Daily Briefing – May 12, 2020

Published on
May 12th, 2020
32 minutes

Daily Briefing – May 12, 2020

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

Published on: May 12th, 2020 • Duration: 32 minutes

Real Vision's Ash Bennington and managing editor Ed Harrison discuss the latest developments in macro, markets, and coronavirus. They dive into the havoc wrecked on the jobs market, the continuously moving plans to reopen the US economy, and Dr. Fauci's warning today to the US senate. They also review what's happening in the Eurozone and which European economies may be a model for the US's own reopening.



  • DR
    Derrick R.
    13 May 2020 @ 12:59
    If Roger is talking about euro today it would be nice to get his take on this view from Stuart Allsop https://seekingalpha.com/article/4345867-fxe-real-yield-spreads-favor-euro
    • RH
      Roger H. | Real Vision
      13 May 2020 @ 18:30
      Hi Derrick - I cover this in today's Daily Briefing (albeit briefly). The Seeking Alpha article is compelling and there are other charts with regard central bank balance sheet differentials that corroborate these views. I think that we are currently in a flow situation, rather than a fundamental/fair value situation. I expect that the need for dollars from the real economy will dwarf the allocation of capital from the investment community (the investment community are more likely to allocate based on valuation and fundamentals). My preference vs the dollar, however, is still vs EMFX such as Brazilian Real and Turkish Lira, where momentum has already been established in favor of the US dollar.
  • CM
    Cory M.
    13 May 2020 @ 05:05
    Ash: "Prescient" two syllables (not three). Please look it up. Other than that, you're always great.
    • AB
      Ash B. | Real Vision
      13 May 2020 @ 07:19
      Hi, Cory. Looks like both pronunciations are used. You are correct: The two syllable pronunciation predominates in the U.S., while the three syllable version is more common in the U.K. Since I was talking about the Iron Lady, perhaps three syllables is the way to go? https://www.google.com/amp/s/dictionary.cambridge.org/us/amp/english/prescient
    • TE
      Tito E.
      13 May 2020 @ 09:04
      "Pedant" always has two syllables though
    • NK
      Nick K.
      13 May 2020 @ 16:31
      I couldn't agree more with Tito... Ash, I hope you or the rest of the RV team don't get caught up in these types of comments. I would rather you focus your time of restoring your computer or bringing us more insights into the financial world unfolding and opportunities we can take advantage of.
  • OM
    Owen M.
    13 May 2020 @ 13:09
    the RV blog is a great idea. thank you all.
  • NJ
    Nimitt J.
    13 May 2020 @ 00:58
    Instead of a blog, do open a https://slack.com/intl/en-in/ account. That way we can contribute as well. You can create multiple channels based on interest.
    • JH
      Joe H.
      13 May 2020 @ 01:48
      I second this for a slack channel. Ash and Ed - I would strongly suggest considering this option.
    • MR
      Matthew R.
      13 May 2020 @ 02:08
      Slack channel would be amazin.. As long as essential subscribers get access to the content as well ofc.
    • AB
      Ash B. | Real Vision
      13 May 2020 @ 02:37
      Interesting idea! I’m going to look into it.
    • JM
      John M.
      13 May 2020 @ 10:21
      Slack would be a better resource as compared to a blog!
  • JE
    J E.
    13 May 2020 @ 10:18
    I think the source articles are a great idea, but the most natural way would be to post a sticky here for the discussion. Thanks guys-
  • RP
    Reza P.
    13 May 2020 @ 02:38
    Fauci has been wrong all the time ... This is the guy who is responsible in destroying US economy with lockdown. Sweden is doing very well without lockdown. Other than a few big cities, US is just like Sweden in population density.
    • BS
      Brian S.
      13 May 2020 @ 05:39
      100% agree with you
    • GS
      Gaston S.
      13 May 2020 @ 06:34
      Although sweden didn’t put out the mandate, many families self-quarantined on their own. Restaurants and public places haven’t been receiving the usual flows of people. So, it is hard to say —sweden didn’t lock down and did relatively fine—
    • MC
      Melvin C.
      13 May 2020 @ 09:59
      Sweden has a much more civil population. Without obbliging them to go into lockdown, they will do that of their own accord because it is recommended. I am in Italy, this would not work here. Would it work in the USA? (Hint: Trump: “With the masks, it’s going to be really a voluntary thing. You can do it, you don’t have to do it. I’m choosing not to do it").
  • TR
    Tara R.
    13 May 2020 @ 06:05
    Do you seriously think that people will book international travel knowing that there is no insurance coverage and they may be refused travel if they have symptoms or test positive? I have serious doubts about the psychology of that decision
    • MT
      Mike T.
