Daily Briefing – August 31, 2020

Published on
August 31st, 2020
Duration
34 minutes


Daily Briefing – August 31, 2020

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

Published on: August 31st, 2020 • Duration: 34 minutes

How is it that the real economy can be so weak while the asset markets continue to fly? Real Vision managing editor Ed Harrison explores this and more with senior editor Ash Bennington. Ed and Ash discuss the ever-widening chasm between Wall Street and Main Street and use Hyman Minsky’s “two-price model” as a framework to understand this dichotomy, and they analyze how asset markets have responded differently to interest rate cuts than the markets for goods and services. In that context, they explain how the sinking labor force participation rate reveals a hidden unemployment which will keep inflation subdued. In the intro, Ash and Jack Farley discuss Jack’s recent interview with Jason Buck on the Real Vision blog, and they also interpret the re-opening woes of airlines and colleges.

Comments

Transcript

  • GL
    Gustavo L.
    2 September 2020 @ 11:09
    Great RVFB... both very well prepared
  • GL
    Gustavo L.
    2 September 2020 @ 11:07
    I keep hearing this nonsense of education disparities because of where you are born. Absolutely FALSE, race sex or else has NOTHING to do. People with nothing, foreigners, make it, second generation of immigrants, make it. Born Americans so drugs, drop out of high school or do not take Advantage of financial aids Stop this false narrativa. Thru history, this has been true: boys need a masculine figure You don’t fix dat... u won’t fix JACK It is cultural/societal Income inequality is crushing indeed... and that is destroying the fabric of this society End the FED or muzzle it
  • MD
    Mario D.
    2 September 2020 @ 07:54
    Great as always. The 'central banks are the only game in town' theme certainly feels like an unquestioned truth by now. I would be very interested to see Russell Napier on RV as he seems to be of a very different opinion on this.
  • BA
    Bruce A.
    2 September 2020 @ 03:03
    Tony is the boss!
  • jW
    john W.
    1 September 2020 @ 02:04
    A little bit of a ditto on the soccer stuff. I have to skip a few minutes of irrelevancy to get to the content I'm paying for. There's plenty of room for a soccer discussion on a free YouTube video anytime you want to make one. Thanks!
    • SL
      Sean L.
      1 September 2020 @ 02:43
      keep the soccer content going - love it. More than enough time for a bit of fun before the serious stuff
    • ML
      Michele L.
      1 September 2020 @ 03:48
      that's what the fast forward button is for if your time is just oh so valuable. ridiculous.
    • JE
      Jonathan E.
      1 September 2020 @ 20:23
      I really hope Man City get Messi dont you?
    • jW
      john W.
      2 September 2020 @ 02:01
      Since you asked and it's OK for soccer here, Messi to Brentford would be spectacular. This team is in the division one below the Premier League. They have specialized in acquiring great players considered cast-offs by the "big" teams. They mould and build a team on spirit and talent. They narrowly missed promotion to the Premier League last year. If Messi got them promoted then won the Prem League Championship, then you've got a story for the ages. Manchester City are the "money" team and can buy any player and consequently the championship. IMO, Messi To Man City would be boring.
  • KC
    Kamil C.
    1 September 2020 @ 20:17
    Jack I've read couple of books of your shelf, and these were great books! Unfortunately not all of your books are visible in this resolution. Jack can you post a list of the books behind you? Thank you! :)
    • JF
      Jack F. | Real Vision
      1 September 2020 @ 22:42
      For sure! Here's a quick list: Security Analysis by Graham and Dodd Titan by Ron Chernow Roger Lowenstein's biography of Warren Buffet America's Bank by Roger Lowenstein (about, you guessed it, the Fed) The Shifts and the Stocks by Martin Wolf The World in Depression 1929 - 1939 by Charles Kindleberger Game Theory for Applied Economists by Robert Gibbons A Random Walk Down Wall Street by Burton Malkiel The Undoing Project by Michael Lewis The Big Short by Michael Lewis Austerity by Mark Blyth Can It Happen Again? by Hyman Minsky Stabilizing an Unstable Economy by Hyman Minsky Bloomberg by Bloomberg (written by, you guessed it, Michael Bloomberg) When Money Dies by Adam Ferguson Banking in Crisis by John Turner
    • KC
      Kamil C.
