Central Bank Liquidity: The Next Crisis Catalyst?

Published on
26 November, 2018
Consumption, Credit-cycle, Recession
37 minutes
Asset class

Central Bank Liquidity: The Next Crisis Catalyst?

Featuring Danielle DiMartino Booth

As 2018 draws to a close, global central bank liquidity will flip from net positive to net negative for the first time in a decade. Danielle DiMartino Booth joins Real Vision to explain her thesis that share buybacks have created positive momentum in US equity markets that until only recently have moved away from historically low volatility. The question is, can that volatility be contained as liquidity withdraws? Filmed on November 14, 2018 in New York.

Published on
26 November, 2018
Consumption, Credit-cycle, Recession
37 minutes
Asset class


  • F

    Floyd .

    3 12 2018 23:03

    0       0

    What a commonsense view ,rationally explained and well understood. Danielle should be brought back to access the Fed's moves as they make them.Her perspective would be valuable.

  • RP

    Ryan P.

    2 12 2018 19:22

    4       0

    I think your housing thesis is super intuitive and I agree almost word for word on what you said.

    I’ve learned over time that it’s not about equities. It’s all about credit. The story in bonds is going to be the story of 2019-20.

    Volatility is coming.

  • JS

    J S.

    2 12 2018 16:22

    0       0

    Thank you DDM, brilliant as always!

    I am currently short the nasdaq and uncomfortably so ... based on your opinion, should I hold on or should I close my position?

  • RK

    Robert K.

    30 11 2018 15:07

    3       0

    Big fan of DiMartino. Have her book - I highly recommend it to everybody who still lives in a fantasy world thinking we have smart people in central banks who think they know what they are doing.

  • JC

    Joe C.

    30 11 2018 03:05

    1       0

    We’ve seen an inordinate number of cabinet/administration members take heat and “resign”. Do you think the President holds the same sway over the Fed Chair? If markets go south, Powell could easily become a tweetstorm-targeted scapegoat, particularly if he bucks consensus/expectations/precedent and either holds firm on tightening or does not ease at a rate acceptable to the White House. Is the tail risk, not of a Powell resignation but of a Powell “resignation—in the same sense we’ve seen other top officials ousted—at all a possibility?

  • SS

    Shanthi S.

    29 11 2018 22:15

    4       0

    Brilliant! Such a clear thinker. Thank you!!!

  • ML

    Maxim L.

    29 11 2018 04:25

    3       0

    Thoroughly enjoyed it.

  • BS

    Bill S.

    29 11 2018 03:51

    6       0

    Carefully read his turn of phrase:

    "Interest rates are still low by historical standards, and they remain just below the broad range of estimates of the level that would be neutral for the economy‑‑that is, neither speeding up nor slowing down growth."

    The key is two terms, "just below" and "broad range of estimates..".
    Powell does not appear to be giving
    up on raising rates, the key is what
    "range" he has in mind and..what number within that range he believes or FRB staff economists
    believe is neutral. So, in my view the market heard what they wanted to hear and did not analyze the spoken word. The press established a false headline.

    In short, once this settles in, get ready for the reversal.

  • IB

    Ian B.

    29 11 2018 00:36

    1       0

    Looks like Powell is a clone or scared.

  • MT

    Mark T.

    28 11 2018 21:39

    4       0

    Thank you Danielle for appearing on RVTV. I hope you get a bunch of new subscriptions. Come back soon. Your views ring true and lead to actionable conclusions even without specific recommandations.

  • SL

    Seth L.

    28 11 2018 17:23

    1       14

    Toning down the hyperbolic tone would go a long way in building credibility. Just sounds like a ranting narrative and hard to take seriously. Sorry.

  • MB

    Markus B.

    28 11 2018 13:02

    6       0

    Danielle, one of the best RV contributions of late. Maybe a question to you as someone that has more insight than us plain mortals: Given the ongoing pressure by the administration on Chair Powell do you see the risk that he may decide to leave, not finishing his term? Any insight / views appreciated.

