Daily Briefing – June 24, 2020

Published on
June 24th, 2020
Duration
36 minutes


Daily Briefing – June 24, 2020

Daily Briefing ·
Featuring Nick Correa, Ash Bennington, and Roger Hirst

Published on: June 24th, 2020 • Duration: 36 minutes

Senior editor Ash Bennington joins managing editor Roger Hirst to analyze the anatomy of bubbles, propelled by emotional mania, and how that is relevant to today's markets. Bennington and Hirst discuss how equity markets appear to be inflated by flows rather than grounded in fundamentals and why the Fed’s balance sheet is the key driver of all of the recent price action. They also explain why time horizons are a critical piece to how traders should form their thesis and shapes the way they look at the market as well. In the intro, Nick Correa shares the IMF's latest update on its global GDP projections, what's happening in CDS markets, and the cost of business operations during coronavirus.

Comments

Transcript

  • AN
    Andrew N.
    24 June 2020 @ 23:06
    Great interview, always love to hear from Roger. However, I think I disagree with his basic thesis. It's certainly true that the Fed's balance sheet appears to correspond to the roll-over of the SPY in the last couple weeks, but I think that might not be as tightly correlated as it first appears. In fact, the SPY seems much more correlated to the inverse of the VIX, suggesting that the swings in the SPY are primarily based on emotion, not flows. I haven't calculated R^2 for the curves, so I'm not sure, but that is my sense. In other words, I think this market (since the Fed Put was first re-asserted at the bottom) is primarily being driving by coronavirus sentiment and not liquidity.
    • DS
      David S.
      24 June 2020 @ 23:51
      Andrew N. - You may be partially correct, but let the Fed withdraw liquidity and we could see the market tank quickly. DLS
    • AN
      Andrew N.
      25 June 2020 @ 01:19
      I think the Fed equity put is a well-learned Pavlovian response. Of course, if the Fed announced that they would never support equities, the market would tank, but I think that's just based on psychology.
    • da
      daniel a.
      25 June 2020 @ 06:09
      My thoughts exactly. The market is currently driven by Covid sentiment. Fear will likely drive markets lower soon.
    • DS
      David S.
      27 June 2020 @ 01:19
      Fed vs COVID. COVID wins in the short run. Gold in the long run. DLS
  • MO
    Megan O.
    25 June 2020 @ 19:50
    Excellent conversation - one of the most interesting daily briefings I've watched. Honest and big picture. I will be listening to this again.
    • DS
      David S.
      27 June 2020 @ 01:06
      Mr. Hirst adds second and third order effects in an understandable way. DLS
  • DS
    David S.
    26 June 2020 @ 19:27
    Great discussion on financial bubbles. Good idea to focus part of the DB on a single topic or review a RVTV interview. IMO we are in a classic financial bubble caused by the shutdown of the economy. There is no reference as to when the shutdown will be over. Future cash flows for governments, businesses and individuals around the world are not predictable. The E in P/E is completely unknown. Governments are trying to fill in the gap, but governments are not the economy. Until the pandemic is over all the discussions on the shape of the economic or market recovery, the future P/E, government, business and individual cash flows are counting Angels on the Head of a Pin. How long will the bubble last? Unknown! As Mr. Hirst said, a bubble can go on for a long time. This bubble is different from any financial bubble of the past. It is a pandemic bubble. The nimble traders can make money in most bubbles. Are you a nimble trader who can keep getting in and out at the right time? That is the bet. DLS
  • AS
    Ash S.
    26 June 2020 @ 05:01
    Celebrating the loss of the great mothership haha.
  • AC
    Aaruran C.
    25 June 2020 @ 19:34