      1 September 2020 @ 23:10
      Thank you! :)
  • TL
    Tracey L.
    1 September 2020 @ 20:31
    Great briefing. Ed--my brain hurts, but keep it coming as it forces me to contemplate more complex financial concepts. Love the soccer banter between colleagues who seem more like friends that co-workers. Keep up the good work!!!! Day's Lesson--enjoy the stock market Autobahn but be careful for reckless drivers!!!
  • MP
    Matthew P.
    1 September 2020 @ 19:15
    Good show gents!
  • MN
    MYLENE N.
    1 September 2020 @ 08:33
    Reiterating an earlier question - where is that Real Vision blog that was mentioned?
    • JF
      Jack F. | Real Vision
      1 September 2020 @ 19:12
      Hi Mylene, here's the link: https://www.realvision.com/blog/taking-the-elevator-up
  • AL
    Austin L.
    1 September 2020 @ 13:46
    Incorrect, last time VIX SPY rolling correlation went positive was December 2019
    • JF
      Jack F. | Real Vision
      1 September 2020 @ 19:11
      I'm assuming your periodicity is different. I used a 10-day correlation which I have seen other analysts use before
  • MJ
    Marius J.
    1 September 2020 @ 15:22
    Please stop soccer talk. I get that other places!!!
  • SW
    Suzanne W.
    1 September 2020 @ 12:35
    I like Jack unscripted!
  • DO
    DIOGO O.
    1 September 2020 @ 12:16
    Apparatus to move away from the FED (and Central Banks in general): Loan garantees by government to COMMERCIAL BANKS (hence, spurring money creation and flow towards investments in real economic growth, and NOT MARGIN SPECULATIVE CREDIT). Reference: RUSSEL NAPIER AND RICHARD WERNER
  • GG
    Gary G.
    1 September 2020 @ 11:39
    For Ash: John Cleese, Soccer vs Football. https://youtu.be/2sD_8prYOxo ;-P
  • MA
    Mike A.
    1 September 2020 @ 08:06
    Q.E is Deflationary not inflationary
  • MA
    Mike A.
    1 September 2020 @ 08:04
    Hey Ed check this out. I know you know Wolf Richter.Would love to get your take on this? https://wolfstreet.com/2020/08/27/unemployment-data-chaos-labor-dept-admits-seasonal-adjustments-went-haywire-during-pandemic-why-i-stopped-using-them-in-may-week-23-of-u-s-labor-market-collapse/
  • MA
    Mike A.
    1 September 2020 @ 07:59
    Jack take a look at the SKEW index.Yes when the S&P and NDX and VIX is correlated it usually precedes a drop in the markets.
  • MS
    Martin S.
    1 September 2020 @ 07:28
    Well done Jack! Good analysis, unscripted.
  • SS
    Shane S.
    1 September 2020 @ 07:19
    Bring back Jack!
  • jW
    john W.
    1 September 2020 @ 04:11
    A lot of people think Powell's JH speech is more of the same but some people think differently. "Lynette Zang - The currency reset is here", on youtube says “The last time that a fed chair made such an important speech was in the monetary regime shift that happened in the 70s”. Thoughts?
    • AI
      Andras I.
      1 September 2020 @ 06:27
      It's like watching shadow puppets
  • SC
    Sejong C.
    1 September 2020 @ 04:44
    Really looking forward to the RV blog. RV had a think tank a while ago, and that had great material to look into various data and think. I miss RVTT. I hope the blog can be a potential substitute.
  • DB
    Daniel B.
    31 August 2020 @ 23:06
    I appreciate that Ed mentioned Nikola as a ponzi scheme instead of using Tesla. Nikola is scam, but Tesla has real value.
    • DM
      Don M.
      31 August 2020 @ 23:24
      Yes the value is about 1300 P/E
    • JS
      Jon S.
      1 September 2020 @ 00:01
      Tesla is the future this is the value. My bet is that Tesla will be inexistent within 10 years... this is not apple or amazon.
    • DB
      Daniel B.
      1 September 2020 @ 04:09
      I'm glad to see there are still skeptics out there, which means the stock has more room to run. However, I also wouldn't buy at these levels.
  • PD
    Peter D.
    31 August 2020 @ 23:41
    Jack Farley killin the game, good call goin off script 👌
    • RA
      Robert A.
      1 September 2020 @ 04:03
      Please see my comment above....kudos to the producers of DB.....let the talent evolve and roll! Raoul surrounds himself with bright young motivated intellect and gives them enough room to develop. I’ve always said that RV’s secret sauce is “Curation”—content and personnel. What many don’t know is that some of the original excellent RV personnel were met and “recruited” on commuter flights in the Caymans—-you can't make this stuff up !
  • SB
    Steve B.
    1 September 2020 @ 04:00