      13 May 2020 @ 09:35
      .... also I believe London Heathrow is (was) the busiest International Hub (possibly now Dubai??) , and from today all International Passengers into the UK will be required to quarantine for two weeks.
  • RT
    Rob T.
    13 May 2020 @ 01:28
    On the tactical front, would you be able to get any sense on what is happening with after hours trading and it's impact on the current levels we are seeing the S&P? Is this a recent phenomenon or a recent market "quirk"? There seems to be a pattern of overnight trading that seems to help nudge the stocks up after hours. It's been earnings season so that's helped a bit but ever after the fact I've observed this behavior and it's rather disturbing.
    • MR
      Matthew R.
      13 May 2020 @ 02:09
      Could be just the Asian markets being either more bearish or bullish. Usually they seem more bearish at the moment compared to the Europeans from what I've been seeing on US and UK futures.
    • MT
      Mike T.
      13 May 2020 @ 08:49
      for those have records of market data going back decades and know how to 'mine it' so to speak will appreciate in *statistical* terms, most days when looking at overnight movement in the Futures Market (/ES) there is ZERO market tell for what will happen upon normal market hours opening IF the overnight action in the Options Market for /ES is showing price range within 1 Standard Deviation. There are two types of overnight participants: 1./ Portfolio Hedgers 2./ Scalpers. If however a sudden 5 Standard Deviation occurs in overnight futures, put on your waterproof pants immediately.
    • MT
      Mike T.
      13 May 2020 @ 09:11
      ... timed at 5.11 am EST as derived from the then Implied Volatility for June /ES a 1 SD range corresponds to 48.01. At the time of writing /ES has a overnight range of 39.75 i.e. therefore price movement so far is NOT mathmatically significant i.e. in simple mathmatical terms ZERO tell for what might happen when normal market hours opening arrives later today.
  • AK
    Ado K.
    13 May 2020 @ 08:21
    Great breakdown boys, lack of price discovery is something I am interested in hearing a bit more about. Get Roger on asap!!!
  • VS
    Ville S.
    13 May 2020 @ 07:23
    I'm excited to have a blog too
  • ab
    alfred b.
    13 May 2020 @ 06:56
    Ash: Excuse the capitals. Just for highlighting the core idea. CREATE A VIRAL/ECONOMIC INDEX (BASED ON THE VIRAL OUTBREAK RATE) AS A GUIDE TO SHUTDOWN RULES AND ENDORSE NATIONALLY/GLOBALLY/REGIONALLY. CALIBRATE WHAT IS REASONABLE TO OPEN/QUARANTINE BASED ON THE INDEX NUMBER. I think what should work the best is a very reactive/proactive model, which provides an 'allowable' quantum of virus growth... the opening and closing is thus more closely correlated to balancing an acceptable viral rate... I think people are missing this. It is often an all or nothing approach...ie Open up fully or shut down fully. Neither of these are viable or realistic. It should be relatively doable to create a mathematical model which allows the targeted balancing of economic velocity with viral velocity... A kind of index that informs regional and national Goverment to attempt to manage this out at an ideal balance between loss of economy and loss of life. This all or nothing approach is naive in the extreme to me. There is no way that either extremes are viable. Eg. if 1.25 is the target on growth, then it creates an indicator for regional authorities to recalibrate shutdowns... The ideal outcome being partial shutdowns based on viral flares, with low scoring areas being more generous in allowing economic activity. It is not perfect, but it is the only solution that I can come up with. Without a cohesive National, and even global policy, we will see massive see-sawing for years to come.. my 5 cents... Ed
    • ab
      alfred b.
      13 May 2020 @ 07:05
      ...basically a more proactive model with consistent actions based on an agreed viral growth index. this is then massaged from time to time as facts inform the results. It is not perfect as there will be systemic friction but it is better than economic gridlock with zero velocity versus 100% economic activity with massive viral activity.
  • WC
    Will C.
    13 May 2020 @ 05:39
    Assuming GDP growth y/y is the measure of economic recovery, if you look at the data going back to 1950 when GDP growth goes below -2% to -4% in the U.S. it has rebounded every time back in a V-shape (source: Haver Analytics). Every recession there is the debate about which shape it's going to be (U,W,L,Nike swoosh etc... you name it). It's prudent to go with the highest probability given historical data, which shows that since 1950 it has been V shaped every time. Like Ed says it is unlikely that once the U.S. comes out of lock-down that they will go back into a strict lock-down structure which means that the economy only get's better from here and risk assets should continue to do well. Fauci is a doctor and his job is to save lives from a medical perspective, he hasn't got policy experience when it comes to saving economies. Ash - like you say its about trade offs, and it seems no longer practical from a social, political and economic stand point to keep the U.S. economy closed.
