Comments
Transcript
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PSStephanie sums up bitcoin probs pretty well - why should another form command a premium? And the one whic uses so much energy in vain? Pity the scepticism re crypto is all but gone from RV
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WSanddddd noooow gold is POPPING OFF. ENJOY! (So is Bitcoin)
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SBI ran a large M&A team for part of my career, for a big corporate and the overriding rule we set ourselves was objectivity and honesty. No delusional optimism that things would "somehow work out". Just the facts, before determining a valuation and taking a go/no go decision. That inevitably led us to closely examine all the things that could go wrong but that was an essential part of the decision making process. Over the years, that corporate developed a reputation in the market for getting it's acquisitions right, which was no small achievement. With that background, I welcome RV's and Grants "dark" perspective and i do not understand the criticisms in this comments section, that they are somehow not optimistic enough. There are no shortages of propaganda out there, if that is your thing, but i strongly encourage RV to maintain it's pursuit of truth, objectivity and candor. That is what distinguishes you from every one else.
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RSI’m chuffed to bits. Very informative talk. Highly enjoyed the quality of your relationship reflected in the conversation. PS: I’m what someone could call a Gold bug but I see the biggest value of Bitcoin in shifting money across borders.
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JEI do not see a great connection to the economy and the 10 year "bull market". Wage growth has lagged for decades. A system that bails out institutions, leaving individuals to fend for them self........
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LBGreat conversation; really enjoyed that. Sending the transcript to clients NOW!
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CGI would like a little more reflection. For example there is no relationship between tax cuts and GDP e.g., https://www.politico.com/interactives/2017/gop-tax-rate-cut-wealthy/, but there is an increase in the wealth of the wealthy, an increase in many people's sense that the system is rigged, and a continuing financial separation between the haves and the have-nots. But the tax cuts do increase the national debt which has become impossible and which will fall on everyone in one form or another. Frankly, I was a little disgusted that these data were not discussed. Maybe there is a reason that many people who know little about economic or market theory are calling for change?
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SSGreat jobs by both Stephanie and Grant. Thank you. You addressed a wide range of topics with insight and candor. The dollar discussion looked at both sides of the argument and SP still reached a clear conclusion. She disagrees with Raoul, but perhaps each of them will be right, just over different time horizons. More discussion of bad inflation would have been helpful. That is the killer scenario. If inflation rises, long rates want to go up Higher rates may trigger a bursting of the corporate debt bubble and cause problems for all debtors. That may be the recession that the Fed can't fight off with QE. Stephanie said corporate debt is $9.5 trillion, but the numbers she gave for some of the components don't add to that: $2.5 T in BBB, $2.5 T rest of investment grade, $2.4 T junk and leveraged loans. I wonder what makes up the other $2 trillion in her accounting. Total Corporate debt is $15 trillion, but that presumably includes non-traded debt (bank loans, e.g.), and SP seems to be focused in this discussion on traded debt. The pension shortfall is troubling, but a rise in interest rates will reduce the present value of future pension liabilities. Higher rates will cause big problems for debtors, but they may benefit pension funds, at least on the liability side.
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WMGood interview and discussion. Always find the comments interesting but always amazed at the folks out there that believe everything is fine and that there are too many negative nellies on this board. Its difficult to understand why anyone would not be deeply concerned? Add to the state and corporate pensions crisis the looming, (just starting in 2019 as SS tax receipts now do not meet outgoings), social security funding crisis, coupled with historically high stock market valuations, massive government deficits during "good times", political polarization, international tension, climate change, oh let me stop right there. Clearly I must be completely "out to lunch" to be concerned and believe I am watching financial lemmings following the leader.
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FCThis is a great question. BUT, Steph is actually addressing an easier question and that is why the market should go down. The harder question to answer is why the market is going up in spite of all the logical points that she is making! We need someone who puts that part the problem in the context - why is the market going up in spite of everything? Is it just the dovish Fed stance? OR, something big on the China front? Or, is it because US is a relatively better place than all other places? Or something else? And then, what is the path going forward.
