Daily Briefing – June 3, 2020

Published on
June 3rd, 2020
Duration
36 minutes


Daily Briefing – June 3, 2020

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

Published on: June 3rd, 2020 • Duration: 36 minutes

Senior Editor Ash Bennington joins Managing Editor Roger Hirst to discuss the latest developments in macro, markets, and coronavirus. Bennington and Hirst discuss what "returning to normal" means for markets—whether it’s breaking into a new regime or a return to the status quo. They also dive into "the dollar smile," where bond yields are headed, and commercial real estate in the UK. In the intro segment, Real Vision's Nick Correa talks about the 1968 influenza pandemic and how the world's response to pandemics in the past was vastly different from the response today.

Comments

Transcript

  • CH
    Connor H.
    3 June 2020 @ 23:13
    Another thing, I have heard nothing recently about fact of a second wave of coronavirus infections, the resumption of lockdowns and restriction of activities which would necessarily follow, and the effect in the stock market and possibly even the irrational equity markets. After the massive public gatherings of Memorial Day weekend followed by those of the protests this last week, clock is taking for second wave, not this fall, but probably July. The only way that this would not occur would be if the biology of the virus has changed so that it is less transmissible, or virulent. It is rather amazing how the public has become so complacent about this and just a few weeks time.
    • GS
      Gary S.
      3 June 2020 @ 23:15
      the scamdemic is over
    • AM
      Aziz M.
      3 June 2020 @ 23:48
      The second wave is already going on (excluding effects from Memorial Day weekend). Look at Alabama, Arizona, the Carolinas, ... even if you adjust new case count for increase testing. Texas reversing the trend meaningfully as well in the last few days. Numbers will likely not be pretty in the coming 1.5-2 weeks
    • DS
      David S.
      6 June 2020 @ 20:11
      The testing and the number of cases information have become politically controlled to promote political agendas. This is not new. It is hard to really trust the data. This makes planning and control difficult. DLS
  • DS
    David S.
    4 June 2020 @ 02:28
    The main reason, as I understand it, for locking down for COVID-19 was hospital beds and ventilators – remember Italy. It is possible that in 1968 people just treated the Hong Kong flu like the regular flu and died at home. (There were 100,000 deaths in the US with the Hong Kong Flu.) If there is a second wave, we probably will not lock down in the US because we did such a bad job on the first one. The smart old people and people with co-morbidities will stay at home. The younger people can keep the economy going and hope they do not die of the virus. Sweden accidentally did this as most of the of the deaths were old people in nursing homes. DLS
    • DS
      David S.
      6 June 2020 @ 20:04
      The next time Sweden will do a much better job of protecting their elderly. So far there is no evidence that Sweden is developing the herd immunity faster. The Swedish economy is expected to drop by 7% this year. I am not sure how much the domestic economy was helped by not shutting down. We would need to see some analysis separating the economic declines between exports and domestic consumptions. DLS
  • JS
    Johannes S.
    5 June 2020 @ 06:39
    Dear @Ash, I love your segments and your analysis, you're an excellent interviewer. But please please please stop with the awkward and contrived referencing of other videos in the library. It is so obvious that your doing this since recently as a new template to drive more viewers to the site, but it just comes across as forced and unhelpful. You basically serve RV with this, not us. We're all adults and have paid our dues already, so if we are curious about other content in the library, we will find it. Apart from that, keep up the good work! :)
    • DS
      David S.
      6 June 2020 @ 19:49
      Johannes S. - Mr. Bennington is making an easy reference to the presentations he believes are relevant. Not everyone is as thorough as you are. Mr. Bennington, please, please, please do what you think is best. DLS
  • PS
    Paul S.
    4 June 2020 @ 00:25
    I assume Mr Correa is referring to this article: https://www.thelancet.com/journals/lancet/article/PIIS0140-6736(20)31201-0/fulltext
    • GH
      Gabrielle H. | Real Vision
      5 June 2020 @ 15:17
      Yes, that's the one!
  • DL
    David L.
    4 June 2020 @ 14:04