    I haven't had someone so precisely express my own view in a Real Vision video in a while. Totally agree with Roger! I've found the best way to capitalize on this environment is to run multiple portfolios with different time horizons and then use a derivative overlay to hedge out macro risk. I look at it as a hybrid of investing and trading. Some positions in my long only portfolio are 100-year stocks; others in my dedicated short portfolio might be covered later in the day. It definitely takes a different breed. However, the combination of leverage and liquidity with futures lets you protect yourself quickly when sentiment sours outside of normal market hours. If you look at flows and positioning (look at Z-Score of net short positions in E-Minis or the amount of dry powder in P/E as two examples) and assess the statistical relationship between Central Bank balance sheet size and the SPX index, it's pretty clear to me that equities have a lot more room to run in the next 3-6 months barring the narrative changing in a significant way. Start riding the asset bubble now before you join later amidst the madness of crowds. But if you do, remember it's a game of musical chairs. Hard assets should be the core of your portfolio. Don't let Tesla calls get out of hand. But when the time comes, make sure you're short equity, long dollar and long vol and we will join each other in the promiseland.
  • PE
    Paul E.
    25 June 2020 @ 19:02
    This was a good one!
  • SG
    Stuart G.
    25 June 2020 @ 15:56
    Why early June doesn't qualify as sufficient exuberance required to define a market bubble I don't know. But great information about money flows and how it affects the market.
  • TS
    Timothy S.
    25 June 2020 @ 13:15
    Id love Roger to debate the fed's effectiveness with Jeff Snider.
  • JE
    J E.
    25 June 2020 @ 12:04
    A light went click with Roger’s idea that equity flows are non-productive and further reduce productivity... A positive feedback loop.. bubble time guys
  • JA
    Jonathan A.
    25 June 2020 @ 08:29
    Good comments from Roger on the new types of market participants.
  • SS
    S S.
    25 June 2020 @ 00:05
    Just got off a Zoom meeting with President Trump, Jay Powell and Larry Kudlow. It was a beautiful meeting, fantastic meeting, best meeting of all time. They told me to tell the RV audience, See you at 4000 on the S&P 🚀🌙 All you bears out there, save the hate and negative comments I'm just the messenger 🤣
    • DS
      David S.
      25 June 2020 @ 03:58
      If Chair Powell keeps the printing presses going, the S&P might be at 6,000 by the election. DLS
    • SB
      Stewart B.
      25 June 2020 @ 07:38
      The printing press is the most powerful and addictive weapon known to man. Once you start using the printing press to solve every problem, it will be impossible to stop.
  • RA
    Robert A.
    25 June 2020 @ 06:53
    Roger Hirst for president
  • da
    daniel a.
    25 June 2020 @ 06:02
    Hmm RV comments are too bullish.. Sorry Roger, but Covid FEAR seems to be the sell indicator to look for. Throw in some zombie companies and call it a day!
  • JC
    Juan C.
    25 June 2020 @ 05:56
    Great show today. Excellent. Very instructive, incredibly helpful.
  • IP
    IDA P.
    25 June 2020 @ 05:51
    thanks for this, ps: please invite Sven Henrech northman trader
  • SE
    Seth E.
    25 June 2020 @ 03:49
    I spent years as a sports handicapper and your analogy there is 100% spot on. Nailed this one guys. Thank you.
  • SH
    Sahil H.
    25 June 2020 @ 02:39
    That was a great daily briefing. I really enjoyed Rogers outlook as to how capital flows are a key driver in the market and that could be a good indicator for when the markets start to turn. I also found his thoughts on the key ingredients of a bubble very interesting. I think emotion is such an important part of it because it is what drives capital out of the market in an irrational way (i.e. fast and usually very violently). A lot of people on the sidelines seem to feel a bit cheated because less sophisticated investors are currently making a lot of money than they are but its important to consider that no trade is still a trade. If entering the equity markets right now feels too risky then don't play it and you're still making money by not losing any.. I know SO SO MANY people that "made" insane amounts of money within a few months during the 2017 Crypto bubble, I'm talking multiples of 6-7 figures. The vast majority of them ended up losing all that money because they ended up selling at losses or held coins that had lost 90% of their value from ATH's. With a few exceptions, the only people I know that made a lot of money were more experienced investors and those that got into the markets early on in the market cycle in 2016.
  • SH
    Sahil H.
    25 June 2020 @ 02:38
