Daily Briefing – September 2, 2020

Published on
September 2nd, 2020
41 minutes

Daily Briefing – September 2, 2020

Daily Briefing ·
Featuring Nick Correa, Ash Bennington, Ed Harrison, and James Altucher

Published on: September 2nd, 2020 • Duration: 41 minutes

Senior editor, Ash Bennington, joins managing editor, Ed Harrison, to talk about the risk of an equity drawdown for retail investors in particular. Ed and Ash explore how market volatility is increasing and the fact that bond yields globally have converged to zero makes a drawdown that much more severe. They also talk about how the activity in the derivatives market is playing into the uptick in market volatility. Ash also hosts James Altucher to discuss his recent article in the New York Post about the narrative of the death of cities, and Ed and Ash provide their thoughts. In the intro, Nick Correa discusses Australia's slide into recession after almost 3 decades of economic expansion.



  • wj
    wiktor j.
    5 September 2020 @ 09:42
    Hedge your bets with dollars.
  • DB
    Donna B.
    4 September 2020 @ 14:49
    I've been at the Festival of Learning, so I'm late to this party. Another classic RVDB. Ash, don't be concerned about being wonky. I suspect other subscribers, like me, want the wonky details, which is why we are here. Great job to all! I would be interested in a discussion about cities. You can't talk about NYC without talking about San Francisco and Chicago. Suggest to segment views by residential, commercial and tourism, as well as demographic.
  • DS
    David S.
    3 September 2020 @ 23:48
    Great DB. These 2 are gold! Ed's gotta a big brain
  • DM
    Dominic M.
    3 September 2020 @ 23:03
    Great briefing. I'd love to see more focus on covid migration patterns (urban/suburban, small/big cities, etc).
  • RM
    Robert M.
    3 September 2020 @ 16:48
    Had to revisit this thread as Ed's call may be playing out already.
    • JA
      John A.
      3 September 2020 @ 22:38
      Yea, I think Ed may have made a perfect call here. If the DIX doesn't recover in the next couple of days then gamma is gonna flip and it is gonna get ugly.
  • MC
    Michael C.
    3 September 2020 @ 03:40
    Gentlemen, I had to stop the video in the middle and pour a large bourbon on ice. I have never done that before. So many thoughts. 1) Long vol. Time for Chris Cole from Artemis and his long vol portion of the 100 year portfolio. 2) Disagree with Ed a bit about the long end of bond yields. 65 bips could drop to zero and bonds would be a win. Hell, based on what you're projecting a 3-5% loss would be a "win". Cash isn't trash despite what Ray Dailio sez...gives you options. And I'm not married to cash. 3) If rates are going to drop through the floor, those risk assets that benefit from no carrying costs like gold and crypto should be zooming...I don't understand why they're not unless they're fatigued from all the chatter. 4) Pension funds. OMG, how are they going to face the retirees with either a) we lost a ton of money in equities and/or b) your monthly check is going to be cut? 5) Brian Livingston, Muscular Portfolios, has stated 25% loss is the magic number. Lower than that, the retail investor says "get me out". The SP500 is about 15% above the 200 day...that would be a helluva haircut before people realize what happened. 6) The "wise men" have been signalling. Buffett has circled the wagons and shot the wounded (airlines) and even his favs, the banks for the most part and bought Barrick, the fact that his shop bought it is significant - I am sure they discussed with WB in advance. Marks sold out 2 years ago, Druckenmiller tried to ride the tiger and got bit, Soros, Seth Klarman, Jeremy Grantham played the big dip and got out, Sam Zell playing in the oil patch. Watch what they do, they're the tell IMO. 7) Loved the discussion on Gamma...finally makes sense. Portfolio managers have career risk and they're chasing via options and/or the stocks but more likely the former. 8) What to watch? Problem is what kills you is what you don't see. We didn't see the CV19 trigger but the conditions are more frail than Feb and actually by many valuation measures, worse than 2000 so unless you are 50 or older, 2000 doesn't mean much. But I expect something like the Vix closing above the 200 day MA and banks rolling over more a decent tell. The thing that struck me today is 2 darlings, PTON and NVDA, were upgraded (at/near their 52 week high BTW) before the open and they closed below their opening prices. Analysts falling over themselves to upgrade and nothing happens...no juice left. Vix is low, time to go..hehe. 9) The GAMMA discussion reminded me of the 87 crash portfolio insurance...when it started to unwind, the market makers pulled their bids. The last few years has pretty well killed off the value shops, active managers, and bears except Chanos so there are not a lot of natural buyers left to cushion a real sell off. 10) Marty Zweig said in his 1996 book that a bear market occurs on average every 3 1/2 years, average loss in DJIA 35%, and lasts 18 months. We haven't had one since 2011. He also states there are 3 conditions for a bear market, extreme deflation (check), extreme valuations (check) and inverted yield curve (check, it's when it uninverts, things get dicey). Get all 3, 1929-1932, -89%, I wouldn't be so bold as call it a prediction but "interesting". Future guests...I would love to see the GMO guys interviewed, why they stepped in and bought the March bottom and why they sold "too soon"...lol Great show (since I'm in flyover country, James A didn't do a whole lot for me...lol)
    • GH
      Gloria H.
