Daily Briefing – May 4, 2020

Published on
May 4th, 2020
Duration
31 minutes


Daily Briefing – May 4, 2020

Daily Briefing ·
Featuring Jack Farley, Ash Bennington, and Ed Harrison

Published on: May 4th, 2020 • Duration: 31 minutes

Ash Bennington hosts Real Vision's Managing Editor Ed Harrison to discuss recent developments in markets, macro, and the coronavirus crisis. Today, Bennington and Harrison discuss Warren Buffett and his statements at the Berkshire Hathaway Annual Shareholders Meeting, the state of the airline industry, and the risks and limitations of reopening the global economy.

Comments

Transcript

  • PJ
    Peter J.
    6 May 2020 @ 08:22
    Tony’s a good trader, but much prefer Ed, Roger or Raoul’s Macro perspectives/ discussion.
  • UJ
    Ulf J.
    5 May 2020 @ 07:44
    Ed is right about Sweden restaurants are open but even in Northern Sweden, they are filing for bankruptcy because people have change behavior and Boliden Aitik instead of hiring 300 people for the summer they are not. Construction companies in the South are letting people go. Collector Bank profit Q1 down 78%, numbers from the Swedish unemployment government facility don't know the name (arbetsförmedling) 70000 people put on hold for losing their job numbers from March and April.
    • ML
      Mark L.
      5 May 2020 @ 15:05
      Ulf, thanks for the boots on the ground view of Sweden.
    • UJ
      Ulf J.
      5 May 2020 @ 18:48
      Glad I can contribute to something. Haparanda a border town to Finland a business owner who sells snus the profit is down 85% since Finland closed the border.
  • DS
    David S.
    5 May 2020 @ 14:30
    Is it possible a lot of the money that the Fed and Treasury provided to businesses is just going into the stock market again? Cash is fungible. Could business/people be using other funds to invest? Is everyone overseas putting money in the US stock market as a safe haven? Are 401Ks still being deducted and passively put into the market? I see so many businesses closed, other running on life support, grocery stores now with far fewer people buying. Why is the stock market is going up?? Goldman Sachs is predicting “the economy will rebound in second half of 2020 as states reopen for business.” No wonder I am in cash. I simply do not understand the juxtaposition of these two worlds! DLS
  • DS
    David S.
    5 May 2020 @ 13:58
    In the April 30 Daily Briefing, Mr. Hirst said “I do think that European banks, a lot of the Eurozone banks will end up being nationalized.” Can we have a follow up? Thanks. DLS
  • AS
    Ash S.
    5 May 2020 @ 12:31
    Really enjoyed this again today. My take on watching buffet was there is just a timing difference. I understood his message to be - don't bet against America in the long term, but in the short term there is a lot of uncertainty. See you tomorrow 👍🏼🙏.
  • RK
    Roger K.
    5 May 2020 @ 09:02
    Guys! can Jack and Max will have a go on this daily briefing?
    • AS
      Ash S.
      5 May 2020 @ 12:26
      They do great intros, especially Jack's summary. I think the current structure works well.
  • DS
    David S.
    5 May 2020 @ 01:47
    I cannot refute, but I do not believe the FEMA projections. It is just too off the wall for now. The pandemic is caused by a simple virus. It has no strategy except for reproduction. So far it is doing a pretty good job. Stock markets, bond markets, commodity markets are in uncharted territory this time. They are just the collective bets on the possible outcomes. The bond market is the adult in the room, but still without adequate information of the future. I am hopeful for better therapies and a vaccine sooner than expected. The whole medical world is focused on this. Good luck on your antibody tests. DLS
    • DL
      David L.
      5 May 2020 @ 12:17
      I think it is fair to point out that most previous models and projections have been wildly inaccurate.
  • BS
    Blake S.
    5 May 2020 @ 01:09
    Hi guys, can you share more on the Swedish SME bankruptcy work you referenced? Thanks
    • EH
      Edward H. | Real Vision
      5 May 2020 @ 01:37
      Sure thing. This is in Swedish but Google Translates works well for Swedish https://www.di.se/nyheter/restaurangkonkurserna-fortsatter-rulla-in-stockholm-varst-drabbat/
    • DR
      Daniel R.
      5 May 2020 @ 08:45
      Thank you, Ed, for sharing the source. You've mentioned the bankcrupcy rate is 6 times over the last year but the article states 286% increase instead. Was it something else referring to as well? Maybe different period? Thanks for clarifying. Cheers.
  • sc
    sung c.
    5 May 2020 @ 03:36
