A World DeFAANG-ed: High-Beta Bets and Emerging Markets

Published on
December 1st, 2020
Duration
65 minutes

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A World DeFAANG-ed: High-Beta Bets and Emerging Markets

Live ·
Featuring Kevin Muir

Published on: December 1st, 2020 • Duration: 65 minutes

Kevin Muir, CFA, owner of Winter Capital Ltd., joins managing editor Ed Harrison to discuss the markets’ shifting focus, where Muir sees opportunities in the midst of the market rotation, and his thoughts on the relationship between deficits and bonds. Muir argues that the world is entering into a period of synchronized growth unlike anything we have ever seen before and that investors need to own assets in high-beta markets such as Canada, Australia, and emerging markets. He also explains why fiscal deficits are the private sector’s credit, why the market does not yet realize this, and the implications this has for yields. Key Learnings: In a world awash with low growth narratives arguing that further FAANGification of the market is in store, Kevin Muir makes a cogent argument for the opposite — synchronized global growth. Muir's bullishness on high beta and EM highlights the markets' rotation into cyclicals as an expression of their economic growth expectations into the new year. This sort of market environment is most beneficial to emerging markets and commodity-rich economies such as Canada and Australia.

Comments

Transcript

  • DW
    Denton W.
    10 December 2020 @ 00:37
    What I find fascinating with Kevin is that he always says your policy views don't matter. All that matters is what is going to happen. Which I agree with. Yet, he endlessly injects politics and what he believes the policy prescriptions should be.
  • SS
    Stephen S.
    9 December 2020 @ 20:13
    I personally don’t see it. Roaring twenties was a sort of blow off top of earlier innovations and cultural liberalization. I think we’ve run out course on both of those things at least for awhile. 2020s will be a decade of stagnation in my view, also aligns with Neil Howe’s of cyclical history in the US.
    • SS
      Stephen S.
      9 December 2020 @ 20:25
      Commented too soon he has a lot of good insights.
  • KZ
    K Z.
    3 December 2020 @ 21:25
    Thank you for a very good interview and comments about Bitcoin, it’s getting a little too much bitcoin on real vision and it should be toned down I think , it’s getting to the point of pushing it , I appreciate bitcoin but not when it’s taking the oxygen from the real issues of out time
    • AI
      Andras I.
      4 December 2020 @ 00:48
      That's the gentle way of putting it :)
    • JL
      J L.
      5 December 2020 @ 06:46
      In almost every circumstance this would be absolutely correct. With Bitcoin, however, the weight of emphasis seems reasonable due to a credible body of evidence suggesting it is one of the most compelling opportunities traders could see in their lifetimes, and also sits at the nexus of the global debt cycle, Austrian thought, and a number of other big picture trends as the world looks to a post-Bretton Woods era. It is pound-the-table emphasized in part because it is extraordinarily important to understand the outlier nature of the opportunity. If Bitcoin were just another random trade, it would make sense to say "why all the hype." But with each passing day the argument gets stronger, while speaking to the biggest monetary macro trends of the day.
    • KZ
      K Z.
      7 December 2020 @ 03:40
      Sorry JL. , again I am not against bitcoin, but bitcoin is not held by central banks, governments are not going to give up their main power which is the currency to bitcoiners!, This is a fantasy and a way for some big funds to stir people in to this bubble and then crash out.. The Crypto technology will be useful and is useful but its only going to be part of the piping of the financial system and not a currency itself. So its good to see which technologies are developing , but don't miss the water from the pipe! Having some perspective of history and power plays in the world can put things in perspective so we dont loose our money in fantasies that just sound good. As far as real vision , I think this push towards crypto will backfire big time when this bubble burst again and people feel that real vision brain washed them in to bitcoin, not a good long term strategy for real vision, there is nothing wrong with covering it , but don't take the oxygen away from everything else.
    • JL
      J L.
      7 December 2020 @ 23:25
      @Keyvan Everyone is free to disagree, but your argument is flawed. First of all, this is about a probability distribution, which means the odds of success do not have to be 100%, they only have to be high enough relative to the potential rate of return to create a highly attractive expected value (EV), which is all one needs to make an investment or trade. Second, your argument vis a vis central banks is already disproven by gold; to the extent central banks hold gold as a stabilizer, they are already utilizing a third party store-of-value asset they do not have "main power" over. The question then becomes whether BTC can more efficiently fulfilll comparable functions to gold, and the answer there is yes. BTC is like gold that is easier to store, move, and transport, with an intermediary payments layer provided by giants like PayPal and Square (and soon enough Visa and Mastercard and other major facilitators).
    • KZ
      K Z.
      8 December 2020 @ 01:06
      JL., BTC is not like gold, is trying to present itself like gold but there is no proof that it is, Gold is what dollar and all currencies were backed by for a long long long time, the problem with BTC is 1- Governments will make it illegal as soon as it becomes a threat ( china the fastest growing economy has already done that and others will follow) 2- Your digital keys will eventually get hacked by more and more powerful quantum computers in the future and once you loose the digital key, its done , never to be recovered again. 3- Portability is the only advantage and governments are watching closely and will block it as an illegal activity. 4- Also until I don't know where the Origin of Bitcoin was and all that mastery is not solved, I ain’t putting my hard worked money on it, except at times for a TRADE , not an investment, no matter how many fancy financial words are used to describe Bitcoin and its advantages.