  • BT

    Brian T.

    28 11 2018 13:00

    2       0


  • BT

    Brian T.

    28 11 2018 13:00

    2       0


  • OS

    Oliver S.

    28 11 2018 12:15

    2       0


  • cl

    chi l.

    28 11 2018 09:13

    4       0

    she has a great mind. super analytical...much better than other speakers so far...(some biased)..
    great input.

  • WB

    William B.

    28 11 2018 06:29

    5       0

    I’m a Daily Feather subscriber so take this comment in context of my financial interest in The Daily Feather and every interview or publication Danielle might do.

    I was blown away.. This is such a great presentation. I learned a lot. The Daily Feather is a great resource for keeping up on what Danielle is looking at each day but this video is the macro view that she keeps current at all times.

  • JF

    Joseph F.

    28 11 2018 06:27

    4       0

    Wow. Fantastic interview.

  • GR

    Garey R.

    28 11 2018 03:23

    4       0

    Thoroughly found this interview to be worthy of consideration, enough to view it several times and still considering a third or fourth.
    She mentioned autos briefly in the presentation but it would certainly be of interest to hear more from her about that sector of the economy. Have her back again!
    Thanks to the RealVision team for the great content and insights!

  • DY

    Damian Y.

    28 11 2018 03:03

    3       0

    This is the second time I've watched this interview as there is a lot of great information to take in. Thanks Danielle and thanks RV.

  • BH

    Bernard H.

    28 11 2018 00:58

    7       0

    Very good. Danielle highlights a crucial point that many market commentators overlook about the property market in the US and here in Australia: The Millennials are not going to be there to buy the Baby Boomer properties off them. The Millennials are much more interested in using their money to enrich their experiences in life and the thought of going massively in debt to buy a house just does not appeal.

  • PC

    Philip C.

    28 11 2018 00:24

    2       1

    I'm not sure why baby boomers seeking liquidity will be forced to sell their homes. The inceasingly popular option is equity release, which usually takes the form of home reversion or a reverse mortgage. I can foresee this becoming big business as the bulk of the boomer generation retires.

  • SW

    Scott W.

    27 11 2018 22:01

    3       0

    I was just talking to a friend who labors at Capital One about how they now consider themselves to be a "technology" company. How they are hiring the brightest and best engineers (not financiers) from the ivies. How said brightest and best stick around for a year at best because they get bored - most likely because there's no more innovation to be found in extending consumer credit to the masses. I think this comports with DDB's general theme that "liquidity" has been pushed around for entirely too long and in far too many unintended ways and places. I might also just be a raving old codger.

  • OG

    Owen G.

    27 11 2018 20:48

    0       0

    A great watch, thank you.

    RV - Is it possible to some how replicate the ending headline below? The reason I ask, when I come to read the actions/points at the end of the videos, I will often pause the video to take some notes. When you pause the video, you get the time, the play buttons, etc which all get in the way. Just an observation and a wish from me. Many thanks.

  • VP

    Vincent P.

    27 11 2018 20:07

    3       0

    Excellent presentation. Cash management, ST Muni's and Gold lets one sleep at night. Good color and style Danielle. You are now obliged to return on the other side of this mess we're in. It appears you'd be welcomed! Thank you!

  • TJ

    Terry J.

    27 11 2018 19:18

    4       0

    Invaluable and thought-provoking analysis from Danielle, who clearly knows the Fed's strengths and weaknesses like the back of her hand. Thank you RVTV for yet another priceless video.

  • PP

    Patrick P.

    27 11 2018 16:32

    5       1

    IMO the Fed has two mandates...Protect the over spending and borrowing of the US government, and at all cost protect the banks...especially the money center banks. Everything else is window dressing.

  • BS

    Bill S.

    27 11 2018 16:14

    3       0

    Very entertaining. Would like more in depth content on the IG BBB potential fallout and it's effect on
    HY as well as IG funds out there.
    Even a Vanguard VFSUX ST IG fund
    has about a 20% exposure to BBB
    and other Vanguard/IShares IG funds are worse than that. Just what is the estimated rollover into
    HY and the effect on the IG sleeve?

