Daily Briefing – October 9, 2020

Published on
October 9th, 2020
Duration
32 minutes


Daily Briefing – October 9, 2020

Daily Briefing ·
Featuring Ash Bennington and Raoul Pal

Published on: October 9th, 2020 • Duration: 32 minutes

Real Vision CEO Raoul Pal is joined by senior editor Ash Bennington to look back at market action and make sense of several secular trends. Raoul shares several of the lessons from his interview with "The Bond King" Jeffrey Gundlach, which leads into a discussion about changes to risk appetite and time horizon within the hedge fund industry. Raoul and Ash then discuss the latest banning of crypto derivatives for amateur investors. They close by discussing wage deflation and software's ever-tightening grip on the economy.

Comments

Transcript

  • CN
    Charles N.
    12 October 2020 @ 23:31
    It may be too far in the mists of time for very many people to remember an investment banking firm in San Francisco called Hambrecht & Quist. The company brought the IPO's of firms like Apple, Genentech and many others. When asked one time over cocktails what he looked for in a company he chose to invest in he said, "I want it to have a CEO who has done it before...and will lose his house if he doesn't do it this time." If you knew Bill Hambrecht you knew that you didn't ask him if he was kidding.
  • HK
    H K.
    12 October 2020 @ 16:02
    I feel all these 'official' digital currencies will go the way of the 3D TVs. ie manufacturers touting a product they know how to create but don't really understand. A token without censorship resistance is no different from the current money in a bank. As digital as ever. The only thing that may displace are pvt bank deposits because now one can put money with the central bank and not worry as much about credit risk
  • WF
    Will F.
    12 October 2020 @ 06:01
    as a 5 years as a homeless person.... I make my punch hat life, its not going that great but... its better... just good to put me off the system, just to the point that i fail.. the government takes everything i have made... COVAD.... USA it the more wrong.... I miss Asia
  • RB
    Robert B.
    11 October 2020 @ 18:06
    Great update as always but I have to disagree with some of the comments related to VC investing. The current model/standard for VC funds is very flawed and inefficient. But don't take my word for it, according to Cambridge Associates “85% of US venture funds underperform the Russell 2000 Index over any rolling 10 year window in the last 30 years.” There are a few groups with a better model for VC investing, including: https://www.linkedin.com/in/joemilam1/. https://thelegacyfunds.com/
  • JW
    Jim W.
    10 October 2020 @ 12:00
    Gents, This there are some days when you just receive dividends on previous investments. And since the market was not moving, today was that sort of day. In fact, any day without important newsflow lets me instead get two great minds (and mouths) talking through things. Raoul, you are correct that your last MI piece on life portfolio management, or personal risk management or whatever is one of the three best things you've done at RV (the other two being your AMA on 'how to RV', and the other the "Buy Bonds Wear Diamonds"), and should eventually be shared in the "before you Realvision" channel. Further, your discussion of entrepreneurship and working at a start-up is spot-on. The best experience I ever had working was in an Internet start-up 1996-2000. In some ways, I've tried to duplicate that work environment ever since. Most of the start-ups I've invested in (or founded) have either cratered or done trade sales--I don't have any IPOs in my relatively young portfolio. People spend too much time on the scorekeeping piece of entrepreneurship and/or the super-young founder, rather than realizing that most of the successful start-ups are from people with real experience and/or expertise. I would love find a way to reach those people, and let them know that while the risk seems high, the rewards are also material. Anyway, I've already listened to your "nothing happened" brief twice, and will probably do a third time over the weekend. Thanks again for this! Jim PS I know you've started some pieces on the RV life or similar, but hope you have a few clips from back in the day. I treasure the growth of the company, and the opportunity to be a "Realvisionary".
    • JO
      John O.
      11 October 2020 @ 15:13
      What is the name of Raoul's MI piece on life portfolio management and when did it appear? Have looked around on RV and cannot find it.
  • SS
    Stephen S.
    10 October 2020 @ 17:47
    I hear this stuff like “software is eating the world”, “truck drivers, etc” don’t need them and think this just results in further concentration of wealth and more have nots. I appreciate the optimism around innovation and entrepreneurship but to my mind there isn’t much discussion of the fallout and downsides to these trends.
    • MR
      Michael R.