    Workers see working from home as a chance to move from a crowded, expensive city to a cheaper and possibly more pleasant small town or rural area (or maybe even the Cayman Islands!). But from a corporate point of view, if remote working is feasible, why not off-shore 10-20% of white collar jobs to India or Thailand at one tenth the cost? Off-shoring office jobs seems to me to be the real trend here. How deflationary would that be?
    • jc
      james c.
      4 June 2020 @ 14:58
      I think you discount the inefficiency of people working in different time zones.
    • EA
      Egil A.
      4 June 2020 @ 21:25
      Some companies probably will look into that, and it could bring down cost on the type of work that is less complex. I am not mentioning that because I think the other countries are not intelligent, but in complex work you need social interaction, soft skills. Having similar culture and timezones and language is making cooperation and soft skill much easier. Other factor is that many companies have tried to save money by offshoring but they usually find out after a year or so that it is actually more expensive and slower. Not to forget that by offshoring, you are directly vulnerable, because off shore are not employees and not under your management and they can be shifted out and upskilling of new time has to be done. Also, covid 19 showed many companies that offshoring a lot is deadly for a company. India was experiencing full lock down and no one were allowed to their work. That is translating to that your off shore team is not available. Many other reasons why offshoring is bad idea in many cases, but this post already too long :).
  • DR
    Derrick R.
    4 June 2020 @ 20:39
    For those of us holding TLT, its down somewhat (in my case 5% now), time to get out? Or do we expect it to recover?
  • TN
    Tim N.
    4 June 2020 @ 06:54
    Question regarding Bitcoin which seems to be touted as the macroeconomic panacea for all the central bank actions to prevent a collapse of the current economic and asset structure. If a government loses control of its currency it loses power over its citizens and economy . Therefore governments will do everything under their control to prevent their citizens acting freely according to their own interests. At the moment Bitcoin has a market capitalization of <$200 billion so is small beer. Say it goes up 30x. Then it will be a real problem for many governments esp in smaller countries. To control Bitcoin ie > 51% of the hashrate would likely take an investment of 100's to 100's of millions of dollars which for a government is peanuts. Can Bitcoin be protected from the actions of a determined state actor? Maybe the protocol should be changed to ration hashrate for a particular country.
    • DT
      David T.
      4 June 2020 @ 09:39
      Problem with crypto coins is that they are not stable in price. No one will use them as a currency while flying up and down.
    • RP
      Richard P.
      4 June 2020 @ 20:26
      Disagree entirely. Such a small market cap at the moment results in huge volatility because dumping billions in the market moves the price. If the market was a similar size to gold billions in and out results in smaller swings in % amount. The general population has a mentality built in measuring stick (the dollar) but everything is relative. I was in btc 2015 I hung on for dear life through the ups and downs not wanting to spend a satoshi. Now it’s worth a decent amount relative to what I paid for it I use btc for whatever I can day to day. I Just booked a holiday today with Travala that are now excepting crypto 🏝
  • CH
    Connor H.
    3 June 2020 @ 23:08
    In general I enjoy your daily commentary. I think however, that you are way to conservative in your comments. Why cannot you call out the US equity market for the insane madness which it is? Feel free to sample from the abbreviated lexicon below: Bubble Death of Capitalism FOMO Gaslighting by Powell/Fed Mega-irrational exuberance Wall Street/Main Street chasm Rent Seeking Regulatory Capture (lack of) Skin in the Game Financialization of the Economy Financial Repression You're Welcome :)
    • AB
      Ash B. | Real Vision
      4 June 2020 @ 00:00
      Ha. Thank you.
    • BS
      Bevyn S.
      4 June 2020 @ 01:51
      Ah. Wrong website, think you're looking for zerohedge.com.
    • DT
      David T.
      4 June 2020 @ 09:43
      Marx already did that long time ago and he was proved wrong.
    • IN
      I N.
      4 June 2020 @ 15:45
      This is related to Roger's comment, so I will say it here. My observation is that the bigger the central banking liquidity injection, the higher the re-traceement. (Large injection in the US, indices almost retraced in full. Lighter injection in the EU, smaller re-tracement.)
