Too Early to Be Bearish

Published on
June 18th, 2018
33 minutes

Too Early to Be Bearish

The Expert View ·
Featuring Jawad Mian

Published on: June 18th, 2018 • Duration: 33 minutes

Jawad Mian, who writes the global macro research publication Stray Reflections, saw a bottom in deflation in early 2016 when many were fearing a global bust. He has held a constructive view on equities ever since. In this piece, Jawad explains why risk assets remain on solid ground. He also presents his view that the U.S. midterm elections may deliver an unexpected boost to equities. Filmed on June 1, 2018 in Grand Cayman.


  • TK
    Toby K.
    22 July 2018 @ 18:09
    Jawed is one of my favourite guests but I disagree with him on the dollar. In my view, the correlation breakdown between rate differential and FX is the reason for why US monetary conditions have been kept relatively loose. With that in mind, the idea of a Fed put seems far fetched. Even if we assume inflation remains contained, unless the dollar appreciates, I believe we should see higher real rate rather than a Fed relent. I do agree that at some point the EM spillover could hurt US growth but I believe one of the causes will be higher USD rather than the reverse.
  • JD
    Jonathan D.
    13 July 2018 @ 07:34
    Trumps approval rating is anything but poor. With MSM 95% negative Trumps approval rating is higher than conman Obama’s at this point. Americans LOVE Donald Trump.
  • CC
    Charles C.
    26 June 2018 @ 22:26
    good presentation. I would love to hear a follow up about how they filter signal from noise and keep their focus on big picture (his closing lines).
  • AA
    Aymman A.
    18 June 2018 @ 15:20
    Every argument is based on this Aristotalean sequence: Premises —- Logical Argument —- Conclusion. For a superior analysis you have to have premises that are different and better than consensus. Here a little humility is needed. How can one person or advisory service have such strong opinions (premise) on things as varied as Italian politics, US mid term elections, J Powel’s Reaction function function to name a few. Every analysis starts with a core competency. What is the core competency here? The arguments that Jawad lays out are very elequent but the are based on too many premises. This makes the conclusions suspect.
    • DS
      David S.
      26 June 2018 @ 21:20
      18 June 2018 @ 22:47 9 2 The conclusion of an Aristotelian syllogism must follow only from the major and minor premises. It works for simple statements only. DLS
  • DH
    Daniel H.
    25 June 2018 @ 06:00
    For an analyst who is history based, I am surprised he did not look at Watergate as the analog to this midterm election. He seems oblivious to the scandals. The Democrats owned the Congress from 1972 to 1974, and this midterm is more likely to run in that direction for the House. He is right about the Senate.
  • ah
    ahmed h.
    24 June 2018 @ 13:23
    great insight.. if we short the usd into strength what do u own instead? even front end usd yields 2 pct returns.. eur jpy chf irrelevant.. cnh maybe? thots?
  • VP
    Vincent P.
    20 June 2018 @ 19:31
    Jawad is very cool and very smart but could also view him as Poster Child for Complacency. Although, I do not disagree with him much it's still very hard to believe and rest morals on historical comparison of data in today's financial and geopolitical environment. Democrats will blow the mid-terms, agree on that but how the hell can the pace of rate hikes keep the yield curve steady before flat lining (i.e. 7's/10's virtually flat) which generally precedes recession?? Over and out.
    • BC
      Burton C.
      23 June 2018 @ 13:47
      Spot on... my thoughts exactly regarding complacency. In the central bank serial bubble economy one must at some point step to the sidelines. Calling the top is virtually impossible so its best to simply play defense near the top. That would have been the correct strategy in 1999-2000 & 2007-mid 2008. IMO that's where we are now. Jawad does not seem to appreciate the urgency of the risk.
  • WM
    Will M.
    22 June 2018 @ 22:43
    Not sure the dollar is heading down (significantly), as any European crisis is likely to force capital out of Europe and into the US pushing the $ up. But we shall see before end 2018. Gold will be my hedge.
  • DF
    Dominic F.
    22 June 2018 @ 11:41
    I think Jawad is fantastic. He is extremely insightful and wise. However many people on RV and in the business say "we need to block out the noise" but all have different views. Distinguishing which noise to block out is the hard part ;-)
  • PV
    P V.
    18 June 2018 @ 10:33
    While was "sold" on the assessment about Turkey's risk, was frankly puzzled by the Italy's & EU section. As an Italian living overseas and working in the financial sector, was appalled by the simplified and, at time not correct, thesis. To start with there's no discussion in Italy about leaving the European Union. Leaving the Eurozone is on the other side, very much discussed and, in fact, likely. Confusing the former (a commercial union of 28 countries) and the latter (a monetary union of 19 nations) is a gross error. Furthermore, there's no need for any amendment of the constitution to leave the Euro; a simple decree re-denominating the currency will do, Any Italian speaking observer understands that the odds of Italy will HAVE to leave the Eurozone (not the EU again) are currently in the 70-80s. Such a cavalier approach to one of the major macro issues today, doesn't bode well for the quality of overall the analysis
