Daily Briefing – October 16, 2020

Published on
October 16th, 2020
34 minutes

Daily Briefing – October 16, 2020

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

Published on: October 16th, 2020 • Duration: 34 minutes

Senior editor, Ash Bennington, and managing editor, Ed Harrison, look forward to the relevant themes. Ed adds to David Rosenberg's recent comments that "organically, the economy is still in recession," and he and Ash reflect on the recent success of Sweden's pandemic shutdown response. They then put a week of bank earnings into context and analyze Warren Buffett selling the bulk of Berkshire Hathaway's holdings in Wells Fargo. In the intro, Ash speaks to Real Vision editor, Jack Farley, about "priming" in the markets for distressed debt. For reference, the video Ed discusses at the beginning can be found here: https://exchange.realvision.com/post/the-breakdown-what-all-financial-crises-have-in-common-5f89ad21d788a45104be209e.



  • HK
    Henrik K.
    17 October 2020 @ 12:12
    Thanks for pointing out the excellent Howard Marks memo. Unfortunately his conclusion seems to be that he has no clue what will happen and that he is focused on making investments whose outcome are not impacted by the macro. If he is not able to figure out a macro investment thesis what hope for the rest of us.... As much as I enjoy your RVDBs I must urge you to stop praising the approach of Sweden; as this is not supported by the facts. Their death rate per capita is a disaster compared to their neighbouring countries which are the only ones that make sense to compare with (e.g. 5x Denmark, 10x Norway). Given Sweden's favourable conditions to Covid vs other European countries in terms of socio-economics, demography and pop density; their outcome is a disgrace. And to say that Sweden has "done really well since April" is simply not true. Since June they have the third highest death rate per capita in the developed world (only behind Israel and the US) and 10x worse than Denmark, 20x Norway. Meanwhile the Swedish economy has not meaningfully outperformed their neighbours so there really is no justification for their approach from the available data at this point. And their case rates are rising rapidly again like everyone else.....so much for heard immunity..... This article provides a much more fact and evidence based review of the Swedish approach. Please read it before continuing to pursue this narrative: https://time.com/5899432/sweden-coronovirus-disaster/
    • EH
      Edward H. | Real Vision
      17 October 2020 @ 14:27
      Henrik, the Swedish situation is more nuanced than you are presenting it. There are two distinct periods in Sweden, the first when they did not lock down and the go forward, more socially distanced period. In the first, which is where most people concentrate, Sweden's approach failed, especially in eldercare facilities whereas the Danes, Norwegians and Finns did well. The Swedish approach was an unmitigated disaster. But, in the go forward approach, the Swedes have done well. Danish economist Lars Christensen pointed this out this morning in comparing Czech and Sweden https://marketmonetarist.com/2020/10/17/the-czechs-and-the-swedes-the-tale-of-two-covid-strategies/ The Swedes actually tightened up on mandatory socially distancing rules after April, making them more compatible with other nordics. See here, for example https://www.msn.com/en-us/health/medical/sweden-had-resisted-mandatory-social-distancing-measures-that-changed-on-wednesday/ar-BB125I21 And the same is true regarding travel restrictions beginning in June https://www.government.se/articles/2020/06/social-distancing-and-markedly-reduced-travel-in-sweden/ The result has been a decline in infection rates. See here https://www.bloomberg.com/news/articles/2020-07-07/swedish-covid-infections-drop-after-steady-distancing-patterns making their go-forward approach sustainable. As the second wave takes hold in Europe, it has yet to catch Sweden out, even though the move indoors there preceded the move indoors elsewhere. So, at this point, I believe there is a strong possibility that infection rates and death levels in Sweden will be lower than elsewhere in Europe. My concern is that the vaccines will not be as effective as needed and/or may take a long time to administer at scale. Moreover, there is limited evidence that re-infection is occurring because of virus mutation. See here in Swedish https://t.co/q4Zi15Jla9 As a result, you need a sustainable long-term mitigation approach that takes you through at least one more complete calendar year if not further. And we just don't have that in most places across Europe and North America. If we had a tradition of mask-wearing, the protocols in Japan or Singapore or Thailand would be the ones to emulate. But, I think there is too much resistance to that in the West for it to be as effective even though I wear a mask and socially distance assiduously. I think the Swedes, with enhanced mandated social distancing rules and ad hoc travel restrictions are doing it better than most and that's one reason their infection and death rates have yet to spike again. I realize that is not the prevailing view. But all approaches will be battle-tested in the coming coronavirus wave which looks set to be very deadly. So we will find out.
