Comments
Transcript
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TCYep just keep going with the sceptical and bearish views snuggly thinking you're correct. Well you will right one day but in the interim you miss lots off moves. Being too attached to either side is a bad idea and shoes lack of knowledge
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CNThanks, guys. A quick reaction to your touchpoint about emotional markets driven a lot by the new players as evidenced by 3 million new brokerage accounts in the last couple of months. My take is that most of them are looking at the markets in the same ways that they look at video games or internet poker, et al. Used to sitting at keyboards, watching screens intently and playing and winning constantly (with no consequence) is a mighty strong brew to swallow. As I understand it,the same parts of the brain are lighted in video games as are lighted in gambling as are lighted in the brains of cocaine addicts. Add in the group-think in the Robinhood world or stimulated by high pitched, emotionally charged "news" on financial channels (save for RV, of course) and we should, as you point out, expect irrationality to continue for a while. McKay and Kindleberger are still worth reviewing. Cheers to All.
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BSWhat does it take for you guy to change your bearish outlook? Some good indicators: .618 retracement? Check Breadth? Check Decelerating unemployment? Yes Dollar backing off? Check The only thing the confounds me is the yield curve, which appears like it wants to break out. But is still pretty low.
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GCI just want to reiterate… We really need to have a technical analyst expert on the show at least once a week. The problem is that there often is not a difference between being early and being wrong. While the RV consensus view may ultimately pan out we could all lose a generation worth of wealth while we wait. Look at Peter Schiff for example; he’s been singing the same song for 11 years now, and eventually he’ll be right but his audience will be broke. Let’s not go down the same road. Thanks to the RV staff for your excellence.
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DRIs insolvency not even a concern anymore? What’s to stop the debt binging and fake recovery when the administration and fed only care about STONKS GO UP? https://finance.yahoo.com/news/hertz-possibly-worthless-equity-soars-125820858.html?.tsrc=rss
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MCSomething you didn't mention Roger is how the market structure (passive/rules trading) makes leverage increase as VIX drops. Central banks have just encouraged the same behaviour, renting the rally via repos and swaps (where are we at with funding the carry trade now?). Can you cover this aspect in your next appearance and discuss the potential for a 2nd liquidation? Thanks
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MTUnemployment rate, jobless claims go up, stocks go up. Unemployment rate goes down, nearly two million new jobless claims, stocks go up. Negative GDP, negative corporate earnings, stocks go up. Something is rotten in the city of Denmark.
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DRThis is great info but we are missing out on so many great trades in this environment. BRZU is about to explode this morning, for example. I’m starting to wonder why if we are having daily updates, we aren’t getting some daily or at least weekly trade ideas, while I wait for my macro recommendations to pan out here, my buddies are executing multiple trades of 50% plus gains in succession. I admit maybe I’m looking for an altogether different thing than RV wants to provide, I appreciate macro but I think I’m missing so much right now, perhaps Tony Greer’s product is what fills this gap? I don’t know
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NRI think Julian’s “Sell the USA” is about to hit...
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GSI never once heard Roger come out and say markets will go to 0.638 fib, now he says it was expected. RV has been bearish all way up and now it will go down in months to a year!!???? So another bearish view... but hey it may go to 4000 ... talk about a bob each way
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IHThat US10Y:US2Y spread I'd imagine is very bullish? Perhaps I'm misunderstanding.
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SBSpot on. It is good to hear someone else acknowledge that lower rates and QE actually lead in the longer term to stagnant/lower growth. This is not just through misallocation and overcapacity, but fundamentally, if you supply the market inelastically funding at 0%, you will get 0% growth. In other words, when r < r* (where r* is natural rate of growth in the economy and r is the central bank rate), it will tend to pull r* down in the long term. Here is an example which clarifies. Imagine an economy with a 3.5% short end rate. GDP growth is 4%. Let's assume that banks lend freely at this rate. Also imagine that you are a project manager and in the economy there are three types of projects. One set of projects has an expected return of 4%, the next set has an expected return of 3% and the last 2%. Which do you borrow to fund? The answer should be clear; the 4% projects. So, you, like all good entrepreneur will borrow at 3.5% to fund a new project that yields 4%. However over time, all the 4% projects eventually try up. Economic activity stagnates and GDP growth falls to 3%. Now the central bank cuts rates to inelastically supply the market with a 2.5% short end rate. Now, given all the 4% projects are done, there are only projects available that are expected to yield 3% and 2%. Which do you choose? Again, you borrow at 2.5% to fund 3% projects. This creates economic activity but eventually it is done and economic activity stagnates and GDP growth falls to 2%. Again, the central bank cuts to 1.5%. You as the project manager do the best you can, which is to borrow at 1.5% to fund projects with an expected yield of 2%. This is a very contrived example, and doesn't factor in the market price of risk. But hopefully it demonstrates why lower rates may stimulate economic activity in the short term but ultimately lead to lower growth rates in the long term. If in any doubt, take a look at the world over the past 40 years. Nearly every country has long end rates very similar to their nominal economic growth rates. Similarly, those countries that have tried to artificially supply the real economy with lower borrowing costs have ultimately found slower growth rates after this short term stimulus has passed. Unfortunately this is not something that central bankers realise.
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NPCan we change the name of this show to the Daily Bear Report?
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DvHi Roger, can you please elaborate on short interest? Last Friday CTFC Futures pointed out that there are nearly 285k short future contracts in the SPX. In the other index (DJI, NDQ, R2K) the amount of shorts is much higher than the 1YR and 3YR averages. I think that's also behind this up move. There are still a lot of short contracts that need to be covered. Love your show guys! Many Thanks!
