Daily Briefing – July 2, 2020

Published on
July 2nd, 2020
Duration
30 minutes


Daily Briefing – July 2, 2020

Daily Briefing ·
Featuring Ash Bennington and Ed Harrison

Published on: July 2nd, 2020 • Duration: 30 minutes

Senior editor Ash Bennington joins managing editor Ed Harrison to discuss the latest developments in markets, macro, and coronavirus. Bennington and Harrison dive into the June jobs report and talk about how it fits into the overall picture of the US's economic recovery. They also explore the implications and future trajectory of the coronavirus's spread and its continuing impact on the economy.

Comments

Transcript

  • gc
    guillaume c.
    3 July 2020 @ 20:02
    Is just me or Ed is ready to get the bear into the picture (next to the chemney)?
  • AC
    Antoine C.
    3 July 2020 @ 15:08
    Oh but the outpreformance in EU or Asia was distributed? No. and its a relatives game the reason we have lost any semblance of growth is because we pretend we are a capitalist society BUT WE ARNT. Easy example i have built many businesses with the strictest intent to never ever hire and if i have to ill do it somewhere i can 1099 because if i do hire someone its like I adopted them and i have to take care of them like my child 🤦‍♂️
  • CR
    Cory R.
    2 July 2020 @ 22:22
    How does QE make stocks go higher? Can we have a discussion of the exact mechanics of this?
    • KJ
      Karl J.
      2 July 2020 @ 22:31
      The Fed prints money and uses it to buy stocks and bonds, the increased demand for drives security prices higher.
    • MW
      Max W. | Real Vision
      2 July 2020 @ 23:07
      Karl is not correct. QE involves buying long-dated govt. bonds generally from banks who are intended to lend out the cash they receive. The main direct mechanism that I can see is potentially if that cash is loaned out to say a hedge fund who buys some other type of asset with more leverage than they would be able to get had the bank not received the cash from the Fed. Obviously it is a direct support of long-dated assets they are buying, ,generally treasuries, but its trickle down effects to other assets are still debated. Many argue it is purely psychological as it increases risk appetite.
    • PS
      Paul S.
      3 July 2020 @ 00:24
      Sentiment + FOMO
    • MC
      Michael C.
      3 July 2020 @ 05:33
      Max W. is partially correct. If the Fed buys Treasuries from Banks the cash they receive (one the sale of their TSY's) sits in bank reserves and does nothing except earn interest on excess reserves (Follow Jeff Snider for more on this). If the Fed buys Treasuries from non banks, these institutions can at the margin buy equities. But this is not the driving force behind the rally in stocks. Its a side effect of psychology. The driving force is actually a herd belief in the "ideology" that QE (expanding bank reserves) makes is safe again to buy risk assets. There is no real direct causation but there is correlation. Its a muscle memory reaction in a way. The Fed gives the signal (that they want to supress volatility) and everyone from HFT algos to Robinhoodies frontrun each other in a Pavlovian response (including taking on all kinds of leverage). And the Fed thanks them all very much for doing their work for them. It didn't work in Japan because their culture, beliefs and ideology are different to the US.
    • MW
      Max W. | Real Vision
      3 July 2020 @ 14:35
      @Michael. Exactly, I was speaking theoretically about a direct mechanism that I could conceive of more than saying explicitly that it always results in HFs getting more levered long. Jeff does argue that the money just sits in excess reserves and thus that is why the policy is relatively ineffective at getting credit into the real economy.
  • CA
    Cyrus A.
    3 July 2020 @ 10:12
    We talk about re-openings as some kind of panacea but, as Ed & Co have astutely noted, if consumers pull back because they FEEL unsafe, businesses will need to ask the question i) is it worth staying open with reduced footfall and ii) if it is worth it, can I stay open in the current state i.e. without making drastic changes to headcount, lease space etc. This point struck me when the Head of the Tourism Board for Majorca came on TV this week and said Spain's much relied on tourism sector is reopening, but only 40% of hotels will actually reopen, and of those that do reopen, they will be at a maximum of 20% occupancy rates due to social distancing rules. So you hear of re-openings, but earnings are down 90%+ vs last year. Yes, this is just one example, but parallels can be drawn to other economies and markets.
  • VD
    Vishal D.
    2 July 2020 @ 23:26
    crypto gathering was sub par...the finance guys in bitcoin (except saifadean ammous) and planB miss the mark.
    • KB