      10 October 2020 @ 23:24
      Gundlach mentioned that in the Interview. I think Raoul gets that as well. Destabilized society makes everyone's life suck. Bitcoin fixes this. Seriously. Read up on it.
    • HS
      Henry S.
      11 October 2020 @ 12:50
      This is something I'd like to be discussed on RV. The common "Economist" answer that I often hear is that people move into other fields of work but that hasn't happened across the Appalachian parts of the U.S and the old industrial towns of the U.K where I'm from. Further dependence on the state doesn't seem like the long term answer either.
  • AP
    Alejandro P.
    10 October 2020 @ 01:11
    Raoul I’ve learned a lot from RealVision but I’m really perplexed as to why you would be so bullish BTC/Blockstream after making the statement at the 20 min mark of this recording. Your thesis on BTC completely dissolves.
    • EF
      Eric F.
      10 October 2020 @ 02:01
      Watch again, you’ve completely missed the point.
    • MR
      Marco R.
      10 October 2020 @ 12:53
      Yeah, you missed the point. Raoul‘s bet on BTC is mainly a bet of major adoption by retail and institutions, which will appreciate price. Deflation/Inflation is secondary for the BTC thesis
    • AP
      Alejandro P.
      11 October 2020 @ 03:49
      Missed the point? You guys are betting on BTC being able to handle institutional and retail transactions after major adoption. BTC doesn’t scale sorry, major adoption will never occur. Bitcoin will succeed but it won’t be BTC.
  • MV
    Mathieu V.
    11 October 2020 @ 01:28
    Try come to live in Montreal you'll see that NY is finally fine in winter :)
  • JJ
    John J.
    10 October 2020 @ 19:41
    It might have been fun for you, but I wanted some feed back on the market and where things are going. This was not a Daily Briefing.
    • MR
      Michael R.
      10 October 2020 @ 23:21
      I think it was more State of the State. More helpful strategically.
  • MR
    Michael R.
    10 October 2020 @ 23:21
    Raoul is ON FIRE in this interview! Awesome!
  • DS
    David S.
    10 October 2020 @ 15:25
    How does the rise of a multitude of sovereign supported digital currencies - all competing - help Bitcoin? Would love to hear this explained.
    • AP
      Andrew P.
      10 October 2020 @ 16:57
      The rise of Central Bank Digital Currencies in the next decade will do at least 2 things. It will familiarize people with digital currency which will raise bitcoin’s legitimacy in the general public’s mind by default. CBDCs will also allow central banks/governments to do more aggressive monetary/fiscal policy, including airdrops of money into peoples accounts, which is likely to be a theme in the next few years in the political discourse. Since bitcoin is hard capped at 21 million, it will be seen as a good store of value which cannot be debased by creating more dollars out of thin air.
    • ZT
      Zach T.
      10 October 2020 @ 18:23
      Central bank digital currencies provide on ramps into crypto currencies, and as people figure out bitcoin is the hardest money around they will rotate from a digital dollar into bitcoin to hold their wealth.
  • EO
    Erk O.
    10 October 2020 @ 15:46
    It is really amazing to be part of the Real Vision journey and see how it grows everyday. I have no doubt that one day I will tell my grandchildren that I was the early member of the Real vision Empire when majority of the public dont know much about it
  • OM
    Owen M.
    10 October 2020 @ 14:27
    When does the Gundlach interview get published? I currently don't see it on the platform.
    • OM
      Owen M.
      10 October 2020 @ 14:30
      NM, found it. thanks
  • HK
    Henrik K.
