Daily Briefing – July 9, 2020

Published on
July 9th, 2020
Duration
25 minutes


Daily Briefing – July 9, 2020

Daily Briefing ·
Featuring Peter Cooper, Ed Harrison, and Tyler Neville

Published on: July 9th, 2020 • Duration: 25 minutes

Real Vision managing editor Ed Harrison hosts Real Vision's Tyler Neville to discuss the ever-expanding chasm in markets between fundamentals and flows. Drawing upon his experience on the buy-side, Tyler analyzes how market forces such as commission free trading and the widespread adoption of passive ETFs have distorted price discovery, and he and Ed explore whether this means that the bull market mania could last longer than the bears expect. Ed is skeptical and argues that the pain on Main Street must eventually move to Wall Street as well. Ed and Tyler also explore how macro tailwinds such as demographics affect the pension system. In the intro, Peter Cooper looks at job destruction that's currently happening in several different countries and what the long-term effects the pandemic may have on employment.

Comments

Transcript

  • SM
    Sean M.
    17 July 2020 @ 21:44
    Tyler, How does buying retail order flow make companies like Citadel or Virtu money? Does that privy them to know where limit orders and stops exist? I figure market orders get routed to best bid/offer through them but can they jump these orders? Thanks
  • DS
    David S.
    12 July 2020 @ 21:07
    Mr. Neville what is your job description at RVTV since no title was given? DLS
    • DS
      David S.
      12 July 2020 @ 21:11
      Never mind. I found you title Editorial Director & Business Development. Best of luck. DLS
  • DS
    David S.
    12 July 2020 @ 17:42
    A breath of fresh air. I hope this means Mr. Neville is on the RVTV Team. DLS
  • JD
    John D.
    12 July 2020 @ 17:28
    So is this large retail traffic flow Millenials and Gen xers ? or is this a pullback from the market by the big boys expecting a crash ? is the Tesla trade then a result of what the retail trader likes without using fundamental or technical analysis
  • LG
    Lucas G.
    11 July 2020 @ 16:22
    Great as always!! Thanks for putting on subtitles! Helps a lot! Lucas
  • RT
    Richard T.
    11 July 2020 @ 00:38
    "Maybe pensions get funded printed money at some point?" And, so hope triumphs over reason.
  • TS
    Thomas S.
    10 July 2020 @ 23:48
    So this goes on forever ? What are some signs Tyler is looking for to bail on the long play ?
  • CM
    Cory M.
    10 July 2020 @ 18:15
    Boomer love, Tyler. Keep it coming.
  • JT
    John T.
    10 July 2020 @ 02:29
    Tyler Neville is totally 100% my generation. Not really an x-er, not really a millennial, right in between.
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:39
      Nailed it
    • CR
      Cory R.
      10 July 2020 @ 17:10
      My little sister was born in 1980 and she feels like she doesn't fit in with either the millenials or gen-x'ers.. I think she is the best of both.
  • RL
    Ryan L.
    10 July 2020 @ 16:16
    Tyler has turned me from a bear to a bear-bull. Great chat.
  • DS
    David S.
    10 July 2020 @ 14:01
    Great talk. Super interesting final 7 words by Tyler: "Hope I pissed off all your subscribers". A tongue and cheek swipe at generational divide (a fairly common sentiment here in ATX)? Got me wondering, exactly what is the RV subscriber age demographic?
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:54
      Hah it was less at the generational divide and more at the RV bearishness at times. I'm so bearish I'm bullish. CNBC avg viewer is like 65. I think RV avg is like early 30s.
  • DL
    David L.
    10 July 2020 @ 11:38
    Interesting discussion. But with the market structure and these flows, why the downturn in March? Did I miss something? Granted, Trump and the Treasury will be charging hard come this fall, but until then? Very much liked the comment about UBI as the debt jubilee.
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:51
      I don't think the Fed, Fiscal & Global CB liquidity was there in the same size in march. Now it's astronomical and unlimited. My honest opinion we aren't in a totally free market anymore- the stock market is a public utility with small pockets of free market capitalism (where active managers are the bulk of the holder base).
  • CR
    Cory R.
    10 July 2020 @ 05:17
