Junk Yields Rising, Bitcoin Sniffing Out Yield Curve Control, and GameStop’s Hearings

Published on
February 18th, 2021
30 minutes

Bond Yields Scream Higher As VIX Flashes Warning Sign

Junk Yields Rising, Bitcoin Sniffing Out Yield Curve Control, and GameStop’s Hearings

Daily Briefing ·
Featuring Tyler Neville and Ed Harrison

Published on: February 18th, 2021 • Duration: 30 minutes

Real Vision managing editor Ed Harrison welcomes Tyler Neville of Blockworks back to the Daily Briefing to share his thoughts on everything from implied volatility in the credit markets to the ongoing congressional hearings on GameStop’s remarkable rise and fall. Reporting from Austin, Texas, Neville shares his experience amid the ongoing arctic frost that is depriving so many Texans of electricity, heat, and running water as well as disrupting U.S. oil production by over 40%. Neville then shares with Harrison his analysis on lumber and homebuilding stocks and explores whether this crisis will cause secular inflation. Harrison and Neville then turn their gaze to the rising yields of U.S. Treasurys, which Neville thinks could be a wrecking ball for all risk assets. However, Neville argues that the Federal Reserve will enact yield curve control, and it is this possibility which Bitcoin and crypto investors have already “sniffed out.”