    10 October 2020 @ 14:18
    As always thanks for a very interesting RVDB. A great way to kick off my Saturday morning. You touched on a few subjects that I think would be great to go into more detail on: 1. Inflation. I think there is a lot of confusion around the topic of inflation and whether QE has caused inflation etc. A lot of it seems to stem from a lack of distinction between consumer price inflation, wage inflation and inflation in various other categories of assets, goods and services. I would love for someone to have a look over the last 10-20 years and really compare “inflation” across a wider range of categories from consumer CPI to food, utilities, communications, property rents, real estate prices, luxury goods, art, fine wine etc. and of course bonds and stocks (probably looking at P-E or EV multiples to eliminate the earnings growth factor in stock returns which do not reflect inflation). I suspect (hope) this is what Raoul is referring to when he is suggesting that what we have really seen is a lack of wage inflation relative to other assets and hence a loss of purchase power. I would also recommend looking at the “priced in gold” website which compares the price of a wide range of goods vs ounces of gold over time. Even Steinbeck Pianos! I believe this very substantially debunks Michael Saylor’s theory that gold does not hold its value over time and should provide a lot of reassurance for those concerned about the 2% annual increase in gold supply eroding gold’s value over time. Finally a critical review of the definition of CPI vs alternatives (Chapwood, shadow stats etc.) would also be very interesting as there are a lot of adjustments and I think many people have the feeling that there is plenty of inflation in all the things they are buying every day (coffee, utility bills, media subscriptions etc.) yet they are being told by the Fed that there is no inflation. Perhaps they are trying to give us a false sense of security with respect to the purchase power of our dollars? 2. Deflation. Most commentators focus on the inflationary side of the equitation specifically around increased money supply but as Raoul pointed out there are very substantial deflationary forces at work which few people seem to understand and even fewer have attempted to quantify. Lyn Alden did a great job in a recent news letter laying out numerous deflationary forces such as technology, demographics globalisation, savings rates etc. and the recent interview with Jeff Booth was incredibly insightful on the powerful deflationary forces of technology. If Raoul is correct about the coming “insolvency phase” or even just a more “normal” “balance sheet recession” as defined by Richard Koo then there are going to be very powerful deflationary forces at work as consumers save and companies default and deleverage over the next 12-24 months. In addition, the structural forces like technology and demographics are so powerful that it may be pretty close to impossible for the Fed to ever create real wage / consumer inflation (short of giving everyone $1bn as Jeffrey Gundlach suggested!)? Isn’t that the experience of Japan in the last 20 years? Super high debt levels, sustained fiscal and monetary stimulus but no inflation (and bizarrely not much currency devaluing either as far as I can tell)? And as Jeff Booth suggests maybe our view on deflation is outdated? Is it really so bad? I know governments worry that people will not spend if they think prices are going down but we all know a new model of iPhone will be cheaper 18 months after launch yet many of us buy them upon release anyway. Should we be embracing deflation rather than try to combat it with ever increasing debt, and what might that mean for fiscal and monetary policy? 3. Private Equity / VC. I think there is a general low level of understanding about this asset class (or classes in plural as PE and VC are really very different….) and the consistently superior returns net of fees the top funds have generated over many cycles. PE is one of the few business models that is both pro and counter cyclical at the same time and most people underestimate how robust they are in a downturn. Consequently, most people / family offices are very underweight PE and VC which is a shame as they are some of the very best performing asset classes available. In most of the discussion of portfolio construction I hear on RV no one ever mentions allocation to PE and VC. Personally I am close to 50%... I know traditionally they have been very difficult to access for smaller investors but this is changing with various new platforms “democratising” access for smaller investors. As an aside I wouldn’t place the rise of SPACs at the door of PE. Very few SPACS have been raised by top tier PE funds (apart from Apollo maybe) and they are an absolutely classic sign of top of the market exuberance. However, I suspect many PEs are very happy to take advantage and sell their assets to SPACs (part of the pro cyclical side of the business model…)!
  • AA
    Aymman A.
    10 October 2020 @ 03:02
    Unrelated to anything said today. Can you try to interview Willy Woo in Hong Kong. That is his twitter name. He is the absolute best in on-chain data analysis. I understand the fundamental case for Bitcoin. I do not need anyone to teach me how to do technical analysis on charts. BUT analysis of on-chain data is really, really important. RV has not done any segment on on-chain analysis. How do we figure out if the miners are selling? What are the HODLERS doing? etc.etc. I have learned a lot by just following Woo on Twitter. Would love to hear an in depth conversation.
    • SY
      Shiva Y.
      10 October 2020 @ 09:46
      Willy Woo is very hot Bitcoin follow right now! His analysis & insights are just cool! Please bring him on, RealVision!
    • LK
      L K.
      10 October 2020 @ 13:48
      Yes please. He's been doing on-chain analysis far longer than some of the self-proclaimed innovators who have been on the Crypto channel. He also has an interesting take on how derivatives exchanges have been affecting Bitcoin price. I would be interested in a deep dive on this including his thoughts on how the Bitmex episode will affect the space.
  • SY
    Shiva Y.