    • DP
      David P.
      19 June 2018 @ 12:34
      Except that a big chunk of those sovereign bonds are now denominated in euro, making it more difficult for countries to unilaterally leave the currency union. Also wondering about the consequence of devaluation of these currencies ( new lira, new drachma, new french franc, etc..) if the euro breaks up, forced to borrow money for their investments in USD, CNY or new Deutsche Mark to get decent rate while still paying for oil and robots in their now devaluated currency, that will plunge every time the Bundebank or the FED hikes. After the possible euro break up, the PIGSF (replace Ireland by France) are likely to become akin to emerging markets.
    • PV
      P V.
      19 June 2018 @ 15:15
      Hi David, Fyi 98% of all IT Gvmt paper is onshore, eg under IT jurisdiction. Hence a gvmt decree re denominating the national currency (i.e "lex Moneta") would automatically convert all onshore obligations into the new currency. Lastly, Italexit does not imply the end of the Euro as a "core" Euro will survive and probably be far stronger and stable.
    • DP
      David P.
      21 June 2018 @ 08:24
      P.V, as you are an Italian living overseas, i am a French living overseas and am aware about that discussion around the lax monetae that seems to be at the core of the eurozone end subject. Whether it applies or not for the eurobonds emitted after 2013 seems to contradict a clause stating that a change of currency denomination needs the approval of the majority of the bonds holder. In addition, i do not believe that the lax monetae applies to corporate debt as well. A logical conclusion would be that a breakup of the euro would be if/when most countries agree together that "it doesn't work". And in that case, what happens to Target 2 intra-eurozone $1T balance?
  • Jc
    Justin c.
    19 June 2018 @ 18:00
    Great piece. Preferred guest. He made his views and the timing of such views crystal clear. Also, he was wise to give points to support and potential risks to being wrong. He has been quite right regarding macro lately and it would be wise for some of the bears to get a second opinion from someone who appears to really focus on the TIMING of turning points. Being half a decade early with some doomsday forecast is not of any value.
    • EF
      Eric F.
      19 June 2018 @ 22:27
      So right. Being correct is not enough, timing is required. That is where I am a little disappointed with RV to be honest. Even a stopped clock is right twice a day and across the duration RV has been super bearish and quite frankly wrong.
    • FV
      Fredrik V.
      21 June 2018 @ 06:38
      Agree, but dont you think this balance the FANG/Tesla/CB narrative? Regardless of bias, it is hard to state that we are early in the cycle, which is my main take away on timing...which I don’t get on CNBC/BBG or any other media. Markets can defy gravity from time to time but until gravity changes I salute RV for reminding us of this phenomenon as a theme. A clear Real Vission.
  • JN
    Jill N.
    20 June 2018 @ 11:35
    So enjoyed listening to Jawad insights & observations again , loved the snappier shortened interview format instead of the interviewer taking up time & at times adding their views too. With RV uploading so many interviews & updates , the shortened condensed view is much preferred for the time poor
  • MP
    Michael P.
    20 June 2018 @ 00:12
    First thank you for bringing Jawad Mian back. One of my favorite macro analysts for sure. That said, I would much prefer the long form dialogue based interview with Jawad rather than this more abbreviated view. His interview with Grant Williams in 2016 is one of best pieces ever done on Real Vision. I would love to have Grant or Michael Green engage in a discussion interview with Jawad, say once a year every year, to flesh out his views more deeply.
  • CW
    CC W.
    19 June 2018 @ 23:13
    All these talk of weaker dollar is misleading. Weaker against what?
  • JC
    John C.
    19 June 2018 @ 03:03
    RV - would love to see Jawad and Brett Johnson in six months time to see who’s dollar theory proves true and the loser explain what they got wrong. Just a suggestion. Thank you.
    • AR
      Alex R. | Real Vision
      19 June 2018 @ 17:41
      Good idea!
  • SH
    Steve H.
    19 June 2018 @ 11:50
    One of the interesting by-products of having an almost three-week delay between interview and publication is the opportunity for any short-term predictions to be proven right or wrong. Such as Mr. Mian's predictions of a dovish Fed hike and hawkish ECB statement this month. Just goes to show that the old-timers' warning about the dangers of linking a prediction to a date has merit. More generally, it is impossible other than to be in awe of the scope of this presentation. That said, whenever I come across somebody with such wide-ranging and firmly-held views I look for evidence of balance. In this interview there seems to be very little to balance the strongly bullish narrative for risk assets - which is to say the least 'courageous' given the uncertainties lurking out there in the tails. This is not to say that Mr. Mian is necessarily wrong in his opinions, and we know that many funds make their money (when they do!) by loading the boat with high-conviction positions. But given the stage of the cycle and the 'known unknowns' already on the radar, strongly-held convictions need to be examined even more carefully than usual.