    It is good to hear the young man preface his "flows" talk with a mention of fundamentals. I was weaned on fundamentals and it has taken a decade-plus to realize today's markets are for the most part divorced from the traditional P/E and P/B markers. According to Tyler, nowadays it is all about equity stakes and cash on hand. I personally like net profits but that is coming from a mid-GenX'er who can't break away from fundamentals. That is why I missed Tesla and Amazon.
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:48
      Don't get me wrong, valuation matters when the market is dominated by active managers. But the judges at the beauty contest have different preferences than they did 10 years ago- lower fees and flows have way more to do with prices than P/E, P/B, Debt/EBITDA. How else can a generation of guys who run billion dollar funds & graduated top of their class at Harvard be wrong for a decade?
  • AI
    Andras I.
    9 July 2020 @ 23:54
    Epic Mike Green interview related to what Tyler was talking about at 9:00: https://ttmygh.podbean.com/e/teg_0003/
    • NI
      Nate I.
      10 July 2020 @ 05:51
      The best finance interview in 2020.
    • DD
      Donal D.
      10 July 2020 @ 07:05
      Andras, Thank you so much for sharing the link best interview I've heard with Mike Green. For those of you who have not listened its well worth the time and effort. Donal
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:43
      Mike is the GOAT!
  • KP
    Kaushal P.
    9 July 2020 @ 22:12
    Good conversation. Should mention the flip side of passive too. When Vanguard and Blackrock have to sell, they also sell at any price. So if the bid dries up and there are even modest redemptions in passive funds, things can get ugly very fast. That’s why I thing having a long vol position in the portfolio is a must.
    • NP
      Nick P.
      10 July 2020 @ 01:31
      What is your long vol play?
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:42
      Totally agree....Check out the Mutiny Fund!
  • MD
    Matt D.
    10 July 2020 @ 03:18
    Good interview Ed - was going well till the last comment (Tyler) ?? Anyway, did Tyler actually state that these off market liquidity pools still impact the "tape" ie. the price of the stocks they are dealing (off market liq)? I don't believe that - these brokers (who act as Principal) would have to trade somehow (hedge for example) to impact the price. Otherwise they are just tracking the price and their liquidity flows are neutral to the market price. I think Tyler said that despite the macro he is seeing a bullish case (a simple summary) - which is not a dumb observation I guess. Cheers lads.
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:40
      Sorry about the last comment- It was trying to be facetious because there are a lot of RV bears...I'm so bearish that I'm bullish
  • NP
    Nathaniel P.
    9 July 2020 @ 22:41
    A bunch of that went CLEAN over my head. When he (Tyler) talks about the things going on in public markets that traders 'don't know how to articulate', I don't think he did a great job articulating it either, frankly. Love to understand, sounds important. Maybe Ed can give a cheat sheet for those of us dodos who didn't get it.
    • TN
      Tyler N. | Real Vision
      10 July 2020 @ 14:35
      Hey Nathaniel- Sorry I didn't clarify well enough- Microstructure is a deep rabbit hole and super fragmented. What I was trying to say was because retail trading is now a big portion of daily volume, that specific portion of the daily liquidity is not always accessible to giant institutional traders at mutual funds/ETFs believe it or not. Theoretically if you look at 1 mln shares of TSLA trading, ~500k shares of those are retail trades that get sold by Robinhood (The retail trading platform), to what they call an internal wholesaler who pays Robinhood for that "flow". This is the reason Robinhood can basically charge zero commission on their trades. They flip those trades over to these wholesalers like Citadel or Virtu. The wholesaler trading firms basically "internalize" their stock trading before going out to the open market so the majority of large institutions trying to execute on the open market don't have full access to the retail shares trading. The bottom line is if Vanguard or Blackrock are trying to buy 5 mln shares of stock throughout the day because of inflows, they end up excluded from a lot of the trading volume hitting the tape and have to force the price up more given their institutional trading rules which generally are a "% of volume" metric. Meanwhile there are only a few big institutions that can trade blocks negotiated 1 mln+ share orders and there are less and less active managers willing to part with shares these days in blocks. Here's an article that explains more how it works. https://www.bloomberg.com/quicktake/payment-for-order-flow
