Daily Briefing – July 13, 2020

Published on
July 13th, 2020
Duration
29 minutes


Daily Briefing – July 13, 2020

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

Published on: July 13th, 2020 • Duration: 29 minutes

Senior editor Ash Bennington hosts Ed Harrison for a conversation about life and markets during coronavirus. Using Tesla as a jumping off point, they take an existentialist turn and explore what might bring people to speculate on a stock that, by all traditional metrics, is extremely overvalued. Ed proffers that people who take a gamble on Tesla and other retail favorites do so out of a sense of desperation in order to feel a sense of control, at a time when they feel powerless. Ash provides additional color on Ed’s theory by analyzing the impact of fiscal stimulus. Ed and Ash also they frame their thinking through today's interview with Mark Blyth and Eric Lonergan. In the intro, Jack Farley explores the coming "fiscal cliff" in the U.S., and puts Tesla's extreme price action in context.

Comments

Transcript

  • GC
    Guillermo C.
    15 July 2020 @ 20:21
    Also, people want stability, predictability. People are starting to don't give a damn about being able to buy a chinese Iphone for $150 because that's not an option, it's the only thing they can buy. If you have a decent wage, then it's cool if you can choose a cheaper option, but if it's the ONLY thing you can buy, then... Give people a decent wage instead of "cheap" chinese BS that breaks the next day. That's one of the lies of this system, that productivity pushes prices downwards, duh yeah, and wages!
  • GC
    Guillermo C.
    15 July 2020 @ 20:07
    100% agree with Ed here, the US dynamism is another way to say the US instability. In ohter words, I'm more bearish than I thought on the US and more bullish than I thought on rest of the world.
  • JJ
    John J.
    14 July 2020 @ 19:09
    Great discussion and an interesting insight from Ed. Really something to think about.
  • DM
    Dominic M.
    14 July 2020 @ 18:35
    Great conversation, and thanks to Jack for the excellent intro.
  • FF
    Fabio F.
    14 July 2020 @ 17:33
    So, regarding those Tesla buyers, the same principle can be applied to Bitcoin....
  • VP
    Vincent P.
    14 July 2020 @ 16:34
    ED, are you promoting high risk day trading speculation inferring people taking control?? Wouldn't think so.
  • JG
    Jonathan G.
    14 July 2020 @ 12:16
    2001: zero rates 2009: zero rates and QE 2020: zero rates and QE and helicopter money? If it can save their model, they will pull off something..
    • VP
      Vincent P.
      14 July 2020 @ 16:28
      2030 Aliens arrive for payback!
  • VP
    Vincent P.
    14 July 2020 @ 16:26
    "They're sick of the bullshit and want their lives back"! Nailed it Ed. Ain't it the truth.
  • JH
    Jesse H.
    14 July 2020 @ 11:17
    Love listening to Ed and Ash, as usual. However, I respectfully think you are missing the proverbial elephant in the room here - you absolutely MUST understand changes in market structure and the dynamics (and implications) of Passive vs. Active flows. Please have Mike Green on for a daily update guest appearance. I think his magnificent brain will get us all thinking! Thanks. Jesse.
    • JH
      Jesse H.
      14 July 2020 @ 11:46
      Ash - always enjoy hearing your views, carefully thought through and eloquently articulated. But I think you may be missing something really key, possibly because you don’t live in Europe: I have spent ample time in the US in recent years, and grew up there as an American. I now live in Europe and have done for a long time. You overestimate the importance of monetary policy and political agreement between nations vs. Social strife and divisions. The US is on a MUCH rockier path than Europe and while Europe is certainly no bastion of harmony or stability, it is MUCH more stable and actually stronger than the US. Social and economic factors may well trump financial ones (pardon the pun) in the months and years ahead. I fear a civil war in the US is coming, and a larger war globally as well. That will change the shape of our lives entirely.
    • WP
      Wolfgang P.
      14 July 2020 @ 16:08
      I agree with your comment on the stability of Europe. If the EU has continued to prove something over the last few decades, then it's the remarkable ability to "weasel on", and somehow bend itself into a shape of acceptable compromise. It's easy to underestimate that.
  • BC
    Burton C.