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VSGOOD INTERVIEW ... ALMOST ALL PROS KNOW WHAT IS GOING TO HAPPEN-NO ONE KNOWS WHEN? A SUGGESTION IS :IF IRAN MINES THE STRAIT’S OF HORMUZ DUE TO BEING STOPPED FROM SELLING ITS OIL -THEN OIL IS $150-200 + AND INFLATION GOES TO 9% T-BILL YIELDS TO 10% AND ALL OF STEPHANIE'S CONCERNS BECOME REALITY. GOLD ANSWERS MOST OF THIS -NOTHING ELSE!. BUT IMPORTANTLY WHAT HAPPENS TO THE AMERICAN PROFIT POLITICAL SYSTEM? WE DON’T HAVE ANYTHING CLOSE TO “CAPITALISM” ... WE HAVE CORPORATISM+THE WELFARE STATE. BUT WHAT WE’LL GET IS DICTATORSHIP/MARXISM . THIS IS WAY UNDER DISCUSSED? GRANT PERHAPS A FUTURE CONVERSATION???
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VSMillennials say “I can’t imagine why anyone would choose gold over Bitcoin” and Baby-Boomers say “I can’t imagine why anyone would choose Bitcoin over gold”. Go figure.
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SHQuite a few comments here bemoaning Grant's big picture narrative which is clearly bearish. What do you expect? It's a macro conversation not a trade idea to make a quick quid. Surely his and Steph's bearishness makes sense when you look at our global monetary system and path world economies are on? Did they not provide clear, logical explanations to justify their views? As an investor with a long time horizon and looking to preserve capital for retirement and to pass onto my children, I don't care if Grant's narrative has remained for the past 5 years, in fact i'm glad of it and welcome every opportunity to remind myself of it. In 10 years of trying I've yet to find a logical and reasoned argument as to why our current monetary system is sustainable, all the evidence points to the exact opposite.
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AMI don't understand how someone at her level (both professionally and intellectually) "cannot understand cryptocurrencies", you can argue on thier use and adoption but the concept of decentralized ledger and asset tokenazation is not super complicated. She should really look into it, as I believe it will complement the use of gold as money in the future.
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BJWatched her at Mauldin conference 2015. Completely got everything wrong since then. Good to listen to so you know what not to do
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APGrant, any investment advice? (not gold) We already get that bashing Central Bank(er)s all day long is fun (for some), that we should all be worried, that debt levels are ‘unbelievable’ and ‘staggering’. That many things are ‘illusions’ and that ’no-one seems to believe A-B-C’. But watch Stephanie’s reactions: We had to wait till min 45 before Stephanie said “maybe to say something nice and positive here” + min 49 “you keep dragging me back to such dark places”. And as a viewer, I can say she is very right. Using your guests to prove your points and constantly drive them into your angst with flavors of ‘no-one gets it’ has really become religious here (LT RV subscriber here). Suggestion: Get semi-dirty like Raoul with his calls, or at least find ways to be come constructive (or, as I said before, maybe I just don’t get that this is Justine’s job to be constructive and do deep research). Besides, being worried 24/7 is not healthy, and we all wish you best here.
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CHWonderful macro discussion again from Stephanie. Very easy on the eyes as well.
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DFSo nice to see people actually facing up to the reality of the situation. They realise that we have to find a way to deal with the current environment, but the gravity of the consequences of failure of the Feds experiments is clearly laid out here. You have been warned.
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REUnfunded liabilities - only 3 choices. Default - states can't go bankrupt. Restructure - Illinois tried to restructure pensions but the courts shot it down. Reflate away the notional value. Which do you think we will see?
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ROCould it be that Fascism and Communism are both punishments for the poor management of capitalism.