    Warren Buffett is such a liar. He came out less than a week ago and said he was selling airlines only to maintain below the 10% limit. He used the bounce to sell all his airlines stocks to the suckers who kept buying on the rally bounce and now that he is completely out, he is announcing complete sale so he can buy it back after the airlines stocks crash down again. At that time he'll pretend to be the saviour by coming in to buy back airline stocks at the cheap and save them from bankruptcy. What a bunch of bs. IMO
    • AA
      Andrew A.
      5 May 2020 @ 07:05
      or maybe he'll finally realise that airline stocks are uninvestable.
  • RC
    Ron C.
    5 May 2020 @ 05:24
    “Well, nobody’s going away this May” 😂
  • KC
    Kaiwen C.
    5 May 2020 @ 04:57
    Please add up to 3x speed on video play option
  • KS
    Kyd S.
    5 May 2020 @ 04:45
    Thanks guys. great report as always. just want to address the last part where you mentioned the anti-body test. I saw an article earlier on saying that people who recovered from the virus tested again positive and some of them actually passed away the 2nd time they got it which is very sad. It's an old article but you can find it here: https://nypost.com/2020/04/07/51-recovered-coronavirus-patients-test-positive-again-in-south-korea/
  • MB
    Mike B.
    5 May 2020 @ 03:27
    Nice work, guys.
  • BB
    Bob B.
    5 May 2020 @ 03:25
    Based on my assumption that 1918 pathology monitoring was very limited - how would they have been able to assess asymptomatic spreading? Viral shedding was very difficult to study back then.
  • SH
    Sahil H.
    5 May 2020 @ 03:16
    This was a great insight on the two sides of buffet. With regards to moving into the insolvency phase, Raoul mentioned in his talk the unfolding that this is when we will likely start to see the demand for USD rising. I'm not sure if he touched on this but if/when this starts to occur with rising bankruptcies, are we likely to see another sharp decline (similar to the liquidation phase) across all asset classes or will this likely be a slow dribble down that will primarily affect the equities market?
  • DL
    Dominic L.
    5 May 2020 @ 02:27
    Great setup, Jack.
    • JF
      Jack F. | Real Vision
      5 May 2020 @ 03:12
      Thank you!
  • WM
    William M.
    5 May 2020 @ 03:03
    Buffett could sell the airlines because many of them have gone bankrupt before (some twice) without bringing down the whole system. Selling his bank stocks could set off a new financial panic and he knows this. The "always right" stock market was hitting new all-time highs in mid Feb. as the virus raged through Wuhan etc. Now the market is so sure the Fed has saved the day...and will continue to do so, no matter how bad things get. It seems just as overpriced as mid Feb. but there has been a huge winning out of sectors like energy and finance from relatively strong sectors like health and tech etc. The biggest take-away from the 1918 Spanish Flu is that receded in the US in the first summer, travelled all over the globe and came back in the fall in a new mutated form that was even more deadly. All viruses mutate quite rapidly as they reproduce quite rapidly....usually it's something less potent that can spread more widely (for the better survival of the virus), but that's not always the case as the Spanish Flu experience tells us. And this virus has a much more heavily populated, crowded world to travel through at varying speeds, allowing more opportunities for mutations. I suspect that Buffett and his advisors (incl. his close friend Bill Gates) know that it's really not possible for anyone to know what scenario will get. And, yes, even a vaccine in a year isn't a given....though I'm optimistic just given how many different and capable entities are giving it their best shot. As always, you guys are great...incl Jack who could probably make us all smile at the dreariest news....sorely needed these days!
    • JF
      Jack F. | Real Vision
      5 May 2020 @ 03:12
      Fascinating insight about how banks vs. airlines! And thanks for the kind words :)
  • LL
    Linda L.
    5 May 2020 @ 01:29
    Ash and Ed, Thanks for all your insights day after day! The observations on Buffet are right on! I've been skeptical: seeing two Buffets for a long time now. Your Two Buffets scenario has helped to make a lot of sense in understanding Buffet - Thanks Jack Do you guys really believe that FEMA report? The number seems way higher than what Johns Hopkins is reporting daily. Im counting on you for the reality check. I get concerned when you bring in an article like this without expressing any skepticism. Is this a part of your base case on solvency? Also, can you answer a question for me? Mike Green in his live talk with Raoul says he believes that the current markets in the US ( and possibly globally) are undergoing a Structural Change as opposed to Raouls 3 phase recession ending in solvency issues. It is obvious that the US markets are undergoing Structural Change ( Real Vision has had expert