, often undeservedly, keep their operations going).
  • AN
    Andrew N.
    23 April 2020 @ 00:44
    Hey guys, Another excellent and informative conversation. I just want to add a caveat to the Remdesivir story: The economic effects of Covid are really driven by social distancing measures put in place to slow the disease, not the biological effects of the disease itself. So, to improve the economic outlook, any treatment would have to prevent the hospitals from being overwhelmed as people return to their normal lives. It would have to be readily available to anyone who might become sick in a non-socially-restricted economy within the coming months (potentially tens of millions of people), before they arrived in hospital in an overwhelming mass. Remdesivir does not fulfill either of these criteria, even if it does cure everyone who receives it. It is administered as a 5-10 day IV drip, so you must have a hospital bed to receive it, and everything that entails. There are fewer than 1 million available (non-ICU) hospital beds in the US, so these would quickly be overwhelmed in an un-restrained situation. Secondly, considering there are at least 100,000 people currently hospitalized for Covid in the US, there is only enough supply of Remdesivir to treat these American patients. In an unrestrained situation, this supply would quickly be depleted. Based on the timetable provided by Gilead the world will not have significantly more drug before the end of the summer: (From https://www.gilead.com/purpose/advancing-global-health/covid-19/working-to-supply-remdesivir-for-covid-19) "Every day we are improving processes, shortening timelines and increasing volumes as we work to bring remdesivir to patients as soon as possible. Our goal is to produce a total of: More than 140,000 treatment courses by the end of May 2020 More than 500,000 treatment courses by October 2020 More than 1 million treatment courses by December 2020 Several million treatment courses in 2021, if required" This website also describes how difficult Remdesivir is to synthesize, and how Gilead has carefully supplied themselves with several critical precursors to ensure their production capacity. (Of course, I'm only taking them at their word about this. However, I am a scientist and I have a colleague from Wuhan, and she tells me there is consternation in China about their inability to synthesize their own supply.) Remdesivir has great humanitarian potential to prevent lung damage and save lives. But, in a non-social-contrained economy, I don't think it will prevent the hospital system from being overwhelmed, nor do I think the available supply will keep pace with demand this year. Therefore, we may have to endure social distancing until much more Remdesivir can be synthesized and deployed in IVs, or until a vaccine is developed. Unfortunately, I don't think this will happen in the coming months, and we'll have to deal with the economic consequences of our current situation.
    • JF
      Jack F. | Real Vision
      23 April 2020 @ 01:11
      Wow Andrew. Very informative - thanks for sharing
    • CP
      Curt P.
      23 April 2020 @ 01:34
      Great explication! To add, re vaccines: While there are 75 vaccines in early trials for COVID, the success of other coronavirus vaccines for animals and humans in the past has been very unsatisfactory. Further, vaccines for influenza and such provide at most 50% immunization ( 1/2 chance of gettting flu even though you were immunized). And worse, the antibodies for coronavirus deplete within as little as 2 months. The idea that a magic vaccine (like for polio) is going to come along is not reasonable. Look up David States @statesdj on twitter for more.
    • RM
      Robert M.
      23 April 2020 @ 02:35
      Well stated by Jack and Curt. As depressing as it can be to think about it, it looks like we will be dealing with this for a couple of years since a medical silver bullet has a low probability of occurring.
    • BE
      B E.
      23 April 2020 @ 03:17
      Tell me why it couldn't be administered in a hospital infusion center? Same as chemotherapy?
    • JC
      John C.
      23 April 2020 @ 06:17
      Great summary. Others have written how 'cures' for flu-like viruses typically are only up to 50% effective at best. So seems we will be stuck with this for awhile and need to sort out how to begin to open up the economy and simultaneously protect/isolate those of us who are more vulnerable. One would guess Sweden's herd immunity effort might be a part of this. But keeping sunlit beaches and other public areas closed for months on end makes no sense and is counterproductive. There needs to be a balance and society needs to get back to at least 50% of 'normal' whereby we follow social distancing protocols but open up certain stores, restaurants, work spaces etc.
  • JK
    Joachim K.
