Daily Briefing – June 25, 2020

Published on
June 25th, 2020
Duration
44 minutes


Daily Briefing – June 25, 2020

Daily Briefing ·
Featuring Nick Correa, Ash Bennington, and Ed Harrison

Published on: June 25th, 2020 • Duration: 44 minutes

Senior editor Ash Bennington and managing editor Ed Harrison break down the latest economic data amid a bullish day on Wall Street. They discuss the rising infections in states like Texas, Arizona, and Florida, and they take a data-driven look at the apparent stalling of the jobs recovery and the reversal of the durable goods slowdown. Ash looks at how peoples' marginal propensity to spend is affecting the recovery, while Ed explores whether different asset classes are pricing in different recovery "shapes" (equities pricing in a V-shape, high-yield pricing in a Nike swoosh, and investment grade pricing in a "reverse radical"). In the intro, Nick Correa discusses what's happening in Texas and how the virus spread undetected for several weeks before the US locked down.

Comments

Transcript

  • RS
    Rob S.
    26 June 2020 @ 14:18
    Logically I understand Raoul, Ash, Ed thesis that the Fed can solve a liquidity event but not an insolvency event. However, I have not heard this discussed: -- “THIS Fed has shown no restraint, no boundaries, what stops them from continuously backstopping junk debt which would continue allowing current insolvent companies to remain liquid. Meaning this Fed has already kept insolvent companies alive, what stops them from continuing to kick that can for years, a decade even?”
    • CC
      C C.
      29 June 2020 @ 04:21
      Nothing, look at Japan.
  • JD
    Jesse D.
    26 June 2020 @ 01:19
    Just wanted to give you guys kudos for everything to date since the start of the DB’s- you all (+Roger) have been such an integral part of my daily routine it feels like u are my friends! Anyhow thx for the great conversations and please keep it up!👍
    • AB
      Ash B. | Real Vision
      26 June 2020 @ 23:54
      Thanks, Jesse. Really appreciate it.
  • ER
    Emma R.
    26 June 2020 @ 07:22
    Great show guys.Call me sad but RVDB is one of the highlights of my day...such great insight....and I love the humor. I saw two pieces of news yesterday that I thought you might have touched on. First is the default situation in Lebanon. Could this be the first of the dominoes? Second was a piece about the majority of UK High St retailers not paying their 3Q rent....possibly another canary in the coal mine?
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:30
      Emma, glad to have you as a viewer. Many thanks
    • AB
      Ash B. | Real Vision
      26 June 2020 @ 23:52
      Thanks, Emma. Much appreciated.
  • BS
    Boris S.
    26 June 2020 @ 17:35
    Hey RV team, have you got any comment on not airing "lengthy debate on mmt" by Jim Richards with one of the advocates of MMT? Jim tweeted you refused to air it, and yet there has been no answer whatsoever.
    • MW
      Max W. | Real Vision
      26 June 2020 @ 19:35
      The piece in question was filmed in April of 2019. It was not aired because of tone not content. We determined that Jim did not participate in the interview with any sort of open-mindedness or respect for the other guest (Marshall Auerback) and thus it would not be fair to Marshall to air. Civility is a requirement for any piece of Real Vision content that resembles debate. We are not proponents of MMT at Real Vision but we have been covering it because it was clear it was coming and now over a year later it is at our doorstep. You can agree with it or not, but you need to understand it because MMT is here and maybe to stay. The idea that Real Vision has not been an equal platform for those critical of central bank stimulus and MMT is just laughable. We have entire series looking at gold, bitcoin, and with hosts like Danielle DiMartino Booth.
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 19:50