    That was a great daily briefing. I really enjoyed Rogers outlook as to how capital flows are a key driver in the market and that could be a good indicator for when the markets start to turn. I also found his thoughts on the key ingredients of a bubble very interesting. I think emotion is such an important part of it because it is what drives capital out of the market in an irrational way (i.e. fast and usually very violently). A lot of people on the sidelines seem to feel a bit cheated because less sophisticated investors are currently making a lot of money than they are but its important to consider that no trade is still a trade. If entering the equity markets right now feels too risky then don't play it and you're still making money by not losing any.. I know SO SO MANY people that "made" insane amounts of money within a few months during the 2017 Crypto bubble, I'm talking multiples of 6-7 figures. The vast majority of them ended up losing all that money because they ended up selling at losses or held coins that had lost 90% of their value from ATH's. With a few exceptions, the only people I know that made a lot of money were more experienced investors and those that got into the markets early on in the market cycle in 2016.
  • JK
    Jim K.
    25 June 2020 @ 01:12
    Great show guys and fantastic to have Roger back. Quick question: Roger mentioned his “writings” and I was just curious where Roger’s writings can be found? Thanks again!
  • LB
    Louis B.
    25 June 2020 @ 00:28
    Why do we even still call it 'the market'? There is no market anymore; it's just a casino!
  • LB
    Louis B.
    25 June 2020 @ 00:25
    Are there any investors left here on RV?... It seems it's only about trading now!
  • MC
    Michael C.
    25 June 2020 @ 00:11
    Maybe its time to get Mike Green from Logica back on to get his views. He is the genius on flows. Thanks Ash/Roger. These daily briefings are always better when discussed in the context of a framework than when trying to explain daily market noise.
  • VL
    Vid L.
    25 June 2020 @ 00:05
    It's Roger's careful approaching to this bubbleful US stockmarket, his descrete swing from "nevermind this normal bear market rally" to "we just might need to participate in some of this madness", that is the most convincing indicator of a imminent correction/reversal. (I'm not trading on this "information" and neither should you but I'm interested to see what will happen!")
  • SG
    Sebastian G.
    25 June 2020 @ 00:02
    The Crypto-Gathering should have been held at this pub with a lovely beer garden in Aldeburgh. Welcome back, Roger.
  • MD
    Matt D.
    24 June 2020 @ 23:45
    Good discussion Ash and Roger. Quite a lot of useful insights jammed packed into today. The idea of a bubble deflating and the culprits never returning (or the bubble reflating) is interesting to think about - I guess the reflation is possible long term for some major indices/commodities? I did notice passive and active flows mentioned - essential day-trading tools. Very sage quotes too Ash - nice. I wish it was true for trading - "the supreme art of war is to subdue your enemy without fighting". Thanks for today. Enjoyed.
    • DS
      David S.
      24 June 2020 @ 23:55
      Sun Tzu. DLS
  • DS
    David S.
    24 June 2020 @ 23:46
    Great to hear Mr. Hirst's views on the market. The bond and FX markets are the real battle grounds. The US, Euroland, UK and Japan must support their stock markets by printing money forever. There is no easy off ramp in a republic where the central bank's primary role is to protect the value of the stock market. Monetary flows from CBs have already replaced profits as the fundamental mover of markets. Authoritarian governments may handle their monetary expansion better without the voting booth in their face. This will have a major impact on sovereign power and FX markets. Time will tell. DLS
  • cs
    connor s.
    24 June 2020 @ 23:41
    ASH - pls accept my LinkedIn request
  • RK
    Ron K.
    24 June 2020 @ 23:34
    Lots of uncertainty in the market, but if Ash puts another file cabinet in his office, it is 100% certain that he will have nowhere to sit. Great show today.
  • SS
    S S.
    24 June 2020 @ 23:26
    BTFD I knew it Roger. S&P to the moon brother 🚀🌙
  • CX
    Cindy X.
    24 June 2020 @ 23:17
    Wow! This is the best analysis by Roger. Very insightful! For one thing he said, the retail trading may be here to stay while the big fund managers are wishing for a big crash to wipe them out. Not so fast. RV should invite Russell back. He invests in China where it is dominated by retail investors who trade on rumors, not fundamentals. He can teach us how to navigate that. Of course, the Chinese market has not recovered from the big crash, but retail traders still dominate.
  • RM
    Robert M.
    24 June 2020 @ 22:56
    Ash, spot on comment about Roger "bringing us along" as he works towards his conclusion. I find it helps my understanding.
  • BK
    Bruce K.
    24 June 2020 @ 22:03
    A hearty WELCOME BACK ROGER!