    • EH
      Edward H. | Real Vision
      17 October 2020 @ 14:39
      One more thing. I am on record as having predicted lockdowns would occur and supporting them as necessary. In April, I went through the logic on Credit Writedowns for my subscribers https://pro.creditwritedowns.com/p/how-do-we-achieve-minimal-economic In that same April post, I also predicted we would see a large summer 're-opening wave' and a subsequent Fall/Winter wave. And we have done. I wish it weren't so. But, in my view, these outcomes were entirely foreseeable and have much to do with known resistance to adequate mask wearing and predictable riskier behavior in youth populations. So, I think you and I are mostly on the same page about Sweden's initial failure and about what needs to be done now. The question from a policy perspective is what is likely to be successful. And for that, you need compliance, which limits the range of responses. We have to be realistic about that or you get massive waves of contagion, as we now see.
    • LK
      Lauri K.
      17 October 2020 @ 19:03
      I have to agree with Henrik here. There simply is no case for praising Sweden's approach. I think Germany has done very well taking into account the circumstances, while the only good examples to look up to are Taiwan and Hong Kong.
    • EH
      Edward H. | Real Vision
      17 October 2020 @ 19:31
      Lauri, I wore a while Twitter thread on how poorly it went with Sweden early on back in April https://twitter.com/edwardnh/status/1246078881985171457?s=21 It’s not the same now
    • HK
      Henrik K.
      18 October 2020 @ 09:28
      Ed, many thanks for taking the time to respond; I appreciate it. In the RVDB you said that Sweden "has done really well since April". This is just not correct. As the data shows since June they have done even worse compared with Norway and Denmark. It was not until July and August that Sweden saw a big improvement and as anyone who has ever been to Sweden in the summer will know this is because Sweden basically shuts down every July anyway as people go on holiday and spend time in their summer houses and cottages in the middle of nowhere i.e. a self imposed lock down! This summer most other European countries restricted travel to/from Sweden so there was much less international travel by Swedes than say Denmark or Norway which ironically further helped them as fewer people brought the virus back from holiday. As the article I linked points out there is no evidence of herd immunity in Sweden and since September their case numbers have picked up again like everywhere else. In October to date the case rates and death rates per pop are the same for Sweden and Denmark and c. 2x that of Norway. So again there is no data to support the claim that Sweden is now doing measurably better than their neighbours. You are rightly focused on the more sustainable approach given the potential for vaccines to be delayed, ineffective etc.. However at this moment there is really not much different between Sweden's approach and that in the other Northern European countries apart from maybe Sweden's reluctance to implement face coverings. Schools, restaurants etc. are also open in these comparable countries. So it seems very odd to me to pursue a narrative that praises the "Swedish Approach". Why not praise Norway and Denmark for their approach as they took tough action when it was needed and then eased restrictions back off when that was suitable. Seems a better sustainable approach to me.
    • wN
      wubbo N.
      18 October 2020 @ 16:19
      I'm from the Netherlands and Sweden has about the same death rate per capita (based on excess mortality) as the Netherlands. Which is about the same as our flu season from 2018. ~6000 deaths are horrible but not outside the range of a flu season (and the same goes for age). Definitely not enough for a lockdown but the idea is that without lockdowns those numbers would rise. Currently, their deaths are <10 a day so Sweden did and is doing well. Cases are rising though. I wouldn't discredit them solely on that point though.
    • TD
      Ted D.
      19 October 2020 @ 21:07
      We are hearing a lot about falling excess mortality rates in the northern hemisphere. Those generally coincided with the end of summer. I will be surprised if they do not tick back up again soon, particularly in the United States and parts of Canada. However, this is one area where I hope I am proven completely wrong.
  • SN
    Stefan N.
    17 October 2020 @ 02:41
    Singapore economy is now open total death count of 5.5 million people is 26. Masks are used by all and the elderly population has been protected well. Sweden has 5000 deaths. Sweden is not densely populated and have had tragic numbers in their care homes. The economy may have done well but they have paid a high price. It’s about how much you can take I guess. The medical management is much better now so death percentages should and is coming down.
    • wN
      wubbo N.
      18 October 2020 @ 16:29
      Of course, it sounds bad if you put it like that but here's my previous post to put that in perspective: ''I'm from the Netherlands and Sweden has about the same death rate per capita (based on excess mortality) as the Netherlands. Which is about the same as our flu season from 2018. ~6000 deaths are horrible but not outside the range of a flu season (and the same goes for age). Definitely not enough for a lockdown, but the idea is that without lockdowns those numbers would rise.'' It's not a higher price than usual. The response in other countries is the thing that's not usual...