      3 September 2020 @ 19:35
      Great comments. By the way, I'm in NYC and James didn't do (and never does) a wjole lot for me, either.
  • SS
    Stephen S.
    3 September 2020 @ 19:25
    I’m not in NYC but can certainly relate about American cities. It’s like you can’t actually affirm what your own eyes are telling you or you are {insert naughty word here}. Definitely seen a deterioration over the last several years where I’m at.
  • AR
    Andrew R.
    3 September 2020 @ 19:06
    This connected a lot of dots for me. Thanks!
  • mB
    marc B.
    3 September 2020 @ 05:15
    I’m a city guy. Lived in sf when had no kid now in LA with kid. So much to do in cities. That’s why I am here. Grew up in Marin county suburb and will not move back until my 60s. Maybe.
    • mB
      marc B.
      3 September 2020 @ 18:02
      We also need a cyber security specialist on rv. How to protect are assets. Best practices. It’s warfare out here.
  • TG
    Thomas G.
    3 September 2020 @ 15:01
    Hello, I would love to see more " retail traders" on this show instead of big hedge fund guys. Dont take me wrong, i love watching guys like James Altucher, Jay Pelosky, etc. but the style of trading they often do is not relatable to smaller traders. So maybe have guys like Mark Minervini, Nathan Michaud, David Ryan, etc who are individual traders and highly successful intra-day and swing traders. I know this is a Macro subscription, but as a smaller trader I would love to have some of these guys on here.
  • VP
    Vincent P.
    3 September 2020 @ 13:56
    Hey, is that "large" investor buying all those calls Raoul?
  • OM
    Owen M.
    3 September 2020 @ 13:52
    A great RVDB, thank you all.
  • RM
    Russell M.
    3 September 2020 @ 13:11
    Sounds like the derivative action is similar to the Portfolio Insurance action in the 80's that exacerbated the '87 crash.
  • MS
    Michael S.
    3 September 2020 @ 00:11
    Ed, when do the market makers that are hedging these calls and call spreads unwind their positions? Are we talking 30, 60 days?
    • MT
      Mark T.
      3 September 2020 @ 12:52
      Depends i think. Mostly hedge the positions and just get paid theta until they expire (hopefully worthless).
  • DR
    Derrick R.
    3 September 2020 @ 01:09
    Fascinating elaboration of a view, Ed. How does the purchase of calls end up driving up the underlying? Is it by the mechanics you described of the seller acquiring shares to be ready to cover the positions, or speculators looking at the options activity and trading the shares up, or something else / all of the above?
    • SS
      Sunny S.
      3 September 2020 @ 04:50
      I'm not clear on that either. You can sell naked calls and I don't see why a lot of speculators would look at the call/put ratio to buy stocks they'd look at chart action and news narratives first?
    • MT
      Mark T.
