Steepening Curve Could Yield Generational Opportunities

Published on
July 4th, 2019
28 minutes

Steepening Curve Could Yield Generational Opportunities

Investment Ideas ·
Featuring Michael Lebowitz

Published on: July 4th, 2019 • Duration: 28 minutes

According to Michael Lebowitz, partner at Real Investment Advice and RIA Pro, a window has opened, letting in the possibility of a recession. As a portfolio manager of RIA Advisors, he sees some big opportunities in investing from the Fed’s response. Specifically, recent research Lebowitz has done shows that investors tend to underestimate Fed moves, both in raising and in cutting rates, but that the error during cutting cycles is greater. In this conversation with Real Vision's Ed Harrison, he says that the result will be a steepening yield curve and potentially "generational" investment opportunities due to the economic dislocations. Filmed July 1, 2019 in New York.



  • FK
    Fabian K.
    28 July 2019 @ 20:36
    Great interview
  • ES
    Edward S.
    18 July 2019 @ 03:19
    Great interview. I don't think AGNC is still at a discount; it was for a brief time this year. One aspect that may mitigate their steepening advantage is the spread of borrowing cost to the (libor) receive rate on their swaps. During the tightening cycle, if you could call it that... this was a tailwind. now it's a headwind and their hedge ratios are fairly high. NLY is a bit more diversified.. This is a long topic with more than just nly and agnc.. I think he wanted to relay the curve steepening bit. there are some structured products for that but no one should go there! (at par)
  • TS
    Thomas S.
    10 July 2019 @ 01:51
    "politicians will abuse spending, er a politicians will use spending to buy votes whenever they can" amen
  • WB
    William B.
    8 July 2019 @ 02:08
    Time will tell whether or not the Fed will cut rates as predicted. It's an interesting theory. Science would dictate that the theory needs to be tested. Realvision should do a follow-up in 6 to 12 months with the prediction and the reality. I personally cannot predict.
  • SP
    Steve P.
    8 July 2019 @ 00:26
    Watch out for sales schemes making false misleading statements over social media. They’re advertising rates not disclosing full terms and conditions. GS MARCUS dropped their rates ASAP, and they’re very credible. Some of these other ones won’t disclose which banks they put money into and you’ll get customer service when asking about the terms and conditions. They want personal info first . First thing that pops into my mind is the concept that actually they’re scheming exits, so where do I even start ? This flat curve is great for trading t-bills ! Issue is with order size cuz not all of us have $100k to mature in 90 days which seems likely to be worth 2 years in FV , in 90 days for a while.
  • CL
    Chris L.
    7 July 2019 @ 04:10
    Lol the ad at the back end of the video. I thought this was all about market and economic ideas. Now just a production company.
  • GM
    Gregor M. | Contributor
    5 July 2019 @ 23:24
    This was excellent in every way, with a very productive back and forth between Ed and Michael. I particularly liked Michael's calibration of the total size of potential FED cuts, through the lens of history. And his phrase " a window has now opened on to the possibility of a recession" is also a perfect way of describing our current moment. As for future government investment opportunities, it really needs to said that the US is in a deep deferred maintenance deficit, and citing the propensity of politicians to choose poorly among areas for spending, the US is very likely growing under potential in part because of this lack of investment. We still face demographic pressures on growth, but US cities massively cry out for a round of new transport and other infrastructure, because the last big round was mostly after WW II. But I must agree, the political path or route to enacting such specific, targeted investment remains difficult. Indeed, the ongoing fiscal failure is part of how both here, and in Europe, too much responsibility has been thrown to monetary policy. We really don't need rate cuts. We need jobs, particularly in the red states.
  • DS
    David S.
    5 July 2019 @ 20:07
