Daily Briefing – October 22, 2020

Published on
October 22nd, 2020
Duration
34 minutes


Daily Briefing – October 22, 2020

Daily Briefing ·
Featuring Haley Draznin, Ed Harrison, and Peter Boockvar

Published on: October 22nd, 2020 • Duration: 34 minutes

Managing editor, Ed Harrison, talks to Peter Boockvar, chief investment officer of Bleakley Advisory Group, about some of the most recent macroeconomic data releases such as jobless claims and existing home sales and what they portend for the economy. Boockvar also explains why recent comments from the Fed and the level on the 10-year Treasury bond matter. What this means: The macro is telling Boockvar to watch for an uptick in cyclical inflation and he's using it in conjunction with bottoms-up analysis to build a portfolio. Real Vision reporter Haley Draznin analyzes the surge in corporate bonds as companies have done so much refinancing in one year and she looks at the new jobless claims out today which are at the lowest level since the coronavirus pandemic hit in March.

Comments

Transcript

  • KJ
    Kelly J.
    25 October 2020 @ 17:05
    Peter reflects a point of view put out by many with a free-market or Libertarian frame of reference that I like in theory but that's completely unrealistic: He believes that the natural market for Treasuries would have functioned just fine in March without massive intervention from the Fed. Yeah, right, Peter. What a joke. A big chunk of the $10 trillion in corporate debt would have been vaporized. Overpriced stock darlings like Apple, Tesla, and even solid dividend aristocrats would have continued to fall so hard and fast they would have had to be chisled off the pavement. While I'm as bothered as everyone else by the endless intervention of the Fed to distort markets, Boockvar doesn't seem to understand that the global credit system will drop dead and fail - utterly collapse - into a deflationary spiral in short order if the US, EU and Japanese central banks don't continue to massively intervene to keep rates low. It's not a myth. You saw the start with your own eyes. We've got global debt in the hundreds of trillions of dollars, folks, that ALL reprices to current rates as it is rolled forward. The notion we can suddenly market price risk capital now and have the world function as it has is hogwash. One of the artifacts caused many of us investment managers/analysts living most or all of our entire professional lives in a regime in which declining US reserve currency dollar rates have been feeding a debt/growth expansion cycle for 40 years building trillions in leveraged, debt-supported assets worldwide is not understanding what a potentially dangerous, explosively disruptive state change is involved in changing that regime. We were headed toward a long term global depression in 2008 if central banks did not intervene (the Fed backed 20 trillion plus, in addition to zero rates and QE) and we may be headed here again even with central banks intervening this time. A global depression would have started in 2018 Q4 without a Fed policy change. Another would happened in March, 2020 without massive Fed & central bank intervention. And this point, permitting true, free-market driven pricing of sovereign debt in any of the major currencies, thereby realistically pricing risk (via interest rate) on the cost of capital would blow apart the debt-fueled growth paradigm we've been operating on for decades, and cause a global stock and debt crash, period. We'd get a chance to build an economy with much less debt, because most would be deflaulted on and vaporized, but the rebuilding the global economy would take years, and be from scratch, out of a disastrously depressed economy.
  • dl
    donald l.
    24 October 2020 @ 00:22
    Bitcon has an unbeatable competitor - GOLD! (as a SOV). Also it takes huge and exponential energy tp produce. Show me where I'm wrong? Evangelicals can't bear or hear opposite views!
    • LS
      Lewis S.
      24 October 2020 @ 21:28
      There are scenarios where the cost of producing more gold plummets. Giant robotic refineries catapulting 10 ton gold ingots in from the asteroid belt coming to a confusing future near you. And those giant ingots will be priced in bitcoin.
  • LC
    Liliana C.
    24 October 2020 @ 04:50
    This was really good, thank you gents! Es the questions were A+👌
    • LC
      Liliana C.
      24 October 2020 @ 04:50
      Ed, sorry for typo!
  • SJ
    Sean J.
    23 October 2020 @ 12:25
    Haley shouldn’t be forecasting when she’s never run money.
    • CM
      Cory M.
      23 October 2020 @ 16:32
      I didn’t hear her forecast. Thought she did great.
  • CM
    Cory M.
    23 October 2020 @ 14:18
    Always grateful to have Peter B on the platform!
  • VS
    Ville S.
    23 October 2020 @ 09:47
    Excellent explanation on the FED support to treasury prices, to keep the yields low, which helps the state. This is happening all over.
  • TC
    Thomas C.
    23 October 2020 @ 08:05
    Very good guest no BS approach
  • DG
    David G.
    23 October 2020 @ 05:34
    Well, you've definitely given me a lot to think about. It was great listening to you both.
  • NL
    Nikola L.
    23 October 2020 @ 02:41
    great stuff Ed and Peter. thanks.
  • DS
    David S.
    23 October 2020 @ 02:24
    The Dodd Frank Law was passed, as I recall, because the banks had to be bailed out by the US taxpayer. This happens repeatedly. The first main one I remember was the Savings and Loan bailout. You cannot just flip a switch and the banks will follow the rules. Do not get me wrong, we need banks at all levels. We just need guardrails to keep even the best from breaking the law. It seems that the big US banks are happy to pay large fines if the inappropriate behavior makes them more money than the fine. The deep markets that the major banks make are socialized. They make the profits; the US taxpayer bails them out. DLS
  • MC
    Mike C.
    23 October 2020 @ 02:12
    Ed, Would you like to comment on some of the consequences of rising bond yields in the next few days? Note the spread between US10yr and DE10yr govt bonds which has risen from about 110 in August to about 143 now. These are some attractive spreads now and as Peter Boockvar says every asset has it's clearing price. With DM policy settings across the globe at ZIRP/NIRP we shouldn't expect the 200bps spreads seen in 2018/19 when the Fed had tighter policy. Then there is the relative value of USD vs EUR with spreads widening which looks interesting. At what point do rate differentials come back into play compared with ROC of CB B/S expansion. Anyway just a suggestion for the future.
  • DS
    David S.
    23 October 2020 @ 01:36
    (Not sure why it posted early) The reason that COVID will last a long time is it is so contagious. It is just as contagious without symptoms as with symptoms. It may also be that immunity is only several months. I think the corporate treasures are hoping for the best but planning for the long haul. DLS
  • DS
    David S.
    23 October 2020 @ 01:29
    I think the corporations are borrowing every penny they can at low interest rates. They need to fund cash flow through COVID Times by hedging against the insolvencies phase. The market action seems to believe that a vaccine will come and life will get back to normal. The pandemic will pass, but during 2021. The COVID pandemic will become the COVID epidemic as it will be with us for a long time. We are doing much better in treating the disease. Some people are trying to practice social distancing and wearing masks. Others are not. The reason that COVID
  • JL
    Jake L.
    23 October 2020 @ 00:30
    Great discussion.
  • DP
    Doug P.
    22 October 2020 @ 23:49
    Is Slumber J (the oil company stock he said he is long) the same as Schlumberger (SLB)?
    • EH
      Edward H. | Real Vision
      23 October 2020 @ 00:29
      That’s the one
  • VR
    Victoria R.
    23 October 2020 @ 00:04
    Brilliant pull back analysis.
  • JM
    Justin M.
    22 October 2020 @ 23:20
    Ed, Peter - great conversation. Informative but not long-winded.