Daily Briefing – June 9, 2020

Published on
June 9th, 2020
Duration
26 minutes


Daily Briefing – June 9, 2020

Daily Briefing ·
Featuring Peter Cooper, Ash Bennington, and Ed Harrison

Published on: June 9th, 2020 • Duration: 26 minutes

Senior editor Ash Bennington joins managing editor Ed Harrison to discuss market sentiment in light of NBER's recent announcement that the U.S. slid into recession in February. Bennington and Harrison explore whether market participants are betting that liquidity will mitigate the credit cycle's severity and whether this could be a miscalculation that catches investors off guard, leading to a “double-dip” recession. They also draw comparisons between today’s markets to that of the dot-com era, highlight the shift toward momentum trading, and share their thoughts on how durable damage to demand can bring an unnaturally elevated market crashing down later in the year. In the intro, Peter Cooper explains the surge in new online brokerage accounts and explores particular instances of excess speculation by retail investors.

Comments

Transcript

  • HD
    Hedwige D.
    11 June 2020 @ 02:15
    These two are the best...outside of Raoul!
  • AD
    Andrew D.
    10 June 2020 @ 14:12
    Whilst I love the macro focused conversations, it would be interesting if there was a segment showing some technical analysis and which confounding factors the RV team look at to determine the current direction of a stock/ETF as well.
    • CR
      Colin R.
      10 June 2020 @ 23:08
      Yes! A bit more on the line. How does it translate to the market best to these guys. stocks/etfs/forex what are they seeing
  • DM
    Dominic M.
    10 June 2020 @ 19:15
    Great conversation, guys - thanks as always.
  • PJ
    Peter J.
    10 June 2020 @ 19:10
    Ash / Ed Surely with the level of insanity going on in the equity markets i.e. bankrupts that will be $0 soon being bid up, TSLA $1000 and rising; this is the blow off top preceding the bear market fall?
  • TS
    Tom S.
    10 June 2020 @ 18:22
    Something that seems to have been forgotten when comparing the 2000 excess and subsequent bust is how the Fed pumped and subsequently dumped liquidity. Greenspan bought into the “Y2K” theory whereby then current IBM desktop computers’ clocks being incapable of rolling over to the new century would seriously impact commerce. In what was almost a frenzy he goosed liquidity all the way up to start of 2001, then when the world didn’t go to h in a basket, in a knee-jerk reaction he rapidly pulled that liquidity off the table, and previously supported mal investments tanked. This simple observation gave me comfort as Ed described Michael Howell’s take.
  • SB
    Stewart B.
    10 June 2020 @ 08:24
    Ash makes a good point, but not a new point. This type of madness can go on much longer than anyone expects. I can't see the US gov, Fed or foreign central banks stopping any time soon. In fact I am expecting it to continue for years. Eg, even if we get inflation, they will adjust it out in the statistics. Eg if flights become twice as expensive, state statisticians will say that this is not inflation at all as you are paying for twice the seating room. Same with bars and restaurants. I have flashbacks to Janet Yellen keeping QE and ZIRP despite being 5 years into the expansion phase. I hope I'm wrong, but I suspect this will continue much longer than we expect.
    • BK
      Boris K.
      10 June 2020 @ 10:55
      totally agree. The Fed will not let the ball drop, everybody is looking to the end of the $600 bonus for unemployment as the end of the market rally, Whats to say they will not extend that. This is an election year. What surprises me is that Trump is actually against more stimulus as the Dems push for ubi and other permanent programs. Must say during the market bounce rv hosts and guests have predominantly been bearish and skeptical of the rally, a typical "wall of worry" scenario which markets simply barreling over to the disbelief of sidelined managers
  • IP
    IDA P.
    10 June 2020 @ 05:00
    The Fed has interest of making the system surviving, by trying to avoid mass defaults, ok. But does it realize that they are punishing the whole fiduciary finance industry? The put money managers in the situation where they are punished if they evaluate and manage risk, what's the point, to make the whole market become one massive ETF? I really don't get it. Or are they simply doing "try and see? Let's throw some money and see what happens, if it's too much we'll reduce"?