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KSAlway enjoy watching an interview with Grant and Stephanie -- two very smart perceptive people. I totally agree with everything they say - Central Banks are insane and what they have done is insane and the fact that they pretend they don't know the nightmare they have created is insane. But, you know what the bright spot in all of this Central Bank Fiat money ponzi scheme scam really is??? The knock on effect. Central Banks have abused their powers so badly that they now have ordinary people questioning WHAT IS MONEY? This simple question, sent me -not a financial person- but a math teacher- down the rabbit hole 7 years ago - it is how I found Real Vision. I bought bitcoin at $200 because I realized that money is not an absolute - money is a political question. The myth of barter? Most don’t realize, but the story you are told about the invention of money is based on a myth (nice word for a lie). Archaeologist's more than 100 years ago disproved barter myth of money creation. First writings from Babylonia are ledgers and virtual tabs, it was the state not ordinary people that created money, and the way they did it was to force people to acquire gold to pay their taxes. Gold has all the wonderful characteristics of hard money, but then again aren’t cigarettes money in prison? Money is an abstract concept - I am curious about MMT and hope Real Vision gets Stephanie Kelton on to discuss, but she has to be asked the hard questions --- how does one control a corrupt establishment that will print money to buy votes to support their own agendas? I do like the idea of MMT, but I don’t know how one gets around this essential problem and unless this problem is addressed in reality isn’t it no different than the QE negative interest rate insanity we have now.
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EPThe later parts of the video referred frequently to "dark outcomes" which got some pushback in these comments. If anyone wants to try analysing a really dark outcome try https://youtu.be/5WPB2u8EzL8 which has the approval of some significant economists.
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KCmarijuana taxation is only going to pick up the untaxed portion of the over all use of vices minus the reduction of purchasing ability from the taxation that occurs. A few states were able to capitalize on the beginning of it but this concept that it's an end all is ridiculous. It will be a drain on saved capital of babyboomers and will not add to productivity, more likely will dampen it. I'm not against legalizing it but the arguments made for it are very unchallenged.
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diOutstanding, informative and amusing notwithstanding that the end of world as we know it being just around the corner, or the one after that
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JDI personally enjoy your female speakers, please continue with this trend!
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MDGreat interview. Bring her back.
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rrStephanie and Grant present and enjoy cogent chats. Thank you. Dark - Smark. A small ray on reality every now and then hurts no one.
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MFSteph mentioned that Grant loaned her some shoes, maybe I'm old fashioned but I think they look better on Ms. Pomboy.
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BTIs creditism the "middle-path" to capitalism and socialism?
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TMThe Gold vs Cryptocurrency argument is so unbelievably pointless. Anybody who understands the reasons to own either ought to be able to at least entertain the idea that they could complement each other well. Yeah, I 'get' that Bitcoin is significantly more volatile and new, and why it is risky. At the end of the day, you're never going to see 10x+ returns holding a riskless asset. However, this just means you position size it accordingly (0.5 - 1% of a portfolio if you wish to be prudent) to offset the volatility and risk of a substantial decline.
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VMTo me the reason Bitcoin has not been widely accepted is the “cost /friction “ of using it. Give me a credit card instead. I know it can move across the world but how many of really need that in our daily lives. Asking for a friend “SP”.
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BBThank you. One of the conversations that help me keep my (admittedly relative) sanity.
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SSGreatly misplaced pathological modesty.
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PJLong overdue return. Hope it won't be so long for the follow up. Great interview.
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ggSuggestion every guest and professional interviewer put their 5yr record upfront. That way we know how to weight their points.
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SPLovely conversation, thanks. But aside from Gold, where do I put my money now ??
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GHDidn't really learn anything new but still enjoyed the conversation. The lists of concerns are what we all think about everyday and wonder how the current state of affairs will turn out. Only certainty is things take a lot lot longer to play out and the central planners have a vested interest and unlimited amount of cash to keep the party going as long as possible because of the worries you discussed.
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CHStylish
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HOPlenty of reasons to be pessimistic about the economy and the level of asset prices, but very tired of listening to people commiserate about how the sky is always falling. Over time this kind of negativity blinds people to constructive possibilities and makes them bad investors. Many and I dare say most RV guests have disbelieved just about every rally that has happened in the past few years, and go into hibernation until inevitable market corrections confirm their bearish biases. The funny thing is that many pathological pessimists don’t have the cajones to go short and in the same way lack the temperament to go long. The end result is crappy macro returns.