    this was a great conversation, thank you ash and ed! but what to come of the US industrial base vis a vis long preferred outsourcing of manufacturing and a declining labor force participation rate? deflationary pressures for low wage employees alongside climbing asset prices for anyone above low wage.
  • RA
    Robert A.
    1 September 2020 @ 03:49
    I stopped the video after Jack’s “unscripted” presentation—very, very impressive. I have loved watching Jack’s progression and I must say I’m a little jealous of not having been in a position at a younger age to have climbed aboard the RV train. What Jack has done is much harder than people realize and I hope RV/DB utilizes this developing resource.....next stop Nick?—all aboard! Ash, this appears to be your baby—let Ed, Roger and Raoul help you, but run with it Ash!
  • MH
    Michael H.
    1 September 2020 @ 01:03
    You mentioned Jack wrote a blog...where do I find blogs on your site?
    • JF
      Jack F. | Real Vision
      1 September 2020 @ 03:47
      Hi Michael, here's the link to my article with Jason Buck: https://www.realvision.com/blog/taking-the-elevator-up The address for the blog is realvision.com/blog - we are still in the early stages but hopefully it will be accessible from the RV homepage soon
  • EL
    Erik L.
    1 September 2020 @ 01:34
    Most respectfully, enough soccer -- be more respectful of Real Vision subscribers' (valuable) time. Meant in all good faith, tolerance, and respect for the value of your guys -- but not about soccer, TV, and while we're at it, ditch the politics too. Thanks.
    • JM
      Jason M.
      1 September 2020 @ 02:17
      Lighten up dude, who are you...
    • ML
      Michele L.
      1 September 2020 @ 03:46
      really not hard to hit the fast forward button if it bothers you that much. good grief, relax.
  • AI
    Andras I.
    1 September 2020 @ 03:22
    Ed's casual macro masterclass.. Bravo sir! Btw..Talking about Minsky and many people requesting clearing up the bank reserve issue that's stirring up a storm recently: How about Prof. Perry Mehrling as a guest? (seems like him and Zoltan Pozsar have a slightly different angle again vs. mainstream vs. Steven Metre). More confusion or more clarity? Never know until you try!
  • IN
    I N.
    1 September 2020 @ 03:13
    Ash is probably trolling all of us on soccer; he has a shrine to Maradona on the wall we do not see, but makes it seem like he prays to Mike Piazza. Ever since I became a member of RV I started to look for those "invisible numbers" like the unreported unemployment in the US that Ed was talking about.
  • JD
    Jesse D.
    1 September 2020 @ 03:01
    In a globalized world, how do we factor participation rate if companies can just outsource work overseas?
  • BS
    Benjamin S.
    1 September 2020 @ 02:28
    I always like it when Ed Harrison is on. Very smart, insightful, and explains things well.
  • RL
    Roo L.
    1 September 2020 @ 01:44
    Ash, I am a big fan of your poker faced humor.
  • DR
    Derrick R.
    1 September 2020 @ 01:04
    Nice shout out to tradingeconomics.com - I love that site too!
  • CD
    Christopher D.
    31 August 2020 @ 22:08
    I am from Europe but Ed Harrison knows at least 100x more about soccer than me.
    • CB
      Clifford B.
      1 September 2020 @ 00:52
      If you're from Europe why are you calling it soccer?! Lol. Apologies in advance, couldn't help it!
  • GF
    Gordon F.
    1 September 2020 @ 00:48
    Another factor pushing the US into Ponzi finance is the unremitting push for more efficiency in the system, or put another way, the effort to eliminate all redundancy. As long as everything works as expected, profits are maximized, but when something goes wrong, the whole thing goes down. And eventually something will ALWAYS go wrong. Consider Just-In-Time supply lines where if any of a variety of different parts do not arrive on schedule, then the whole assembly line stops. On a larger scale, the US has outsourced huge amounts of our daily necessities to plants in China. If something really goes bad in the US-China relationship, rather than starting a shooting war, all China would need to do is cut off ALL shipments to the US. This would certainly hurt them, but I think we would quickly realize how fragile we are. Trump has imposed selective tariffs, and the Chinese have responded with others, but if they stopped everything - from antibiotics to rare earths to stuff I can't even imagine - we'd be in a world of hurt. Because we have built our whole lifestyle on a fragile system. (Imagine where Apple stock would drop to if China shut down all the Foxconn plants in China, as just a small example.) And debt itself is fragile. If you ever reach a moment that you can't stay current with your obligations, you are vulnerable to your creditors. And eventually something always goes wrong. When it does, it will seem obvious in hind-sight, but there is no way to reliably predict when that moment will arrive. Thus, the best we can do is to try to be personally prepared for those moments/events. It is certain that neither our government nor "the system" will be able to protect us when the crap enters the ventilation system.