  • DP
    Duane P.
    10 July 2020 @ 04:02
    I didn't follow the part about commission-free retail trades go into an internal wholesaler and liquidity is 50% of market but is reflected in price action inaccessible to institutions. Does anyone have some insight into how this works? Thanks.
    • MJ
      Marc J.
      10 July 2020 @ 07:07
      Me too. Maybe RV or George Gammon could do a whiteboard on it?
    • JG
      Justin G.
      10 July 2020 @ 13:04
      Google “how Robinhood makes money” and read the result from Investopedia. Retail brokers sell their order flow to large institutions, so the trades print but never actually hit the market, giving the illusion of liquidity. The institutions have to offer price improvement to the posted bid/ask, keeping spreads tight.
  • MC
    Michael C.
    10 July 2020 @ 13:00
    Please invite Tyler back. Thanks
  • GH
    Garrett H.
    10 July 2020 @ 12:32
    The debt jubilee might be UBI. Excellent point that I've been thinking of as well. They can't wipe out the creditors in one move because of how disruptive that would be. Instead you slowly boil them and transfer wealth from retirees to wage earners and from those holding claims on future wealth (e.g. growth stocks/bonds) to those holding real wealth (e.g. productive/hard assets).
  • UJ
    Ulf J.
    10 July 2020 @ 07:46
    Interesting to see is the stock market (DJI) since march is in lockstep with ETH and Gold. Great discussion guys.
  • JK
    Johan K.
    10 July 2020 @ 07:19
    Great discussion. Tyler seems to bring a fresh and insightful perspective to RV. Well done.
  • MJ
    Marc J.
    10 July 2020 @ 07:07
    Great discussion :)
  • ER
    Emma R.
    10 July 2020 @ 06:44
    Great show today guys. Loved Tyler’s take on microstructure. You also covered two things that have been bothering me.....how this could be setting up for a blow off top and how the pension needs/expectations of the Baby Boomers (current ruling class) have to be met. Even at the expense of their kids and grandkids. Thanks so much.
  • NI
    Nate I.
    10 July 2020 @ 05:52
    I like your interviews Ed. Please keep them coming.
  • JN
    John N.
    10 July 2020 @ 05:30
    this was great. please do lots of these types of daily briefings. same as the M.R. one. adds a good balance to mix. nice for the the shorter time frame traders. the bearish global macro theme is valid but toxic to the shorter time frame if not put into proper context.
  • RY
    Ron Y.
    10 July 2020 @ 00:23
    Teddy Vallee's "chart today on 5-year real yields are super negative" ...... anyone got a link to this chart?
    • DP
      Duane P.
      10 July 2020 @ 03:59
      https://twitter.com/TeddyVallee/status/1281245841727074305/photo/1
  • DP
    Duane P.
    10 July 2020 @ 03:55
    This was very interesting!
  • JF
    Janet F.
    10 July 2020 @ 02:33
    Enjoyed Tyler Neville's fascinating no BS discussion. Thanks!
  • XM
    Xavier M.
    10 July 2020 @ 02:02
    A pleasant surprise, this. Cheers.
  • MS
    Matthew S.
    10 July 2020 @ 01:10
    Sensational.
  • OA
    Oliver A.
    10 July 2020 @ 01:07
    This was terrific
  • AA
    Alberto A.
    10 July 2020 @ 00:55
    very refreshing daily briefing...clear and no bull shit....great epic phrases. Bring him back whenever possible..
  • MC
    Michael C.
    10 July 2020 @ 00:26
    Well THAT was interesting....didn't disagree with much of what was said. Felt like front running order flow by the dark pools and those firms paying for order flow got skirted around. Ben Graham would be rolling over in his grave. Big question or elephant in the room...with this carefully constructed framework per Raoul, what could go wrong? Or could another black swan show up again at an opportune time to throw a monkey wrench into the gears?...lol. Great job Ed and guest!
  • MH
    Michael H.
    10 July 2020 @ 00:25