  • JK
    John K.
    17 October 2020 @ 22:23
    Ed I think there’s many other countries you could of pointed to for a model on how to beat corona and have growth. Singapore, South Korea, Norway, Denmark, New Zealand are alll great examples of countries who beat corona and no longer have to live in fear. Perhaps New Zealand isn’t the best for growth but Norway and Denmark have been fine. My friends over there appear to be living normal lives without any real problems.
  • FF
    Fabio F.
    17 October 2020 @ 17:00
    Please take your mic off of the camera view....
  • SP
    Stanley P.
    17 October 2020 @ 04:17
    Where will we find these curated videos, a separate tab, in The Exchanged, noted on video....?
    • EH
      Edward H. | Real Vision
      17 October 2020 @ 14:31
      On the website, there is a slider now with Editor's picks. It's not on the mobile app. But I am working with the product people to implement changes that our subscribers are requesting. Hang tight because more is to come.
  • Jv
    Joël v.
    17 October 2020 @ 08:56
    What keeps these two gentlemen and basically every other guest on this platform from comparing the west with the east? Let's compare Swedish infection- and death rates and economical performance with Taiwan, S Korea, Vietnam etc. Taiwan's official in charge of the covid response, asked in march or april 'which western nations have reached out to learn from you?' Answer: 'None'.
    • RY
      Roy Y.
      17 October 2020 @ 11:44
      Too 'western' centric. In Raoul's reading list, he mentions a fabulous book by Peter Frankopan ‘The Silk Roads’ that (though he doesn’t mention its sequel, ‘The New Silk Roads’) which ought to be essential reading for the entire RV team. Frankopan’s historic ‘lens’ provides a neat framework for the Kyle Bass interviews on ‘China’, IMHO. Have a great weekend!
  • FA
    Frank A.
    17 October 2020 @ 11:18
    So Interesting, I’m pretty sure that Howard Marks actually specifically talks about the ‘race to the bottom’ in his book, Mastering Market Cycles.
  • TR
    Thomas R.
    17 October 2020 @ 09:26
    The "EDITORS' PICKS" curated list is a nice development
  • MN
    Mark N.
    17 October 2020 @ 05:30
    Where is the curated list of videos mentioned at the end of today's daily briefing?
    • TR
      Thomas R.
      17 October 2020 @ 09:23
  • MS
    17 October 2020 @ 07:45
    If investors want a Swedish based stock with strong growth potential then look at Ericsson. They are a leading 5G supplier and with Apple last week embracing 5G for their latest range of phones and Huawei equipment off the table Ericsson will be a global beneficiary of this growth trend.
  • GF
    Gordon F.
    17 October 2020 @ 03:57
    Personally, I am really grateful to the Swedish decision-makers who decided to take a different route. I wish 50-100 other countries had likewise tried different means of dealing with Covid-19. Why? Because despite all the blowhards puffing about what we needed to do, and changing their tunes in nearly every news cycle, different approaches would give us much better data as to what really works best to control the virus while balancing all other needs. Some good data has been gleaned, but we would know a lot more if different places had tried more different things. Sadly, almost everyone kow-towed to the WHO and other know-it-alls, who in retrospect were just guessing, or worse.
  • PS
    Paul S.
    17 October 2020 @ 00:37
    Beds data - reporting the position as at 08:00 on 01 October 2020 Mechanical Ventilation beds Beds occupied Beds occupied by confirmed COVID-19 patients England 2,702 285 East of England 221 12 London 744 49 Midlands 409 56 North East and Yorkshire 430 69 North West 387 89 South East 304 8 South West 207 2 Total beds Beds occupied Beds occupied by confirmed COVID-19 patients England 113,575 2,069 East of England 11,029 79 London 17,451 275 Midlands 24,596 391 North East and Yorkshire 17,027 502 North West 16,716 688 South East 15,862 98 South West 10,894 36
    • AB
      Alastair B.
      17 October 2020 @ 03:56
  • SG
    Skyler G.
    17 October 2020 @ 02:10
    Look at the trade deficit. That explains the disparity of domestic production vs. consumption
    • JD
      Jesse D.
      17 October 2020 @ 03:09
      That’s what I was thinking too.
  • WL
    Wade L.