      I can comment since I moderated that piece. It was slated to be for April 17th, 2019 in the show format "The Exchange" on MMT with Jim in the anti-chair and Marshall Auerback in the pro-chair. But, the taping didn’t engage on the substance of MMT (questions like what happens to inflation and deficits when MMT policies are followed, etc). And so it got bumped by a piece moderated by Danielle DiMartino Booth. When I got back from vacation, we had already lined up MMT 'inventor' Warren Mosler for an interview in late May. And so we decided to wait for that one instead, as it was likely to be more substantive. The Rickards piece got dropped. We told Marshall and Jim that the DDB piece bumped them and that it wouldn't air and his publicist replied that she understood. We actually did try doing another MMT exchange later in the summer with Rohan Grey (pro) and Kevin Muir (anti). And that one was ok. It was more substantive on questions like what happens to inflation and deficits when MMT policies are followed. But, personally, I came away feeling MMT is a hard topic to do in debate style. That was the last time we did anything on MMT. We'll try maybe one more time though with Stephanie Kelton in interview format.
  • MI
    Miloslav I.
    26 June 2020 @ 00:21
    I heard that James Rickards had a conversation about MMT with some well known MMT representative. I also heard that RV doesnt want to publish the interview. Im asking WHY?
    • MW
      Max W. | Real Vision
      26 June 2020 @ 19:36
      The piece in question was filmed in April of 2019. It was not aired because of tone not content. We determined that Jim did not participate in the interview with any sort of open-mindedness or respect for the other guest (Marshall Auerback) and thus it would not be fair to Marshall to air. Civility is a requirement for any piece of Real Vision content that resembles debate. We are not proponents of MMT at Real Vision but we have been covering it because it was clear it was coming and now over a year later it is at our doorstep. You can agree with it or not, but you need to understand it because MMT is here and maybe to stay. The idea that Real Vision has not been an equal platform for those critical of central bank stimulus and MMT is just laughable. We have entire series looking at gold, bitcoin, and with hosts like Danielle DiMartino Booth.
  • JA
    John A.
    26 June 2020 @ 04:06
    Ash: “Ed, what are you looking at?” Ed: “Not that plant behind me” for at least 2 weeks!
    • SW
      Sarah W.
      26 June 2020 @ 11:29
      Haha! We've all been there. Busy markets!
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:33
      If it weren't for my wife, that plant would be dead now. She's the only one watering it. And she never comes into the basement these days since it's 'my film studio' now. I'll tell her viewers noticed our neglect!!
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:43
      Update: My wife has taken IMMEDIATE action and swapped out the plant. Thanks, John. Tell us if you like the new plant.
  • FL
    Francis L.
    26 June 2020 @ 00:50
    I'd like to hear more commentary on the Fed's restriction on bank buybacks and dividends announced today
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:39
      Will do
  • KV
    Konstantinos V.
    26 June 2020 @ 02:18
    I think these conversations would be better without the covid-19 commentary. The epidemiology is inconsistent and incomplete and attempting to build a case as to why an earlier lockdown would have saved more lives is not a factual statement at this time.
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:37
      I try to steer clear of COVID to be honest. But it has such a dramatic economic impact that we have to consider it. The question for me is not epidemiological though; it’s strictly about the impact on consumption and business closures.
  • MA
    Matt A.
    26 June 2020 @ 02:46
    How could you guys mess this up twice in a row... :face_palm: It's "Looking good, Billy Ray" "Feeling good, Lewis"
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:35
      We’ll get it right eventually. Lol!
  • GB
    Griffin B.
    26 June 2020 @ 01:12
    What type of shirt is Nick wearing? Could put affiliate links in the description, just an idea
    • KB
      Keith B.
      26 June 2020 @ 05:50
      It’s either tailored, altered, or he got very lucky with the fit if it’s off the shelf. Just go to a tailor and get a shirt made for a similar fit
    • NC
      Nick C. | Real Vision
      26 June 2020 @ 13:32
      Nothing fancy, https://www2.hm.com/en_us/productpage.0781758008.html Combination of being very lucky with the fit and working out several days a week :)
  • RC
    Ron C.
    26 June 2020 @ 04:17
    I think Ed is more European than Roger Hirst 😂
    • LR
      Louise R.
      26 June 2020 @ 09:17
      Is he a Chelsea or a Man City fan though?
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:31