  • SN
    SAT N.
    3 June 2020 @ 23:04
    Case for Gold down: Inflation. Interest rate up. So, gold down. (Roger's point today) Deflation. Dollar strength, So, gold down. Liquidation. Gold sell off to get $. Case for Gold up: Inflation. Dollar weakness. So, gold up. Deflation. Insolvency. Safe haven in risk off env. So, gold up. Liquidation. Fed goes Brrr. So, gold up.
    • SN
      SAT N.
      3 June 2020 @ 23:12
      My point is, there is a plausible explanation for every price action, every though those explanations may be contradictory.
    • CH
      Connor H.
      3 June 2020 @ 23:16
      Gold will be strong with either inflation or deflation, including stagflation, but not the middle ground. Raoul made this point in one of his briefings recently.
    • ZI
      Zartashia I.
      4 June 2020 @ 00:22
      Won't be surprised by gold selling off for more than a couple of weeks!
    • BS
      Bevyn S.
      4 June 2020 @ 13:08
      You need to add the real growth, real yields, an EM demand to understand gold price A steepening yield curve implies increasing US real growth expectations. Combine that with rising real yields (due to falling inflation), as well as subdued EM demand, gold will get a swift kick in the crotch
  • JS
    James S.
    3 June 2020 @ 22:54
    1968 overview was extremely interesting - well done Nick. Have to wonder if these mass gatherings/protests will be the second wave trigger.
    • DB
      Donna B.
      4 June 2020 @ 13:01
      Agreed.I have not seen this analysis of the prior pandemics anywhere else. Go Nick! (Also like that you're in focus and your background is not. Cool.)
  • FS
    Faheem S.
    4 June 2020 @ 09:17
    please stop referring to your conversation offline, its makes me feel left out.
    • PU
      Peter U.
      4 June 2020 @ 11:12
      lol, you are easily triggered!
  • TM
    Tyler M.
    3 June 2020 @ 23:48
    How do you guys completely ignore the impact of the protests, rioting, and looting? It's amazing how most investors are completely ignoring the implications of this. Society is clearly changing and the headwinds for investors will continue to grow.
    • KR
      Kartik R.
      4 June 2020 @ 01:49
      Stop being correct and start making money.
    • TT
      Tokyo T.
      4 June 2020 @ 03:37
      Mr Market doesn't care about social agendas. It's a selfish machine.
    • DT
      David T.
      4 June 2020 @ 09:41
      Marx was right on capitalism but, he was wrong on the solution. There is no solution so far.
  • XM
    Xavier M.
    4 June 2020 @ 04:18
    Brilliant these chaps. I’m intrigued by these emergent shifts in the commercial real estate space. I believe it was Mr. Pal who mentioned that the WeWork model may actually be a viable one post Covid-19. I’m rather more interested in these mixed residential developments with expanded office space and reduced parking garages. Something to think about.
    • DT
      David T.
      4 June 2020 @ 09:39
      WeWork will never work. They are just intermediaries market doesn't need.
  • SG
    Sebastian G.
    3 June 2020 @ 23:13
    I know markets tend to be forward looking but it's a BIG call that the deepest part of the recession is over.
    • SG
      Sebastian G.
      3 June 2020 @ 23:18
      As I know you read the comments I will elaborate for a bit of context. In Australia (where I live), approximately 3 million workers' jobs are solely reliant on the record government stimulus package (Job Keeper). This is on top of over 1 million Australians that have lost their job. The stimulus is set to expire in September unless the Government extends it - which is seems increasingly likely. I would suggest that many countries are in this boat. Australia has held up surprisingly well in my opinion, both in staving off the pandemic (touch wood) but also from an economic perspective. The concern is that the risk or the pressure point has simply been transferred to September - or whenever the stimulus tap gets turned off. It might be that, as big as the shock was when the virus first hit, the real shock will be when the stimulus gets turned off. It will require a skillful government to manage this process without any lumps in economic productivity etc. And also, the political will of a "traditionally conservative" to keep spending on the nation's credit card. My 2 cents.
    • SH
      Sahil H.
      4 June 2020 @ 02:10
