Daily Briefing – March 27, 2020

Published on
March 27th, 2020
26 minutes

Daily Briefing – March 27, 2020

Daily Briefing ·
Featuring Ed Harrison and Raoul Pal

Published on: March 27th, 2020 • Duration: 26 minutes

With bad economic data already priced in, the real question is – what will the economy look like months from now? In today's episode, Raoul Pal and Ed Harrison explore that question with particular focus on Raoul's strong dollar thesis and a new twist: the long gold, long dollar pairs trade. They also analyze this week's bear market rally and investigate how subsequent central bank policy might affect future price action.



  • JD
    John D.
    30 March 2020 @ 16:29
    Love the shaved head. I'll be doing the same in a few days.
  • VS
    Victor S. | Contributor
    30 March 2020 @ 11:49
    Euro will end in this crises... $ +gold long has one issue -Trump ...he wants the $ down to sell products .. human nature calls for and L see 1933 March unemployment -25% ... dec 1936 20% when FDR thru the kitchen sink at the US economy. When people lose there job with 8,000 credit card debt no savings and retail is 70% of the eco -forget about a quick comeback.
  • YW
    Yowshi W.
    30 March 2020 @ 09:05
    Raoul is coughing..
  • DS
    David S.
    29 March 2020 @ 17:17
    One can see lightning even with your eyes closed. We are in the early stages of damage - health and economic - from Coronavirus pandemic worldwide. It will spread from one epicenter to the next and then back again like a pinball machine. Until we have a vaccine, we must hope for the best and follow the science. All the bipartisan rhetoric will only slow the fight against the pandemic. Calling a bottom in a Bear Market is always difficult. When many say we are near the bottom, it is not yet the bottom. Cash, gold Bitcoin whatever. Be safe. DLS
  • KA
    Kelly A.
    29 March 2020 @ 15:59
    Very helpful to keep risks in perspective!
  • BS
    Brian S.
    28 March 2020 @ 01:19
    I'd like you guys to wager an S&P bottom. I've got 15K (although with I have a inkling it could go much further).
    • WG
      Wade G.
      29 March 2020 @ 14:02
      Hussman's research shows about 1200 if it simply returns to fair value and doesn't overshoot, thou I'm certain he would say it doesn't have to go that low... a policy response (financial, not medical) might place a floor nearly anywhere... I'm holding back most of my powder for lower levels, say below 1500, because the long term data says my returns above those levels won't be great and I don't need the hassle... volatility, transitory gains (false wealth)...
  • MH
    Michael H.
    28 March 2020 @ 15:23
    How will your thesis change if we get 1) Quick virus detection machine (Abbot Lab just released a 5 min test machine) 2) Cure for the Virus?
    • WG
      Wade G.
      29 March 2020 @ 13:52
      I know you're hoping for Raoul or Ed here, but I'll chime in w/ my 2 cents: 1) assuming affordable and scalable quickly in huge #s, a very modest rally but nothing magic; its major impact would be to greatly enhance contagion management--presumable allowing the healthy to return to productivity safely sooner... if used smartly it could profoundly curtail an otherwise long L-shape scenario 2) same conditions/outcomes apply, but psychologically and substantively so much stronger: I think it would start with the mother of all face ripping rallies, and a more immediate return to favorable market conditions (higher highs/lows) and economy... because there's no way to screw up management: you think you're sick? take this effective medication, you're good!
  • FB
    Frank B.
    29 March 2020 @ 08:47
    Got burned a bit last week on my dollar position and had to close it. Neglected risk management too much. But it also made me think a lot whether and why the thesis may not work as expected. The dollar shortage framework totally makes sense to me and Libor rates have risen significantly in last 2 weeks. Yet several FX rates told a different story last week and the move to stronger EUR and others seemed quite steady. Maybe it was those swap lines and I keep my mind open and better prepared for different outcomes.
    • HS
      Hendrik S.
      29 March 2020 @ 12:32
      Why hold dollars if you can hold Euros. The Euro is just fine, German finance minister jumping in front of a high speed train i sign of confidence and strenght. Also Italy and Spain will be roaring back this summer! As a European I continue holding 50% in usd and 25% in gold. Only a few stocks such as flow traders
  • GT
    Gideon T.