    • RD
      Ruediger D.
      10 June 2020 @ 10:42
      They don*t change the market into an ETF but into a casino.....smile...
  • SB
    Stewart B.
    10 June 2020 @ 08:27
    It is also worth mentioning that many Real Vision guests, and Raoul, have been discussing liquidity vs insolvency. It is important to realise that companies can skirt insolvency by issuing more equity. As long as the market is hungry, and you have a hyperactive central bank and government, companies will be able to raise new capital. This is a subtle point but an important one.
    • SB
      Stewart B.
      10 June 2020 @ 08:46
      My comment above should have read, 'liquidity vs solvency'.
  • PB
    Pieter B.
    10 June 2020 @ 06:04
    If the bond market money (after a decades bull run) flows into stocks, we can easily go up 50% from here in the next 12 months!
  • RC
    Ron C.
    10 June 2020 @ 06:02
    Brilliant as always gentlemen. Regarding "multiple expansion", is the traditional average PE ratio of 15-17 a law of nature, like pi or e, or is it possible with years of central bank shenanigans (nowhere to go but the stock market), technological deflation and whatnot, there could be a secular move to a higher "average" PE?
  • MH
    Michael H.
    9 June 2020 @ 23:04
    New thumbnail cracks me up for some reason. Good work.
    • AB
      Ash B. | Real Vision
      9 June 2020 @ 23:33
      Ha. Yeah. Me, too.
    • CT
      Cherry T.
      10 June 2020 @ 00:56
      Ash and Ed look like the main characters of a stoner comedy about two friends discovering the secret behind a global recession amidst a worldwide pandemic. Jpow is the enigmatic villain pulling all the strings. Raoul is like Gandalf.
    • AB
      Ash B. | Real Vision
      10 June 2020 @ 03:21
      ^^This is the best movie idea I've ever heard
    • JK
      John K.
      10 June 2020 @ 05:21
      Stepbrothers, lol
    • CT
      Cherry T.
      10 June 2020 @ 05:26
      "Ash! Throw the money printer into the fire! Destroy it!" "no... we can wield it, use it for the good of mankind..."
  • mB
    marc B.
    10 June 2020 @ 03:49
    We really need to start monitoring global liquidity. The charts I see on Twitter is that markets follow liquidity. It’s almost exact. I just saw a chart of 85 trillion in global liquidity. I don’t know where to find this but rv probably does. It’s insane.
    • mB
      marc B.
      10 June 2020 @ 05:12
      Every time I want to learn something rv is my ne step ahead. Haven’t listened to mike howell on global liquidity but this is what I want to understand. Rv rocks!
  • WM
    William M.
    10 June 2020 @ 05:00
    Unlike the Internet Bubble, where the Fed was repeatedly raising rates to counteract it, this Bubble is being consciously blow bigger and bigger by the Fed. But the higher we go, the harder we'll fall - at some indeterminate point in the future which we can all guess at. I think Ed's guesses on the timing are as good as anyone's...
  • jR
    james R.
    10 June 2020 @ 04:30
    what happens when all the ‘no earnings’ companies can’t pay bond holders, dividends, or rent? i would think that eventuality is soon in coming regardless of their stock prices.
    • mB
      marc B.
      10 June 2020 @ 04:57
      I know. Also private bankruptcy will increase. Is the government going to forgive all consumer debt. Mortgages? I mean what about the ones who aren’t levered and pay there bills. This is a slippery slope. I could of went to private college but decided public because I didn’t want debt burden.
  • IP
    IDA P.
    10 June 2020 @ 04:31
    whats going on is that guy Davey day trader seems like he has loads of followers
  • OC
    Otto C.
    10 June 2020 @ 03:24
    The Nasdaq is the BIG SHORT and it will make the 1929 drop seem like a small dip in history.
  • OC
    Otto C.
    10 June 2020 @ 03:11
    Short-sellers using options get paid regardless of bankrupcy.
  • OC
    Otto C.
    10 June 2020 @ 03:06
    Nikola ( NKLA ) should return the stimulus money they took from people who really needed it.
  • TB
    Tobin B.
    10 June 2020 @ 00:04
    Thanks for the talk and briefing, gents. Let's do some math shall we, on market liquidity. 21 million (call it 20m) unemployed getting $600/wk (call it $2000/mo make math easy) = $40 Billion over the past month. Call it $80 Billion over 2 months. ----- Compare that with $75.900 Billion TODAY ALONE in repo liquidity. ----- Yeah the retail Robinhooders are certainly helping the melt-up, but the numbers point to a much more influential source. If you trade in dollars, you'd better understand where they come from! Ash - your photo is too much touch up lol your head is much more shapely in video (i know thats not on you). Looking forward to more from Real Vision.