    23 April 2020 @ 04:46
    Wrong glass Roger. That’s white wine ;-)
    • RH
      Roger H. | Real Vision
      23 April 2020 @ 06:12
      Hi Joachim - Its a Riedel Vinum Oaked Chardonnay/Montrachet glass (it does look like some of their Pinot range - though unfortunately the chardonnay version holds a lower volume)
  • DS
    David S.
    22 April 2020 @ 23:14
    In six months, we will probably be seeing the same world we are seeing today unless medical science has a solution. The curve is cresting in New York State because of social distancing. I hope that Sweden's herd immunity works. It has been, however, a massive failure for elderly Swedes. Swedish officials say they should have protected the elderly better, an understatement. Over 70% of the deaths in New York State were people over 70. If we reopen America as many governors supported over the weekend there may be immediate political gains. In addition, we may be able to save the pension and social security systems through the genocide of the elderly. DLS
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 23:25
      I'm following how this unfolds in Sweden as well. (I've got a close friend from Sweden who gives me daily updates.) In the developed world, Sweden really is a major outlier from a containment policy perspective. I hope it works out well, too.
    • RM
      Robert M.
      23 April 2020 @ 02:52
      Last I looked, death rate was running 12% in Sweden. At a current death rate of 5.6% in US, if we had Sweden death rates in US, looking at 102,000 deaths. There have been only 15 pandemics worldwide since the 1300s that have had that many deaths.
    • UJ
      Ulf J.
      23 April 2020 @ 05:46
      Sweden 22 April. Confirmed cases 16004. death 1937 People in intensive care 1182 they also count the people who left the hospital. I know from a smaller place in Sweden on an elderly nursing home they reported 15 cases with COVID19 but when you looked into cases 4 was only tested for the virus the rest of them was suspected. When you talk about the elderly in the nursing home how many would died even without the virus? When the virus first hit Stockholm with COVID19 most cases were in immigration area and many of them did not even understand that the virus was in Sweden that was a big mistake nowadays they need to use many languages.
  • AB
    Ash B. | Real Vision
    22 April 2020 @ 23:14
    I've posted the link to the BIS paper I mentioned in the video. The key summary paragraph is below it. HED: "September stress in dollar repo markets: passing or structural?" https://www.bis.org/publ/qtrpdf/r_qt1912v.htm "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."
    • CM
      Cory M.
      23 April 2020 @ 02:44
      Thank you, Ash. You are so smart. Taught me a new word today too: "epistemic" ie Charlie Munger showed "epistemic humility" in the Jason Zweig interview. Thank you for all you do! ~Mark M.
  • WW
    Will W.
    23 April 2020 @ 00:43
    Great wrap-up, and Roger and Ash really hit on two of conundrums facing investors; will there be a 2nd or 3rd flare up, and to Roger's point how do you unwind the Fed's balance sheet and as investors how do we position ourselves? I am in Roger's camp, and as he correctly pointed out you can pretty much track the gains in the U.S. market with liquidity injections from the Fed, and let's not forget what happened to the market in December of 2018. I imagine Jay Powell is facing the ultimate prisoner's dilemma. On one hand he knows he did what had to be done, but then how in the hell do I get out of this mess? On lockdown I have been forced to consume way too much CNBC which forces me to not be too negative, but I do believe the dollar, oil and bond markets are the bread crumbs to follow, especially on a day like today when equities rallied hard as did gold. Too many mixed signals to sort through!
    • RM
      Robert M.
      23 April 2020 @ 02:37
      And past pandemics tell us that there is always a second wave. If you are managing risk, you should plan on that occurring.
  • CS
    Cam S.
    23 April 2020 @ 02:07
    One day we will have a briefing with Ed, Ash and Roger, and I imagine it going something like this: Ed: "That is is that.." Ash: "That's so spot on Ed.." Roger: "Pop" (background noise of wine bottle being opened and poured) Thanks and keep up the great work boys, these daily briefing's are "spot on". Cheers!
  • AH
    Allan H.
    23 April 2020 @ 00:38
    New York and London are such a function of immigration at this point and they are both already net losers of domestic population each year. They are both priced for perfection and marginal changes have a disproportionate impact..and they are both bankrupt. God forbid that interest rates ever go up in the UK as the buy to let market has already been destroyed and most mortgage holders have interest only mortgages.