    29 March 2020 @ 09:05
    why do people keep comparing US statistics and chinese statistics? adsurd.
  • RM
    Robert M.
    29 March 2020 @ 04:08
    It’s going to be an absolute horror show once deaths in the US explode over the next 10 days. It won’t be a few months, it will be a few weeks.
  • TN
    Tim N.
    29 March 2020 @ 02:32
    I'm still waiting to hear of any big bankruptcies. Whether it be insurance, major bank, investment fund, small country etc. I think when the first domino starts to fall, s**t is going exponential to the down side.
  • TC
    Thomas C.
    29 March 2020 @ 00:39
    Very good discussion. One parameter that's missing Ed is timeframe. Traders are specific iin terns of min days weeks. So conversation needs to add a timeframe to each projection. But good work
  • bt
    brian t.
    28 March 2020 @ 23:21
    I have heard that, some banks failed to deliver physical gold in the comex bar EFP. They've also decided to exit the comex market. Big shortage in physical. Everything is out of stock, to order, Even the Mint. 2 months out on silver ship dates! The leverage on everything has becoming unraveled. Any thoughts? When will this happen the fiat, buying power?
  • DA
    David A.
    28 March 2020 @ 10:15
    I enjoy the daily updates and this was particularly thought provoking with Raoul and Ed's look ahead to the coming months. And I appreciate the lack of hubris (not always the case in RV videos). But please Raoul, do up your shirt. .
    • KJ
      Kevin J.
      28 March 2020 @ 23:19
      Rao is always a four button open guy. It’s just his schtick
  • SM
    Shivani M.
    28 March 2020 @ 22:51
    Raoul, HYG has ripped back up - would you short it again, or are you done with it?
    • SM
      Shivani M.
      28 March 2020 @ 23:10
      I think Ed is about to answer at 4:00
  • JA
    Joseph A.
    28 March 2020 @ 06:22
    True story today. In a grocery store in Roseville CA. I asked the checkout staff if they will receive the helicopter money. They think so. I asked what they will do with it. They said hoard it. This is the reality for many low income Americans. L shaped or long U imho
    • SM
      Shivani M.
      28 March 2020 @ 22:45
      Damn right. Prisoner's dilemma of sorts. If you can count on everyone to lift the economy by spending, then spend, get your job back etc. But if you can't... and if you can't count on the government to extend your meager check... this all gets pretty obvious
  • SM
    Shivani M.
    28 March 2020 @ 22:40
    How many dollars does China have that can be used to pay off the debt of emerging markets in exchange for assets?
  • JE
    James E.
    28 March 2020 @ 22:01
    My opinion: Inflation, food commodities, metals and later in the year, energy.
  • CH
    Chris H.
    28 March 2020 @ 21:51
    Christ stop reporting the numbers as if China is reporting accurately
  • EK
    Edward K.
    28 March 2020 @ 20:50
    Just to hear the term "hysteresis" used is reward enough. Anyway am saving this transcript as a good anchor at what might be considered an inflection point form the old regime.
  • RS
    Rishi S.
    28 March 2020 @ 18:40
    Great briefing. Really appreciated Ed's note on calling out the the precarious cusp we find ourselves at between BBB & BB credits. I'm astounded at how much power the rating agencies continue to have given how the last crisis played out - truly an ugly point of weakness in our corporate credit system. After a decade+ of complacency where companies added unprecedented leverage, the agencies have got us all in a bind with the ballooning of the investment grade market. As cash flows enter crisis mode with the current foreseeable pain in the real economy, downgrades from IG to HY ignite a bomb that could cascade through the credit markets and it can quickly become too much to handle -- is the Fed really going to rely on Moody's and S&P to decide which companies to backstop? Should they have their own system for deciding which companies are creditworthy or pose systemic risk? The high yield market could implode when defaults rise sharply and the agencies start machine-gunning out downgrades across the entire leveraged landscape. Fallen angel risk is more real than it's ever been and, in my view, can happen very suddenly.