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GCI think the RV subscribers could really benefit from having a good or even excellent technical analyst on board to give us a better idea what’s going on behind the markets. Fundamentals are one thing but these market movements are impossible to figure out for people like most of us. There are lots of great technician is out there can we please get one on staff did speak to us at least once a week? What would you guys are doing I just see an opportunity here to make things even better. Thanks as always!
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NLAlways enjoy listening to Roger - clear, concise, easy to understand - thank you!
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JBWhen I look at the time left on the video and am disappointed it's not longer, I know I'm truly respecting the commentary. So many comments asking for more specific predictions but how is that possible when there's nothing to model off because this situation is so unique. Ash, Ed & Roger do an amazing job of making the best sense possible of a time that makes absolutely no sense at all. Well done guys, truly stellar job.
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IPGerman yields are going higher because for the first time in years Germany is pursuing fiscal spending, this is the big change. I believe this is the reason for gold weakness, euro strength and bank rebounds. I wonder the implications for the DAX, stimulus is bullish I guess but higher bond yields reduce the actual value of future cash flows, so I don't see how this can be good for the dax. I hope Roger Hirst may comment on this, thanks in advance
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SBGood pick up on buybacks being confined to tech stocks.
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JSDear @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! :)
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IPtoday was excellent thanks
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IP'There is a vast pool of liquidity, much of it borrowed, under-pinning share prices and ready to move in on any setback. Only when the credit markets are disrupted … is the buying power undermined. The investment fundamentals now play little role'. from the book Capital Wars the rise in global liquidity. What I wonder if this holds up when you have a demand shock like now, other previous recessions were not demand shocks like now, there were financial shocks mainly (china devaluing, Vix crash, Fed tightening) . I hope you will continue to affront these topics
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AAOther than Robinhood, how are you quantifying the “emotional players” in the market are they of a significant enough size to matter?
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mBGreat conversation as usual!
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DSReally well done! Since I am in the overbought camp, it was great to see analyses of why this may be true. No one knows the future, but when a market looks forward to declining earnings with increasing stock prices, it surely is not value investors. Thanks for explaining so many possibilities for the money flowing into the market. One of the best Daily Briefings for me. I will watch it again and take a few notes. DLS
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XMWonderful discussion as always. When will these policy works at the Central Banks realize that we must be made to take the bad medicine in order to progress? “How sweet it is to hate one’s native land and avidly await its ruin...and in its ruin to discern the dawn of universal renaissance.”
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LKReally great discussion today, Ash, Roger and Nick. In addition to all the excellent points you make, the stock market has now become almost "the only game in town" for the average person to attempt to get a return on whatever savings they have. People pile in because where else can they put their money? Bond yields are historically low and now only do well when their prices rise. Property markets have been bid up fantastically over the last 10 years by easy money, but these will now be vulnerable. Younger generations have watched the Fed's success in preventing prolonged downturns over the last 10 years and confidently "buy the dip" under these conditions. So it appears things will continue like this unless and until a trigger occurs where the Fed is truly unable to backstop quickly (and fiscal response is too slow),
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MDNice point about the emotional angst Ash.
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JGNick, love the pic stitching on ur blazer
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ANI'm a biomedical scientist, and whenever I interact with colleagues (scientists and clinicians) there is a basic assumption that a serious 2nd wave of COVID will happen in the US in the fall. Literally to a person...nobody expects otherwise. This is based on: 1. The history of pandemics in the 20th century. They always involve multiple waves, based on season, with subsequent waves often being worse. 2. Basic virus theory. This virus is out there, very widespread, and will accelerate its spread when conditions are right. Many colds are coronaviruses, and there's a reason they're called "colds". The vast majority of people have yet to be infected with the novel coronavirus. 3. The current behavior of the coronavirus. It appears to be in exponential growth phase in many southern hemisphere countries (Brazil, Chile, Argentina, South Africa), which are now entering winter. It has been fully contained in Australia and New Zealand, but those are both islands with well organized governments and health care systems. I have heard one virologist confidently say "Our darkest month [in the US] will be October". Whenever I watch financial media these days, I feel like this is a gorilla in the room that nobody wants to address. At most, someone will give an analysis and then add the disclaimer "of course this is assuming that there will not be a second wave"...but I really do think a 2nd wave, likely worse than the first, should be incorporated into any base case. I'm not picking on RV, this is true for any financial media I've seen.
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jgThank you Ash and Roger!
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KCAsh is right, stonks only go up :D
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ASMaybe you can put this on the list of explanations for the price of FAAMGs... https://www.zerohedge.com/markets/swiss-national-bank-ready-buy-much-more-tech-stocks-weaken-franc
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MTAsh/Roger/Ed- How significant is the retracement of the indexes since the FAANG + microsoft stocks skew them so much? Do the retracement levels need to be looked at in through this lens? How have retracement levels in the past been skewed by over-weighting? Thanks.
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ACGreat interview guys. Thanks.
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TBGreat talk as always guys/mates! Wish I could do an "easy" video response… someday soon likely. appreciate the insight on 401(k) flows, I can say that I have a day job and I have changed my allocation back in October of last year actually I went to money market. Today I actually go lightly long again although I do believe we will see a pullback at these technical levels. Not tomorrow though it's Friday and there were 55b in repos this morning and 0b in reverse repos today afternoon. Question is, can that much liquidity overrun the inflows from passive. Put yourself in th central banks shoes, why do all this, why not do it at key times? What do humans always want more of (power). Really enjoyed the princes of the yen talk as it confirms a few long time held suspicions, and as always, keep up the great work! Tobin from Denver Colorado
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DTPlease, bring Daniel Lacalle for the European economic and political developments and ECB bailouts, especially in Spain.
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DHWhat do we know about the dollar size of the "RobinHood" investors? The newbies. Is it significant or trivial. You noted the number of players, but the dollar value? As a percentage of 401K flows?