  • PP

    Peter P.

    27 11 2018 15:42

    5       0

    Well, that was outstanding. The best thing I’ve seen on Real Vision in months.

  • MM

    Mike M.

    27 11 2018 14:17

    5       0

    Excellent. Hope to see Danielle in February. Inflexion point is close at hand.

    Thank you.

  • NG

    Nick G.

    27 11 2018 12:49

    2       1

    Yes, agree with almost everything. And that is the problem. I fear that most of these points are already mostly, if not fully, priced in.

  • CE

    Carol E.

    27 11 2018 08:34

    5       0

    If you didn't know now you know. Danielle is one smart, astute woman who I am now listening to.

  • FV

    Fredrik V.

    27 11 2018 07:49

    2       0

    I started to think about the difference between earning per share compared to earnings...has any of you seen a graph on how the delta has been?

  • LC

    Liliana C.

    27 11 2018 06:37

    3       0

    Very insightful in several areas. Thank you Danielle!!!

  • SS

    Sean S.

    27 11 2018 06:36

    4       0

    Absolutely brilliant, Danielle! Thank you for sharing.

  • DC

    Darren C.

    27 11 2018 04:13

    3       0

    Share buybacks. I am sure they seem great in times of borrowing free free money and buybacks making the stock fundamentals look arguably reasonable. What I have not seen or heard is what happens when companies cannot afford to borrow to buy back shares anymore? Further, can one not assume that paying back those loans would be a huge headwind to earnings and/or free cash flow? It would seem that at some point in the future, 2-3 years, this double whammy might encourage a serious re-valuing of US equities.
    If anyone can point out what I'm missing I'm all ears.
    Amateur here, so please be gentle as much of the content here is above my pay grade.

  • LB

    Louis B.

    27 11 2018 03:50

    4       0

    Great interview and fun to boot, coming from an ex-Fed insider!
    Loved it when she remarked about the importance of the delta, when comparing today's change in interest rates to the '80s...
    Dare I say it? I hope she's right and Jerome Powell will be steadfast in his plan to carry on 'normalising' quietly. BUT...
    The central bankers' shenanigans could surprise all of us yet again. They (not necessarily the Fed) could very well conjure something out of nowhere that manages to keep the believers from running to that narrow exit door. But what could be better than liquidity? I don't know. I'm no prestidigitator! But I do know that cognitive dissonance is prevalent and easily exploited by central planners. Again, I hope she's right. After all, what she says makes total sense and I agree with it. But we've now been in neverland for soooooo long!

  • JG

    Jackie G.

    27 11 2018 03:37

    0       0

    Does anybody know where I might be able to take a look at the index(s) she mentions?

  • JS

    Jon S.

    27 11 2018 02:45

    13       0

    Ha Ha, perfect mix of sarcasm and historical perspective. I could listen to Danielle for hours.

  • DY

    Damian Y.

    27 11 2018 02:19

    3       0

    Brilliant interview. I always love to listen to Danielle speak. Lots of great information. Please RV, bring her back again soon.

  • PD

    Pat D.

    27 11 2018 01:32

    4       0

    Great presentation. Looking forward to hearing from her early next year
    Interestingly, only 5% Thumbs down (It's generally around the 10% mark).

  • DB

    Daniel B.

    27 11 2018 01:23

    3       0

    You’ve nailed it Danielle, big thumbs up!

  • PG

    Philippe G.

    27 11 2018 00:38

    7       0

    Excellent! Appreciate the direct and honest delivery.

  • SL

    Stephen L.

    27 11 2018 00:17

    2       17

    Did anyone actually learn anything?

  • ZH

    Zack H.

    26 11 2018 23:55

    4       0

    What a breath of fresh air, great colour on monetary past and future. Great guest Real Vision!

  • MR

    Mathew R.