  • SS
    Steven S.
    1 September 2020 @ 00:37
    Well done, Ed and Ash. I appreciate your insights.
  • AG
    Alan G.
    1 September 2020 @ 00:31
    Jason Buck's fund charges all in 2.5% and 28% of profits. Alof of fees for protection.
  • SG
    Skyler G.
    1 September 2020 @ 00:30
    Complex systems.
  • PH
    Peter H.
    1 September 2020 @ 00:26
    Great stuff guys!
  • CM
    Cory M.
    1 September 2020 @ 00:00
    One of the best rvdb's ever. Have to listen again!
  • JS
    Jon S.
    31 August 2020 @ 23:59
    I liked Ash, until he had no idea what does el Clasico mean (just joking) not everyone must like football in Spain during the property bubble and good times the Spanish league also had a credit bubble of top international players and not precisely in el clasico teams... when the bubble burst the inequality applied to football teams as well and the difference between real madrid and Barcelona and the rest exacerbated.
  • SS
    Stephen S.
    31 August 2020 @ 23:40
    I do appreciate Ed’s commentary.
  • SB
    Shadi B.
    31 August 2020 @ 23:33
    Great discussion Ash and Ed! I'd love to hear more thoughts about how to address "structural unemployment" going forward. I believe that the fast pace of technological change will increase the proportion of structural unemployment (as a fraction of total unemployment). The demand-supply shocks secondary to Covid19 are (in my opinion) accelerators of global reorganization of the labor force. The key dilemma is how to create economies that can withstand significant fluctuations in demand-supply, on a background where the pace of technological change is causing structural unemployment at unprecedented levels. If the fed is going to continue to inflate the balance sheet; wouldn't it be prudent to at allocate a significant proportion of the new debt to invest in education/training/entrepreneurship/manufacturing/productivity?
  • RH
    Ron H.
    31 August 2020 @ 23:32
    Just like Minsky was sidelined during his life by mainstream economists, despite his enormous accomplishments which include a theory of endogenous money that is important to understanding the discussion at hand here -- there are those out there who have understood much about these issues for quite some time, but they remain sidelined politically. Ultimately, solving these problems requires those in power to abandon the orthodoxies, a system of beliefs, on which they built their entire careers. It's like asking someone to renounce themselves, or to abandon their religion. And that assumes they care to solve these problems in the first place, even though most are insulated politically and personally by their asset inflation (the Supreme Court ruled money is "speech"). Very hard to imagine such a reckoning until it is forced by a protracted crisis.
  • BK
    Brian K.
    31 August 2020 @ 23:05
    it's baseball season. Dwight Evans(Outfielder) Five Tool Player? Soccer Really?
  • CS
    Charles S.
    31 August 2020 @ 22:50
    Fortunately Ed & Ash's conversations about "soccer" (aka Glo-ball !) are much more interesting/amusing than the subject itself ;)
  • RI
    R I.
    31 August 2020 @ 22:43
    Real economy vs financial economy topic is hugely important.
  • AC
    Alexi C.
    31 August 2020 @ 22:25
    Hi guys - I love your content and have been listening for the past 4 months. My only regret is that I did not start listening sooner. Is there a way you guys can dig into what is behind the labor force participation market statistic? It sounds like this is an important way that we could all start to dig behind the "unemployment is higher than everyone thinks" thesis. Or maybe we can find someone who is an expert in this to help unpack? Thanks!
  • BK
    Binyam K.
    31 August 2020 @ 22:20
    I like the soccer (football) conversation.
  • GZ
    Gervais Z.
    31 August 2020 @ 22:15
    how do we get charts links