    • SH
      Sahil H.
      10 June 2020 @ 02:54
      Good points. You've also got to consider that not all robin hood traders are getting stimulus. So while maybe a good portion of those checks could be traded on markets, there's probably also more money entering from people that can't gamble/watch sports who are now still earning an income but working from home (so have more capacity to trade markets than when they were going to an office). The other thing you've got to consider is that most retail money is likely not being spread across the entire equity market. It's seems unlikely that retail traders are pilling into financial stocks, healthcare, consumer staples, utilities amongst all the other less sexy sectors.
  • mB
    marc B.
    10 June 2020 @ 00:37
    This was one of the better rvdb.
    • mB
      marc B.
      10 June 2020 @ 01:58
      At some point doesn’t the capital in the market have to come out to pay bills/expenses; etc... nobody has been working & forbearance programs are high. Am I missing something?
  • BK
    Brett K.
    10 June 2020 @ 01:03
    I appreciate Ed's assessment. I'm genuinely baffled be the recent moves; thanks for the perspective and sanity check.
    • DS
      David S.
      10 June 2020 @ 01:50
      I also agree with Mr. Harrison's assessment except I think it may be worse. IMO the only thing that will recover is the stock market and that is short term. The economy cannot recover for a long time. The pandemic will rule until we have a vaccine. I saw somewhere that a study at Stanford showed that 500 million infections were stopped in China through America by shutting down. Those days are gone. Each person who is at risk, must now protect himself as the stronger citizens reestablish the economy. Let us all hope for the best. DLS
  • CR
    Cory R.
    10 June 2020 @ 01:44
    One of the best Daily Briefings. Maybe because Market has gotten carried away and we all wonder how much longer this first rally can go -- Ash & Ed have their game faces on big time here. May I suggest that when you do interview the professional investors, they give us an idea of time-frame their stock picks. Thanks a lot.
  • DS
    David S.
    10 June 2020 @ 01:37
    The American savings rate is higher, so hopefully all the $600 per month may not be going into the stock market. The stimulus checks were issued to keep the regular economy going. It is ironic that stimulus checks end up in the stock market just like tax reductions. Do not forget that a lot of rents and mortgages are also not being paid. This adds more fuel to the current market. It will pour cold water on the market when it turns. We will see a lot of bankruptcies in the corporate market. We will see more regular people ready to file for bankruptcy when they must pay rents or walk away for a mortgage. Many are trying to figure out how to get a free lunch. Every twenty years the public needs to learn about market crashes and insolvency. DLS.
  • CN
    Charles N.
    10 June 2020 @ 01:35
    The discussion today about the long times during which markets will be irrational was memorable. To me, because I came to work in the securities business in 1967. That was the tail end of the great bull market of the '60's. At that time, I recall an Old Hand (he'd been a trader since before the 1929 crash) telling me that, at that time, the market was getting a bit carried away with itself. For the next year or two, the 'gunslingers' as they were known then, were in their glory days. The gunslingers were traders and some mutual fund managers who threw their money at anything that had a pulse...and like today, some that didn't. More than a few people in the Wall Street saloons said you could throw a dart at the financial page quotes and make money on any stock that was hit. The other quote that may still be around, "Never confuse brains with a bull market" has been surfaced frequently over the years. But by the time the internet mania hit, I had to constantly close my mouth so the flies wouldn't keep flying in and laying eggs...the duration and height of the hype and mania was so remarkable. In the '60s and for much of the '70s computers were only a