Daily Briefing – September 28, 2020

Published on
September 28th, 2020
27 minutes

Daily Briefing – September 28, 2020

Daily Briefing ·
Featuring Ash Bennington and Ed Harrison

Published on: September 28th, 2020 • Duration: 27 minutes

Real Vision senior editor Ash Bennington hosts managing editor Ed Harrison to make sense of the biggest 3-day breakout in equities since April. Through the lens of Ed’s most recent piece in "Credit Writedowns." Ed and Ash explain why low interest rates tend to make growth stocks more valuable relative to value stocks, and why the recent rally in small-cap value stocks might be short-lived. Ed looks forward to his interview with hedge fund legend Leon Cooperman, which airs tomorrow, on Tuesday, September 29. The pair also discuss discount rates, portfolio rebalancing, and endogenous credit creation.



  • MP
    Matthew P.
    29 September 2020 @ 23:14
    SO new to all this but i keep understanding a bit more each day. Secular learning.
  • TR
    Thomas R.
    29 September 2020 @ 13:48
    Ed: High vol does not favor long call buying. High vol favors selling options as premium is typically overstated. Perhaps I miss understood your position but it sounded like you were suggesting buying calls in a high vol environment. Peace!
    • EH
      Edward H. | Real Vision
      29 September 2020 @ 20:36
      I wasn’t talking a view. But at some point I did say that many of these equity plays are companies with high implied volatility for their future earnings optionality. Thinking of it this way tells you that you’re overpaying for that call option, according to Ben Inker. That’s because the volatility decreases as the company matures.
  • DG
    Dave G.
    29 September 2020 @ 18:52
    Sounds like alot of justification to pay higher multiple prices for all tech stocks.
  • ar
    andrew r.
    29 September 2020 @ 15:31
    Spending drives economic growth? Ed, you're better than that. You were the one that interviewed Dr. Murphy! :) (And did a terrific job, I might add.)
  • AW
    Austin W.
    29 September 2020 @ 14:52
    This is what I need. First RVDB I watched twice!!
  • FL
    Fabrizio L.
    29 September 2020 @ 08:43
    Ash absence of inflation? over 35 years? take a look at this https://fred.stlouisfed.org/series/CUUR0000SA0R in September 1981 the purchasing power of a consumer $ was 107 now it is at 38....
    • AB
      Ash B. | Real Vision
      29 September 2020 @ 08:46
      Relative to the prior 35 years, the slope is flattening, no?
    • FL
      Fabrizio L.
      29 September 2020 @ 13:32
      we should chart rate of change to say that ?!
  • DR
    Derrick R.
    29 September 2020 @ 13:02
    So is Cooperman betting on growth stocks in a relatively short time horizon and we’re headed for a future like Japan’s lost decades? Or does he not think we end up like Japan? Are there key differences between our situation and Japan’s that could give reason to come to different conclusions?
  • RM
    Rosa M.
    29 September 2020 @ 11:43
    Very good overview
  • RS
    Richard S.
    29 September 2020 @ 10:47
    For a very good discussion of whether low interest rates justify buying stocks at excessive multiples of earnings, I would refer RV members to John Hussman who has written extensively about this argument. https://www.hussmanfunds.com/comment/mc200901 His point is simple. In the quest for yield, all assets are being bid up to the point that the yield will be zero. The recent price increases in the FANG stocks are the result of multiple expansion - not earnings growth.
  • JC
    Julian C.
    29 September 2020 @ 10:46
    Ed does a great job of weighing in on the "has everything changed" narrative with this discussion, particularly as regards consumer mindset and debt levels. Many people are weighed down with debt, anxious about covid, and worried about the economy. With justification - as an example Airbus considering a 2 year furlough. Will Boeing follow? It's going to take very significant continuing fiscal stimulus imo to move people into a more confident outlook that will be essential to drive growth, and even then debt level will suppress recovery. Powell knows this, hence his pleas to Government. Seems increasingly likely this will follow when the situation is sufficiently bad.
  • DO
    DIOGO O.
    29 September 2020 @ 10:17
