Don’t Hate the Fed, Hate the Game

Published on
May 7th, 2020
55 minutes

“The Second Wave Is Going to Be Much, Much Worse”

Don’t Hate the Fed, Hate the Game

The Interview ·
Featuring Matt Rowe and Jared Dillian

Published on: May 7th, 2020 • Duration: 55 minutes

Recently the Federal Reserve has taken unprecedented steps to backstop the market, sending investors scrambling to relearn the "rules of the game," and inciting arguably justifiable outrage from others. Matt Rowe, CIO of Headwaters Volatility, and Jared Dillian, editor of The Daily Dirtnap, debate the utility of this outrage and explore whether the level of shock is justified considering the long history of the "rules changing". Additionally, they examine the misaligned incentives for investors and governments, try to make sense of the recent rally in equities and the bifurcation of the high-yield market, and look forward at the potential for big surprises like bailouts or the Fed stepping into the equity market. Filmed on May 5, 2020.



  • SC
    Sean C.
    12 May 2020 @ 20:07
    If you buy say a 3 month forward 1500 put and the market drops to 2200 next month the return on that 1500 put will probably be considerably higher than the 2200/2500 spread.
  • TN
    Tobias N.
    7 May 2020 @ 12:04
    For someone who sat on 10 million worth of HYG short its hard not to hate the FED
    • JL
      John L.
      11 May 2020 @ 16:46
      Corporate socialism from the people that scared you about Bernie Sanders
  • GF
    Gordon F.
    7 May 2020 @ 16:17
    What constitutes critical infrastructure depends on what we suddenly have trouble sourcing. Medical equipment, antibiotics, etc., were all outsourced to China, but suddenly have become critical infrastructure. If the relationship really goes bad, we will find a lot of other stuff that is suddenly critical infrastructure. Rare earth metals are one that I'm keeping an eye on, but there are many.
    • SB
      Stephen B.
      7 May 2020 @ 17:47
      Power grid equipment is a big one.
    • JL
      John L.
      11 May 2020 @ 16:43
      I think China screwed themselves. Supply chains and possibly consumer buying will shift away from China.
  • RY
    Roy Y.
    11 May 2020 @ 12:05
    Thank you for an excellent and measured discussion .... Hope to see you both back on RV sooner rather than later ...
  • TB
    Toral B.
    11 May 2020 @ 05:14
    From the interview: "Fed is buying have yields of 4%. And the bonds that the Fed is not buying have yields of 10%. " Just ran across following article, which states that Fed hasn't actually bought any corporate bonds, junk bonds or related ETFs even though Fed had announced that it would buy them. That announcement itself triggered a rally by yield chasing institutional investors trying to front run the Fed. Does this point in the article seem valid? Does this increase risk of a market crash if Fed doesn't ultimately do what they said?
  • KR
    Kelly R.
    7 May 2020 @ 11:58
    Towel is thrown in....... Now I am shorting Canadian Housing !!
    • SB
      Stephen B.
      7 May 2020 @ 17:45
    • DS
      David S.
      8 May 2020 @ 05:23
      Be careful. Mr. Dillian warned you that housing in Canada is sacred. DLS
    • JD
      Jesse D.
      10 May 2020 @ 03:26
      As a Canadian, immigration is the real reason housing has boomed here. I’d watch the immigration numbers for a relative signal to the housing market. Of course, COVID can do some major damage irrespectively. Houses are very expensive here, but it’s not necessarily current Canadians who are propping up the prices.
  • js
    j s.
    9 May 2020 @ 16:55
    Can't I hate both?
  • MD
    Mike D.
    8 May 2020 @ 17:10
    @Max W and others at RealVision -- please consider the following as a best practice. Your best interviewers ask a question then listen to the answer. Recently, newer interviewers have practiced 'active listening' by saying 'Yup. Yes. Right. Yup. Yup. Uh huh.' while the other person is answering a question. This works during a face to face conversation between two people, but is quite annoying in an interview setting. Thanks.
    • PF
      Patrick F.
      9 May 2020 @ 16:21
      Also the interviewer seems to be interviewing himself and asking Jared to comment on his thoughts. Should have let Jared lead by asking more open ended questions and let the conversation evolve from there.