after expert in all the major sectors discuss this, they may not have described it as structural change, but I think that was their warning/observations.) My question is why is Structural Change mutually exclusive to Recession/depression? How can any shift mask a decline in employment of 30 million people and climbing? especially when we know that the US economy relies so heavily on the consumer And a follow on question is: How can passive investing stand up to this mathematical outcome of 30 million jobs lost along with the accompanying loss in consumer spending? The real linch pin is; will employment snap back to 90% or 100% in the next 4 weeks as lock downs subside. Sorry for the long comment, and sorry I may not have articulated my thoughts well, but I hope you answer the questions for me Thank you
    • RS
      Riki S.
      5 May 2020 @ 03:02
      An increase of 200k per day in infections and a ~100% increase in deaths. Opening up will only drive these numbers significantly higher - what's the plan then, given the reality of a vaccine being on the horizon anytime soon, is very low. The market risk is definitely to the downside. Bleach, Disinfectant or something even more bizzare? Perhaps a war. Its incredible, looking from outside the US, that an event of this scale is being managed with such latency and incompetence by the administration, and the willful blindness of those who have become so polarised by the politics. And now the demonisation of the Chinese (not blameless, but not accountable for what they are being accused of, according to US and the Five Eyes Intelligence network - zero proof. In addition, the leading technical scientist in OZ has called the lab origin theory a nonsense) - this last part sounds familiar to the Iraq intervention - idle chatter and nil proof. This foe is significantly larger than Saddam, so we watch carefully how this progresses as we move toward the Election and the need to find a scapegoat. Prayers for the American people - you unfortunately will need a miracle to save yourselves from your leadership. A significant market sentiment marker to watch in the months ahead.
  • LS
    Lemony S.
    5 May 2020 @ 00:30
    How come you guys never talk about how the infection related mortality (was was previously called CFR or death rate) was shown in numerous studies, all around the USA and the world, to be much lower than anyone (in the media or messaging) ever thought? If, as you say in this interview Ash, you admit there are so many more asymptomatic carriers, doesn't it occur to you that in reality this virus is by definition (and your admission) overstated? There are many studies in California, Massachusetts, Florida, and in Europe that have demonstrated it. You can watch Bill Maher's interview with Dr. David Katz to see that it has nothing to do with politics. The lack of this information being included as opposed to references to the WHO (political organization supported by China and Bill Gates, who has been wrong about more things than any country so far) makes it seem like you have something invested in doom saying or fear mongering, like most of the media coverage has been overall.
    • JB
      Jeffery B.
      5 May 2020 @ 01:15
      I agree with your position. Our problem is that the people have been railroaded into a state of fear and paralysis where common sense and logic and data do not prevail. I am confident this virus will be a super-duper flu, but nothing we should crater the global economy over.
    • LS
      Lemony S.
      5 May 2020 @ 02:16
      Jeffery, the worst part about it is that due to all known data, we actually know this already. I have known it for some time since I dispassionately look at the numbers and know the science of respiratory illnesses, coronavirus in particular (which always goes away in April). The worst part about this that I already predicted is that by quarantining all, including the most healthy (children) who have literally zero chance of dying from this, you are setting up a self fulfilling prophecy of some type of comeback at the end of the year when it gets colder/people inside again. I think that is partly by design, I'm sad to say, or at least a collateral damage of authoritarian chaos. People need to be reminded that 99% of people confronted with this virus do not have any significant symptoms. Read that again and think about how ridiculous media coverage, let alone central planner action, has been.
  • BK
    Brian K.
    5 May 2020 @ 00:43
    Jack Farley commentary on which mister buffet to believe maybe the wrong comment. 1st Buffet talks about the American promise and dream. 2nd Buffet said businesses need to be careful and consumer behavior may change after the shutdown. Hint - I (Buffet) am worth 140 billion dollars and my company has 94 billion dollars in T-bills. I do not think Buffet talking about two different things. It is more like Buffet talking about the same thing by setting you up this nice story with hope and promise about the way things are only to drop the BOOM. Sounds to me a lot like a Depression is coming and the only way to get thought it is by being strong and savvy.