    14 July 2020 @ 03:33
    Belin Wall fell Nov 9 1989. (not 1991). Remember it well
    • CM
      Chris M.
      14 July 2020 @ 15:43
      The wall fell in 1991. They have the date correct.
    • CM
      Chris M.
      14 July 2020 @ 15:45
      Guess you both have the date correct. Started in 1989 but completed in 1991.
  • JK
    Jim K.
    14 July 2020 @ 00:12
    Great segment gents. Ed, I could feel your passion and I wholeheartedly agree that when who people played by the rules end up with the short end of the stick they realize that they have been sold a bill of goods. Crony capitalism (privatizing the profit and socializing the losses) is not capitalism and unfortunately the young people understandably think crony capitalism is the same as capitalism. To those young people reading this, there is an old saying that capitalism “without failure is like religion without sin”. Socialism is not the answer as the resources are even further concentrated amongst the politically connected oligarchical class. Lastly, shame on the Fed for saying that the Fed has not contributed to income and wealth inequality as the data would say otherwise as zero interest rates and balance sheet expansion equals asset inflation at the expense of economic growth and opportunity.
    • DS
      David S.
      14 July 2020 @ 14:19
      Crony capitalism is all we got now and it's really no capitalism at all. We are being gamed. DCS.
  • SB
    Stephen B.
    14 July 2020 @ 13:07
    Hungary is under an authoritarian regime? Victor Orban's alliance won 133 out of 199 possible seats in the 2018 election and still retains approval ratings > 70%.
  • BS
    Bevyn S.
    13 July 2020 @ 22:34
    Globalization pushes down wages and increases wealth / income disparity until the Lewis Turning Point is hit. Some argue China hit it in 2012. High asset prices and debt levels were exacerbated by resultant wage gaps.... If some type of global Lewis Turning Point is being hit now (I suspect it is) theb you see regime shift (or populism rise until it does). That'll drive huge changes in all macro variables... Until then more of the same...
    • DT
      David T.
      13 July 2020 @ 23:13
      Marx was saying that capitalism and its production productivity were pushing down prices and increasing social gap that would lead to class warfare. You blame globalisation, In reality Marx was right, however his solution was stupid,
    • BS
      Bevyn S.
      13 July 2020 @ 23:51
      Yea agreed. When excess labor is fully absorbed, you tend to see riots and demands for higher wages. US saw something similar during it's golden era (burgeoning middle class). Karl Marx saw this regime shift and certainly pushed for ridiculous solution (Socialism). The outcome is higher wages, productive investment, and increasing social stability. We're at the other end of the spectrum right now
    • BS
      Bevyn S.
      13 July 2020 @ 23:53
      Globalization reversed the result of the 'golden era' Lower priced goods are nice, but people want jobs and a decent income
    • BS
      Bevyn S.
      13 July 2020 @ 23:59
      Falling price of goods isn't bad if it's matched by investment in productivity. Net the worker sees a real growth in income. Bringing in the third world labor pool has not encouraged investment in productivity
    • AB
      Ash B. | Real Vision
      14 July 2020 @ 00:12
      Bevyn & David: If we think of economists as metaphorical physicians, I'd say Karl Marx possessed brilliant insight at describing and diagnosing illness -- unfortunately, the cures he prescribed were a good deal worse than the disease, and his patients around the world have suffered tremendous pains over the past century.
    • CR
      Cory R.
      14 July 2020 @ 02:23
      I agree, it seems like the "golden era" of responsible working class and conservative overlords (1940's to 1980's) has slowly morphed into the self cannibalizing, nothing-but-problems economy (1990's to present) This could all be solved with the $20T infrastructure package I am hoping the Donald will push for next Spring after he is reelected. The infrastructure bill has been waiting in the wings throughout many passing administrations according to a lady I heard on RV awhile ago. She too is hoping it will finally come out as an active plan. Wouldn't that bring back a "golden era"? I am sure hoping and praying for this solution.
    • BS
      Bevyn S.