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jeWith regards to corporate debt, has anyone done a deep dive study about where the borrowed money is going . Some obviously has been used for buybacks. I'm sure there are a multitude of reasons to float a bond . There must be some trends or patterns within sectors. ??? The why is important ... Are most borrowing until their ship arrives ...
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PDGreat interview , but, errr.... can we get the name of Stephanie's personal trainer....?
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DWAnother great interview, Grant. Around 95% Steph and 5% Grant. Perfect balance. Too many interviewers make it about themselves. Informed and informative. Impressed!
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DPGreat guest and interview.....
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RM*inserts comment about broken clocks*
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TMWant to save capitalism? Then work to reintroduce some version of the Border Adjusment Tax or tarrifs. It would stop deflation, provide the American consumer(70% of the economy) with money to spend, normalize rates, rebalance assets prices, and constrain the growth of government. That would not solve all the problems US has, but it would solve a lot of them.
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CTGreat interview, bring her back!
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DSTwo trillion dollars for infrastructure starting soon. DLS
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TCI'm of the belief that the Fed and central banks around the world know the massive central bank intervention will not work long term & that is has negative implications. They are not dumb, they see what is happening, I'm sure they read stuff written by their critics, and I'm sure they are well aware of the counter arguments to money printing & ZIRP, etc.... But my guess is they feel they are forced to do what they have to do to prop up markets short term. We are in a world that thinks very short term, and NOBODY in politics or gov't wants to stand up and take the hard medicine that would make the economy & markets healthier in the long term. U.S. presidents & congress think very short term, because they have to be re-elected. They all know it would be political suicide to take the bitter pill that would mean health long term for the country, economy, capitalism.....but maybe mean short term asset price crashes and recessions that would get them voted out of office. So the only choice is to continue to prop things up as long as the next election.
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GCI've heard this basic conversation so many times. Grant's consistent theme is, "I can't believe it and at some point it will matter." We get it, but the lament is getting old (and costly, for anyone who'd been scared away by Grant and Pomboy over the past five years). I love the long format. Just wish the repetition in Grant's wonderment could be reduced. That said, kudos to Grant for landing an extended interview of Pomboy. Always appreciate hearing her views and insights into possible investment opportunities (as well as her humor), except when she allows her political ideology to cloud her perspective (for instance, she fails to acknowledge the ways income and wealth are already redistributed up and uses the tired albeit effective scare tactic of positing a bipolar choice between capitalism and socialism). And she seemingly fails to appreciate the reasons why populism and progressive politics are gaining steam; she seems to think everyone is riding the wave. Of course, all of us have our blind spots, so I don't want to make too big a deal out of this.
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TCJust wanted to mention it again, Grant W. is a super talented and gracious interviewer. Keep it up sir.
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IFPro Trump comments from a permabear. I'll take it.
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APGreat interview, I hope to see Stephanie on here again soon!
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AF@joseph said it in one. real vision......unreal vision, this stuff is crazy!! we have to feel some pain at some stage, better to let it be felt now
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JLoutside of Real Vision and finTwit there is almost no real or honest discussion going on in the public about the federal reserve. Thanks for doing the real work.
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DSThe move from some central banks like China, Russia, Poland and Hungary to buy gold is a recognition that the US has and will weaponize the dollar against them. Over time, the world will learn to live without any reserve currency and will be better off for it. The FX markets will set the price of each currency for better or worse. At least they have skin in the game. As long as we can legally buy and sell gold, we can use gold as a partial hedge, but silver coins may be more tradeable for bread. In the new world everything is in play. Be careful. DLS
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JSEveryone is over thinking this. It's really a simple algorithm. What day is it? If its a non holiday weekday, then market goes up:)
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JHWhen everyone's making money everyone is long denial. Thus we keep dancing.
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GWAmazing interview and fantastic discussion on leveraged share buy backs. To all 11 viewers that voted thumbs down, get your heads checked.
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LJThe Rip Van Winkle question on Gold always gets me...I would answer in the multiple 1000's and I would be dead wrong in USD, but if I were Argentine, or Turkish, or Canadian, or or or...I would be so right. Also I wonder if there has ever been and investment that so many "smart" people were in agreement on that just didn't "pan" out?
