The Great Reset

Published on
May 28th, 2020
Duration
47 minutes


The Great Reset

The Expert View ·
Featuring Stephen Clapham

Published on: May 28th, 2020 • Duration: 47 minutes

Stephen Clapham, founder of Behind the Balance Sheet, analyzes the unique challenges that companies worldwide are facing during the ongoing pandemic. Using forensic accounting, Clapham surveys the financial landscape to identify risks and opportunities. He argues that the crisis will force companies to prioritize shoring up their balance sheet, and that as a result, stock buybacks will be diminished and return on equity across various sectors will suffer. Clapham reviews how companies have been juicing their earnings with "adjusted" figures, and he argues that this pandemic is a catalyst for a "great reset" in which executives use the ongoing crisis as an excuse to accurately tally their companies' earnings. Across a longer time horizon, Clapham expects inflationary pressures to mount as central banks continue to monetize debt and as major players in consolidated industries – such as hospitality, retail, and airlines – gain pricing power. Find out more about Stephen Clapham's work at https://www.behindthebalancesheet.com/. Filmed on May 27, 2020.

Comments

Transcript

  • DB
    Darko B.
    28 May 2020 @ 23:41
    Hi Stephen, I looked at the course and it's 89 quid a month. Not free as you said......
    • RE
      Raymond E.
      29 May 2020 @ 03:49
      Looks free to me: https://www.behindthebalancesheet.com/3030
    • SC
      Stephen C. | Contributor
      29 May 2020 @ 06:28
      I have more than one course. You can sign up for the free training programme at https://www.behindthebalancesheet.com/3030 hope you enjoy it steve
    • JT
      Jayne T.
      30 June 2020 @ 00:15
      Steve, what is the free course about? It says becoming a "better investor", but what does that mean? I thought it was a forensic accounting course. Thanks!!
  • JT
    Jayne T.
    29 June 2020 @ 23:49
    What's not expected? The Covid-19 lasting for several years as no heard immunity happens and vaccines are not generally safe.
  • FD
    Franbcois D.
    14 June 2020 @ 16:14
    Loved the interview. RealVision is more macro oriented, but having a more micro company level discussion is always welcome. The whole goal here is to get a better framework for us subscribers when navigating the markets. Especially with the coming default cycle in the corporate world, shedding some light on the massaging of earnings and the entire gaming of the compensation scheme was great. Thank you Steve and thanks again RV.
  • SG
    Sashi G.
    10 June 2020 @ 07:41
    Great presentation by Stephen. Enjoyed his style of getting into practical details instead of just sitting on macro views. Second order effects as he mentioned. Not everyone does that in an engaging way.
    • SC
      Stephen C. | Contributor
      11 June 2020 @ 20:29
      thanks Sashi, great that you enjoyed it steve
  • PE
    Paul E.
    9 June 2020 @ 20:23
    Excellent session, really enjoyed it! Thanks!
    • SC
      Stephen C. | Contributor
      11 June 2020 @ 20:29
      thanks, kind of you to post - I have been getting upset at the number of thumbs down so it's good to hear Steve
  • SS
    Shanthi S.
    7 June 2020 @ 06:53
    Really enjoyed this. A very straightforward and honest way of approaching things.
    • SC
      Stephen C. | Contributor
      11 June 2020 @ 20:28
      thanks for the kind words - appreciate it steve
  • IP
    IDA P.
    6 June 2020 @ 12:18
    thank you Stephen Clapham, I believe Russell Napier too, and I'm preparing.... thank you !!!!!!!
    • SS
      Shanthi S.
      7 June 2020 @ 06:51
      Agreed. I don’t see how any MMT like economy can function without capital controls.
    • SC
      Stephen C. | Contributor
      11 June 2020 @ 20:27
      Russell is a super smart guy, although he is usually early as he is just so much cleverer than the rest of us. IT takes the markets a while to catch up.
  • MO
    Mario O.
    4 June 2020 @ 14:07
    Is this a sponsored video?
    • SC
      Stephen C. | Contributor
      11 June 2020 @ 20:26