    10 October 2020 @ 10:47
    Wow! It was very insightful. Wish Raoul would come on DB everyday! I found the discussion about SPACs highly informative. Link between the skew between public-market & private-market multiple to IPO & SPAC was revealing. I'd hoped Raoul would comment on Square (SQ)'s purchase of 4,709 BTC though.
  • RM
    Ron M.
    10 October 2020 @ 10:25
    Fully agree that venture is one of few asset classes that can still provide opportunistic returns. It is totally illiquid, long-term and opaque which is why few investors like it. However, innovation continues to attract some of the brightest and accelerate at an exponential rate. Covid is a small part of the story; this trend was already well in place before (editing of genomes, blockchain, automation/AI/ML, shift from precision to personalized medicine, etc.). Precious metals also makes sense to have a disproportionate allocation. Those two bets seem underpriced. We are truly in unique times.
  • jn
    jordan n.
    10 October 2020 @ 09:55
    Hi Raoul, is there a reason you haven’t reopened long treasury positions in the macro insiders portfolio given the pop in yields and opportunity it may represent? Many thx!
  • BF
    Bret F.
    10 October 2020 @ 09:08
    Wage deflation spot on. Plus the change from Company employee first went to company share holder first... I feel really bad for young people now. I at 18 forced to finish high school in night school. 19 birthday walked into a factory job. In 60 days tripled minimum wage, HMO no monthly premium (everything medical free),30k life insurance, retirement pension (received in full 35 years). 4 years later 401k they add 4%. I felt so rich got a 6 month CD paying 9%... All this with zero College debt... I really doubt many under 35 make the equivalent money especially because of debt burden. Sadly young people just don't no why things seem tough... One cure 50% of buyback money should pay employees health care premiums... Great weekend (o;
  • ig
    ian g.
    10 October 2020 @ 08:20
    Ash & Raoul !! ON FIRE AS USUAL !!!
  • PB
    Pieter B.
    10 October 2020 @ 07:14
    Thanks a lot Ash & Raoul! This was great again!
  • DS
    David S.
    10 October 2020 @ 03:47
    Why do you continue to make the DB FREE to the whole world. No respect for the Essential subs? How long do you leave the line out to "fish" in new subs? I had to upgrade to the the Plus for missing content and we used to get GMI report peeks every week or 2 from May through July, but that's disappeared too. Love the content, but they shuffle the tiers/content too regularly for my taste.
    • MN
      MYLENE N.
      10 October 2020 @ 05:11
      I don't mind that DB is free to the world but I would like that paying subscribers get the option to pay for the one off content we're interested in but isn't available for our tier. Not everyone here (at least not me) is investing in the hundreds of thousands. My capital is only $10k and currently unemployed so can only afford basic essential tier for now. Upgrading to Plus will be the first thing I do when I get an income stream again.
  • JS
    John S.
    10 October 2020 @ 02:55
    Janis Joplin sang that "Freedom's just another word for nothin' left to lose" and your briefing today helped define it all. The risk discussion was really a riff on freedom and I appreciate your insightful perspectives. From investment horizons to hedge fund insider dynamics, the authenticity of Ash and Raoul is truly brilliant.
    • GA
      Gerald A.
      10 October 2020 @ 03:19
      FYI: Kris Kristofferson wrote the song "Me and Bobby McGee" with that lyric that Janis Joplin sang. First song I ever learned to play on my guitar.
  • SS
    Steven S.
    10 October 2020 @ 02:45
    Greetings from Northern Wisconsin. I'm saving up to take a tropical vacation over the winter in NYC.
  • MD
    Matt D.
    10 October 2020 @ 02:41
    Great chat to end a great week on RV. A few standout interviews. Interesting comments about Mr Grundlach - I agree, best to learn from others, especially from legends, but these days we have access to so much intel - yet are we any better on average? Perhaps it comes down to the emotional memory JG talks about. From a day-traders point of view, most weeks are full-on. No complaints here.
  • RT
    Rupert T.
    10 October 2020 @ 01:54
    ah - but you saved yourself with the last comment - yes risk taking is certainly not for everyone and yes you have to learn to get back off the floor again and again - nice one. yes you get older - and you don't want to get nailed back to zero - students and 20 somethings can always get by - in your 30s - yeah you can make do - reboot - been there done that - made it work as well... but after that it gets real harsh if you foul up. "if you're gonna bet the farm - make sure you have two !!!"