    17 October 2020 @ 02:55
    Gotta love the Nicknames flowing from Ed -- Maybe we'll see Jack "Hollywood" Farley and Rodger "Bjorn" Hirst host the same episode. But first, I'd like to see some of the rules behind the Credit Writedowns drinking game to toast to Ed "self-quotin'" Harrison ;)
  • PP
    Patrick P.
    17 October 2020 @ 01:44
    Warren Buffet has continued to to shit the bed over and over again. He has made some huge bets that have kicked his ass. He loved Wells Fargo as they were stealing from their customers. Now he's moving on... wonder what he likes about BAC? IMO some investors and politicians who are old, and in the news, need to go away.
  • MA
    M A.
    17 October 2020 @ 00:57
    About content presentation... Could you rank videos based off user likes? Fan favorites of the week/month/all time etc...
  • JS
    Jon S.
    16 October 2020 @ 22:55
    I totally disagree Edd. When the Winter will come Sweden if they have no herd immunity what I doubt it will be catastrophic for them. Cold temperatures and the lack of vitamin D sun is what makes the virus more severe.
    • TM
      The-First-James M.
      16 October 2020 @ 23:05
      Alternatively, Sweden may already have herd immunity, and winter will prove to be no problem for them; completely vindicating their strategy as the sane path to have taken...
    • AP
      Anne P.
      16 October 2020 @ 23:46
      "Herd immunity" is a term applied to a vaccinated population. it is still not known if there is any immunity conferred by experiencing the illness.
    • JS
      Jon S.
      17 October 2020 @ 00:15
      Thanks "The-First-James", I now stand corrected. Ed, my apologies.
    • JS
      Jon S.
      17 October 2020 @ 00:18
      Lol, just a little Friday humor folks. I'm the "other" Jon S. who hijacked Jon's comment. Carry on:)
    • JG
      Jave G.
      17 October 2020 @ 00:44
      Anne: would you agree that if immunity is not conferred by experiencing the illness, it means there's no possibility of a (permanent) vaccination? (I'm not an expert at all in this realm. But logically, one would seem to suggest the other.)
  • PS
    Paul S.
    17 October 2020 @ 00:41
    Just saying, here's the data not an opinion
  • PS
    Paul S.
    17 October 2020 @ 00:37
    "nearly 250,000 men were lost in 2 months of 1944 after the D-Day landings" that was a war
  • ss
    sunny s.
    17 October 2020 @ 00:33
    I don't know what strategy might be better to safeguard ourselves from Covid and still be able to have economic development. I also don't know if the Sweden model will eventually work, but being in lockdown is really quite terrible. Domestic violence, suicides, depression and other stress/anxiety related disorders are one the rise because of isolation, uncertainty and lack of control. And I don't think any "model" is taking this into consideration. The second wave will also induce more fear and panic, how that impacts our immune systems is also quite worrying.
  • pk
    philip k.
    17 October 2020 @ 00:33
    We can’t use Sweden! They have a free available public healthcare system for all, ease of testing and seeking treatment. We don’t, I’m seeing higher minorities and undocumented workers here spiking again in WA state.
  • AP
    Anne P.
    16 October 2020 @ 23:39
    You mentioned content presentation. I may be unusual, but I watch all your content. Please restore the slider presenting all your content in chronological order. That is convenient, and it allows me to watch what I have not yet seen with no intervention between episodes.
    • EH
      Edward H. | Real Vision
      16 October 2020 @ 23:49
      Anne, I will pass your comments on to product about fixing that. Cheers, Ed
  • PS
    Paul S.
    16 October 2020 @ 23:49
    Sweden; Population 10,117,619 Total cases 103,200 Deaths 5,918 Norway, Population 5,433,567 Total cases 16,272 Deaths 278 "Norway's prime minister has warned that the gradual re-opening of Norwegian society must now stop" "As of 28 September, face masks are now mandated for everyone using public transport in and around Oslo at times when a one metre distance cannot be maintained. That's part of a new clampdown in and around Oslo that will impact up to 1.3 million people"
  • DT
    David T.
    16 October 2020 @ 23:45
    Sweden's recovery is a myth.
  • JJ
    JARED J.
    16 October 2020 @ 23:28
    Priming loans are not new. Traditional DIP financing is by definition a "priming" loan because it jumps ahead of existing creditors. These new "priming" deals are priming loans outside of the bankruptcy process (for now anyway). Lenders in search of yield have agreed to more and more "covenant lite" loans in recent years, and in Raoul's impending "insolvency phase," many of them are going to learn the consequences of agreeing to forgo those protections.