      Cheers, Ron. Louise, Roger is Man U, I'm Chelsea.
  • PC
    Peter C.
    26 June 2020 @ 11:03
    Ed, in principle the W-recovery is a fact according to your definition because there is nothing that can stop the surge in hospitalizations, even if the impacted states go in complete lock-down today. There is a delay between a peak in cases and a peak in hospitalizations of about two weeks. The question remains how this 2nd wave impacts the markets. It may give the markets a scare when situation suddenly worsens but it is likely followed by another boost due to "stimilus hopes", Fed QE and increased stimulus down the road. The market started turning in March when QE infinity was announced and never looked back. The reopening narrative might be responsible for the rotation in cyclical stocks but did actually impact the market overall? Maybe the market will not experience a dip due to a second wave at all? I am not sure but I think we need to see a policy error or a spike in defaults before a repricing of high yield and equity markets is needed to face reality. Btw, not sure if you are big fan of the Reds but congrats for the title! Did you watch it during the interview? ;-) I don't think so because otherwise you would have shown a scary face when KDB scored that amazing free kick :-))
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:29
      Thanks for the feedback, Peter. And I fear you're right on the hospitalizations. We're still in the delay between case count, hospitalizations and deaths and economic pain. So there's still hope the US can overcome this blow. I am realistic enough to think the base case is a W now. As for LFC, I'm actually a Chelsea fan, though I admire Klopp. I was watching, but not during the taping because the streaming would have killed my video quality.
  • SW
    Sarah W.
    26 June 2020 @ 11:28
    Ed's gone right down in my estimation being a Liverpool fan.
    • EH
      Edward H. | Real Vision
      26 June 2020 @ 13:27
      LOL! I had to give you a thumb's up for that one. Two things on that though: first I misspoke talking about Liverpool missing out on first division glory for 40 years instead of 30 years. And I'm a Chelsea fan, even worse! I like Klopp though and am impressed by the way Liverpool play. Klopp's done great things for them.
  • RR
    Ryan R.
    26 June 2020 @ 05:33
    While there is plenty of news about jobless claims and rates, I haven’t heard much about temporary or permanent salary reductions. I have friends across multiple industries that have 20% or greater temporary salary reductions. I noticed this much more than I noticed outright unemployment around me. I would enjoy an analysis about how these salary reductions factor in.
    • RC
      Ron C.
      26 June 2020 @ 06:06
      Hear hear, my brother in law works for Aon, 50,000+ employees and 20% pay cut across the board indefinitely, so they are essentially 80% employed while being 100% employed
    • CA
      Cyrus A.
      26 June 2020 @ 10:16
      Good point...there are some interesting data points, as well as just anecdotal evidence, pointing to 20%+ salary cuts for white collar workers (who don't qualify for any govt support/benefits because they are still technically employed)...these salary cuts obviously won't be reflected in unemployment numbers but they will have a negative impact on consumer spending and confidence, and will have subsequent knock-on effects with mortgages and other debt repayments. Remember these aren't pay freezes but sizeable and immediate salary reductions. Spending habits of white collar workers also likely to change dramatically as year-end bonuses evaporate If employers can't make the P&L work even with salary cuts, then a potential wave of white collar lay offs later in the year is coming and will ripple out, further impacting leisure, house sales, autos, retail, travel, hospitality etc
  • GH
    Galen H.
    26 June 2020 @ 09:04
    In Barton Biggs' book, Wealth, War and Wisdom, in a very short paragraph, he explains the US' Post-War Blues in 1946-49. Post WWII, the US went through such a period. The EU had poor growth, or so did the rest of the world and the enormous war time US stimulus came to an end. This resulted in the Dow, having rallied sharply, then fell 20% in a month and remained stagnant for a couple of years as the US adjusted to lower stimulus. The massive stimulus first resulted in 18% inflation and then 9% inflation in '46 and '47 respectively, but then deflation. This reminds me of what can happen now.