    RV Notes 9/9/2020 * Micro-structure: * New emergence of retail traders in past year * Commission-free retail trades go into an internal wholesaler (i.e. this is 50% of TSLA) * Internal wholesaler liquidity is 50% of market but is reflected in price action inaccessible to institutions (not sure this is accurate in my notes) * VanGuard, BlackRock, etc, can’t keep up so they buy stock with all inflows available, further driving up the price. * My own conclusion: no large institutional sellers = stonks go up until that changes * Bull market can go on longer than we may think * 1997 had ~7k public companies, now ~3500 * Fed liquidity and retail money is chasing fewer companies / assets * Trillions in buybacks removing float (public available stock) * In 2000 only ~5% float, most mainly held by insiders * Fundamental analysis has sexy jargon and makes you look smart but retail doesn’t care * Passive vs. Active: mutual funds are being re-allocated to passive funds (5% cash vs. basically zero cash) * Political triggering event (HK dollar peg or FAANG break-up) may change things * Massive in-flows of cash into ETFs and passive funds * Market-cap weighted indices reflect high growth stocks with high liquidity from retail * Money forced to move into market-weighted assets * Creates bubble, herd-like effects * Hedge funds seeing lower vol and value-at-risk and are levering up for returns in equities * High fee hedge fund structure is disappearing slowly due to mediocre performance * Bond market has very low yields * Owning a Treasury is like owning a Put that you’re getting paid for but no growth * Old companies are capitalized with lots of expensive debt * New growth stocks capitalized with equity and cash (VC, PE, IPOs, etc.) * Debt is a tax on future earnings/income * Nobody wants to pay an active manager when passive management outperforms long-term * Pensions i.e. CalPERS starting to use leverage, looking for returns * Complete disconnect with current economic reality * Leaves most of society behind, massive inequality, globalization, etc. * “Elephant in the room” * In a W-shaped recovery will make disconnect even larger as cash continues to concentrate * Social unrest, call for billionaire taxes, will become an election issue * Currently undergoing ’generational arbitrage’ where younger people are moving to low cost of living areas * Old politicians will do everything, anything, within their power to keep the system going * Retirement crisis - a backdrop - is a solution that needs to be solved with high asset prices * Pensions may just be funded with printed money, causing inflation concerns * UBI is a real possibility if this gets extreme = possible debt jubilee manifestation
  • SS
    Sheldon S.
    10 July 2020 @ 00:24
    More Tyler, please.
  • RC
    Randolph C.
    9 July 2020 @ 23:57
    Tyler's perspective is a great complement to the fundamental analysis.
  • JR
    Joseph R.
    9 July 2020 @ 23:26
    Bring Tyler back on when it all goes tit's up.. Seriously, just keep printing. Got a good laugh out of that.. Joe R.
  • CR
    Cory R.
    9 July 2020 @ 23:23
    "As long as there is promise of future growth somewhere.. (market will go up)" "They won't let deflation happen.." "This might be a raging bull market in the face of an economy that's never been worse.." A refreshingly astute young man this Tyler Neville is. Bravo.
  • DS
    Donna S.
    9 July 2020 @ 23:16
    Great segment and good interview, Ed. . I really enjoyed Tyler and would love to see him back again.
  • CR
    Colin R.
    9 July 2020 @ 23:16
    Interesting, thanks. Could anyone tell what's behind USDTRY for the last 15 days it's like it's pegged... but I haven't seen such news
  • TB
    Tobin B.
    9 July 2020 @ 22:51
    Geritocracy I love it! I'm 39, and thoroughly enjoying this sh*tshow
  • GE
    George E.
    9 July 2020 @ 22:48
    Love to see ATX well represented on the Daily Briefing. Well done RV
  • DG
    Dave G.
    9 July 2020 @ 22:44
    The overwhelming response I've seen from the millennial traders is "this time is different" Maybe it will be.
  • MA
    Mike A.
    9 July 2020 @ 22:39
    Thanks ED Makes perfect sense!!!
  • TM
    Tyler M.
    9 July 2020 @ 22:32
    Awesome. Really liked having him on
  • MS
    Marcus S.
    9 July 2020 @ 22:30
    Excellent - Let's have Tyler back again at some point!
  • DH
    David H.
    9 July 2020 @ 22:16
    Awesome. So, there is supposed to be a big hole in the economy that sucks up all of the stimulus money. Apparently not happening. Are the marginal flows therefore caused by loan forbearance - a temporary bridge over the big hole? Does this mean it can turn with a vengeance when people have to start paying their bills again?
  • MT
    Mark T.
    9 July 2020 @ 22:15
    Great interview, really enjoyed the discussion topics.
  • MH
    Muddshir H.
    9 July 2020 @ 22:09
    Great work Ed