    26 11 2018 23:42

    2       0

    Loved her book...awesome to see her in a RV interview!

  • EH

    Edwin H.

    26 11 2018 23:34

    1       0

    Sooo, scotch anyone? A glass... A bottle...

  • HS

    Hendrik S.

    26 11 2018 23:02

    3       20

    She is such a hotty. Love her linkedin photo.

  • SU

    Shakeel U.

    26 11 2018 22:06

    8       0

    Very good 10/10. Please bring Danielle back, and thank you.

  • Sv

    Sid v.

    26 11 2018 21:56

    2       0

    very nice discussion

  • DF

    Dominic F.

    26 11 2018 21:08

    3       0

    Danielle is awesome!!
    If things are crystal clear to you after watching this interview you need to check your bias’.
    Plain speaking, on point after point after point, no agenda, and funny to boot.
    Thank you Worth Wray for suggesting we follow Danielle on Twitter when she had 400 followers. Her insights are invaluable and Jerome Powell is da man 😉

  • NI

    Nate I.

    26 11 2018 20:40

    10       0

    Good interview RV. Curious about Danielle's claim to hold "cash". Does she mean $100 bills in a vault or as liabilities of one or more banks. I'm guessing the latter since she claimed the returns were above inflation (presumably she means the BLS version of inflation). The fallacy of course is the inflation measure. John Williams' shadowstats.com and many others including my own household budget show that inflation is at least 4%-5%. Even the Oracle of Omaha says 5% on average. The hedonic adjustments at the BLS are a farce (where can I buy a 1968 television?). Danielle will lose capital with her allocation as a consequence of underperforming genuine inflation, but not as much as she might in the equity or BBB bond market. I agree with her on muni bond safety in certain locations, but I don't think munis will beat inflation either (except maybe the BLS version). Gold is a good answer, but it will also take a hit in the early phases of meltdown just as it has in past crises; however, high probability that it will ultimately recover to preserve purchasing power.

  • NH

    Neil H.

    26 11 2018 20:38

    1       1

    always great to get Danielle's perspective. She seems concerned about mortgage rates over 5% hurting the economy, but what happens when we go into a recession and rates go down. will she still be worried or will housing perk back up with lower rates again.

  • AP

    A P.

    26 11 2018 19:20

    1       0

    Like her style a lot. All the best with your new company Danielle.

  • MC

    Matt C.

    26 11 2018 19:17

    7       0

    Surprised that she confuses the explicit short vol blow up w/ risk parity...

  • AG

    Anubhav G.

    26 11 2018 19:15

    5       0

    I am unable to find MOVE index on TD. Does anybody know the correct code ?

  • CL

    Cyril L.

    26 11 2018 18:37

    22       5

    Too sensationalist. She's more of a journalist than a deep thinker. I've read her book about the Fed, which while interesting was a bit annoying too for that exact reason. Hard-hitting statements but not much to back them up.

    One example: "Leverage loans are basically issued by companies that cannot access the junk bond market. They
    are junkier than junk. So what do they do? They go off to their friendly neighborhood investment
    banker, and they syndicate a big junkie loan. " Hmmm. No. I work in leveraged loans (on the buyside) so admittedly I'm biased, but that statement is simply factually wrong. Actually many companies issue both leveraged loans and HY bonds, so no they don't issue loans because they can't issue HY bonds. They're just different instruments, with different characteristics. Moreover, typically loans are senior secured and HY bonds unsecured (at least in the US), so if a company issues both loans and HY bonds, its loans will be less risky than its HY bonds. It's true that as in every extended credit cycle, some leveraged loans are issued that shouldn't be issued and investor protections (covenants) have seriously weakened. There will be a day of reckoning, and some loan funds (and HY funds) may blow up, but the majority of the market remains healthy (at least on a relative basis, i.e. if you invest in a leveraged loan fund managed by a conservative and experienced manager and end up suffering permanent capital losses, it will still be the least of your worries because in the environment in which that happens, all your other assets but maybe gold and cash will have lost much more value). People may freak out about leveraged loans because of all the headlines, but my advice is if you see the loan index trading back at 70 or below like in 08-09), buy a loan fund from a conservative manager (simply pick one whose fund will have declined significantly less than the index) and either it will be the trade of your life or if not, you'll still lose much less money than on everything else.