      hey Mario, no it's not but why do you ask? The only sponsorship was that I resuscitated a free programme I created for lockdown to help people pass the time and improve their investing skills (and a lot of people have been having fun doing it, so I am really pleased). Please let me know why you ask so that I can get it right next time Steve
  • JF
    Jim F.
    1 June 2020 @ 03:02
    'Capitalism without bankruptcy is like Catholicism without Hell.'
    • SC
      Stephen C. | Contributor
      2 June 2020 @ 05:39
      Great - can I use that one? thanks Steve
    • PE
      Paul E.
      9 June 2020 @ 19:58
      Isn't that one of Charlie Munger's?
  • TP
    Timothy P.
    28 May 2020 @ 14:23
    < Empty positive comment that makes it into the "Distillery", leaving out the more insightful or contentious ones. >
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:16
      Timothy, apologies if I haven't been controversial enough - truth is, I have a strong view that things are going to be really tough. But honestly, I find it difficult to weigh up the economic impacts vs the impact of the Fed and the injection of liquidity. I don't think that earnings estimates are anywhere close. thaks steve
    • TP
      Timothy P.
      4 June 2020 @ 15:05
      @Stephen - it was a comment based on how Real Vision chooses their comments to include in the weekly round-up "The Distillery". Its usually the ones that say "Great job Real Vision!". Any contentious comment or actively debated comment isn't included. That is what annoys me, not your interview.
  • VS
    Ville S.
    1 June 2020 @ 21:36
    Great...going to check the trainings
    • SC
      Stephen C. | Contributor
      2 June 2020 @ 05:40
      Thanks. Look forward to seeing you Steve
  • jg
    john g.
    1 June 2020 @ 16:47
    This was EXCELLENT. Plain spoken and without financial jargon and acronyms. Great communication.
    • SC
      Stephen C. | Contributor
      2 June 2020 @ 05:39
      Thanks John, Glad you enjoyed Steve
  • AV
    Alvin V.
    1 June 2020 @ 02:39
    The case of a Reset is very well argued. It does make sense for big companies to take this opportunity to start from a lower base for a very fast growth thereafter; if they come out. For rest of 2020, they still have to solve the solvency problem first.
    • SC
      Stephen C. | Contributor
      2 June 2020 @ 05:39
      Solvency certainly an issue, although credit is available. Issue will likely be how far balance sheets are stretched. thanks Steve
  • NR
    Norbert R.
    31 May 2020 @ 04:28
    Chirping bird noises are distracting
    • SC
      Stephen C. | Contributor
      2 June 2020 @ 05:37
      Sorry about that - I find it too. Apologies. I live in central London on a garden square. Hard to avoid them! I WIll install some new noise cancelling software on my PC for next time. Thanks for the feedback Steve
  • CT
    Crispim T.
    30 May 2020 @ 16:08
    I can never trust someone who trusts Jim Chanos.
    • SC
      Stephen C. | Contributor
      2 June 2020 @ 05:34
      Sorry to hear that. I have a great deal of respect for Chanos. I don't know him, never met him, but I exchanged views with one of his team for a while - super smart and thorough. good luck Steve
  • RF
    Russell F.
    30 May 2020 @ 13:03
    A lot of crypto's will use cloud services like amazon's. Including ELF, IOTEX and others a like. Iotex can run side chains like other coins so I'm sure many many industries will use this feature and use cloud services for certain things. Cloud will become especially useful in IoT so I reckon amazon will only grow from this
    • SC
      Stephen C. | Contributor
      2 June 2020 @ 05:33
      Sure you are right. Lots of opportunities for Amazon to grow. Luckily, as the valuation requires growth, a lot of it. Very hard to judge that valuation, in my view. Thanks Steve
  • AD
    Anna D.
    1 June 2020 @ 08:59
    Hello, I can't play any videos today, I get this error: Failed to execute 'appendBuffer' on 'SourceBuffer': The HTMLMediaElement.error attribute is not null.
    • AD
      Anna D.
      1 June 2020 @ 09:00
      ok.. the issue has been resolved.
  • SS
    Stefan S.
    31 May 2020 @ 21:34
    Please add a feature to “cast” video from phone to smart tv or device👍
  • mw
    michael w.
    28 May 2020 @ 21:27
    Will those residents use BTC to get capital out like Chinese did in the 2017 bull run?
    • SB
      Stephen B.