    • KZ
      K Z.
      8 December 2020 @ 01:25
      JL., Also the reason Central banks hold gold is to give some credibility to their fiat currency as with out it , they have NO credibility or value, they are not stupid to hold all that yellow rock for no reason , 12% of all global central bank reserves are in gold and gold is what has and does give any real value to fiat currencies, every 30-40 years after over printing their fiat currencies, they all get together and have a big meeting and devalue their currencies against gold and then start printing again, we are very close to one of those meetings. Also all of the old money is in gold, they don’t even consider bitcoin, Bitcoin is popular with the generation that does not really represent wealth, but make a lot of noise. Forgive my directness, but thats my honest feeling.
  • GK
    Gautam K.
    5 December 2020 @ 16:41
    Yeah Kevin, stocks only go up!
  • PU
    Peter U.
    5 December 2020 @ 12:01
    Well done Max! Excellent job. One of the best interviews with Jim Grant.
  • MJ
    Marius J.
    5 December 2020 @ 09:18
    Useful to get the bearish side of Bitcoin, I hope RV can focus more on this to get this side as well.
  • JL
    J L.
    5 December 2020 @ 06:39
    Some great insights, though his dismissal of Bitcoin was deeply disappointing. Not in terms of having a different point of view, which is fine, but in taking such an illogical stance with nothing at all to back it up. Whether Bitcoin ultimately succeeds or fails is unknowable, but you can think about expected value in terms of probability distribution. Say -- just for example -- there is a 66% chance Bitcoin fails by 2030 and a 33% chance Bitcoin goes to $1 million per coin by 2030. That could be distilled to a potential 50X return at 1 out of 3 odds. The expected value on that is insane. You would never bet the farm on a probability distribution with a two-thirds chance of failure, but you would certainly bet some small amount, e.g. a single-digit percent at minimum. Why would you not? It would be understandable for someone not to own BTC if they were strongly convinced the probability of success is zero. But to acknowledge that the chance of success is distinctly nonzero, and then to yet dismiss it as an investment based on extremely weak arguments and a funny little joke -- it's just disappointing. It's an indulgence in irrationality really. "I am going to dismiss one of the most incredible expected value investment propositions ever for reasons I can't really explain, and then make a non-funny joke about it."
  • SN
    Stefan N.
    4 December 2020 @ 03:25
    Agree this is a welcome input as its been BTC heavy heavy lately. Great to see more balanced discussion especially as Raoul is pushing EM on other channels.
  • KK
    Kristian K.
    3 December 2020 @ 20:49
    Wow fantastic! We should just do global pandemics every time the business cycle down. So easy.
  • PG
    Philippe G.
    3 December 2020 @ 16:49
    Great to see Kevin...miss those free weekly Macro Tourist emails, laughed and learnt something! Agreed on pent-up demand...all the social extroverts I know are really struggling (mentally and emotionally)...they have the banked vacation time and the savings...Yes, I know...just an inconsequential personal anecdote big picture...but anyways...
  • BA
    Bruce A.
    3 December 2020 @ 05:47
    I'm an unabashed fan of Kevin Muir and a MacroTourist newsletter subscriber. Well worth the money. Kevin helps provide much needed broad picture macro perspective as well as actionable trade ideas. Add in a killer sense of humour and you've got a great newsletter.
    • RK
      Robert K.
      3 December 2020 @ 15:55
      Great podcast too. One of my favorites. THE MARKET HUDDLE
  • GA
    Gary A.
    3 December 2020 @ 13:00
    I respectfully think that he is wrong on the robust economic recovery.
  • BC
    Barry C.
    3 December 2020 @ 09:31
    Everyone is thinking there will be a tourism boom...well maybe not. People only have so much vacation time, (the people that still have jobs). Many people can afford to take 2-3 vacations/year, their employer will not allow them. My dentist, a very well off man, told me because of his career responsibilities, he can only take one vacation/year and he has to book it a year in advance. My favourite place to vacation, Hawaii, expects tourism not to reach pre-pandemic levels until 2025 at the earliest. From over 10.5 million tourists in 2019, Hawaii expects 6.2 million in 2021, 8.3 million in 2022, 9.4 million in 2023. I realize Hawaii may not be a good benchmark, but I think there is a story in their projections.
  • DS
    David S.
    3 December 2020 @ 02:10
    The US and other countries economic survival of this pandemic - where so many people cannot work to provide for their families - is completely different from even a deep business cycle recession. In some respects the problems of a pandemic are more like the Irish Potato Famine. An Irish farmer did all the farming necessary to put in and care for the potato crop to feed his family. You can discuss why it happened. You can give the Irish farmers the solution after the fact. Nothing except personal savings and the assistance of the church and state could allow the Irish people to survive the famine. Creating massive CB reserves in commercial banks with no one to lend to will not help the farmer or the merchant in the village. Giving money to the aristocracy will help a little as they fix up their mansions and buy stocks in America. Unfortunately, this does not help the overwhelming majority of the Irish people. In a pandemic the economy will survive when people survive. We will rebuild a growing economy. The all clear is on the horizon. We are most fortunate that men and women of science have developed vaccines at warp-speed. We need to help the families and important businesses in the most need to survive for six more months. We can do a better job the second time. We know more about what works! It is the right thing to do. It is also the necessary thing to do to rebuild an economy at warp speed together. DLS
    • AC
      Andrew C.
      3 December 2020 @ 08:38
      Nothing says overreaction in shutting schools/restaurants/everything more than this https://www.statista.com/statistics/1107913/number-of-coronavirus-deaths-in-sweden-by-age-groups/