Daily Briefing – July 20, 2020

Published on
July 20th, 2020
1 minutes

Daily Briefing – July 20, 2020

Daily Briefing ·
Featuring Ash Bennington and Ed Harrison

Published on: July 20th, 2020 • Duration: 1 minutes

Senior editor, Ash Bennington, hosts managing editor, Ed Harrison, to analyze the economic news of the day. Ed and Ash examine the recent jobs figures, and Ed describes why he believes the current jobless claims may be significantly underreported. They also discuss gold, and analyze ongoing progress of the EU recovery deal. In the intro, Jack Farley places in context recent movements in the dollar, yen, and euro.



  • WM
    William M.
    21 July 2020 @ 02:06
    Woah, hold on there Jack Farley .. Careful about implying the forward basis (spread between Forward and Spot rates) implies expected spot moves. That spread converging is mainly a function of interest rates in EU and US converging (ie covered-interest-parity), and not an indication of future appreciation in EUR/USD.
    • JF
      Jack F. | Real Vision
      21 July 2020 @ 02:59
      Thanks William. Currencies is not my specialty and I am always learning so I appreciate your input. It sounds like you know what you're talking about. It's my understanding that pure forward contracts for currencies (outright forwards and non-deliverable forwards) price in current interest rate differentials between currencies (as well as spot rates, of course) but not expected changes in those interest rates. Is it possible you are thinking of cross-currency basis swap? You're definitely right that the narrowing I saw on the chart is a reflection of the interest rate differential. But is it inaccurate to say that a compression of the spread between euro interest rates and dollar interest rates implies an indication of future appreciation in EUR/USD? I'm thinking of the "interest rate parity" I learned in school - but maybe on the trading floor such fanciful notions are not abided? I think of exchange rates and interest rates as space and time for global macro - they are part of the same dimension, i.e. "spacetime." Am I mistaken in this belief? (genuinely asking) I'm interested in your thoughts and expertise on this. You can comment here, or email me at jack@realvision or reach me via the Real Vision fan slack channel. Thanks, Jack
    • WM
      William M.
      22 July 2020 @ 17:58
      Jack, I've traded a significant amount of spot FX over my career (volumes in the $trillions), along with an awful lot of overnight swaps to roll those FX positions forward from one value date to another. The first thing you learn doing so many currency swaps (where the near leg is spot, and the far leg is a forward), is that the forward points you pay/earn rolling the position has everything to do with the differential interest rates of the two currency legs in the pair over the tenor of the swap (ie the no-arbitrage forward price based on the two interest rates), and nothing to do w perceived future spot moves. You are right that interest rates and FX can be linked, but the relationship isn't linear, and sometimes means different things. For example, think about this: 1) The "carry trade" is when people buy higher yielding currencies vs lower yielding currencies, viewing that supportive capital flows will bid up the held currency, or at least prevent it from depreciating enough to outweigh the yield advantage above the cost of funding. 2) Meanwhile, Purchasing Price Parity (PPP) posits that the highest inflation currency should depreciate vs lower inflation currencies over time to ensure that over time a similar basket of goods should have similar costs across borders in local terms. Extend that a bit, and remember that nominal interest rates are the sum of real interest rates and expected inflation, and you'll see that a country could have a high nominal interest rate due to high inflation, which PPP would view as negative for currency. In such a case, "carry trade" and PPP would be giving diametrically opposed indications about which way the future spot rate would move based on the relevant interest rates. Like I said, it's fine to point out the yield differential between US and EU converging, and by definition, also causing the forward differential to converge. But IMHO, it's best not to take that extra step and imply that change implies as certain expected future spot move. -William
    • WM
      William M.
      22 July 2020 @ 18:07
      That said, I think you do a great job with your segments. I know you will go very far in your career with your competence, humility, and genuine curiosity. Keep up the good work.
  • PP
    Patrick P.
    21 July 2020 @ 02:17
    Ash .. Covid 19 .. no rising death counts .. check the numbers. Death counts peaked back in April. The MSM would have you believe people are dying by the million daily.
    • AB
      Ash B. | Real Vision
      21 July 2020 @ 03:27
      Hi, Partrick. You are correct. Death counts peaked back in April. Unfortunately, the the daily death count is once again rising. https://www.theatlantic.com/health/archive/2020/07/second-coronavirus-death-surge/614122/
    • CO
      Craig O.
      21 July 2020 @ 04:22