  • RT
    Rupert T.
    10 October 2020 @ 01:47
    i have to disagree on three points here : a.) The market is incredibly trade-able for someone focused on short time lines and big fast moves - it's amazing - Silver from $22 to $25 - 5000oz futures contract - beautiful - NQ Futures doing 200 point sweeps in the hour - amazing - surf's up bro !~ .... but hey one man's garbage is another man's gold. I know people making 6 figures in the last few days. b.) The central banks are going to struggle against real crypto and their digital coin is 10 years late and just going to end up causing wild inflation. So nice of them to mince into the markets with all their red tape (smells like panic to me), but it's not gonna help - and in the end institutional money will flow to where it's best rewarded or get left behind. You can't entirely approach this situation as another traditional year in finance. The whole thing is being upended "the great reset" and you have clowns like the WEF actively proclaiming it ! c.) The covid thing is nothing but hysteria at this point - cases are up but testing is to the moon - actual deaths are very very low - doctors have learned how to treat it - old people are keeping out of the way - it clearly doesn't hurt young people too much - and you can't come with horror stories about one toddler - toddlers die in swimming pools and choking on plastic toys and from measles and Roto Virus - my daughter was on a drip for 2 weeks because of Roto Virus in 2014, I don't recall them closing the entire economy down for her. Covid is statistically insignificant at this point - and yes i get it that it's the reaction that counts, but the reaction is hysterical. If hoards of football fans are rioting in hysteria - it's the Govts job to calm things down not fan the flames of hysteria.
  • AD
    Antonio D.
    9 October 2020 @ 22:36
    Glad to see that shirt back in action. Last sighted in Plan B interview circa Oct 2019: https://www.realvision.com/shows/the-interview/videos/the-quantitative-case-for-bitcoin
    • FL
      Francis L.
      10 October 2020 @ 01:33
      I'm just over here waiting for Ed's snowman art to make it's winter comeback...
  • AF
    Alan F.
    10 October 2020 @ 01:29
    fantastic chat! I'd love to hear more details on the mis pricing in the private markets particularly as it relates to seed stage opportunities. What signs should I look for to know these opportunities are overpriced?
  • MS
    Mark S.
    10 October 2020 @ 00:33
    I'm shocked that neither of you mention the purchase announcement by Square of bitcoin. Shocked!
    • AB
      Ash B. | Real Vision
      10 October 2020 @ 00:49
      Hi, Mark. Sebastian covered it in The exchange the day it broke. Thanks for watching RVDB! https://exchange.realvision.com/post/breaking-news-square-purchases-50-000-000-in-bitcoin---https-twitter-com-sq--5f7f35258f27626c5ffb009f
  • RF
    Russell F.
    10 October 2020 @ 00:44
    Wages haven't kept up with inflation since 1971. https://wtfhappenedin1971.com/
  • TM
    Tom M.
    10 October 2020 @ 00:34
    I would love to see an Entrepreneurship channel.
  • OS
    Oliver S.
    10 October 2020 @ 00:29
    I enjoyed the RP letter about how to set your assets up. Very interesting. Anton Kriel has another interesting view.
  • JA
    Jordan A.
    10 October 2020 @ 00:12
    That risk taking advance sounds extremely helpful.
  • SL
    Shawn L.
    9 October 2020 @ 23:13
    What about Square putting 1% into bitcoin? Big news!
    • SL
      Shawn L.
      9 October 2020 @ 23:16
      https://news.bitcoin.com/square-bitcoin-50-million/#:~:text=Square%20Inc.%20has%20put%201,in%20a%20global%20monetary%20system.%E2%80%9D
    • AB
      Ash B. | Real Vision
      10 October 2020 @ 00:04
      Hi, Shawn. Thanks for the comment. We covered it on The Exchange the day it broke...
    • AB
      Ash B. | Real Vision
      10 October 2020 @ 00:05
      https://exchange.realvision.com/post/breaking-news-square-purchases-50-000-000-in-bitcoin---https-twitter-com-sq--5f7f35258f27626c5ffb009f
  • CT
    Charles T.
    9 October 2020 @ 23:11
    I'm surprised Square's Bitcoin allocation wasn't mentioned.