  • CG
    Christine G.
    19 February 2021 @ 05:01
    It is understandable that Texas has few snow plows. The collapse of the energy market, however, was completely predictable because of a poor regulatory environment and pricing everything on the cheap. From Ed Hirs, an economics professor at the University of Houston: "The operation of the electrical grid was consigned to the Electric Reliability Council of Texas. It is a nonprofit consortium that operates the grid for about 85 percent of Texas. Understand, ERCOT has no ability to invest in generation or infrastructure. It acts only as the air traffic controller for electrons on the network. ERCOT is accountable to no one, but it reaps hundreds of millions in fees. Because it is contained within Texas, ERCOT is not subject to federal oversight. ERCOT created a system whereby generators, companies that own power plants, compete by bidding to provide electricity for the “day ahead” and in real time during the day. It is called an “electricity only” market. Think of it this way: If the players on the Washington Nationals were paid in the same fashion, only those players on the field for the game that day would earn a paycheck. Everyone else on the roster would be unpaid. Players would offer bids to play for the next day, each undercutting the other." This led of course to low infrastructure investment and to not using union labor." www.washingtonpost.com/opinions/2021/02/18/texans-grid-outage-deregulation/ The system supplying natural gas also had problems with freezing and delivery. Again, poor regulation and the desire to save money.
    • MA
      Martinez A.
      19 February 2021 @ 07:24
      FERC made recommendations in 2011 -- 10 years ago. Texas was warned yet did not heed the warnings. So sad that people suffer due to lack of preparedness and operational foresight. https://www.ferc.gov/sites/default/files/2020-04/08-16-11-report.pdf
    • CG
      Christine G.
      20 February 2021 @ 00:13
      Martinez A., yes. and FERC had warned them again in the late 80's - same situation. Texas, unlike all the other states, does not have to follow FERC because they have cut themselves off from power grids in other states and therefore do not have to answer to interstate and federal regulations. And this catastrophe will happen again. Penny wise/pound foolish planning. This will cost lives and billions of dollars. I hope attorneys taking civil cases are sharpening their pencils, that may be the only way to get the attention of the Texas power elite.
    • RM
      Robert M.
      20 February 2021 @ 01:53
      25% of electricity is generated from wind. >92% of the turbines went off line because of icing. There is insufficient contingent backup.
    • mb
      michael b.
      21 February 2021 @ 03:29
      I’m north of Dallas. Yes, it was rough for a few days. Some friends had it much worse with frozen pipes that burst and days of trying to keep warm. There are also countless stories of neighbors and even complete strangers stepping up to help each other. The temperatures were 20+ degrees BELOW the typical lows, so it is fair to say that this is/was an extreme weather event. Also keep in mind that Texas battled upwards of 30x the typical annual snow accumulation in just a 4 day span. That would knock power out in almost any state in the union. Our neighbors (California refugees) remarked that it took much, much less to lose power completely back in CA, though clearly the bitter cold added insult to injury. All said, I would stop short of begging for government regulation/intervention. I personally fled the Washington, DC area 5 years ago and immediately enjoyed lower electricity bills, greater freedom, and higher quality of life. The difference was incredible and the savings was massive. The government is more locally-empowered so if rapid changes are needed the local officials are usually responsive. To ask for unions, regulation, and heavy-handed government might just turn this state into everything that many of its residents willfully escaped from. Yes, there needs to be accountability, and yes, some heads will need to roll but we also need to be careful not to adopt the “never let a crisis go to waste” mentality. Crazy weather events happen and just about any extreme weather event is bound to happen given enough time - that doesn’t really make it “predictable” though, does it? Texas is great. I live here and I love it. Yes, this freak event sucked but we’ll move on.
  • KC
    Kirk C.
    19 February 2021 @ 03:20
    Yield curve control after WW2 worked because the deficits dropped when the war was over. Who will move us down to 1% deficits now???
    • WG
      Wade G.
      20 February 2021 @ 15:05
      Also, household debt was on the floor, and corp debt was low; only gov't debt was sky high. Situ today is a far cry from WWII era. No need to even discuss the cultural abyss.
  • CS
    Curtis S.
    19 February 2021 @ 19:28
    Hmmm! Passive is swamping out true value investing. If there's a sell off every stock in an index goes down whether good stock or not. Well,, search out small companies that are not in any index or ETF sounds like a lower risk tactic given timing the market is tough and you want to reduce risk.
    • OC
      O C.
      19 February 2021 @ 22:07
      Steven Bregman talks about this in his interview with Mike Green. "Crossing the ETF Divide". He also talked about this way back with Grant Williams.