    • JF
      Jack F. | Real Vision
      5 May 2020 @ 02:09
      Thanks for sharing your perspective. That’s an interesting way of looking at it - either way, the contrast between the long-term “financial arc of history bends towards growth” narrative, and his actual capital allocations, is EXTREMELY stark.
  • JB
    Jeffery B.
    5 May 2020 @ 01:13
    You guys rock! This is now part of my daily routine. I love the analysis and the second and third level thinking. I'm a research analyst/practice lead and without fail I get something to share with my team from this briefing.
    • AB
      Ash B. | Real Vision
      5 May 2020 @ 01:38
      Thanks, Jeffrey!
  • JD
    James D.
    5 May 2020 @ 01:36
    Ed! Your plant needs water. Ash, you need a plant...great job again.
  • PB
    Paul B.
    5 May 2020 @ 01:23
    Warren is like.....We are fuck if we do and fucked if we don't...Hence his large Cash position
  • NI
    Nate I.
    5 May 2020 @ 00:47
    FYI. In the US, States are sovereign entities so they can't file for "bankruptcy". When Senator McConnell said that State bankruptcy raised "constitutional issues", he was right (a rare moment for him in my opinion). States could default on their debt and pay the price with high rates on any new bonds they issued, but nobody wants to admit that unlimited debt is a bad idea, so the most likely outcome is for the Fed to ignore the Constitution and the 1913 Act and buy up the garbage debt of States to enable them to just keep on borrowing. Someday this money won't spend. The score is five to zero that a country can keep on doing this forever (Portugal, Spain, Netherlands, Franc, Britain).
  • MB
    Michael B.
    5 May 2020 @ 00:26
    I don't get your market intel. Alll the HY corporates that have filed for Chapter (JCP NMG WLL DO etc...) have been floundering for several years. The fulcrum securities in these capital structures have never been the equity. It has been in the unsecured's or the bank debt. Most of the retail Chapter 11 this year will be getting DIP financing in the form of "loan to own". When are we going to see new distressed names i.e. IG names that go from BBB< to defaulting? These old names are just a sign of the old PE shell game coming to a close.
    • EH
      Edward H. | Real Vision
      5 May 2020 @ 00:32
      Macy’s is where the rubber hits the road since they got a junk designation before the Fed’s backdate. I mentioned them as one to watch. For me, they are the test case here https://www.reuters.com/article/macys-ratings-sp-idUSL4N2AI3YB
    • LS
      Lemony S.
      5 May 2020 @ 00:32
      Great points, Michael. Generally they are still important to cover, but it falls into my presumption above that either there's hot news to talk about in our 24/7 news cycle, or that it feeds a doomsday narrative, or both.
  • JM
    John M.
    4 May 2020 @ 23:20
    $140B cash! Not even one ounce of gold? Maybe it's time for Buffet to swallow his pride, admit he was wrong and start buying gold. Just a thought.
    • MS
      Malcolm S.
      4 May 2020 @ 23:43
      He will view gold differently if negative rates come to the US
  • JA
    Jonathan A.
    4 May 2020 @ 23:43
    Great job as always, guys! Really hard to see how we get to 200k cases per day based on REPORTED numbers (such as those rallied by Johns Hopkins). Wonder if we’ve just been exposed to the real number of cases relative to the “official” ones a lot of us track daily.
  • SW
    Suzanne W.
    4 May 2020 @ 23:32
    Great intro and discussion today folks!
  • RY
    Ron Y.
    4 May 2020 @ 23:18
    Do you have a link to share to the NY Times article that is based on the FEMA statistics?
    • AB
      Ash B. | Real Vision
      4 May 2020 @ 23:30
      Hi, Ron. It's under the day's coronavirus update. You may have to scroll down a bit... https://www.nytimes.com/2020/05/04/us/coronavirus-live-updates.html
  • GF
    Gordon F.
    4 May 2020 @ 22:37
    So as I understand it, BRK dropped below a 10% holding of all outstanding shares in AAL and the others last week, and then this weekend Buffet announced that he had sold all his holdings. That is a LOT of airline stock to sell in just a few days, and while the airlines are marginally down over the last week, I would think that unloading such a large holding would have caused even more of a drop. So my question is - Who bought all those shares that BRK sold?
    • MW
      Max W. | Real Vision
      4 May 2020 @ 23:18
      The unwashed masses... https://robinhood.com/collections/100-most-popular