      28 May 2020 @ 23:43
      I tried getting some money out of Brazil using Bitcoin and the authorities made it next to impossible.
    • SC
      Stephen C. | Contributor
      29 May 2020 @ 06:30
      It's a potential solution, as is gold etc I am no expert on crypto (understatement) Steve
    • UJ
      Ulf J.
      29 May 2020 @ 19:21
      Bitcoin out of Brazil should not be a problem in worst-case scenario just memorize the private key and leave the country or use a phone, or a letter if you trust mail.
    • SO
      Shaun O.
      29 May 2020 @ 21:54
      Why is it impossible in Brazil? That does not make sense I work with Brazilians and regularly pay in crypto. In fact many of my Brazilian freinds I helped move into USDC before the real crash and have been doing very well
    • ZY
      ZHENG Y.
      30 May 2020 @ 13:41
      For countries to block majority of citizens, is to block the interface between banks and crypto exchanges....thats will stop majority of the people to buy in or problem to cash out.
  • NR
    Nicolas R.
    30 May 2020 @ 00:07
    Stephen, great stuff. Really enjoyed it and can’t wait to go through your course. Quick question, what is the Anderson letter you referenced? Is it available for public consumption?
    • SC
      Stephen C. | Contributor
      30 May 2020 @ 07:22
      yes you can find it on the Baillie Gifford website they produce a lot of material and the index is not the easiest but you'll doubtless find some other interesting material. I am setting up a mini-site where I shall post these sorts of articles in the next few weeks, That's not much help now, but if you check my Twitter feed, the link will be there steve
    • SC
      Stephen C. | Contributor
      30 May 2020 @ 07:23
      I should have said my feed is https://twitter.com/steveclapham don't forget to follow me while you are there :)
  • mB
    marc B.
    29 May 2020 @ 19:11
    He was great! RV helping me remain patient & waiting to buy. Except gold/silver/bitcoin! Paas been on a tear!
    • CM
      Chris M.
      29 May 2020 @ 23:57
      PAAS is rocking. Got that idea from a Beaty interview on RV a while back.
    • SC
      Stephen C. | Contributor
      30 May 2020 @ 07:20
      thanks for your kind words steve
  • BP
    Brett P.
    29 May 2020 @ 08:51
    Wow, near 100% comment reply rate from @Stephen C.! Really great to see that, thank you!
    • SC
      Stephen C. | Contributor
      30 May 2020 @ 07:19
      hey, I aim for 100%! thanks least I can do steve
  • SB
    Stephen B.
    29 May 2020 @ 02:40
    Very interesting. Thank you.
    • SC
      Stephen C. | Contributor
      30 May 2020 @ 07:19
      glad you enjoyed steve
  • mf
    massimo f.
    28 May 2020 @ 19:22
    I suppose the jury is still out on this but early data seems to show a noticeable drop in productivity presumably from people working at home. Does that not do away with any notions of working from home becoming commonplace? Lower productivity and less economic activity?
    • mw
      michael w.
      28 May 2020 @ 21:45
      I think it does. My bosses hated the work from home time.
    • SB
      Stephen B.
      28 May 2020 @ 23:45
      I am suspicious of the notion that there will be a major move to working from home. OK for highly motivated, responsible staff but too open for abuse for a significant portion.
    • SC
      Stephen C. | Contributor
      29 May 2020 @ 06:37
      I think staff like to have the possibility. I agree it's easier with knowledge workers, but there are quite a lot in the modern economy. I don't know how to quantify this, but if you allow knowledge workers or senior staff you probably have to let some others also. I know several firms who are significantly downsizing offices, merging offices with others who will see drops of >50% in man days spent at the office. I think the number of offices which will have a zero hit will be very small. Even if it's 5% or 10%, that's a significant cut in business for local services businesses - thatw as teh point I was trying to make. thanks steve
  • CB
    Christopher B.
    28 May 2020 @ 20:53
    This guy clearly doesn’t know the actions taken in the 1920s versus now.
    • SC
      Stephen C. | Contributor
      29 May 2020 @ 06:32