  • CP
    Chamil P.
    19 February 2021 @ 05:13
    Can we please get Preston Pysh on RV at some stage?
    • EH
      Edward H. | Real Vision
      19 February 2021 @ 20:06
  • zh
    zzzz h.
    19 February 2021 @ 01:55
    lumber price increase is bc of fed's action? huh? FOS as usual
    • CS
      Curtis S.
      19 February 2021 @ 20:00
      Perhaps indirectly; low mortgage rates spures demand for housing, incentivizing builders to max out their ability to build at ever highr selling prices allowing builders to pay ever higher materials and labor prices....
  • MB
    Michael B.
    19 February 2021 @ 01:36
    this guy is an ex-execution trader. why do we care about his opinion? He is either stating obvious or piecing together things he read on bloomberg.
    • TN
      Tyler N. | Real Vision
      19 February 2021 @ 01:39
      Fair point lol. Were you an ex-fundamental analyst?
    • DA
      David A.
      19 February 2021 @ 14:00
      As an occasional contributor, I generally do not find it helpful when contributors reply aggressively or dismissively to criticism. Tony Greer used to do this but has stopped and, in a small way, I now respect him more. But in a small way, Tyler, I now respect you less.
    • MW
      Max W. | Real Vision
      19 February 2021 @ 18:35
      @David A Criticism is a strong word here. Michael's comment did not address a single point Tyler made and only tried to discredit him for his CV. We have plenty of people on RV who don't fit the Ivy League to 2-year IB program to buyside track and many of them are fan favorites. Lyn Alden for instance worked as an engineer before starting her investment strategy business. Lilly Francus is another great example of someone who didn't go the traditional route. If you disagree with someone fine, take them to school on their thesis but by Michael's point of view anyone who isn't a central banker shouldn't be listened to about the Fed.
  • OC
    O C.
    19 February 2021 @ 16:36
    Man, this is wild stuff right here. I want to see Tyler talk to Mike Green on his macro-crypto merge. Mike Green talks about crypto being a form of "opt out" but also recognizes the reality that the average individual has been rendered so powerless. Having identified the two issues that he focuses most on (passive flows and China) and seeing Tyler talked about these two from the perspective of who we are as Americans and the end of free markets, I'm sure that will quite the conversation (yes, people, I am also aware of the generational difference between Mike and Tyler but I think that these issues go beyond that). This was good. Thanks.
  • ML
    Max L.
    19 February 2021 @ 13:39
    This was really fantastic.
  • GH
    Glen H.
    19 February 2021 @ 00:16
    Who watched the Hugh Henry / Raoul Bitcoin debate on Twitter? I think Huge completely exposed Raoul’s irrationality regarding Bitcoin. Further, I question someone who has put “60% of his portfolio” into Bitcoin. I love Raoul, but this is nuts. I’ve always heard that the #1 rule of investing is to not fall in love with a single investment. Clearly Raoul has and it makes me question his rationality and how much I should listen to him.
    • MH
      Michael H.
      19 February 2021 @ 00:29
      i watched it. i agree 60% sounds a bit shocking but remember it was qualified with "liquid". private business ownership, real estate, alternative non-liquid assets (watches, cars, art), do not factor into this number. honestly though hugh's chiding "Raooooouuuuullllllllllll..." was the funniest thing i've ever heard on RV.
    • IM
      Indranath M.
      19 February 2021 @ 00:38
      “The reasonable man adapts himself to the world: the unreasonable one persists in trying to adapt the world to himself. Therefore all progress depends on the unreasonable man.” - G. B. Shaw
    • GH
      Glen H.
      19 February 2021 @ 00:47
      I encourage everyone to listen to the 18 minute exchange. Take out the word Bitcoin and just listen. Raoul did a PERFECT job of describing a Ponzi scheme. His dogged obsession with Bitcoin is irrational. Borderline GameStop.
    • JA
      John A.
      19 February 2021 @ 01:15
      The number one rule of investing is to make money and not to lose money. There is simply nothing rational about this market, and Raoul's view is that in a world where everything is essentially an expression of the same trade ( liquidity and dollar weakness ), it makes sense to be in the asset that best reflects that trade. For him, that is Bitcoin. He doesn't expect to own it forever, he just doesn't see anything attractive in a risk/reward bet that can hold a candle to it right now. You don't have to agree with him, but you should look past his personal asset positioning and look around. What other trades are out there that are expressing a unique view, and aren't simply a derivative of the global macro effects of Fed stimulus and the dollar? The whole world is a series of derivative trades on flows, liquidity, and the dollar.
    • FH
      Felicity H.
      19 February 2021 @ 02:14
      Do you have a link to that video? Thanks!
    • RP
      Raoul P. | Founder
      19 February 2021 @ 02:28
      John A - spot on. It is the superior trade. Its as simple as that. Like it or not, its up 78% this year. I will take some off the table when I am ready to and not when anyone else thinks I should. Right or wrong. Ive been doing this for 30 years and this is the single best bet Ive ever seen.