  • AS
    Ash S.
    13 May 2020 @ 05:08
    Blog is a great idea.
  • SP
    Saxon P.
    13 May 2020 @ 04:58
    The blog is a great idea!
  • MR
    Matthew R.
    12 May 2020 @ 23:50
    Really like these daily videos, and the blog will be great. Adding a lot of value to my subscription.
    • GT
      Guillaume T.
      13 May 2020 @ 02:00
      A blog could be great, but comments are already doing well in a way. The main issue being, we don't see if we have an answer to the previous comment.
    • AB
      Ash B. | Real Vision
      13 May 2020 @ 04:48
      Hi, Guillaume. We're looking into this very issue...
  • PH
    Paul H.
    13 May 2020 @ 00:10
    Time for a hair cut Ash., no pun intended!
    • AB
      Ash B. | Real Vision
      13 May 2020 @ 02:43
      Plenty of haircuts to come for everyone...
  • ke
    karl e.
    13 May 2020 @ 01:55
    Very good.
  • BK
    Brett K.
    13 May 2020 @ 01:33
    I really enjoy these briefings. I especially appreciate the open minded, data driven attitude of Ash, Ed, and Roger (not to mention Raoul). The fact that they share their ideas freely, but with humility and a willingness to adapt to facts is awesome; the resulting conversations are both stimulative and informative (while never irritating). Keep it up! This is why I love RealVision.
  • NF
    N. F.
    13 May 2020 @ 01:25
    Riveting stuff!
  • DG
    Dave G.
    12 May 2020 @ 22:42
    When talking about a recovery the only one that's a V is the qqq's. Guess the real world economy doesn't effect tech. Wait didn't we see this show in 99/2000 also. 🤔
    • mf
      massimo f.
      13 May 2020 @ 01:14
      It is interesting, ive seen tech companies lauded for increasing revenue Q1 even though net losses increase alongside them. This is the result, I think, of the pavlovian instinct of buy the dip present in markets these days. Especially in retail, everyone thinks they’re warren buffett despite the fact that A. He is not buying and B. They are exactly who he is talking about when he discusses market sentiment. Its pretty tough to watch and it is a prefect example of the pitfalls of the age of information; most are not capable of using the info available to make intelligent decisions.
  • MS
    Mark S.
    13 May 2020 @ 00:51
    In Iceland, what happens when ever few weeks several people show up and test positive? Who is going to pay for getting them back home and the care they would need while waiting to have that arranged? Iceland.
  • WB
    William B.
    13 May 2020 @ 00:35
    The blog idea sounds great!
  • WB
    William B.
    13 May 2020 @ 00:30
    Groundhog Day...
  • TS
    Thomas S.
    12 May 2020 @ 23:36
    I always enjoy the back and forth in these Daily Briefings. Occasionally, however, there is something that makes me cringe. Ash cites these comments from Dr. Fauci as significant: And if there is a rush to reopen without following guidelines, “my concern is we will start to see little spikes that might turn into outbreaks,” he said. “The consequences could be really serious.” In fact, he said opening too soon “could turn the clock back,” and that not only would cause “some suffering and death that could be avoided, but could even set you back on the road to try to get economic recovery.” Fauci comments 5/12/20. But, these are really just imprecise words commonly used by someone who is reluctant to give an opinion and wishes to avoid being pinned down. Fauci has been wrong plenty of times in the very recent past, so this is understandable ('go on a cruise', 'Americans should not worry about this virus'). This is a classic case of a prediction or predictions that experts tell us should not be relied upon. “Forecasters who use “a fair chance” and “a serious possibility” can even make the wrong-side-of-maybe fallacy work for them: If the event happens, “a fair chance” can retroactively be stretched to mean something considerably bigger than 50%—so the forecaster nailed it. If it doesn’t happen, it can be shrunk to something much smaller than 50%—and again the forecaster nailed it. With perverse incentives like these, it’s no wonder people prefer rubbery words over firm numbers.” -Excerpt From: Philip E. Tetlock, “Superforecasting," p. 129. This is exactly what Fauci is doing. Of course things "could" get worse and consequences "could" be serious. But, saying this adds nothing.
    • AB
      Ash B. | Real Vision
      12 May 2020 @ 23:51
      Hi, Thomas. Thanks for commenting. I agree with with you about how this sort language can be fuzzy. Tetlock‘s good judgment project is important work; it influenced the way I think about probabilities. I cite Fauci’s comments largely because they are seen as representative of a view held by many In the medial establishment, and because a senior White House advisor testifying before Congress is likely to be given significant weight by the senators.