    Great Daily Briefing, as always. :) However, when talking about ''secular stagnation'', you guys are looking ONLY to the actual data.... But guys, take a look at professor Russell Napier on financial repression, or even at Julian Brigden's video from yesterday.... This stagnation will remain ONLY until the USA government starts to spend fiscally and ALSO THROUGH THE POLITIZATION OF COMMERCIAL BANKS CREDIT.... Sum up to that the sharp decline in USA oil production and the subsequent rise in oil prices... WE ARE NOT IN KANSAS ANYMORE....LOL
  • FL
    Fabrizio L.
    29 September 2020 @ 08:21
    Great work as always, I keep hearing this narrative of the discount rate: Lets assume that it may make sense (and its a may and an assumption) to justify current valuations: it talks of a system with expected low returns and of single components of the system with equally low returns and lots of sensitivity thus fragility if the assumptions change. so why invest in such an environment? I guess if you are a money manger you have no choice, if you are a billionaire you have to a certain extent have some chips in that game, but otherwise why? why play a game where expected returns can only be valued or justified on a relative base?
  • MB
    Mark B.
    29 September 2020 @ 07:28
    Great flow and broad content... so many phrases and terms I still don’t get... please keep doing the occasional definitions/explanations ...it’s such a revelation!
  • WT
    William T.
    28 September 2020 @ 23:09
    Don't know what you really said
    • ST
      Scott T.
      29 September 2020 @ 05:44
      Yeah it takes awhile to learn all of the terms and different concepts, but if you keep at it then everything will make a lot more sense
    • MJ
      Marc J.
      29 September 2020 @ 07:03
      It's a long journey, maybe a lifetime, keep listening, keep plugging away. Eventually the crystal ball starts clearing.
  • TW
    Todd W.
    29 September 2020 @ 07:02
    Loved the new frame work. Keep it up
  • MJ
    Marc J.
    29 September 2020 @ 06:59
    Thanks guys, definetly helpful. I'm slowly building up a picture of the system, you just added a couple of pieces :)
  • MA
    Mike A.
    29 September 2020 @ 05:17
    Great work guys. This is why I come here everyday!
  • RM
    Robert M.
    29 September 2020 @ 01:45
    Just glancing at numbers using Morningstar, what I can't figure out is why Apple is trading at 34x PE while net income annual growth rate is 6% over the last 3 years while Google is trading at 32x PE while net income is growing 21% per year over last 3 years (as one comparison vs Apple). Another comparison is Microsoft growing earnings at 20% and trades at 36x PE. Get that it is about future earnings, but Apple is not showing a lot of innovation right now. Understand they are growing services, but still not sure why stock buyers love this stock at these levels.
    • MA
      Mike A.
      29 September 2020 @ 05:07
      The Dividend and the possible future growth in a tech cycle 5G. You do make a great point and I struggled with this as well..
    • AD
      Adam D.
      29 September 2020 @ 05:15
      emotional brand attachment might have an impact?
  • AB
    Ash B. | Real Vision
    28 September 2020 @ 22:06
    Hi, guys. Ed & I went really big picture on today's RVDB — zooming out to the hit the deep fundamentals of equity valuations. Really curious to hear what you guys think about today's show!
    • JI
      JWD I.
      28 September 2020 @ 22:36
      Appreciate the effort to balance weekly consistency coupled with some experimentation/variety. RVDB looking into both the micro and macro at different times is also welcomed. When asked for feedback I always want to provide something constructive/critical but all I want to say in response is...keep up the good work!!!
    • AB
      Ash B. | Real Vision
      28 September 2020 @ 22:38
      JWD: Thanks, man
    • JS
      Jon S.
      28 September 2020 @ 22:42
      I think starting the Monday with a big picture and going Tuesday and Wednesday into technicals/momentum with roger on Thursday with his financial/credit specific analysis nd to finish with Raoul. Is the way to go! Great work. Ash you need to be interviewed as well! You are always interviewing others! :)
    • JI
      JWD I.
      28 September 2020 @ 22:52
      Jon S...I agree about Ash being interviewed as well.
    • PE
      Paul E.
      28 September 2020 @ 22:57