      14 July 2020 @ 02:58
      Michael Lind's book The New Class War is a great read if you're interested in this topic and potential solutions. I really don't think an infrastructure bill is a long term solution, although I'm sure there's much deserved repair out there (so at least there's some direct social benefit from the output). Unfortunately governments attempts to cure this issue tend to be wasteful. One big help would for the financially oppressive (to its own citizens) CCP to fall and a liberal democracy / republic to be formed, to allow wages to rise naturally and capitalism to work it's magic (probably a pipe dream). Unfortunately that's out of our control and China will probably continue to export deflations and absorb world demand, further adding to instability. Eventually globalization will hit a Lewis Turning point if the economic forces are allowed to play out and operate correctly (theoretically). Don't know if it can with all the government meddling out there in the world. I hesitate to go for protectionism, but I don't know what other options there are. Play the game or get played, I guess.
    • CR
      Cory R.
      14 July 2020 @ 05:09
      Hi Bevyn, I disagree with your assessment that physical infrastructure development has no meaningful impact on long term economic growth. Consider how much economic power could be unleashed with continental US goods delivery times slashed by half. I'm talking about a network of high speed rail funded by the equivalent of war bonds. The development of the project would be funded by millions of private investors who would receive a bond with a dividend. The dividend would be paid out of the productive capacity of the project. But I guess this would never happen because the US Federal Govt prefers to let Wall Street invent synthetic derivative instruments that promise an endless future of financial prosperity.
    • KB
      Keith B.
      14 July 2020 @ 05:12
      China has a higher chance of going into a 20 year civil war than becoming a liberal democracy. China’s history has a war like that in every major dynastic change, but they have never had democracy.
    • BS
      Bevyn S.
      14 July 2020 @ 12:26
      Sorry Cory but that sounds like a colossal waste of resources, human time and energy. You don't happen to be in the train business do you 😂? Keith-the prospect of them becoming a liberal democracy or republic is pretty low. Probably could've told you that twenty years ago. One of the biggest flaws in the assumptions pushed with further integration with China in the late 90s...
  • BC
    Burton C.
    14 July 2020 @ 03:41
    Ash, I love your work, but tonight you began hallucinating. Stating that the FED has the intention of reducing its balance sheet and raising rates? Come on. They tried that, how did that work? It's never going to happen, don't even go there. It ends in a jubilee or currency destruction. They have lost control if one can't see this that's the definition of la la land.
    • AB
      Ash B. | Real Vision
      14 July 2020 @ 11:09
      I’m skeptical of the Fed’s ability to do so myself. I was just posing it as a hypothetical potential outcome as devil’s advocate.
  • MT
    Mike T.
    14 July 2020 @ 09:28
    @ 05:06 EST, VIX thirty day & /VIX futures front month (N0) whilst only small slipped into backwardation. VIX long term average round number = 18, VIX at time of post 31.14, current 'volatility' nearly 60% higher than average.
  • SM
    Shawn M.
    14 July 2020 @ 09:10
    Ed well said. Ash, their sick of being fed a line of bullshit. I hope the sense you are having comes to fruition. TRULY! But I'm not holding my breath either.
  • RP
    Richard P.
    14 July 2020 @ 08:51
    I’ve been thinking the same thing as Ed for the last few months. I usually travel a lot I see it all over on the ground. People forge conspiracy theories in their head, they hate and blame the system, they hate people who have done well, they feel left behind, there’s plenty of wealth in the world just not enough opportunity.
  • DP
    David P.
    14 July 2020 @ 07:23
    Long european companies making money predominantly in USD.
  • IP
    IDA P.
    14 July 2020 @ 06:43
    Dear Ash and Ed, you really think that Merkel has no influence on the frugal four? the frugal 4 must put on the show of course, but I wouldn't bet on them going against Germany. The USD is strong on a trade weighted basis, but lately the Euro is relatively stronger (I posted the graph on Twitter) for this reason. Of course they won't do fiscal union, they'll just put a band aid as usual, to gain another 4 or 5 years of time.
  • DH
    Daniel H.
    14 July 2020 @ 06:20
    Ash, polarization was worse in 1968 with race riots and the children of the middle class dying in Vietnam. In those days you were either a patriot who went or a coward who went to Canada. The rich kids joined the National Guard or got out of it with things like bone spurs. Things are much quieter, sadly, because of the all volunteer army which is filled with poor kids. The polarization today looks more to me like magical thinking on both sides. The Covid depression may yet surpass 1968 as homelessness explodes, but so far we have relative peace but with lots of contentiousness.