myth. By the '90s...the PC had appeared and then the internet. I believe that both the financialization of our economy and the belief that 'risk' is easily controlled/managed can be laid off to the proliferation of modern communication and computing power without a commensurate effort in understanding the implications. How much of the current spike in stories of disbelief is due to technology or hubris or psychology is beyond this guy's pay grade, yet I continue to marvel at those who mock the Warren Buffet's of the world...or even me as the local handyman told me the other day that his wife was making enough on Robinhood so that they could retire soon. He is in his mid-30s. I think that Ed and Ash (and John Maynard Keynes) are correct in underlining the obvious fact that markets can stay irrational longer than we expect. If I were a betting man, I'd say that September/October might be timeframes to expect the irrationality to end. But I might change my mind tomorrow. Mr. Market will always have the last word. Good Luck to Us All.
  • DS
    David S.
    10 June 2020 @ 00:54
    Since Mr.Lacy Hunt did not think any significant part of QE could possibly get into the stock market, maybe the rest of the Fed believes the same thing. IMO banks and hedge funds must be using QE to day-trade the markets. If the Fed wanted to stop this cozy arrangement, they could put covenants in the QE programs. It is therefore reasonable for me to conclude that the Fed supports the ballooning of the stock market This is the Fed's new self-imposed mandate to protect the wealthy, pension funds and the administration._ regardless if it keeps the market in balloon mode and not in a valuation mode. The Fed promoting economic instability “is the most unkindest cut of all” – paraphrasing WS. DLS
    • TB
      Tobin B.
      10 June 2020 @ 01:08
      Yep!
  • GC
    Gino C.
    9 June 2020 @ 23:03
    Excellent job Peter! You got right to the core of what’s driving the market higher. The traders out there I don’t care about anyone’s macro view. Looking forward to your next update on the data. Many thanks.
    • mB
      marc B.
      10 June 2020 @ 00:33
      One of the best intros. Data is great. Volume is important. Also liquidity updates.
  • DL
    David L.
    10 June 2020 @ 00:14
    Everybody is piling into the market with novice retail investors being one of the main driving forces. Can someone tell me why this is not a mania?
  • DC
    D C.
    9 June 2020 @ 22:37
    Nice to hear you finally talking about getting some balance back on RV. Listening to Raul constantly talking his book is getting a bit tedious.
    • PB
      PHILLIP B.
      9 June 2020 @ 23:34
      Raoul is probably filthy loaded and doesn't need any of us to buy into his book. A key part of the RV mission is to help ensure that people with retirement funds, who are of the retail type, don't lose their supers/401ks/life savings over the course of the epic changes that are occurring and that are going to occur. I'd also say that RV tends toward providing narratives that are macro, that tend to be middle to long term. Come August, or whenever (maybe never), if there is some crash or air pocket, then we'll see where things are at with $EURUSD, etc.
    • PB
      PHILLIP B.
      9 June 2020 @ 23:44
      Let's see if the USD index decisively breaks below support and sticks. If there is a change in the data, I'd suspect that there would be a change in the narrative. In these times, even a decisive break that holds for a couple of weeks might not be enough to break the narrative. Weird times.
    • JS
      John S.
      10 June 2020 @ 00:11
      Please share your macro framework so we can compare it with that of Raoul!
  • XM
    Xavier M.
    9 June 2020 @ 23:58
    Great as always. A bit of sanity in this most unsavoury environment. Please do challenge Mr. Pawlowski and Mr. Conner when they appear. The views these gentlemen hold are far from those that I and I dare say most RV viewers hold. Cheers.
  • TB
    Tad B.
    9 June 2020 @ 23:46
    Excellent work guys !
  • EP
    Eric P.
    9 June 2020 @ 23:34
    The only thing more massive than the liquidity Michael Howell speaks of is the pile of books behind his head.
  • DG
    Dave G.
    9 June 2020 @ 22:52
    Dip back into a recession. I would be shocked if we were already out of one. So much noise out there when most people can't see the forest for the trees.
  • jg
    jesse g.
    9 June 2020 @ 22:43
    Thanks Ash, Ed, and Peter!