      3 September 2020 @ 12:49
      Market makers provide the liquidity to the clients. The clients buys the call (long delta) and the MM is now short the call (short delta). In order to maintain a delta neutral book the MM must buy the underlying driving the market even higher. Now, the MM is what is known as short gamma, This means his positions will become "shorter" as the market increases. Suppose the next day the market is higher he must go into the market and purchase even more of the underlying to remain neutral. Its a feedback loop..... oh and it also happens on the downside...
  • AS
    Aki S.
    3 September 2020 @ 11:54
    I'm constantly amazed how battery draining these RV videos are on my phone and my laptop. Anyone else having the same issue?
    • BE
      Brent E.
      3 September 2020 @ 12:39
      The RV interface needs a lot of work. It is very clunky and uses a lot of resources.
  • SB
    Stewart B.
    3 September 2020 @ 10:54
    BTW you have the Daily Briefing formula spot on today. Thanks - it is my guilty pleasure on a London morning with a coffee.
  • MJ
    Marc J.
    3 September 2020 @ 07:24
    Is Tesla a bet on a Democrat win?
    • SB
      Stewart B.
      3 September 2020 @ 10:52
      IMHO a Democrat presidency would be more likely to offer continued subsidies for EVs than a Trump presidency. This isn't a political statement, more an observation.
  • SB
    Stewart B.
    3 September 2020 @ 10:51
    Thanks for covering the options buying, into market maker hedging, into higher VIX with higher stock prices. Market participants have been buying up heavily OOM calls from market makers, who are forced to buy the underlying to hedge, or for regulatory reasons, and may have been losing money doing so. Their natural reaction would be to sell fewer OOM calls. This would have the effect of higher premium prices, esp OOM, and hence a rising VIX.
  • DS
    David S.
    3 September 2020 @ 00:32
    Mr. Altucher is one voice of reason in the wilderness expressing a logical outcome in a pleasant, hyperbolic NYC fashion. Many US cities, counties and states were already in economic trouble before the pandemic. They will have the same problems as NYC. We in the United States of America lacked the leadership, both side of the aisle, and more importantly the citizenship to fight a new mindless apex predator. Known lies are believed and fought over like gospel. Even countries which did a much better job will never be the same. Mr. Altucher is correct that the economic base of NYC is gutted. Monetary and fiscal policy tried to fill the liquidity gap in the US but allowed us to deny reality of inevitable insolvency of many. Even now the market is in denial or gearing up for the rapid inflation of financial assets. Coming back from a pandemic is not like coming back from a recession or even a depression. (I hope that Mr. Pelosky is more correct than I am.) The whole world, however, will have to adjust to the economic effects of the pandemic. The aftermath is never easy, but two-legged creatures find a way to adapt. Europe was bomb beyond belief in WWII. They came back. England survived the Blitzkrieg. They came back. Japan endured two nuclear bombs. They came back. China has been coming back for thousands of years. How many years to establish a new normal is hard to tell. It is easier to understand the problems of a bombed-out city than a city full of buildings that are economically idle. Because of the vast excess of funds to be invested by the wealthy, the GDP can plunge, and the stock market can still melt up – for a while. If your portfolio is not hedged, it is not a portfolio. DLS
    • RN
      Robert N.
      3 September 2020 @ 09:52
      For a more expansive but not very optimistic view of "two-legged creatures finding a way to adapt" and the creation of "new normal" try any of the highly acclaimed "Fall of Civilisation" series https://www.youtube.com/playlist?list=PLR7yrLMHm11X6-M_usCj5H-gdstyWNLXQ For example, the fall of the Khmer civilisation had links to an elite motivated to continually increase taxation, a leader with a belligerent foreign policy and a complex economic and environmental infrastructure that could not withstand a sudden shock. It would be illuminating if someone picked the best comparison for current times from the series and gave us reasons to expect less dismal outcomes.
  • NL
    Nicola L.
    3 September 2020 @ 09:29
    Great interview guys. A good representation of how Nasdaq is overbought. QQQ RSI is at 81.2. Highest since Volmageddon in 2018...
  • JF
    Jess F.
    3 September 2020 @ 09:16
    Turn off the lights, John Galt
  • RR
    Rishi R.
    3 September 2020 @ 08:57
    If there is a shock and downside for the NASDAQ then would you expect the "Robinhood" investors to suffer the worst as a lot of them have probably bought high and also the commercial investors have the ability to get out quicker?
