Gentlemen. Great update. One thing to add is that I think there may be a misunderstanding as to why QE makes stock markets go up. There is some front running, but it is mostly about passing the hot potato. Here are the mechanics: WHY QE MAKES THE EQUITY MARKETS GO UP When a central bank conducts OMO to buy assets, they exchange the asset for a cash deposit. For example they may buy a treasuries from a broker dealer. In this case the broker deal no longer has the treasuries and they now have a cash deposit. However sitting on cash deposits is not the business of broker dealers, so they will try and replace their inventory. Let's assume they use this cash deposit to buy treasuries from a hedge fund. The hedge fund now has the cash deposit. However the hedge fund looks at treasuries, and considers them a bit rich, so uses the cash deposit to buy say munis, or IG credit from say a family office. That family office now has the cash deposit. However, just like the participants before, they don't want to sit on cash deposits. So, the family office now eyes the munis and IG and thinks they look a bit rich, so uses the money to buy Tesla and Beyond Meat equities. And that, is why QE makes stocks go up. One thing to add is that OMO injection in one country usually flow to the equity markets and credit markets with the highest relative strength. In doing so they weaken the domestic currency and strengthen the target currency. We see this all the time. QE weakens your currency, unless your own market is the leaders. A useful analogy is this: Imagine your wife gives you $50 to go out and buy steaks for the BBQ. When you get to the supermarket, you learn that Jay Powell has already been there and bought all the steaks with counterfeit money. He is at home with Ben and Janet enjoying a lush BBQ with ingredients that cost him nothing (as bought with freshly printed money). However you are left with a quandary. You have $50 and there are no steaks left. So you step out the risk curve (with your wife) and buy pork sausages and burgers (not your first preference). Your wife is a bit unhappy. But, the next person who arrives was going to buy pork sausages and burgers, but now there are none left. They have to settle for crappy veggie burgers. If we assume that the laws of microeconomics hold for this supermarket, then (1) no one got what they wanted, except the central bankers who dined for free, and (2) everyone had to pay more for their BBQ food.

To compare a bank's market capitalization with potential equity losses from bad loans is incorrect. For example Commerzbank in Germany has a book equity of 24 Euro per share, but is trading at 3.xx, so even if it loses 12 billion of its equity it could still triple from the current stock price.

It is significant that this is an EU and not Euro initiative. European countries want to help each other. They do not want to take on everyone's debts. Even Italy, Greece, Spain, etc. do not want to bail out other countries at the expense of their own citizens. To me this is a very positive move. There is a recognition that the EU is a better confederation than Euroland. DLS

Spain's assessment was inaccurate. Most of Spain is in phase 0, not in phase 1. Most important story in Spain is not economy, it's political turmoil that is coming. There are daily antigovernment protests that are growing all over Spain. People are protesting Venezuelisation of Spain by Chavista government.

Love Roger's clear cut explanations and Ash asking the right questions. Roger speaks fast and there is a lot to unpack but it's worth the time. How Fed liquidity actually makes it into the equity market, I wondered the same thing, and here it comes up in the briefing.

Roger, what’s your favourite pudding to bake?

Always Always Always Tune in when Sir Roger Hirst speaks!

Great daily briefing! Great to hear the explanation on how liquidity is getting into the stock market, in addition to all the other thoughts and observations.

And thanks for the breakdown of the S&P excluding the top 5, super interesting!

Go the boy from Manchester...... You need to through that (light hearted but very British) Manchester grenade back into Raoul's court Roger!

Echo praise for the explanations! You cannot explain enough. You cannot explain enough. You cannot... (you get me).

The 5 stock concentration in the SPX is a bearish sign.

Agree with the comment that we will have a "V" recovery when you consider that the 2nd quarter could be down +30%. So the 3rd quarter will be a blowout number up some big percentage. You would think the market does expect this, but when 3rd quarter estimates are announced, sure you will see a big rally as if it is "new" news. The key point that Roger made is to what level does the economy jump back. With projections for slowing real growth below 2% before the virus, now with a significant percentage of people and businesses materially impacted financially from the stoppage and balance sheets weakened, and with some reduced/changed spending going forward, one would have to think it would be hard for GDP to bounce back to previous 2020 projections as debt and lower cash flows weigh on consumer/business/local and state governments ability to spend.

Will the Hugh Hendry and Richard Werner interview be up today?

I love the Roger segments. There was a RV interview a few months ago with Schiller I believe, or I saw an interview with Schiller regarding his book about narratives and how narratives shape our outlook. It feels that when it comes to the stock market, there is a narrative that 1) we're in a new bull market because look at the rebound and conversely 2) the stock market and the real economy are disconnected. Ash and Roger discussed it here, and it's been discussed before how the FAANG plus Microsoft stocks are really distorting reality. The S&P 500 is supposed to be a more reliable indicator of the underlying economy, but when 5 stocks have such disproportionate weighting how useful is it? It seems that these 5 stocks should be excluded/reported in their own index. This would correct the misperceptions of both #1 and #2 above and bring them more in alignment. Just a thought.

Brent: 1, everyone else: 0.... restaurants, travel, and most of everything that goes on in a city, is truly, and perhaps tragically, non-essential. A country just needs food, factories, vehicles, and logistics. If 30% of the population dropped dead along with all the restaurants and travel, and the cities are left uninhabited, just slap some QE on it, "no problem", or do nothing, and make yourself understand the the purpose of a government is to "secure liberty"; something America has done the least worst.

Great show!

Thanks for the shout out, Ash!

Still keen to hear possible vehicles by which you can play the EM stocks and currencies in the UK? Pls

Still keen to hear possible vehicles by which you can play the EM stocks and currencies in the UK? Pls

I’m sure I speak for many, these daily updates have become part of my daily routine, and on that day they cease I will be filled with the same melancholy as when one finishes a great work of fiction.

English accents and financial news....like peanut butter and jelly.

What the hell is going on with these markets!! Unemployment rate soaring and markets right back to all time highs! I give up ! Loving these market reviews each morning (Australian time)!

Couple of points: 1. Given the concentration of money flowing into the FAANG stocks, would it be correct to suggest that Roger et al think it is a mini tech bubble and if so, is there a view it will burst? 2. Don't think we haven't noticed the repositioning of Roger's camera to hide the wine (or lack thereof). Great way to start the morning in Australia with the daily briefing. Cheers.

Have we seen the low in stocks?