  • EK
    Edward K.
    9 May 2020 @ 15:00
    I like the skepticism about negative rates and the Fed buying stocks. Jared is an interesting observer of the markets and not that he is a strict contrarian but rather pragmatically cynical.
  • ML
    Mehdi L.
    9 May 2020 @ 13:43
    Thinking that the US market will be protected by the Fed at all cost creates the conditions for the perfect storm. The reason some people decide not to participate in this market is that if you can't base your capital allocation decisions on financial fundamentals (and instead on "going along" the Fed), you are taking risks that are not adequately priced in your risk-return, namely systemic risks that are higher than current risk free rates of zero.
  • AB
    Allex B.
    9 May 2020 @ 04:05
    Aussies are also fanatical about the housing market. For a period due to COVID you could go to RE auctions but you couldn't go to church..
  • EV
    Erik V.
    9 May 2020 @ 03:50
    This is one of the most facile and offensive interviews I have ever listened to. The whole framing of the discussion is preposterous. No one is “refusing to participate” in the market because they feel “morally offended” by Fed action- that is a complete straw man argument. These guys apparently think it’s a moral protest simply to not promptly blindly buy whatever the headlines suggest the Fed is buying, completely careless to price. So anything other than completely automatic “greater fool” buying no matter how distorted a market, to these guys is the equivalent of putting yourself on a crucifix. Please skip these clowns
  • MI
    Mitchell I.
    9 May 2020 @ 01:26
    I enjoyed this video
  • ml
    m l.
    8 May 2020 @ 17:35
    Yes more macro ! I don’t miss all the interviews that I got paywalled from because they moved to a higher tier without communication... jeez I miss the Grant Williams content I originally subscribed to this platform for which is non existent now.. not surprised if see more pure advertisement videos like the past.
    • NP
      Nick P.
      9 May 2020 @ 01:09
      Grant has a great newsletter, sign up and enjoy twice a month. He also has a couple of podcasts. Search them out.
  • MB
    Matthias B.
    8 May 2020 @ 19:19
    it was a good discussion though, I like Matt’s thinking
  • MM
    8 May 2020 @ 19:18
    Sure, absolutely, we have to transcend our own attitudes toward right & wrong, politics, etc. It seems obvious, but it's always good to be reminded, and to constantly check ourselves. Now, be careful, our egos can be very cagey; listening to Jared I can't help but wonder if such a strong view on this transcend-your-biases point might in fact steer someone away from their better judgement (having confused it with a personal bias) based simply on, say, price action, or even what the Fed happens to be buying...
  • MB
    Matthias B.
    8 May 2020 @ 19:10
    maybe Raoul could have gotten more out of Jared to make this a highlight. Jared is good but was unfortunately a bit undersold here.
  • DP
    Duane P.
    8 May 2020 @ 19:04
    I like Matt's content. More options oriented strategies (spreads etc.) on RV would be great.
  • DA
    David A.
    7 May 2020 @ 19:59
    I wish that Matt would allow Jared to speak more, his questions go on forever
    • KB
      Kirk B.
      8 May 2020 @ 18:34
      Jared always has interesting insights, but the interviewer spent much of the interview sharing his thoughts. The interviewer needs to ask succinct questions, and then get out of the way.
  • JH
    Joseph H.
    8 May 2020 @ 16:56
    Good stuff. As a retail financial advisor for everyday working blokes I often wonder if the pontificators have ever had to make a tough decision on behalf of those class of people. Not the 8 digit net worth people, but the 6 digit and low 7 digit net worth investors that make up 99% of the investor class. Hoi polloi trying to get to retirement with some measure of dignity. More of Jared, less of the pontificators.
  • TG
    Tony G. | Contributor
    8 May 2020 @ 15:42
    Good one JD. Need this cat on THE VISION more.
  • AP
    Alex P.
    8 May 2020 @ 13:21
    Big fan of Jared and he always has a somewhat different opinion. Would love to see him on more.
  • CR
    Carlos R.
    8 May 2020 @ 09:45