  • JS
    Jordan S.
    26 June 2020 @ 08:16
    Captain America!!
  • KB
    Keith B.
    26 June 2020 @ 07:05
    Every time I see the chart of US jobless numbers I see myself using that chart teaching History class in 20 years time. It’s like the chart of Reichmarks/gold from 1920s Germany.
  • mf
    massimo f.
    26 June 2020 @ 05:26
    I was looking back at real gdp growth in the 2000s and notice there was a quarter of positive gdp growth within the defined boundaries of the 08-09 recession (i think it was q2 2008). If its one quarter of growth before more decline it is effectively one recession, no? Seems like splitting hairs to define it as two recessions, especially if permanent layoffs are steadily increasing throughout.
  • SB
    Steve B.
    26 June 2020 @ 03:35
    high quality stuff right there
  • SS
    Steve S.
    25 June 2020 @ 22:53
    Great RVDB today. Glad you went over time. I've been trying to figure out what the picture of Ash and Ed reminds me of and why it keeps making me laugh. Then I got it. All you wrestling fans will get this. Its the Dudley Boyz. Bubba Ray Dudley (Ash) and D-Von Dudley (Ed). I wonder which tag team you would like to take on, Perhaps the PPT, Mnuchin and Powell. 🤣🤣
    • DL
      David L.
      26 June 2020 @ 01:07
      LOL
  • NL
    Nikola L.
    26 June 2020 @ 00:57
    good stuff but I can't see long term surge of sales in external video cards. Most people will simply buy laptops with dedicated video cards. Either way - Long Nvidia and AMD.
  • BE
    Brent E.
    25 June 2020 @ 23:34
    This I should scary: https://www.theatlantic.com/magazine/archive/2020/07/coronavirus-banks-collapse/612247/
    • RS
      Riki S.
      26 June 2020 @ 00:45
      Excellent read - thanks for sharing Brent.
  • AD
    Adrian D.
    26 June 2020 @ 00:41
    Another great DB, so does everyone get a free lunch, to keep the recovery going? With all the forbearances listed why should they stop, if spending on the reopening is the recovery then all is well? Canada's Gov't now has Corona cash, plus EI benefit top ups and a reopening, meanwhile the big six banks have billions in mortgage forbearance. However the S&PTSX is up, so all is well. Thanks again Ash and Ed, amazing insight.
  • CL
    Christopher L.
    25 June 2020 @ 23:45
    Dear Ed, #YNWA
  • PK
    Paul K.
    25 June 2020 @ 23:10
    LOL "last name like Bennington. Shame on you!" Good one
  • WM
    William M.
    25 June 2020 @ 22:47
    maybe it's still a V shaped recovery, but the bottom of the V won't be until 2025
  • JD
    Jonathan D.
    25 June 2020 @ 22:43
    Its great to hear you guys deal head on with the consequences what the Fed is doing. I wouldn't have a problem with a lot of the Feds actions assuming it was paired with the taxes, regulations, and social safety net seen in Western Europe; but given that most of America is expected to survive in an unforgiving free market environment this feels so wrong. As an investor I feel like the play is will this provoke a popular backlash or not? Higher taxes, tech regulations, and increased social spending will probably crush asset prices no matter what the Fed does. If this is GFC 2.0 and there are no consequences to bailouts maybe this train keeps chugging along.
  • WM
    William M.
    25 June 2020 @ 22:42
    the virus was supposed to fade away in the summer....oh well at least it's mostly young people getting the new infections, right?? The stock markets: What me worry??
  • RS
    Riki S.
    25 June 2020 @ 22:36
    Interesting commentary on gold. For the TA fans amongst us, check out the GDX, HUI and BGMI, which have or are in the process of taking out major resistance levels after establishing a significant multi year base. Naturally spot gold has already shown the way, which is typical of a bull move, but now the major miners are clearly indicating gold miners are at the very beginning of a major bull market. Obviously the economic monetary and fiscal backdrop supports the move, which is more likely to get worse rather than better, despite the inflated equity market indicating otherwise. Discounting genuine thematic opportunities.
  • MT
    Mark T.
    25 June 2020 @ 22:11
    I think there is a lot of conflation of the shape of a recovery and what exactly is being recovered.... is it GDP, which drives the recession, or the stock market, which is in la la land.