    • CP
      Curt P.
      23 April 2020 @ 01:47
      Consider the knock on effects of a real estate crash in NYC/London. Those assets are the gold standard of assets in the American Empire.
  • AT
    ALAN T.
    23 April 2020 @ 00:46
    I really get so much out of these. No need to end on a positive note from my perspective.
  • HC
    Hahns C.
    23 April 2020 @ 00:29
    Remember the share buy backs inflated the markets and was accepted by policy makers because it boosted the pension funds and retirement accounts.
  • DL
    David L.
    23 April 2020 @ 00:04
    Has anyone said "in vino veritas" yet? Another insightful discussion, very useful. Thanks.
  • OC
    Otto C.
    23 April 2020 @ 00:01
    Oil is not no longer the canary in coal mine, it's the dinosaur watching the meteorite about to strike earth. The Fed is the meteorite!!!!
  • MH
    Matthew H.
    22 April 2020 @ 23:33
    So an anecdote for you, I'm in Perth Western Australia and we have had an easy run of the virus so far. I'm already seeing the general mood and attitude shift in the streets. I think we will not have our habits changed here from the experience so far unless the virus comes back with a vengeance. They will likely be changed in the areas hit hard it will not be uniform around the world. The high-density areas have mainly been the ones hit hard which will also likely be the ones that swing the economy I guess though.
  • JH
    Joel H.
    22 April 2020 @ 23:32
    just awesome guys..thanks v much for that
  • CW
    Claude W.
    22 April 2020 @ 23:31
    Can you guys stop with the "end on an upbeat note" meme? For example to talk about treatments and vaccines is upbeat. Doesn't matter if it's at the end or middle.
  • JT
    Jack T.
    22 April 2020 @ 23:25
    Would be nice if these 2 could talk for an hour. Excellent discussion.
  • OT
    Omar T.
    22 April 2020 @ 23:10
    That drug data had no control, and was only applied to severe not critical cases. https://www.nationalreview.com/2020/04/coronavirus-pandemic-gilead-remdesivir-treatment-clinical-trials-inconclusive/
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 23:19
      Omar. Yes. Absolutely right. It's a compassionate use trial. Not double-blind, placebo-controlled. It's anecdotal evidence — but, we hope, suggestive of what's to come in Remdesivir trials and in the promise of yet-to-be-developed drugs in the same class in the future. Thanks for the link.
  • HR
    Humberto R.
    22 April 2020 @ 23:14
    Excellent commentary Roger!
  • Rg
    Ruben g.
    22 April 2020 @ 23:03
    Roger is the man! good, informed honest perspective. "can we end on a positive note?" * deep breath Roger "No"
    • AB
      Ash B. | Real Vision
      22 April 2020 @ 23:04
      ^^That’s on my top ten list of favorite Roger lines.
    • JG
      Judith G.
      22 April 2020 @ 23:12
      You wrote this while I was writing my similar comment. I was sooo glad Roger said, "No."
  • JG
    Judith G.
    22 April 2020 @ 23:10
    Please do NOT concern yourselves with ending on a positive note. We count on you to provide an historically rich context and an articulate synthesis and synopsis. Your job ends there, and thank you for doing it so well...day after day.
  • LW
    Layaly W.
    22 April 2020 @ 23:02
    RV - The only group filtering signal from noise. Thanks Lads, Cheers!
  • ZW
    Zi W.
    22 April 2020 @ 22:48
    Roger Hirst, what a classy motherf**er. Enjoyed both of their analysis immensely.
  • LS
    Lemony S.
    22 April 2020 @ 22:46
    Hirst I think is the best analyst on RV currently. Great idea on the perception, Ash and he bounce great ideas off one another here regarding overpopulated/flight to cities now maybe reversing, large corporation problems that have been slowly but surely going that way for years, etc. I loved this one, guys, cheers.
  • JS
    Jon S.
    22 April 2020 @ 22:41
    I feel smarter just listening to these guys! Thanks everyone at RV!