  • AA

    Aymman A.

    26 11 2018 18:24

    1       0


  • RA

    Robert A.

    26 11 2018 18:20

    6       0

    Yes, some more please. Danielle and Richard Fisher must have attended some Texas based “Pithy, Concise and Succinct” thought and speaking school. I could listen to both of them for hours. I enjoyed Danielle’s prior RV work and immediately ordered and read her book “Fed Up”, which book I highly recommend to my fellow RV’ers. IMO, this is one of the best RV presentations of the hundreds I’ve watched...it checks all the boxes—timely, informed, well presented and, of course, the “pithy, concise and succinct” box. You go Girl!

  • HO

    H2 O.

    26 11 2018 18:11

    2       0

    A great speaker, and a follow up conversation with her would be even better with an interviewer to give the discussion more structure. A lot of listening required to put together her outlook and read it through to her investment thesis.

  • VA

    Vikram A.

    26 11 2018 17:23

    2       0

    This is great. Any chance we could find out which muni bonds specifically she would buy and/or which muni manager she has her money with?

  • BP

    Bob P.

    26 11 2018 16:34

    8       2

    I just listened to the whole thing again - closely. If this doesn't scare you I don't know what will. This woman clearly knows what she's talking about. I really hope they have her on more. She's a true expert right at the heart of the problem.

  • DJ

    Dan J.

    26 11 2018 16:25

    3       0

    excellent interview

  • ag

    anthony g.

    26 11 2018 15:01

    3       0

    Well explained.
    Bring her back at some point ?
    Well done RV.

  • Nv

    Nick v.

    26 11 2018 14:01

    5       0

    Great episode. Well done

  • DS

    David S.

    26 11 2018 12:59

    1       6

    Brexit is another hot crisis catalyst in the markets. The British Parliament is certainly in disarray. PM May has made a Herculean effort to get a Brexit deal to give an alternative to a Hard Brexit. It will be difficult to call an election, as another RVTV interview disclosed that it will take more than a majority of Parliament to call for a new election. A new referendum on Brexit would be difficult and not definitive. A third option is not to leave the EEC. It has been over two years since the referendum and the world has changed. The Brexit vote was basically 52% to 48% - certainly not compulsory. With all the Brexiteers fighting each other hammer and tong, staying in the EEC might be a winning vote in Parliament. A vote on staying in the EEC might also bring the Brexit factions back together. I am not a citizen of Britain nor the EEC. I am not proposing, just trying to understand Brexit options. Does anyone else have other viable Brexit options. The outcome of Brexit will certainly move world markets. DLS

  • BP

    Bob P.

    26 11 2018 12:39

    7       3

    Very good information and perspective. This is what we pay for.

  • DS

    David S.

    26 11 2018 12:18

    3       1

    Most annalist I have seen agree with Ms. DiMartino Booth's assessment of the current liquidity and super debt cycle crises. The future may be a little different if the Fed raises in December but does not follow the next rate increases as stated. In addition, the Euro Central Bank may not stop its QE in December as scheduled. The debt super cycle will unwind, and it will be ugly. The big money to be made will be in timing which is above my pay grade. DLS

  • PD

    Peter D.

    26 11 2018 11:30

    9       1

    Ms. DDB's call that Jerome Powell is not an ordinary central banker is one of the gutsiest around. Conventional wisdom and Powel's resume suggest that he is a typical swamp rat, who will flood the system the minute markets break materially from their long-term uptrend. This was already the most entertaining RV presentation of the past two weeks. However if DDB is correct about Mr. Powell, it will vault her to a whole new level,

  • AR

    Abishek R.

    26 11 2018 10:48

    12       0

    Vintage Real Vision. Brilliant.