      I liked it! Always appreciate some big picture material, even in RVDB. I like the variety, different items on the RVDB menu. Keep it up! Thanks.
    • KT
      Keven T.
      28 September 2020 @ 23:08
      Thanks Ed & Ash. Content is just what Im after. Reading todays tea leaves and how that affects risk for the medium term ( 6mths to 2yrs) for the Macro picture. ie Im not a trader.
    • GG
      Greg G.
      29 September 2020 @ 00:01
      Feedback on today's show: The more "why" questions you can answer, the more you help somebody in your audience make a connection so they can build their own mental model. Why does the conventional wisdom think X? Why does the contrarian think the opposite? Why are these two thing correlated? Why does a move in X usually lead to a move in Y? Why does thing A work like it does? Thanks for the experimentation and eagerness to hear feedback to keep improving things.
    • SS
      Shanthi S.
      29 September 2020 @ 01:09
      Loved it.
    • RH
      Ron H.
      29 September 2020 @ 02:34
      Very interesting framework(s). Thank you both. One problem with so much more of implied valuation resting in terminal values (long duration cash flows of tech stocks) is that there is so much more uncertainty associated with every year you go out, not just because forecasting business revenues and earnings for 5-10+ years is very difficult, but also because to go long a stock is also to go long stability (short vol): of domestic and global politics, of the financial system, of the CAPM theoretical apparatus. 'Equity risk premia' have also fallen (just checked Damodaran's data), not only the 'risk-free' rate. But, since longer duration cash flows are less certain, and since they now comprise a larger share of implied valuation, shouldn't equity risk premiums be rising? Shouldn't volatility be permanently higher in a ZIRP world, with every bit of new information? Investors should expect to be compensated for this, but are they being compensated? It wouldn't appear so.
    • CA
      Chad A.
      29 September 2020 @ 04:38
      I enjoyed. It was great to get a proper framing for valuations. You guys are awesome. Love the show every day!
  • NI
    Nate I.
    29 September 2020 @ 03:35
    It never hurts to review fundamentals like DCF once in awhile. Another great RVDB. Thanks guys.
  • BB
    Bob B.
    29 September 2020 @ 01:24
    Ed - In your dissertation on economic impact between private and public spending I had hoped you would of commented on the denominator - velocity. Velocity is a psychological phenomenon so it matters greatly where the money lands. You've mentioned this before. So can not public spend on things like infrastructure be more effective than handouts that pay down debt, saved or as we noticed lately put into Robinhood accounts?
    • BB
      Bob B.
      29 September 2020 @ 01:56
      Meant multiplier not denominator - opps.
  • SS
    Shanthi S.
    29 September 2020 @ 01:05
    Brilliant. Thank you. More please...
  • DE
    Dante E.
    29 September 2020 @ 01:03
    keep ones like this coming, loved it
  • MP
    Matthew P.
    29 September 2020 @ 00:48
    Thanks Ash and Ed for the continued education. Great work RV Team.
  • GR
    Gabriel R.
    29 September 2020 @ 00:21
    Ash and Ed- thank you. I enjoy your daily talks everyday. I've been thinking about the growth vs value argument. One potential outcome of the markets is a sideways market for many years. In a sideways market, does that not benefit value? With bond yields being near zero and value paying a dividend, investors could compound their dividends over that time period (if they invested in value). Interested what others are thinking...
  • GF
    Gordon F.
    28 September 2020 @ 23:38
    Raoul has been talking about how RV is primarily an education platform for people who want to understand the economy and investing. Segments like today's RVDB are a great way to fulfill that vision.
  • RB
    Roy B.
    28 September 2020 @ 23:00
    I have been poking around the edges of discounted cash flow valuations for some time. Today’s discussion really tied it all together. Love to hear more. Thanks.
  • JH
    Jason H.
    28 September 2020 @ 22:37
    I enjoyed this segment. I’m not an expert macroeconomist so I enjoy the variety of topics. Narrow and broad. Comedy included. It aids in visualizing the whole picture.