  • RP
    Ronald P.
    2 September 2020 @ 22:45
    Is James Altucher the guy who kept buying adverts for scam priced classes last Bitcoin bull market all over social media/the internet?
    • RP
      Ronald P.
      2 September 2020 @ 22:47
      Did a google search: answer was yes.
    • PF
      Pablo F.
      2 September 2020 @ 23:41
      Yeah, he said he had "cracked the crypto code" and could tell which crypto was going to rip next week based on the fact that he could read the code. Disgusting. I used to follow him and read his books but I couldn't look pass that blatant scam. Turns out, he had rented out his name and identity and a scammy company was writing that copy and selling the "info" on what penny crypto they were going to pump and dump next. RV: You guys are too good for this. JA should clear his name and face that he allowed his brand to be used to scam idiots instead of sweeping the whole thing under the rug.
    • PF
      Pablo F.
      2 September 2020 @ 23:45
      https://pro.chooseyourselffinancial.com/p/ACT_cryptocode_1217/WACTU102/Full?h=true 'I’ve CRACKED the hidden “crypto code.”' Might as well claim he's a nigerian prince...
    • AS
      Arjan S.
      3 September 2020 @ 02:42
      I am always interested in what James Altucher has to say, but the timing of when he enters my personal zeitgeist has always been weird to say the least: 1. Summer 2007 - Him and Jim Cramer used to do daily videos on TheStreet around this time. He would always be touting stocks mentioned on a website he built, Stockpickr. This was also the top of the market. 2. Summer 2011 - He had a blog that got really popular, focusing on personal happiness. The market also broke down of the debt ceiling crisis and Eurodollar Crisis #1. 3. Summer 2017 - The crypto key stuff people already mentioned. Maybe it’s just selective memory, but whenever I see James appear in my periphery, I start double checking to make sure my portfolio is properly risk weighted.
    • AB
      Alastair B.
      3 September 2020 @ 08:34
      If John Oliver mentions any asset class booming, short it. He’s the best shoe-shine boy in the world
  • IH
    Iain H.
    3 September 2020 @ 07:54
    Brilliant guys, this was really great help. Cheers
  • MJ
    Marc J.
    3 September 2020 @ 07:24
    Is Tesla a bet on a Democrat win?
  • jW
    john W.
    3 September 2020 @ 07:21
    Excellent! Yes I think many investor portfolios are at risk for exactly the reasons Ed explained with portfolio managers running on auto with the 60-40 Stock/bond allocation.
  • RT
    Richard T.
    3 September 2020 @ 06:30
    "Where in the World" is Ed on his "Quest for the "New Normal"?
  • tb
    thomas b.
    3 September 2020 @ 00:16
    maybe the hedge is not bonds but CRYPTO
    • CJ
      Christopher J.
      3 September 2020 @ 06:29
      but crypto seem to be positively correlated to stocks unfortunately
  • LS
    Lewis S.
    3 September 2020 @ 05:59
    Hey there are Celts in those countries too, amongst other things..
  • BE
    Brent E.
    3 September 2020 @ 05:38
    This one video is worth the cost of a year's subscription. Thanks Ed.
  • BA
    Bruce A.
    3 September 2020 @ 00:04
    I need help: 'The natural rate of interest on a zero date fiat currency liability is zero'. Did I hear this correct and can someone explain this please? Is the natural rate of interest the 'inflation adjusted fed funds rate', or what? thanks in advance
    • SS
      Sunny S.
      3 September 2020 @ 05:04
      I think it's just a fancy way of saying cash (fiat) has no interest or coupon rate. Cash is basically a perpetual IOU with no duration (zero date maturity) and no interest. The guys are tending at times towards creating cool babble instead of being understood.
  • BK
    Brigitte K.
    3 September 2020 @ 04:13
    Brilliant...and prophetic.
  • ER
    Eric R.