    • DS
      David S.
      13 May 2020 @ 00:05
      Dr. Fauci job is to give medical advice! He says constantly he is not giving economic or political advice. What do you want him to say- It is just another virus - some people may get sick, some may recover and some may die? When the facts and/or the science change Dr. Fauci will change his advice. Politicians can lie because the spin doctors will give a palliative - relieving pain without dealing with the cause of the condition - to the true believers. DLS
    • DS
      David S.
      13 May 2020 @ 00:09
      Ash B. - I wish you were right about the Senators. I have seen little evidence to support your hope. DLS
    • SB
      Scott B.
      13 May 2020 @ 00:26
      Ash I would caution against relying on what others in the mainstream media are saying. The media, generally speaking, has lost all credibility. They seem to want a bad outcome in fact in order to derail Trump. I also understand you are in the epicenter, and emotion will play its role...it has too, you are human. That being said, Fauci is a doctor and he will take a hardline stance to save all human life, even though across a broader expanse of time, the loss of life from a great depression will make covid-19 look like a walk in the park. We have become weak-willed in the US...it's time to suck it up buttercup. The virus ain't going anywhere...so do we quit and self-implode? Or do we get this bitch up and running again?
  • KR
    Kelly R.
    12 May 2020 @ 23:42
    Ed with the 'L' ....shaped recovery thesis. Same as Rosie just said. I agree.
  • MT
    Mark T.
    12 May 2020 @ 23:22
    It is a trade off. Infectious diseases are a part of human life. So is having to work for a living for most people. If the government wants to prevent a second lock down, give folks confidence that if they do get sick, they won't go bankrupt. Provide free health care for patients with infectious diseases. Isolate and protect the at risk groups like the elderly and ones with comorbidity factors. Everyone else just needs to accept they may get sick, but at least they'll have a backstop if health care is provided for free. Paying for health care for these folks is probably a lot cheaper than -30% GDP and the trillions they are printing up. Just my opinion though.
    • DS
      David S.
      12 May 2020 @ 23:40
      You are basically correct. I wish that we did a better job of lockdown, but that is water under the bridge. The only hope for a better, sooner new normal will be much better treatments for the sick and the Fed printing money to subsidies everyone. I do not like all the printing of money, but at least we can. Euroland is in bigger trouble until each country can print their own currency again and let interest rates and the FX market sort it out. DLS
  • WM
    William M.
    12 May 2020 @ 23:20
    What if the House and Senate can't agree on more stimulus? It feels like we need stocks to drop to bring back a sense of urgency.... meanwhile the losing stocks incl. banks keep diverging more from the winners
    • NL
      Nikola L.
      12 May 2020 @ 23:34
      yes, they will agree eventually and yes, market will make them agree. this is as close one can get to free lunch if one shorts the markets now. Both, fundamentals and political games around new stimulus will push markets much lower. just a view..
  • CB
    Clifford B.
    12 May 2020 @ 23:32
    Great discussion gents, thanks!
  • DB
    Donna B.
    12 May 2020 @ 23:31
    Great idea to give us a list of the articles you read to prepare. Also, Ed's comment at the end that currencies are last bastion was spot on and intuitive. Good job guys!
  • NL
    Nikola L.
    12 May 2020 @ 23:30
    btw Peter, I recommend DELL.
  • DS
    David S.
    12 May 2020 @ 23:30
    Humans will survive the Corona virus crisis, but what kind of world will we be living in? That is the question? DLS
  • NL
    Nikola L.
    12 May 2020 @ 23:16
    I start to get addicted to these daily briefings. thanks guys.. great stuff.
  • SC
    Sam C.
    12 May 2020 @ 23:15
    That blog idea would be great
  • HR
    Humberto R.
    12 May 2020 @ 22:49
    Always great analysis, but was surprised no one touched on the biggest U.S. number that came in today... Inflation at .3%
  • CR
    Colin R.
    12 May 2020 @ 22:42
    A feed of news would be great
  • DS
    David S.
    12 May 2020 @ 22:35
    As an aside. WebMd has a reference to COVID-19 and blood type. A Chinese study shows type O may be less susceptible and type A more susceptible - small study, no peer review yet. WebMd "The finding that blood type may affect COVID-19 risk could be important for healthcare workers treating COVID-19 patients, because those with A blood types" "might need particularly strengthened personal protection to reduce the chance of infection." DLS https://www.webmd.com/lung/news/20200320/blood-type-may-affect-covid19-risk-study