    Thanks for the interview i really enjoyed it. It's the second interview where I hear "long/short gamma trading". Where I can learn more about this concept? I don't know how translate the theory to something practical. Thanks
  • BP
    Bryce P.
    8 May 2020 @ 04:24
    Jared is always pretty good. Like to see him on more.
  • mn
    marcus n.
    8 May 2020 @ 01:23
    Very sobering discussion, thank you both.
  • BP
    Barry P.
    8 May 2020 @ 01:21
    Excellent conversation, Jared was great, Matt's perspective/experience equally strong. thx
  • JE
    James E.
    8 May 2020 @ 00:35
    Always a fan of Jared.
  • BB
    Byte B.
    7 May 2020 @ 10:58
    Interesting comment on Canadians valuing houses like american's value stocks. The real lesson there is pension funds. If pension funds fail, a nation fails. Therefore, pension funds of any nation cannot and will not fail until everything else does so in the wise words of Alan Greenspan "BTFD or GTFO"
    • SB
      Stephen B.
      7 May 2020 @ 17:51
      Both the Canadian and Australian housing markets got hyped on stories of a wave of Chinese investors moving in. The reality was that the number of inbound Chinese investors was modest but the hype was huge. Classic bubble.
    • RT
      Rob T.
      7 May 2020 @ 22:06
      Some of it is related to the way mortgage insurance works as well. Government backstops most mortgages via the CMHC so banks have very little exposure to mortgages, it's really the govt that hodls the exposure.
  • NN
    Nathan N.
    7 May 2020 @ 10:43
    Where’d the transcripts go?
    • MW
      Max W. | Real Vision
      7 May 2020 @ 13:07
      Hi Nathan, Our transcriber is taking some time off this week, and the service we are using is for what ever reason not delivering as fast as usual. Sorry for the delay. They should be ready today.
    • DR
      David R.
      7 May 2020 @ 18:29
      Max, your regular transcriber does a FANTASTIC job !!!!!
    • MW
      Max W. | Real Vision
      7 May 2020 @ 19:30
      She really is! She's based in the Philippines and transcribes almost every piece of RV content. I always joke that one day she'll start a fund.
  • DK
    David K.
    7 May 2020 @ 19:29
    I enjoyed this discussion. I would agree that in this era price discovery is virtually impossible. One observation, if I take this to heart, is that managing money is all about increasing profits regardless of the moral implications associated with those decisions. If that is true then of course the smart hardworking sociopaths will most likely be the ones at the top, those like Soros that are completely ethically unencumbered. I am blessed not to have to make a living in such an environment but I certainly enjoy the education that Real Vision provides.
  • DS
    David S.
    7 May 2020 @ 19:09
    Keeping the stock market overvalued in the US is not a cultural thing, it is a political thing. If the market is down, politicians will not be reelected. We are spending trillions of dollars to keep the stock market up. Do you really think that the three trillion dollars is going to the lower wage earners? It is a goodie grab bag for the rich. It is interesting that the programs run through September. Could this be keeping the rabble happy until the election? With Coronavirus we cannot even keep the voters happy with gladiators. DLS
  • AW
    Abigail W.
    7 May 2020 @ 17:15
    Great aspect and many thanks! People tend to judge what is wrong and right and how it should be based on their own moral compass and value system, this kind of thinkings should be kept away from placing the best possible trade.
  • PS
    7 May 2020 @ 16:38
    N mn mmm
  • VP
    Vincent P.
    7 May 2020 @ 16:13
    To borrow a popular Twitter phrase, "this is the content I'm here for", these guys are good and really enjoyed the discussion. Felt like being back on the job having the luxury and privilege to talk with some smart people. Thank you!
  • RK
    Robert K.
    7 May 2020 @ 13:07
    Nice. This is important to see for people who are suffering because they understand that what's happening is fundamentally wrong on so many levels including the moral. Nice pragmatic hints on how to approach these obscene markets from that standpoint.
  • CB
    C B.
    7 May 2020 @ 12:34
    Great interview, thanks guys.