  • MM
    MARTIN M.
    14 July 2020 @ 03:45
    Or, simply, stocks got hammered to the tune of 35% in 3 weeks, the Fed stepped in, stemmed the "liquidity crisis", smart money played the bounce, sustained it long enough for folks to start receiving stimulus checks and unemployment benefits, in some cases, to the tune of more than they made while working. The latter, along with the sports better without a sport to bet on -- as evidenced by the huge increase in online retail trading accounts -- having learned, or simply having heard, over the previous 11 years that you always buy the dip, especially when the Fed engages, entered the fray. Those who'd sell took notice and held for higher bids. Higher bids begot higher bids, FOMO sucked in others and had performance-mandated pros playing the game harder and longer than they otherwise would have.... I.e., sure, Ed's "this is folks who feel disenfranchised taking control" thesis is deep and thoughtful, but, frankly, I dunno....
    • BC
      Burton C.
      14 July 2020 @ 03:54
      Nice analysis of the past 3 months... you got it. The simplest description is typically the correct one.
    • CR
      Cory R.
      14 July 2020 @ 05:00
      Is it possible the Fed has figured out a way to open Robinhood accounts to directly control markets? An argument could be made that all those Wells Fargo fake accounts was a practice test. I know this is too far out there to be realistically considered.. but in today's world, well, why not? Of course it wouldn't be them directly. It would be an "associate co." hedge fund of some variety. Also consider this, keeping market high is now a national security concern. There is too much at stake. So 30% drops will be tolerated but they must return to highs before too long. Either that or I have the touch of cabin fever from the Covid lockdowns and my overactive imagination has detected what is simply not there. Cheers all and happy investing. Remember, investing is a marathon not a sprint.
  • RD
    Ross D.
    14 July 2020 @ 04:51
    One of the best daily briefings so far, Thanks Ed and Ash.
  • BB
    Bob B.
    14 July 2020 @ 03:21
    Sorry guys - you're somewhat myopic on your views of societies around the world. USA is in no special state. Many people around the world are as stressed or more than people in the USA and exhibit similar behaviors albeit in differing sequences. Think yellow shirts, Hong Kong (3 million out of 7!), China lockdowns, Brexit protests , Argentina, Venezuela, Columbia, many African countries and on and on all around the world!
    • SW
      Sarah W.
      14 July 2020 @ 04:46
      We didn’t start the fire! It was always burning since the world’s been turning...
  • TM
    The-First-James M.
    14 July 2020 @ 01:18
    I find it beyond a coincidence that the period of stability that ended in 1973 occurred within 2 years of the USD coming off the Gold Standard. Labour ended up being screwed when the Money became Funny...
    • GB
      Griffin B.
      14 July 2020 @ 03:48
      I think your causality is flipped. It was more related to the globalization wave in which a gold standard would not have worked under such a model bc the US agreed through these deals that we would print money and go into debt so that we could buy their goods which would become priced in USD over time
  • MT
    Mark T.
    13 July 2020 @ 22:12
    Great intro Jack! So many 'tech' companies love to spin what they do or what their product is. Uber is a taxi service, plain and simple, but they call it ride-sharing. Amazon is a a retailer, but they say they are a tech company that applies it's tech to retailing. And now Tesla, a car company, saying it is a computer on wheels. People eat it up too. Remember the old saying, if it walks like a duck and quacks like a duck, it's a duck.
    • JF
      Jack F. | Real Vision
      13 July 2020 @ 22:21
      Hah too true, Mark!
    • CR
      Cory R.
      14 July 2020 @ 02:25
      I thought back in 2014 or so that TSLA would get bought by GM or other major and that would be the way EV's would begin to be introduced into the transport ecosystem. How wrong I was...
  • IN
    I N.
    14 July 2020 @ 01:57
    Best RV Daily Briefing of 2020.
  • JY
    John Y.