    US annual deficits and total borrowings are rising even before MMT. What will be the effect on the US government yield curve of a warning and/or second downgrade on US debt? The rating agencies were delinquent on mortgage backed security risk. What about government debt in the US and many other countries? DLS
  • DS
    David S.
    5 July 2019 @ 19:46
    Excellent interview. I especially like Mr. Harrison summations that are clear and accurate about the trade plus his caveats which add perspective to the trade idea. Thanks. DLS
  • NH
    Neil H.
    5 July 2019 @ 16:54
    Michael's thesis was well articulate and made for a great interview. Perhaps there will come a day in the not to distance future where AAA,AA and A rated bonds will no longer be available.
  • RS
    Ruben S.
    4 July 2019 @ 09:19
    I disagree with the view that the fed has "only" 250bps of cut possible, in our world negative yields are pushing the limit further. Whats Michael view on that?
    • ml
      michael l. | Contributor
      5 July 2019 @ 11:58
      I agree, NIRP is very likely.
  • RH
    Robert H.
    4 July 2019 @ 13:32
    Interesting interview. Question: If you believe the curve will steepen, then why not take a direct position in the bonds themselves?
    • AM
      Alonso M.
      4 July 2019 @ 18:01
      I assume it's because buying a 2 year Government note unlevered doesn't give you much torque whereas the stock picks certainly do.
    • ml
      michael l. | Contributor
      5 July 2019 @ 11:57
      You certainly can as I mentioned towards the start of the interview. I wanted to present an option for retail/individual investors that can not short bonds or trade eurodollars.
  • CO
    Craig O.
    4 July 2019 @ 23:32
    It's official. This is now my favorite series on RV. May be confirmation bias, but this was another excellent piece. And Ed is one of the better things to happen to RV.
    • CO
      Craig O.
      4 July 2019 @ 23:34
      Also, the RV advertisement at the end is the right way to do your commercials, if you must do them here. Much more tasteful than the almost insulting stand alone videos posted lately.
  • DH
    Daniel H.
    4 July 2019 @ 21:00
    Great interview. Thanks.
  • SU
    Shakeel U.
    4 July 2019 @ 20:44
    Great interview 10/10 😀
  • SV
    Steven V.
    4 July 2019 @ 19:34
    Long rates will collapse under heavy government borrowing and contracting consumer and corporate borrowing demand.
  • TB
    Theron B.
    4 July 2019 @ 19:14
    Keep these coming :) This type of access and insights are what I paid for.
  • RA
    Robert A.
    4 July 2019 @ 18:03
    Another great interview by Ed as he kept it “tight”, relevant, focused and specific. What a fantastic way to learn and have thought provoking concepts presented to us. For some of us “retail” viewers this is a pretty simple way to play the “bull yield steepener”—not without risk of course and there is always that pesky bit about timing. FWIW, I liked Justine’s pitch regarding RVTV making customized videos for others—first, RV now has the chops to produce after having excellent people in place for some time and have made it to the other side (IMO) of the learning curve and second, what a great way for RV to Fund itself and make all this content available to us at such a great price (and value for content received).
  • DH
    Dabangg H.
    4 July 2019 @ 06:51
    Great discussion, thanks guys. you mentioned A corporate bonds over BBB. Any comment on the duration of these AAA bonds?
    • RH
      Robert H.
      4 July 2019 @ 13:37
      Not sure. However, he expected that the front end would "plummet" while the back end comes down. To me, that would imply shorter duration would have greater return.
    • AM
      Alonso M.
      4 July 2019 @ 18:00
      Duration x change in rate ~ price return. You can plug in your assumptions to see how much the long end needs to come down to give you a higher price return than the scenario in which 2 year yields plummet 100 to 150 basis points.
  • IO
    Igor O.
    4 July 2019 @ 15:02
    150 bps by the year end? That's exciting
  • AP
    A P.
    4 July 2019 @ 12:11
    This has become the best show on Real Vision IMO. Thanks Ed for your great job.
  • DL
    David L.
    4 July 2019 @ 11:18
    Informative interview, thank you.
  • AP
    A P.
    4 July 2019 @ 07:19
    Could you please add the Audio & Transcript? Many thanks.