    3 September 2020 @ 03:59
    Ash, you deserve praise for you way of interviewing people. Structured, prepared and you let people talk. Splendid. Ed, you were at your very best today, which is a high standard. You have the courage to be explicit, concrete and specific. Everybody knows that you could be proven wrong, but it is SO refreshing when people have the courage, based on factual analysis, to utter an opinion/conclusion that is specific enough to fullfil the criterium of science, i.e. it is falsifiable. Well done.
  • RA
    Robert A.
    3 September 2020 @ 03:52
  • RI
    R I.
    3 September 2020 @ 02:58
    Topic: Real economy vs financial economy!
  • JT
    John T.
    3 September 2020 @ 02:56
    I was thinking your tier 1 city list should be New York, San Francisco, Chicago- all high cost, high density cities with lots of mass transit. LA, where I work, has a low-rise downtown with a big mix of single family homes and apartments that are very spread out, lots of driving, and dysfunctional mass transit. As a result, LA is not suffering the same hits overall and parts of it are outright booming right now. Construction never slowed at all, it was considered essential.
  • SG
    Skyler G.
    3 September 2020 @ 02:38
    The fundamental reason for multiple expansion like this could be inflation?
  • DT
    Denis T.
    3 September 2020 @ 02:31
    Perhaps a long shot but why not contact Jerry Seinfeld and see if he'll come on and discuss NY with James Altucher?
  • AM
    Alexander M.
    3 September 2020 @ 01:36
    New normal indeed. Surely its the New Abnormal. The immorality of it all has yet to make touchdown. Caveat emptor.
  • CM
    Cory M.
    3 September 2020 @ 01:33
    After a full day of Fest of Learning, you guys are refreshing! Thanks! James was great - I love his books as well. Ed's CW this morning was re-readable, so I'm grateful you covered it here. Ed's been calling this Sept/Oct thing for a while. I wonder if it will go as well as his prediction of the zero bound int rates? Anyway, top top top notch, esp. when it's Ash and Ed.
  • CP
    Carlos P.
    3 September 2020 @ 00:22
    Really useful conversation. Thanks Ed and Ash
  • TC
    Timothy C.
    3 September 2020 @ 00:13
    Interesting application of the 2015 narrative. We'll see if it holds true. The Fed has a say in the complete flattening of the yield curve, as do agency credit ratings. If there are sufficient downgrades, there will start to be spread gaps. No doubt the basic principles apply though...
  • AT
    ALAN T.
    3 September 2020 @ 00:07
    Outstanding, all of it.
  • RM
    Robert M.
    2 September 2020 @ 23:56
    On your thesis, the question is the trigger and what actions the Fed would take like buying stocks to stop a downdraft. But based on the setup we are seeing and the articles discussing the options situation, could see a flash crash happening. And September and October are the witching months. More negative economic news will be coming out, but market doesn't seem to care. Whether we get a vaccine or not is probably irrelevant for many investors now with the market recovery. So the key would be what motivates owners to sell recognizing the nature of a flash crash is its unpredictability.
  • RM
    Robert M.
    2 September 2020 @ 23:50
    People going back to restaurants in UK are benefiting from the government paying for 50% of the meal. Something to keep in mind.
  • RM
    Robert M.
    2 September 2020 @ 23:34
    So have been looking at spreads in some stocks above their 200 day moving average. Ed talks about 30% on Nasdaq. Any thoughts on what % levels suggest excessive pricing levels using this metric?
  • JH
    Jacqueline H.
    2 September 2020 @ 23:28
    Epic Daily Briefing. Thank you gentlemen.
  • ER
    Ernesto R.
    2 September 2020 @ 23:12
    thanks you guys thanks for the knowledge I hope that NY do not died
  • PW
    Paul W.
    2 September 2020 @ 23:01
    Excellent briefing Ed and Ash. I have had a gut feeling that recent action in the US stock market was hedge funds and other institutional investors taking advantage of retail investors. Thanks for the framework on implementation.
  • SB
    Samuel B.
    2 September 2020 @ 22:30
    You guys need to provide links to enter the festival of learning. It keeps sending me to registration when I have already registered.
    • JP
      Jason P.
      2 September 2020 @ 22:42
      Festival of frustration ..... unwatchable (literally) links don’t work or it keeps crashing anyone else having issues?