    • FC
      Fractal C.
      19 June 2018 @ 12:02
      Beautifully said.
  • FC
    Fractal C.
    19 June 2018 @ 10:50
    I am positioned exactly opposite of Jawad's recommendations - Long USD, Long Bonds and short US equities!
  • AR
    Abishek R.
    19 June 2018 @ 06:29
    Jawad is fantastic as always.
  • NI
    Nate I.
    19 June 2018 @ 02:19
    I would like to see Jawad on RV more frequently. His views always provide important facts for investors to consider. If Jawad's RV interview was four hours long, I would still be listening intently to every word right to the end. Thumbs up on this one RV.
  • JM
    Jason M.
    18 June 2018 @ 23:07
    A lot of intelligent points but something in the logic chain is missing here. Over the past 45 years (Fiat-only era), whenever the US economy had significant wage gains (ie tight labor markets), the USD outperformed and crushed most non-US markets except for highly concentrated US exporters. Why is this time different? If one gets this call wrong, the whole thesis crumbles. I think the current environment looks a lot like the late-1990s (agree with Raoul) and has some similarities to the late 60s and early 70s that could turn quite ugly (3-5 years) later. If you are expecting Republican's to keep both houses (as am I) from US mid-terms you are looking at very high US growth and wage gains for years. Meanwhile, Europe doesn't break-up but continues to thrash about trying to keep so many disparate groups happy....which you do through lower rates and a lower Euro. This is not a criticism, they are actually way behind the US in terms of amount of time on QE life-support - so it should be fine if they stay on longer as long as the US can show it can get off the drugs. I think the S&P cares about the USD but the US consumer can win from a strong USD that might offset some inflation pressure. If Powell is less about stock prices, he'll be more about keeping a lid on inflation (we are agreed on this as well) letting the USD drop a further 20% is g'teed to stoke serious inflation in an already strong economy. I also see absolutely no way to keep a lid on rates if the USD becomes that unattractive again (as in 2017). Btw, I'd love for you to respond on this comment because you are certainly smarter than I am.
  • DS
    David S.
    18 June 2018 @ 22:51
    In the future can the final summary page be included in the transcript so it can be easily copied? Thanks. DLS
  • TH
    Truman H.
    18 June 2018 @ 22:48
    Saying that the Fed put is now in the bond market begs the question, to what extent can the central bank really control long term rates? Maybe the Fed put in the stock market merely has a lower strike price than before. I'm more concerned about the Euro than Mr Mian's apparent view that problems are manageable in the short term. Germany w/o Merkel would have consequences if it occurs, and rising EU populism is not a small matter. I hope his optimism is correct but I'm doubtful.
  • DS
    David S.
    18 June 2018 @ 22:47
    The conclusion of an Aristotelian syllogism must follow only from the major and minor premises. It works for simple statements. Mr. Mian is presenting many observations with correlations and judgments like a cubist painter trying to get a handle on something that is extremely complex and predictive. He is interviewed for his opinions. His core competency comes from his experience in the market and skin in the game over the years. Mr. Mian always states that these are his opinions. Although I disagreed with parts of his analysis, his conclusions at the end were not markedly different from mine. I am just a lot more nervous. DLS
  • MK
    Michael K.
    18 June 2018 @ 22:32
    Opening music audio is of an appropriate volume - thank you!
  • WB
    Wes B.
    18 June 2018 @ 16:37
    I am a big fan of Jawad. His perspective always seems unique. I love hearing world views from someone based outside of US/UK. Jawad has been pretty right since the 2016 lows. I agree that equities may see higher but they likely need a weaker dollar to get there.
  • HK
    Himali K.
    18 June 2018 @ 16:30
    Classic- try to improve the signal / noise ratio....
  • DP
    Devraj P.
    18 June 2018 @ 15:12
    As always Jawad brings deep insight. Covering true macro picture with stunning details. RVTV please make Jawad a monthly host 😇
  • HO
    H2 O.
    18 June 2018 @ 13:46
    Great interview. Gives a very good presentation of a pretty "Goldilocks" view of all of the major risk factors out there, implying skinny tails. This is where my own views diverge. Tails are fattening, and this implies very different positioning. Hard to see how one can expect this policy cycle and geopolitical risks to evolve in a linear fashion.
  • NG
    Nick G.
    18 June 2018 @ 12:42
    Poor Jawad. He agrees 100% with my long term views: USD down, bond yields stable to up, significantly higher stocks. We are obviously both wrong in a big way :) See you in the poor-house, Jawad.
  • PB
    Pieter B.
    18 June 2018 @ 10:55
    Great presentation Jawad! Thanks a lot!
  • HA
    Hammad A.
    18 June 2018 @ 10:51
    Jawad has addressed all the recent investors’ concerns through a very informative and deep analysis. We need to see him more on RVTV. Thanks Real Vision !
  • sB
    sylvain B.
    18 June 2018 @ 10:33
    Very eloquent and interesting global macro presentation. I also share the view that the adjustement variable could a lower USD, that benefit most parties (US, EM)