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VPGood to have Stephanie back as we continue to seek clues as to what happens next. To add, it could be interesting to hear how skeptical players are participating in this market environment. Are they going along with the uptrend in high flyers, hedging, FX positioning approach, interest rate strategies etc.... By God, they better not be short preppers!! Thanks loads!
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CRRecently the clock doesn't consistently fade away when in full screen.
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GRSurely the next crypto will be based on a Bank of Good Deeds - the coin being BGD. People will give their free time for good deeds and the receiver of the good or service will "print" payment in BGD. Before you know, BGD will be wide in circulation and the world will be wonderful. Mike Novogratz, if you read this.....you're welcome. Please print me some BGD.
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DLTerrific interview - thanks so much.
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MMAmazing to listen to. Worth the subscription price.
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JSReally enjoyed this interview. Very articulate and logical and knowlegeable.
STEPHANIE POMBOY: If this is the underfunding situation now, when we're arguably at the peak of economic and financial activity, what is it going to look like when, heaven forbid, the market actually sustains a downturn? It's remarkable, the complacency around the corporate sector's ability to service all of this debt. It's going to take people a while to wrap their heads around the size, the sheer magnitude, of money printing that's going to be required.
GRANT WILLIAMS: Yeah.
I'm about to have a long overdue conversation with my dear friend, Stephanie Pomboy. I've been trying to get her to come back on Real Vision for a long, long time, and she has resisted for reasons best known to herself. But there's a whole bunch of stuff we want to talk about. I'm going to ask her why she resisted, and she's going to blame me. But don't believe her.
The Fed, corporate bond markets, junk bonds, equities, there's so much going on. And Steph does some of the best work out there on all of it, much to her chagrin. She's going to hate me saying that. So let's go and sit and talk to Steph.
Well, well, well. Fancy seeing you here.
STEPHANIE POMBOY: Here we are.
GRANT WILLIAMS: Here we are again. Now this has taken a long, long time. Personally, I blame your almost pathologically misplaced modesty. You're probably going to blame me.
STEPHANIE POMBOY: No.
GRANT WILLIAMS: But--
STEPHANIE POMBOY: There's no blame whatsoever.
GRANT WILLIAMS: But we're here. We're here, finally.
STEPHANIE POMBOY: We made it.
GRANT WILLIAMS: Steph Pomboy, welcome back to Real Vision.
STEPHANIE POMBOY: Pleasure to be here.
GRANT WILLIAMS: It's been far too long. So, so much to talk about. And as you and I tend to do we get together, we have to start with the Fed, right? It seems the logical place to start because from the mails or the Fed, all sorts of things tumble out. So I've got to ask you, what do you make of Powell's flip-flop? How important is it? Or are we wasting our time worrying about it?
STEPHANIE POMBOY: It's amazing to me the speed and magnitude of the turnaround. You know, at the end of October, they were debating whether they were going to raise rates two times or three times and everything was fantastic. And in the span of six weeks, now they're talking about not just-- not raising rates but pausing the balance sheet, unwind, et cetera. And what's been stunning to me isn't even that the Fed reversed course but the way the markets interpreted that.
It's going into it when they were talking about raising rates two or three times in 2019, everyone was saying, hey, this economy is so strong we can handle the higher rates. You know, bring it on Fed. And then when they flipped in, you know, whiplash-inducing fashion, the narrative was, oh, this is great because now we're going to continue to get liquidity.
GRANT WILLIAMS: Liquidity.
STEPHANIE POMBOY: So there was no reflection on why they had to abruptly reverse course and what that says about the fundamental state of the US economy, and more broadly-- from our long discussions about the Fed-- how they can ever extricate themselves from this box that they've neatly drawn around themselves, where they can't ever raise rates. We got 10 year Treasury yields just above 3%. And you can feel the economy is starting to shake like an old car on the highway.
GRANT WILLIAMS: But, I mean, I think that's exactly it. They've built this trap around themselves. I remember putting a picture a couple of years ago of the central bank governors-- Bernanke was in the chair at the time-- in a corner with a painted floor where the last bit of floor of the painting was right in front of them, and that seems to be what they've done. And yet, for now, they've gotten away with it, which I'm just-- I'm just baffled by it.