    14 July 2020 @ 01:16
    This for Ed ... he was getting at this during his discussion w/ Ash. Sidney Homer analyzed 5000 years of history, finding an interesting pattern in interest rates across the evolution of empires: There is a constant decay of interest rates until civilizations mature, followed by a sharp rise in the decay of civilization. This pattern has been detected in the Babylonians, the Greeks, the Romans, the Venetians, the vast majority of European empires.  So, we must at least consider the possibility that the Western Civilization is on the verge of following the same pattern.  Ultra-low interest and negative interest rates are an indication that the western civilization is reaching its climax.
  • AD
    Adrian D.
    14 July 2020 @ 01:11
    Back to back amazing DB, thanks again Ash and Ed. Canada has announced today it will continue its stimulus package for unemployment insurance to the end of the year, based on 252,000 separate companies being effected by the pandemic. All the while equities trek higher, is this the beginning of UBI? Let's hope not.
  • dd
    david d.
    14 July 2020 @ 00:50
    thank you both
  • PW
    Paul W.
    13 July 2020 @ 22:52
    I find it weird when people talk about stability from 1945-1970's. We fought two major hot wars in this time--Korea and Vietnam. We had a president assassinated as well as a presidential candidate and the most prominent civil rights leader. We had riots in the 1960's that were far more extensive and destructive than anything we have seen since. We lived with the realistic fear that we could be annihilated in a nuclear war. People were far more poor back then they are now and lifetime employment with a single company was more myth than reality. I was born in the 1950's and the picture people paint of this time bears little resemblance to the reality.
    • AA
      Alberto A.
      13 July 2020 @ 23:41
      Great points Paul. I believe the comparison is always from an economic point of view and relative to other markets. The USA has always been much more rich versus developed and developing markets. I do agree with you that every decade/s have their own unbalances. Ah! by the way....weren't the 80's and great? they did end up with a big crash...but it was pure cocaine fun all the way....(being ironic here!)...
    • BS
      Bevyn S.
      14 July 2020 @ 00:35
      You seem to be overlooking the millions who attained equality under the law and climbed the economic ladder into the burgeoning middle class...
  • RK
    Ron K.
    14 July 2020 @ 00:01
    Props guys, you are excellent conversationalists.
  • AA
    Alberto A.
    13 July 2020 @ 23:55
    Great conversation and I do see the anger coming from Ed. But I have to respectfully disagree regarding feeling out of control. I come from a very underdeveloped and authoritarian country where everyone lacks opportunities to grow professionally and personal. The USA is the best country in the world. Here you have free education (which is not the best but at least you can get a decent education), if you are a good student and work hard you can make it to college (public education) and get a great degree. You can then be hired by a great company (e.g Coke, P&G, and all the new tech ones), and if you work hard and save money you can make a great living so you can get married, buy a house and cars with low interest rates, you get great benefits from your 401K, etc, etc, etc. So I don't believe for one second that people feel out of control. These are just excuses that people make always blaming other people for their destiny. And believe me when I tell you that I was not born in a golden cradle. It is a matter of positive attitude and working hard....this is a great country...and I'm super bullish on it....everything is relative in this world and I have live the very dark side of a developing or underdeveloped country. I understand where Ed was coming from regarding people being tired of the financial and technocrat people to try and run our lives but it is really up to us and this is nothing new. I guess I might be coming from a different angle but it might be the same point Ed is trying to make of people waking up and take control of their lives....finally!
    • AA
      Alberto A.
      13 July 2020 @ 23:58
      BTW....when I say is free I mean we pay it with our taxes!!!
  • XM
    Xavier M.
    13 July 2020 @ 23:56
    Loved, loved, loved today’s analysis. This deep dive just captures the zeitgeist of it all. Love the way it was seamlessly tied into the interview piece with Messers Longren and Blyth. “We are fed up with the bullshit!” Brilliant Ed. And as for Tesla, it’s essentially being subsidized by cheap Fed money. We’ll have to see how the company ultimately manages this. They have yet to sell a million cars whilst Toyota sells 6 million. But yes, I know, Tesla is so much more than a car company. Cheers.
  • ER
    Ernesto R.
    13 July 2020 @ 23:56
    excellent show
  • TB
    Tobin B.
    13 July 2020 @ 23:06
    Ed that point about control is spot on. I have felt that control is non existent the past 20 years, and this at least I do have control over. At least my decisions. Coming out of this, I will have a much higher understanding of my ability to control myself. Thank you gents for being there with me on this journey!