      Sorry Patrick. I suggest you watch less MSM and more RV. 😉 Deaths seem to have stopped their decline on national level and appear, on the surface, to be basing. But as referenced elsewhere in these daily briefings, Simpsons Paradox means assumptions based on nationally aggregated data may be wrong, since they don't account for real and significant trends in what are really multiple epidemics (regional) instead of one national epidemic. The dominant trend (rising deaths) is sadly well underway and will be reflected soon enough in the (less informative) national aggregate data. RV looks well beyond MSM soundbites in their analysis. These guys not only highlighted Simpsons Paradox in "falling" death rates a week or more ago, they are among the few (w/ David Rosenberg) to give the more insightful view on unemployment claims, vis a vis, seasonal adjustment nuances. And today both Roseburg and Ed gave an insighful look ahead at claims. I'm w/ Donna B., below.
    • DL
      David L.
      21 July 2020 @ 11:28
      Excuse me, but the terminology is a little confusing. Does death count refer to the absolute number of deaths? If so, more cases equal more deaths almost per force. Or are we talking about a rate of deaths per 100,000 infected people? I would guess the rate is decreasing due to advances in treatment while the count is increasing. If true, that would mean the virus is becoming less dangerous.
    • DM
      Don M.
      22 July 2020 @ 12:43
      Patrick look up the numbers. Don't rely on MSM or Fox News. Deaths are rising.
  • MN
    22 July 2020 @ 08:29
    "Bubblicious" Ed Harrison I'm stealing this adjective
  • CA
    Cyrus A.
    21 July 2020 @ 10:51
    Thank you for the analysis on the unemployment numbers. I looked at the tables in the transcript and, if I may, have one question. I see how the S.F. number is a percentage of the NSA over the SA, but who or what determines the SA number in the first place that is then used to calculate the S.F. thank you for clarification
    • EH
      Edward H. | Real Vision
      21 July 2020 @ 12:41
      The Department of Labor statisticians decide the adjustment factors well in advance. The table being used now goes out to April 2021 I believe. And while the seasonal factors from one year to the next are relatively similar, they’re simply trying to use the most recent years data to tweak the factors so that people can make comparisons across the year without having to worry about the natural seasonality of when people file for unemployment insurance. The problem this year is that the factors built for normal 1x claims are being used on claim counts that are 6x and 7x. So, they end up overwhelming the data flow when adjustment variation is high, such that most of the change in claims is a statistical artifact of the adjustment.
    • CA
      Cyrus A.
      21 July 2020 @ 21:04
      Thank you Ed. Appreciate the clarification.
  • JD
    Jesse D.
    21 July 2020 @ 20:47
    "FEELING GOOD BILLY RAY!" LOL...SO awesome- you guys rock! 🤣 Please continue the great dialog and work! Q: Regarding the case for cryptocurrencies, whether as a store of value or future acceptance as a transactional currency, I'm curious if there is any real-time data available on the required compute requirements vs. what is currently available in order to make, say bitcoin, a mainstream currency? (forgive me if this is already widely known, would love to find credible sources to reference if anyone has them) It just seems there is a disconnect, even with cloud computing, where the overall industry is not capable (yet) of utilizing cryptocurrencies in a meaningful way today due to the nature of the computational tasks required by the underlying blockchain technology? (doesn't it require massive simultaneous compute cycles to confirm the millions of transactions/sec concurrently?) Any guidance to follow this would be appreciated! Thanks again for everything fellas- luv your work!👍
  • NL
    Nicola L.
    21 July 2020 @ 18:02
    Could you guys talk about commodities in the next DB? I think that we are seeing something really interesting with gold but above all silver with the latter that is going to overperform the former since years. Thank you
    • MT
      Mark T.
      21 July 2020 @ 18:55
      Agreed. Lot's of chatter about being long commodities at this time, would be interesting to hear their take.
    • AB
      Alastair B.
      21 July 2020 @ 20:13
      Silver up 6% today
  • FM
    Felix M.
    21 July 2020 @ 14:33
    These two do a great job breaking things down. Appreciate you guys. Thanks
  • TZ
    Tibor Z.
    21 July 2020 @ 01:01
    I still don't know what cryptos are good for! And even if it's good for anything in the end it's only a handful gonna survive. Originally Bitcoin was developed for transactions. Now, only 1% is used in that way. The only reason people are buying it is speculation. The greater fool theory! I am nearly not as confident about buying BTC as gold!
    • mr
      martyn r.
      21 July 2020 @ 01:39
      cryptos are unregulated artificial scarcity machines. It's musical chairs and whoever has the biggest stack gets to turn down the music.
    • MJ
      Marc J.
      21 July 2020 @ 06:27
      It would be interesting to know percentage of usd used for transactions
    • wN
      wubbo N.
      21 July 2020 @ 14:30
      It's a new and better open financial system while the old one is being pushed to its limits. As we speak defi is growing exponentially and being used for all kinds of innovative financial constructs. The only real caveat is in how governments or companies will inevitably adopt the technology (which they are already doing).