    • DS
      David S.
      28 March 2020 @ 20:06
      The rating agencies were late on the mortgage backed security fraud also. They were triple A until they were not. DLS
  • TR
    Troy R.
    28 March 2020 @ 19:40
    When the Emerging Markets gets COVID19 in a big way things will really get out of control (India, Africa, South America, Southeast Asia, etc). So sad to think about...
  • wj
    wiktor j.
    28 March 2020 @ 19:01
    Awesome stuff. I am more worried about the new reinfections happening in China. China has now closed all Cinemas again! Is China getting the 2nd wave or a new strain? We will see. Looks to me as this will be with us for a long time. My only hope is that the 3 drugs that are being tested now actually work and a vaccine is developed. I also don’t understand why everyone should wear a mask. If we had masks for everyone the curve would have been flattened. The Czech republic are actually doing it. It doesn’t have to be a N95 mask. Just any mask. Its to protect others from getting infected. Then perhaps the economy wouldn’t have to shut down. I also like these reports we are getting from Asia where in the pictures you can see EVERYONE wearing a face mask and not 1 reporter actually ask 1 gov official why cant we all have face masks.
  • TS
    Tim S.
    28 March 2020 @ 18:11
    Great interview. Quick suggestion, closeout each update with a new joke. Hard to find positive things sometimes, so a little humor may go along way. Stolen Reddit joke: Two caterpillars are escaping a spider. They climb up a branch and get to the edge, but realize they are now trapped… "Hold on tight!" says the first caterpillar and he quickly chews through the branch. It snaps and they begin to fall, but he grabs two protruding twigs and uses them to steer the branch through the air with grace and finesse. "That's amazing!!" says the second caterpillar. "How in the hell are you doing that?!" The first caterpillar scoffs. "Am I the only one in the whole damn forest who knows how to drive a stick!?"
  • DG
    Dave G.
    28 March 2020 @ 16:53
    The contraction in earning is NOT priced in yet. More down and then a summer rally.
  • AA
    Alberto A.
    28 March 2020 @ 13:32
    This was awesome all week long. Ed, Ash, Roger, and of course Raoul finishing the week. Great format, great commentary, great insights. Keep them coming! This is super value added for RV. Have a safe weekend!
  • PB
    Pieter B.
    28 March 2020 @ 12:35
    So buy gold and usd until the usd get so strong that the cny & hkd get devalued, then swap your usd for eem (while still holding gold)
  • DW
    Dean W.
    28 March 2020 @ 11:18
    Great perspectives, I don’t see how anyone can down vote this episode. Yet some people do, smh.
  • IP
    IDA P.
    28 March 2020 @ 08:06
    Please try to bring back Russell Napier from ERI-C , he is writing a lot of stuff on financial repression which is arriving in many countries . As for the Covid sceptics I'm in Italy, I suggest this: https://catalyst.nejm.org/doi/full/10.1056/CAT.20.0080
  • DL
    Doug L.
    28 March 2020 @ 01:47
    How does the advent of the FDA approving both a 45 minute and 3 hour covnavirus test not merit contemplation? It's my opinion that test's performed in such short duration provide means to eliminate general lock-down and replace it with quarantine for the afflicted. Cepheid has the 45 minute test and Roche has the 3 hour test. https://www.barrons.com/articles/danaher-stock-subsidiary-fda-covid-19-test-51584969017 If there comes to the market test for the various viruses in form similar to a pregnancy test, these tests will be in use all the time to screen flights, cruises and large gatherings.
    • JM
      John M.
      28 March 2020 @ 06:36
      In Canada's 'The National Post' today there was an interesting article about a new Corvid-19 test from Ottawa-based Spartan Bioscience (Could this be a Game Changer??) "....Unlike existing technologies, the Spartan’s devices are portable, and use could be used in airports, cruise ships and makeshift medical clinics to test for potential new cases more efficiently. The company has said it can possibly confirm test results for the virus in less than one hour, compared to a days-long delay required with other methods." https://nationalpost.com/news/covid-19-ontario-to-buy-one-million-testing-kits-from-leading-tech-firm-amid-backlog-worries
  • AR
    Ankit R.