      Keith B.
      3 July 2020 @ 05:13
      The geopolitics chat was good.
    • JS
      John S.
      3 July 2020 @ 09:21
      I thought it was excellent
  • IP
    IDA P.
    3 July 2020 @ 08:26
    I really hate to admit this, but it seems that M. Howell who looks at fed liquidity (net treasury issuance) is the only one who has nailed it, he was bullish right from the beginning of April with no doubts. Everyone has been very hesitant
  • SM
    Shawn M.
    3 July 2020 @ 06:54
    I'm in full agreeance with Ed we see a rise into Sept / Oct and a realization that the election is a complete wildcard. The Market is a forward-looking mechanism and if that is the case, as usual, the market proves the most logical wrong. UP UP AND AWAY!!
  • KJ
    Karl J.
    2 July 2020 @ 22:26
    Sadly, Ash and Ed have gone all wobbly on the efficacy of the free-market economy, but they are wrong: in 2-3 years the data will show that the US not only bounced back faster from the Covid-19 shock than Europe, but also grew much faster.
    • RD
      Riki D.
      3 July 2020 @ 00:17
      It would be useful if you could walk us through your underlying thesis logic Karl. The US obviously has massive potential, but its slowly walking through a years of challenging political structural issues which create too much dissonance and partisanship to build sufficent momentum. Once moderation of ideology returns to the mean, there will be now stopping it.
    • AP
      Ash P.
      3 July 2020 @ 01:33
      Lucky you. I'd love be able to predict the future. Out of curiosity, with that super-power why subscribe to RV. Got more keen insights to share?
    • KB
      Keith B.
      3 July 2020 @ 05:14
      Thus is the power of the military-industrial complex when tasked with a new round of geopolitical containment of a new enemy
    • JV
      Jonny V.
      3 July 2020 @ 06:40
      Current failures obviously show the tremendous weakness in the US system of sink or swim, pretty natural to reflect upon it. If "free-market economy" includes capitalism, I am not sure the US has it any more. It is the Fed and Gov who control the market and to a large extent how companies and assets fare, not the free market.
  • PL
    Pierce L.
    2 July 2020 @ 23:29
    Liked the variety this week, but also good to hear from the dynamic duo! The Daily Briefings are my bookend the day. Enjoy the unfiltered commentary on the current market environment, always gives me new angles and ideas. With so much going on in the markets, it's valuable to get the high points and the crew's thoughts. R.V.>CNBC and broadcast TV every time.
    • AB
      Ash B. | Real Vision
      3 July 2020 @ 05:21
      Thanks, Pierce. Much appreciated. It's good to be back.
  • MO
    Miguel O.
    3 July 2020 @ 05:01
    Half the room: Cash or bonds (Protect Capital - Risk Off) Half the room: Stocks (Gain Capital - Risk On) Half the globe: Save the Economy Half the globe: Save the People _____________________________________________ Uncertainty, Volatility, amid rising CoronaMetrics. Fun Q3 ahead... Thanks for breaking down the jobs numbers and the landscape, gents!
  • RJ
    R J.
    3 July 2020 @ 02:08
    Be the mic, feel the mic.
  • HC
    HIMANSHU C.
    3 July 2020 @ 01:45
    If the anomaly known then isn’t it already included in the expectations. Similarly the rollback of reopening is known and hence the expectations will be lowered as well.
  • AD
    Adrian D.
    3 July 2020 @ 01:22
    Ash and Ed hit it out of the park once again, have a great long weekend. As I have said before Realvision is full of crusaders. When it becomes possible, I will do MY best to shake your hands. Thanks again.
  • DS
    David S.
    3 July 2020 @ 01:18
    "Wall Street Estimates" numbers are really esoteric. For Mr. Pal and me would you please start with the year-over-year or quarter-over- quarter number first. Then you can mention the "Wall Street Estimates" are. Thanks. DLS
  • PD
    Paul D.
    3 July 2020 @ 00:39
    I didn't know you could mix wine and vodka
  • es
    elizabeth s.
    3 July 2020 @ 00:33
    The map is not the territory
  • RK
    Ron K.
    2 July 2020 @ 23:01
    On Ed’s #4, Fed allowing higher average inflation rate to catch up to 2 percent, what actions does the Fed actually do? Is it just messaging?
  • CR
    Cory R.
    2 July 2020 @ 22:51
    Does the market price in official unemployment numbers or the real unemployment numbers?
  • AJ
    Adam J.
    2 July 2020 @ 22:46
    Unfortunately New Zealand managed the lockdown well but then didn't control the border quarantines properly, despite being surrounded by water. So that compromised the effectiveness, however there seems to be minimal fallout/community spread now anyway. Not sure if a less virulent strain of the virus or sage management...