    • JG
      Joshua G.
      19 February 2021 @ 02:29
      Was this a video debate? Can you link? Thanks
    • AA
      Alberto A.
      19 February 2021 @ 03:19
      If you are a macro trader it makes perfect sense. I see this as another trade with a very high asymmetric risk reward. The biggest difference is the network effect acceleration (Metcalfe's law) and the reflexivity loops that it is starting with the ok of institutions. Just like Soros with the pound and Stan with bonds/credit markets. Last year the Eurodollar, bonds, and High Yield were great set ups. Looking at BTC like is going to change the financial system is another story...
    • GH
      Glen H.
      19 February 2021 @ 03:24
      Raoul, just want to say I love you bro and I love RealVision. I’m worried about your risk level if the crap hits the fan. I think Hugh was right by recommending taking your cost out. But hey, I’ve had a 50% cash portfolio since mid Jan and working the other 50% like a rented mule. That probably makes me a wimp to risk. Cheers!
    • ML
      Michele L.
      19 February 2021 @ 05:45
      for those asking where to find it, finally located the link in raoul's twitter feed - https://www.pscp.tv/w/1gqGvoqvRPBJB
  • TT
    Tokyo T.
    19 February 2021 @ 04:50
    Thank you guys, awesome DB. 👏
  • KT
    Kevin T.
    19 February 2021 @ 04:49
    Excellent interview! Feels like Tyler is upping hs game. Nice work
  • AA
    Adam A.
    19 February 2021 @ 04:38
    I heard the same Preston Pysh comment and had the same lightning bolt strike on the brain. Crypto yield is expressing volatility leaking out of traditional market (where it is suppressed at all costs).
  • NE
    Nathan E.
    19 February 2021 @ 04:23
    ‘Pay up Mortimer, I’ve won the bet.’ Props to Ed for the Trading Places reference;)
  • EK
    Egemen K.
    19 February 2021 @ 04:17
    This is great and I personally don't see many talks like this elsewhere.
  • MK
    Martin K.
    19 February 2021 @ 04:12
    I live in Japan and 70-80% of the equity market is owned by the J-government. They cannot stop buying as the entire pension system will collapse. They have to keep buying and even forcefully increase the pension contributions from the working population just to keep with the pace of people retiring and meeting their pension liabilities. I have a feeling similar thing will happen in the U.S.... maybe in 5, maybe in 10 years but there are just so many unfunded liabilities.
  • JK
    John K.
    19 February 2021 @ 02:14
    Please let us know how we can subscribe to Tyler’s newsletter. Thanks.
    • st
      satheesh t.
      19 February 2021 @ 03:57
  • JH
    James H.
    19 February 2021 @ 03:17
    Loved this interview - particularly the point around the passive bubble. Here in Australia, our government is mandating an increase to forced retirement savings (called superannuation) from 9% of annual salary to 12% over the coming years. As much as I suspected equities were bubbly, I now think that a clear trade here for the coming 15 - 20 years is going to be buying the index and front running the growing demand from passive flows. I'm struggling to see how this doesn't work when the net inflows will far outweigh the net outflows. Anyone have a different perspective on this or what I might not be seeing? What could force this passive bubble to pop - particularly here in Aus? Cheers, James
  • IN
    I N.
    19 February 2021 @ 01:46
    One of the most important RVDBs ever. The right questions are asked by the no-water man.
  • JA
    John A.
    19 February 2021 @ 01:17
    I usually am in disagreement with Tyler because our time horizons don't match up, but he was spot on today. Between agreeing with him and Tony Greer more and more, that makes me think we are at an inflection point. Don't know if that is good or bad for markets, but I don't think the next couple of months are going to be boring.
    • TN
      Tyler N. | Real Vision
      19 February 2021 @ 01:41
      If credit spreads widen I’ll change my tune too! But for now I think the inflation narrative holds major weight.
  • JF
    Jonathan F.
    18 February 2021 @ 23:32
    Really nice to see Tyler back. Great session Ed & Tyler!
    • RT
      Richard T.
      19 February 2021 @ 01:10
      Ty is indeed on-the-ball-smart. But, some of us judged him by the backward ball-cap; so it was good that he explained the lack of water to shower to was hair. I hope others stayed through the end?
    • B
      Bob .
      19 February 2021 @ 01:13
      Strongly agree. Sometimes I wish I could hit the thumbs up symbol on the right more than once. Tyler calmly makes some excellent points in areas where he is clearly very passionate. I appreciate his comments.
  • BD
    Bruce D.
    19 February 2021 @ 00:24
    I had a hard time following this guy he went from boomers to the dollar, to blow off top, to retail, to Weimer republic, k shape recovery, to crypto, with no explanation of any of them.
    • MR
      Michael R.
      19 February 2021 @ 00:40
      I definitely wanted to dive in deeper on his crypto thought experiment statement and the calculation of an interest rate and to compare that to the FED manipulated interest rate..
  • CM
    Cory M.
    19 February 2021 @ 00:16
    Fantastic. And interesting. Thank you.
  • GS
    Gerald S.
    19 February 2021 @ 00:03
    Great update. Thanks, guys.