    • TB
      Tobin B.
      13 July 2020 @ 23:31
      Ash - glad you brought the counter point to the table; as its very important! (Also very much improved Mic positioning although I did like the red rocket haha). However, the "virus" is a tool by the central banks to increase control. They would not have been able to bypass the 13(1) Federal Reserve restriction and begin buying corporate bonds (and ETFs, what????) without it. There's something much bigger happening than the here and now in front of us. We may see a pushback on that though, assuming more people begin to see whats going on b4 its too late.
    • TB
      Tobin B.
      13 July 2020 @ 23:34
      Ed great point about Gen Z. This generation will seek stability, and I see socialism in the cards for this (unfortunately)
    • TB
      Tobin B.
      13 July 2020 @ 23:45
      Guys I want to call your attention to whats going on celestially as well, because, like it or not, gravity is a reality. Both Jupiter and Saturn are aligned while the Earth is at Aphelion for the rest of July. Meaning - Earth is closest to the two largest planets in our solar system, while it is as far from the Sun as it ever is. Ever heard the phrase "the planets are aligned" ? Well, now they are. There's more to it than I ever thought. Think I'm the only one feeling this pull? I'm not, we all are. Trade accordingly!
    • TB
      Tobin B.
      13 July 2020 @ 23:50
      Whoops - I caused my comment to become Hotly Debated by replying to it! Not my intent, but my input is important.
  • AD
    Antonio D.
    13 July 2020 @ 23:23
    I enjoyed hearing about a "control of my destiny therefore I trade" thesis/narrative from you, Ed. It's much more aligned with the macro approach of RV / GMI in understanding the market as a whole. Keep it up, interested to see if you shape it further and how it plays out.
  • DT
    David T.
    13 July 2020 @ 23:21
    War is what "solved" the problems world is facing now. Every 100 year cycle starts with a was in the first 30 years. War is unavoidable and this time good guys will be defeated, mainly by their own suicidal policies.
  • ZD
    Zachary D.
    13 July 2020 @ 22:39
    I'm probably in the minority here, having been long TSLA since last year. But I find the continued dismissal of the company to be perplexing. What I believe is reflected in market cap of TSLA vs traditional automakers is the realization that the competition is not coming the way people expected. If TSLA does show improved profit throughout the remainder as of the year, as I would expect them to, I think it will quickly shift the perception of their balance sheet vs the other automakers, whom are heavily indebted. I think of Mike Green's comments here on RV previously about how coronavirus is simply an accelerant for existing trends. I personally feel that is reflected here with TSLA more clearly than anywhere else. TSLA may do worse due to coronavirus, but their relative advantage has increased. I can't say that 1800 is fair valuation, or even 1500. But there is significant change occurring before our eyes. Those who hold to see it through will be rewarded. I'm personally eyeing SP500 inclusion, should it occur, as a potential time to hop off this roller coaster though :)
    • DT
      David T.
      13 July 2020 @ 23:18
      TSLA has a lot of technical problems to solve before going mainstream. It still needs a lot of time to charge and charging station issue will become a major problem for EVs. It's advanced software car but, it's very simplistic inside and not that comfortable. Competition will catch up. Germany dedicated a lot of state funds for carmakers to catch up with other EV automakers. Most of the tesla owners have another none EV car.
  • es
    elizabeth s.
    13 July 2020 @ 23:18
    I agree with people's urge to take control - people are just saying "Screw it, Tesla is going through the roof, I'm gonna get some of that" but this conversation was a mess. Societal, financial, medical concepts were conflated left and right, and Ed and Ash were talking at cross purposes. I don't feel that Ed was listening to what Ash was saying. I think Raoul has been trying lately to address the conflation issue, on Friday he was trying to step away from conjecture and epidemiology and focus on the market. At the same time it seems to me that the most pressing issue is that COVID cases are going exponential in the US with no visible means of control. If this happens, the traders can keep playing with themselves, but the real world will go down the toilet. This conversation fell in the grey space between the market and the national catastrophe.
  • SS
    Stephen S.
    13 July 2020 @ 22:53
    “Neo Liberalism he made their life unstable”. I like Ed, he can read the zeitgeist.