    28 March 2020 @ 06:16
    Can you tell what can happen to USD vs INR(indian rupee) in coming month?
  • ML
    Michael L.
    28 March 2020 @ 04:52
    Many thanks for the daily update/perspective, great discussion, as always!
  • DS
    David S.
    28 March 2020 @ 03:17
    Just for perspective, the epicenter of the Coronavirus is still Europe. The US has over 100,000 cases, but Europe combined is probably around 300,000 - apples to apples. As far as the markets are concerned, this may be the eye of the first hurricane. The P/E of the S&P is still about 19 which may be a reasonable market without passive, buybacks and quants before Coronavirus. The earnings now will be radically less. The governments around the world will spend trillions of dollars to help companies and citizens to fight this crisis. All over the world government tax revenues will plummet as taxable income will tank. - personal and corporate We have not even started to see the effects on Coronavirus on places like India. I agree with Mr. Pal on US dollars. If we have other legs down in the market, gold will still be hit with margin calls. All this and I am an optimistic old guy. DLS
  • DR
    Derrick R.
    28 March 2020 @ 03:06
    Outstanding conversation..
  • nw
    nathan w.
    28 March 2020 @ 02:55
    This was great! God bless and stay healthy!
  • JS
    Jim S.
    28 March 2020 @ 02:04
    Ed, thanks for the shout out to the Lou!
  • JT
    Jay T.
    27 March 2020 @ 23:51
    So who legitimately has gotten wealthy in Japan in the last 30 years? We always hear about lost decades, stagnation, etc., but there must have been people following strategies that built wealth off of the foolishness of what the central bankers and politicians did to Japan. An interview that analyzed that would be very interesting IMO. If the US is heading there, where's the dough to be made (aside from gold & other real assets....or is that it? :-)?
    • CH
      Charlie H.
      28 March 2020 @ 00:27
      Masa Son of SoftBank???
    • SB
      Stephen B.
      28 March 2020 @ 00:52
      A good question! I understand that real estate has done badly in Japan over the last decade or so, driven largely by demographics. So, with the benefit of hindsight, where could one have made money in Japan during this period?
    • WH
      William H.
      28 March 2020 @ 01:30
      Satoshi has
  • LS
    Lemony S.
    27 March 2020 @ 22:30
    Please stop talking about the total number of cases, unless you also talk about how many cases of common cold, allergies, common influenza, etc to make the number (and this will do it) not a silly, fear mongering stat. PLEASE.
    • RT
      Rob T.
      27 March 2020 @ 23:09
      Is it possible to do these as their own segment? Basically have like a short morning or mid-day video and save the meaty market recap for after the evening?
    • CJ
      Christopher J.
      27 March 2020 @ 23:19
      you are in lala land
    • JL
      Jack L.
      27 March 2020 @ 23:31
      I don't see the utility in listing the COVID case count alongside common colds, allergies, and ordinary seasonal flu. The former kills 1 in 100 patients. The latter (broadly speaking) kill 1 in 100,000.
    • DM
      Dominic M.
      28 March 2020 @ 00:27
      Well you're either watching FOX News or Chinese state media. Let's see how long you think the number of covid-19 cases is a "silly" stat ...
    • AH
      A H.
      28 March 2020 @ 01:22
      It's a reasonable request. My local news station has an FAQ regarding citizens not trusting the government. The fear of instant sudden death is a powerful emotion.
  • MD
    Mike D.
    27 March 2020 @ 22:19
    I absolutely love the format which has Ed Harrison as both interviewee and interviewer. It's great to have more opportunity to hear Ed's insights and opinions. Thanks!
    • BS
      Brian S.
      28 March 2020 @ 01:17
      Damn, Music Royalty in the house!
  • DM
    Dominic M.
    28 March 2020 @ 00:19
    Raoul, I take it from this you recommend closing the UUP trade?
    • JC
      Justin C.
      28 March 2020 @ 00:57
      I don’t think he was saying this at all, but rather commenting on how tough a trade it is for institutional players that can’t take the volatility. For me personally, I have a core allocation and I’ll use the vol to trade around it.