  • SJ
    Sean J.
    21 July 2020 @ 13:02
    Snapshots of the past on the US$ ??? You’re assuming futures investors KNOW the future. 🙄
    • JF
      Jack F. | Real Vision
      21 July 2020 @ 14:05
      I said "visions of the future." I didn't say those visions would be correct. -Jack
  • MH
    Martin H.
    21 July 2020 @ 05:56
    Silver supply is destroyed faster than demand under these circumstances. It is mostly byproduct and recycle which both falter if industrial demand falters. Monetary demand rises under these conditions. This could add up to a perfect storm for silver.
    • AR
      Alexander R.
      21 July 2020 @ 10:55
      Silver is poor man money Central backs buy gold, people buy silver to protect themselves from inflation Few month ago silver was 12 and it is above 20$ now on a narrative of reflation. It can go up as fast as it goes down. I hold silver now, but it is a trade Gold is investment Silver day to truly shine is few years away
  • JV
    Jan V.
    21 July 2020 @ 09:52
    Nice to see crypto getting more mainstream adoption via PayPal. I am wondering if the infrastructure is ready for a big increase in transactions by PayPal users? Won't this lead to blockchain congestion, higher confirmation times and higher fees? This in turn could lead to the same criticism we saw a few years ago.
  • RK
    Roger K.
    21 July 2020 @ 09:28
    34min waste!
  • JV
    Jan V.
    21 July 2020 @ 09:17
    Does anyone pay attention to these gold forecasts? In 2015 they all agreed gold would drop below $1000 in a big way. Now they all see gold going towards $2000 and higher. Good luck with buying based on their "advice".
  • MJ
    Marc J.
    21 July 2020 @ 05:49
    Ed, I think what you are saying is, if you e.g. hire extra autumn farm hands it will be a fixed number of people, not a percentage related to previous figures. So, the figures as they are released essentially produce a mathematical derivitive which simply amplifies any changes.
  • EN
    Elizabeth N.
    21 July 2020 @ 05:11
    Ash, it was 10,000 btc for the 2 pizzas, not $10,000’s worth.
    • AB
      Ash B. | Real Vision
      21 July 2020 @ 05:27
      Yes. So ≈ $91,000,000 pizza.
  • DB
    Donna B.
    20 July 2020 @ 23:24
    Ed's analysis of the unemployment insurance claims is the reason I subscribe to RV. No one else is talking about it.
    • AB
      Alastair B.
      21 July 2020 @ 05:24
      ‘The money GPS’ on YouTube is, but that is bear porn. FT is barely mentioning it.
  • VP
    Veselin P.
    21 July 2020 @ 04:57
    Is there a video purely on silver anywhere on RV? I am trying to understand these rumours about price suppression on the Comex via short positions by 5-6 players and the DoJ investigation into JPM... Half of it sounds like a conspiracy theory and I need a reliable source.
  • TZ
    Tibor Z.
    21 July 2020 @ 00:46
    I would love to see a crash in gold! So I can get in!
    • BM
      Brook M.
      21 July 2020 @ 03:15
      Don't hold your breath waiting for that to happen. I have been waiting for the last 6-8 weeks for a pullback that seems to never come.
    • RT
      Richard T.
      21 July 2020 @ 03:43
      And what might cause that "Crash"? I would urge getting-in now.
  • CC
    Cornelius C.
    21 July 2020 @ 03:42
    There is no way Paypal is doing this out of good will. Paying through them would probably result in higher costs for the people using crypto. Do you guys have any thoughts on the impact of the Twitter hacks/ crypto scam?
  • PP
    Patrick P.
    21 July 2020 @ 02:13
    Store of value? No thanks .. I want my store of value to be something very close to stable.
    • B
      Bob .
      21 July 2020 @ 02:59
      I have to agree 1,000%.
  • JA
    Jonathan A.
    21 July 2020 @ 00:05
    “Feeling good, Billy Ray!”
    • JO
      JOHN O.
      21 July 2020 @ 02:30
      "Lookin' good Billy Ray". Feeling good Louis". One of my all time favorite movies. (https://www.youtube.com/watch?v=UBYCZCGSVmQ)
  • DB
    Daniel B.
    21 July 2020 @ 00:29
    Fatality rates... are falling. Very important distinction. This is the result of improved health care.
    • pk
      philip k.
      21 July 2020 @ 01:14
      Its picking up again, it’s a lagging indicator
  • CS
    Charles S.
    20 July 2020 @ 23:55
    We finally get to see RV's startup garage ! Bona-fide Smart-Set
  • nw
    nathan w.
    20 July 2020 @ 23:38
    "heat index" Love these guys
  • CR
    Cory R.
    20 July 2020 @ 23:26
    Powerful briefing. Thanks Ash for that term "processional effects". It is a very good concept.
  • MD
    Matt D.
    20 July 2020 @ 23:16
    Any interview that uses the word "bubblicious" deserves a thumbs up. Interesting news about PayPal and Paxos. Liked that crypto interview Ash.
  • SS
    S S.
    20 July 2020 @ 23:11
  • MH
    Muddshir H.
    20 July 2020 @ 23:09
    Great analysis Ed
  • AN
    Andrew N.
    20 July 2020 @ 22:54
    If it's true that some people are getting more money from unemployment than from their previous job, couldn't that explain the month-over-month rise in consumer spending? If consumers are spending more money then it must be coming from somewhere.
  • AN
    Andrew N.
    20 July 2020 @ 22:41
    I expect that Europe will get hit hard by a second COVID wave in the fall, which will affect their economic performance over the remainder of 2020.