STEPHANIE POMBOY: It is baffling. You know, they've demonstrated a perfect record and getting it wrong every time. And yet the markets continue to adapt to them with some great gift of insight and ability to navigate us through any kind of economic or financial shoal, all evidence to the contrary.
GRANT WILLIAMS: Right. But is it that? Is the market thinking that? Or is the market-- I think liquidity cheering thing is just that. It's, OK, almost as if they kind of expected this to happen. We're going to keep going. There's no way they're going to get these four rate hikes away in 2019. So we'll kind of keep buying. We had that wobble in December. And as soon as they about turned, it was like, we knew this would happen.
STEPHANIE POMBOY: Right. The status quo is great as far as Wall Street is concerned. What happens in the underlying economy is almost irrelevant at this point, as long as you keep the liquidity pumping and there's cheap credit to buy back shares, what's to stop this game from going?
STEPHANIE POMBOY: Well, let's talk about those buybacks because that's such a massive component of what's going on. I don't have the numbers to hand, but the percentage of the advances that are down to share buybacks is, I mean, so staggeringly beyond anything you could have imagined. But, again, it's hard to see how people aren't looking at this and going, this is a terrible thing.
STEPHANIE POMBOY: Well, the numbers are staggering. And it really-- the corporate sector, I guess, is the largest purchaser of stocks in the post-crisis period. I was looking at-- we have seen this ballooning in corporate debt in this whole recovery phase. And I was looking at that relative to buybacks because we all know intuitively that buybacks have been debt financed primarily. And the numbers are actually even more remarkable.
So according to the Federal Reserve's flow of funds numbers, there was $3.3 trillion increase in corporate debt.
GRANT WILLIAMS: Right.
STEPHANIE POMBOY: Buybacks over that same stretch were $3.4 trillion. So [LAUGHS] I mean, the numbers are just truly staggering. And one window that I think is really important into the role that buybacks have played is the difference between S&P earnings numbers, which are heavily flattered by these buybacks because they're per share earnings numbers, and the profit numbers reported by the government as part of their GDP report. And this is super wonky. Only nerdy economists like me would look at this.
But it's been amazing to watch the gap between those two measures expand. We had this huge obviously 24% increase in S&P earnings last year, and the rule to which that was influenced-- even notwithstanding the tax cut by the record amount of buybacks-- is so under appreciated. And it's had me worried that as we come into 2019 in that tax cut lift phase, people might start to realize, hey, the underlying fundamentals here aren't really that strong because while the S&P was reporting earnings of 24%, the broader government profit numbers were only up 7%.
That's a massive gap. And you've only seen gaps like that a handful of times in the last 50 years. And every time you've seen a gap where the S&P ran ahead of the government numbers, it's been ultimately reversed.
GRANT WILLIAMS: It's catch down or catch up. Yeah.
STEPHANIE POMBOY: The BEA, the government, has had the numbers, right? And S&P ends up moving back into alignment with it which will be really painful if it happens this time.
GRANT WILLIAMS: Well, and also the estimates for earnings growth, I mean, are plummeting, right? I mean, it was a great chart you put in macromavens which I shamelessly stole. And if I--
STEPHANIE POMBOY: Steal away.
GRANT WILLIAMS: I would have tried to pass it off as mine, but everyone would have known that it was not me. But, I mean, it's-- I mean, these things are falling off a cliff. And yet, and yet, and yet--
STEPHANIE POMBOY: Right. The chart is, you've got the earnings revisions going down and the stock market just keep going up. And I guess part of it is that we're really kitchen sinking, if that's a phrase, the weakness into the first quarter. And if you look at that trend in estimates going out, they see earnings picking up. And then ultimately going back to double digits in 2020. So this is just temporary. You know, it's--
GRANT WILLIAMS: Transitory. Yeah.
STEPHANIE POMBOY: Right. It's seasonal. It's the one time effect of the tax cut. So nothing to see here.
GRANT WILLIAMS: But, I mean, everywhere we look-- and the work you do and