  • UD
    28 March 2020 @ 00:51
    Keep up the good work Ed and Raoul!
  • SB
    Stephen B.
    28 March 2020 @ 00:39
    Even through offices are opening, schools are still closed in Beijing. Similarlry, while restaurants are now open for sit-down customers (they remained open for take-away throughout the worst of the crisis), they are only half full. If we are looking to China for a view on the shape of the US recovery, plan on a U shape recovery of at least three to four month duration.
  • ML
    Mike L.
    28 March 2020 @ 00:25
    Raoul you're probably right about not trading now, but shorting EM looks so good now! esp. after this latest bounce
  • TS
    Todd S.
    28 March 2020 @ 00:18
    These are so good
  • RA
    Robert A.
    28 March 2020 @ 00:07
    Another excellent one guys. These Daily high quality briefs are so apropos. BTW, much improved CI Internet tonight....a few mike issues but less herky jerky. I’d like to give a personal shout out to Drew (my hometown compatriot) for his work this week....another good RV Resource!
  • JA
    Jerram A.
    27 March 2020 @ 23:29
    Ed's personality and insights are shinning brightly in these updates. Keep it up mate. Who thinks Raoul is an ENFP? Great viewing team.
    • RP
      Raoul P. | Founder
      27 March 2020 @ 23:32
    • CH
      Charlie H.
      27 March 2020 @ 23:39
      16 Personalities model https://www.16personalities.com/enfp-personality
    • PS
      Pavel S.
      28 March 2020 @ 00:05
      https://www.google.com/search?q=enfp+personality I dont think so and I dont care tbh :)
  • ns
    niall s.
    28 March 2020 @ 00:02
    Why not make you own informed judgement of the likely duration and impact of the corona virus by clicking on the below website . You can select your country of choice and view all the stats and may I suggest you ignore all other data except the hard undisputable data of daily deaths. By comparing the barcharts of daily deaths of the countries in the middle and early stages with those that have come out the other side , you will have a better picture that will help keep you imagination in check . Stay Safe https://www.worldometers.info/coronavirus/
  • DL
    David L.
    28 March 2020 @ 00:00
    It seems many EM countries face a double challenge. Income from trade and commodities has dropped to nearly zero while health costs of prevention and care associated with coronavirus soar. Even absent extreme values for the dollar, many of these countries will surely be tempted to default or renegociate sovereign debt. Would you see this as a serious possibility and, if so, is it possible to estimate on what time frame the impact of this might be felt in the economies of the developed countries?
  • AK
    Adam K.
    27 March 2020 @ 23:54
    I love how you guys directly discuss the index (SPX) behavior at the beginning. It really is an essential part of what we need as investors from a high level. You guys are great together
  • Bm
    Ben m.
    27 March 2020 @ 23:44
    For your daily Corona virus update, is it possible to provide any noteworthy news besides the statistics? These can be easily obtained online. Thanks
  • FG
    Flavio G.
    27 March 2020 @ 23:33
    Bought SPY 4W puts yesterday. So far so good. Will hold to expiry. Conviction this market goes down and will perforate lows.
  • RT
    Rob T.
    27 March 2020 @ 23:27
    Any comments on: 1. The Rent Strike movement rolling through US (and it appears in some pockets internationally)? Could it's cascading effect come through come May / June to credit markets? Despite the helicopter money and cash being rained down, under current conditions it seems like there is no incentive to pay a landlord and instead pocket the cash while things are so uncertain. 2. What's the outlook for gold? It's hard to get physical but now we've issues with gold miners seeming to be shutting down delivery. South african miners and a Canadian (Saebee) mine have blamed lack of commercial airlines for ability to deliver. Are there any potential national restrictions in the background coming down to prevent this delivery?
  • JS
    Jon S.
    27 March 2020 @ 23:15
    Awesome. Thanks Ed and Raoul!
  • sc
    sung c.
    27 March 2020 @ 23:15
    Great content and insight. Thank you both.
  • WW
    William W.
    27 March 2020 @ 23:10
    "L" & "U" seem to imply that the bottom in the equity market is in...