      agreed. I think there is still worse to come here in Australia. Economically we've been doing much better than other countries so far and the rise in the iron ore price has definitely helped our economy more recently. Whenever those stimulus taps turn off its going to be a real shock. Also Australia has the highest debt to household income ratio in the world. Once the mortgage grace period is over (surely our banks can't sustainably keep this up right?), money from stimulus (if more is given) / salaries that would otherwise flow through the economy will need to go back to paying mortgages and rent. My current thesis is that our property market will be the turning point in our economy. Regardless of the stimulus given, if the natural resources sector doesn't pick up again, or drops off its going to have a huge impact on the job market. I just can't see how current property prices can be sustained in that kind of economic environment. If people start losing their jobs they will inevitably have to default on their mortgages and other debt . I also agree about your point with our politically conservative as it is the NSW government tried to pass legislation to put pay rise freezes on public servants (many of whom have been instrumental in helping our country deal with covid) and tried to bribe them with $1000 on off payments. Then basically threatened if they didn't want to accept the pay rise freezes people would lose their jobs.
    • SG
      Sebastian G.
      4 June 2020 @ 07:36
      Hi Sahil H, I have been an Australian housing bear for a while now - and I have been wrong. I totally underestimated the Government's (and the population for that matter) desire to keep pumping money into the housing sector. There are numerous grants available and even now, the idea that the government is going to give you $25,000 to "renovate" your house or to buy a newly constructed house is just another policy in an already long line of initiatives numerous governments have taken. I agree with you it has to eventually fall away, but they are once again throwing the kitchen sink at it. It will be interesting to see what happens when the banks lift their mortgage moratorium, too. Without being too crude though, as a counter point, most of the jobs that have been lost are in retail and hospitality. A lot of professional service firms (lawyers, accountants etc) have had their pay reduced by 20% or so, but the overwhelming majority of job losses are low-income based jobs. Do those people own houses with mortgages? Granted some will and I understand their inability to pay the rent will see valuations turn downward in property... but is it really going to be huge? I don't know. I never bought the idea that a 30% drop was on the cards, simply because it has basically never happened in Australia. Retail/Commercial property, though... Different story. I think you'll see a considerable pull back in valuations. Less demand for space (working from home etc) and also, the pandemic has sped up the death of bricks and mortar retail. It will never *die* but it is going to significantly reduce in size. Interesting times.
  • DT
    David T.
    3 June 2020 @ 22:43
    I don't hear you guys talking about retesting lows anymore?
    • DT
      David T.
      3 June 2020 @ 22:51
      Flip-Flopping.
    • GS
      Gary S.
      3 June 2020 @ 23:17
      why would they, they were wrong , they are wrong 80% of the time
    • PG
      P G.
      3 June 2020 @ 23:51
      And make so much money when they are right the other 20%
    • ZI
      Zartashia I.
      4 June 2020 @ 00:14
      Very well said PG.
    • BS
      Bevyn S.
      4 June 2020 @ 01:53
      Their views are evolving. Market internals are suggesting more than a bear market bounce, per Roger's commentary
    • DS
      David S.
      4 June 2020 @ 02:36
      They are calling it as they see it. It is difficult to call a momentum rally as you do not know when the flow money will change. If you want to believe in this momentum market, put all your chips in. Time will tell if we ever get back to a valuation model. DLS
    • SN
      SAT N.
      4 June 2020 @ 03:50
      Julian has been discussing liquidity driven reflation view since the end of March low -- he almost called the bottom. But he appears mostly on RV Pro. Useful to learn different thought processes and reach one's own conclusions. It is a matter of timing. Raoul's views played out very well before Covid and till March low, especially the bond trade. His (and most of the daily briefing's views) can still play out in the longer term going forward as insolvency accelerates. Time well tell.
  • BS
    Bevyn S.
    4 June 2020 @ 02:02
    Today was an interesting day for market internals, thanks for the commentary!
  • jR
    james R.
    4 June 2020 @ 00:11
    i’d love to hear a Zoltan interview discussing the state of the Repo rescue.