      I am quite old, but not that old. I have however read a lot on the subject. I do appreciate that there was a fundamental error by the authorities in 1930, and that the tactics employed by governments in the 1930s contributed to the depression. Thankfully that lesson has been learned and we are now in an extraordinary experiment - lets see how it turns out thanks steve
  • JI
    Jose I.
    28 May 2020 @ 17:02
    Debt and more debt is the clear path forward. More Government support programs, ballooning Fed B/S…and kick the can down the road. debt skyrocketing everywhere, low interest rates for long…Stock markets sustained …This dynamic can last many years…Why not?
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:08
      Jose, you may well be right. Who knows? Liquidity is obviously an important driver for markets. And it helps sentiment, and TINA is everyone's favourite girl now. I think it's difficult to predict the level of markets - I could make a case for a new high before the end of the year; equally I could make a strong case for the market to fall 40%. But I think there are some great opportunities in equities both on the long and short sides. Almost irrespective of where the market ends up - that's where my focus lies. thanks for your comments Steve
    • RC
      Rob C.
      29 May 2020 @ 02:00
      Because there is no such thing as a free lunch. The bill will come due.
  • BD
    Ben D.
    28 May 2020 @ 08:38
    Always been a fan of Stephan since hearing him first on "The Acquirers multiple" Great to hear his opinion from the point of a business with other RV contributors POV from a macro perspective. This was a good expert view but would have done better with a few more charts/examples to illustrate ideas.
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:23
      Thanks Ben, more charts on my website - check the blog https://www.behindthebalancesheet.com/blog-1/10-features-of-the-post-virus-investment-landscape
  • CC
    Craig C.
    28 May 2020 @ 09:14
    "...and she can put a million dollars through everyone's letter box, then let's see what happens" Lol - Pure Gold (Pun Intended)
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:22
      thanks Steve
  • RS
    Ruben S.
    28 May 2020 @ 10:11
    Quit interesting on balance sheet issues but overly superficial on the implications of more and more debt...
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:22
      Ruben, fair criticism. I wish I knew the answer. What I do know is that - I don't like debt and that it causes a lot of problems - debt has never been cheaper; it has often been far dearer - too much of it is risky More and more debt will be fine until it isn't. When that point comes, who knows? thanks steve
  • NR
    Nathan R.
    28 May 2020 @ 13:54
    Please keep the Expert Views rolling. Specialists holding forth on pre-prepared question sets is both highly engaging and illuminating.
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:18
      i wish they had given me pre-prepared questions, I would have been rather more articulate! cheers steve
  • CD
    Christopher D.
    28 May 2020 @ 15:01
    Great guy, no nonsense and open minded as to what is likely to come.
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:12
      Thanks Christopher think you have to be open minded - who knows what will happen I appreciate the kind words Steve
  • AC
    Ay C.
    28 May 2020 @ 15:32
    "...Zoom 2 or Mooz?"hahaha i love it
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:11
      thanks Anouar - i just registered Mooz.com! Steve
  • OC
    Otto C.
    28 May 2020 @ 16:55
    "...economy will be back to normal in a month..." I'd have some of what he's smocking.
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:10
      I gave up smoking. I may restart. I wish you were right, Otto, and I am puzzled as to why you think this - can you please elaborate?
  • se
    steve e.
    28 May 2020 @ 17:09
    Great perspective. Great interview.
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:03
      thanks Steve, good name! Appreciate your kind words Cheers Steve Clapham
  • MT
    Mark T.
    28 May 2020 @ 18:18
    Would love to hear more from Mr. Clapham.
    • SC
      Stephen C. | Contributor
      28 May 2020 @ 19:02
      thanks Mark, hopefully I will be asked back! Cheers Steve Clapham