Political Risk & The Next Systemic Crisis

Featuring David Levine

David Levine of Odin River joins Real Vision to discuss the emergence of political risk and how it will contribute to the next systemic crisis. Specifically, he provides his thoughts regarding Italy and how its crisis will unfold. Even though David is a short-term bear, he explains why he’s optimistic in the long run, and why themes such as transparency will continue to gain traction. Filmed on May 29, 2018 in Greenwich, Connecticut.

Published on
20 June, 2018
Topic
Europe, Politics, Credit Market, Financial System
Duration
30 minutes
Asset class
Bonds/Rates/Credit, Equities
Rating
111

Comments

  • AA

    Aaron A.

    12 7 2018 23:27

    0       0

    Refreshing enthusiasm, and I tend to agree with the long-term bullish sentiment. However I think the rosy picture he painted at the very end of the interview of a future with only mission-driven companies existing and higher transparency ignores the reality of historical human nature. All in all, good stuff RV. I would have preferred a longer segment and someone like Grant to help the interviewee expound on some topics.

  • GR

    George R.

    7 7 2018 22:59

    0       0

    "Like" almost too brainy for his own good, but although lacking an erudite delivery, there's definitely some useful content and food for thought......

  • CD

    Charles D.

    30 6 2018 15:37

    0       0

    Absolutely brilliant dissertation...agree DB is the canary.

  • PD

    Pat D.

    30 6 2018 00:58

    0       0

    IMHO this guy is way past the Mensa Club. Would love to see if one of the great interviewers (Jim Grant, Michael Green, Grant Williams) can slow him down in a Deep Dive.

    • BK

      Brian K.

      30 6 2018 14:54

      0       0

      Yes Mike Green for sure

  • JW

    James W.

    29 6 2018 02:26

    0       0

    What a rambling freakin' mess. It's interesting for RV to have some of these folks on here where we can get a closer look at what they're about.

  • WG

    Wade G.

    28 6 2018 00:25

    0       0

    Thanks David, really interesting thesis. I think u may be off on your quick tally of total CB QE... I thought ball park $12T, not $20T. So much of your main thesis was intuitive to me, fitting easily in my view of our recent history. What I really appreciate is your emphasis that this has been a credit cycle and your point that the markets can give way before the economy turns. Also agree w/ your long term optimism, but apparently more than you, I'm concerned about a looooong downturn... sort of like the dark ages (that eventually were overcome). Thanks again for sharing.

  • AE

    Alex E.

    27 6 2018 00:07

    1       0

    For what it's worth, a good interview. The ECB can throw all the fake money it wants to at the coming recession, it "ain't" gonna do whooey...The Fed learned that more QE did exactly nothing to revive the U.S Economy. Why would ECB efforts prove any different? As for the coming crisis coming out of Europe, it's plausible, but I would think the Fed tightening will cause a recession first if The Orange Swan doesn't break the global economy!
    Something tells me that Transparency will eventually morph into a World Government type of scenario which neither good nor healthy for freedom-loving individuals...
    The long delayed Financial System enema is about to be administered...hope you have a rain slicker and some rubber boots :)

  • JY

    James Y.

    24 6 2018 09:31

    11       0

    I’m not sure why the ratio of thumbs down in this video is a high as it is? This was a refreshing interview from someone who looked to have a lot of energy and delivered a thought provoking thesis. I agree with someone’s comment below in that there should be the option to ‘agree or disagree’ with the thesis, and then like or dislike the delivery etc.

    I love real vision but feel like when people don’t deliver a world is going to end tomorrow investment thesis people dislike/dismiss what could add value to their own world view.

  • ML

    M L.

    23 6 2018 18:57

    1       0

    "...[the ECB] buy high yield debt in Europe"

    No they certainly do not.

  • WM

    William M.

    22 6 2018 22:33

    5       0

    This was a higher level discussion including lots of "insane" stuff that has been going on "blah blah blah". Not the greatest delivery, rambled on across topics a bit, but I followed his arguments and agree with his thesis. I thought the points made by David, though not by any means totally new (e.g the terrible risks in european sovereign bonds, the rising political risks in Europe), were overall, very cogent. Some excellent reminders about the lunacy of Italian yields vs USA 10 year yields. This confirms the way debt risk has been manipulated and when Draghi loses control, yes, watch your screens for the global reaction. Martin Armstrong has suggested Europe (or perhaps China) will probably be the catalyst for the next crisis driving capital to the USA. Good job David, if you return, some interviewer focused questions / answer could make his input great! If I was in New York I would certainly take up any offer to buy him lunch!

  • DR

    Daniel R.

    22 6 2018 19:28

    2       0

    I wish this had been David’s 9 th annual interview. Very understandable and helpful. Could have used this to an advantage years ago. Will use now to inform my decisions.

  • DW

    Doug W.

    22 6 2018 12:08

    12       0

    Great interview! Please have him return.

  • PL

    Paul L.

    22 6 2018 06:42

    7       1

    First, I’ll say I liked the point of view David presented. I believe his comments re the stresses in euro are seriously worth thinking about. Deutshe Bank’s stock price points to something that isn’t good and the Italian debt / politico situation cannot be comforting. And how these are resolved, if they can be, have profound implications for the global financial system. A one year timeline ought to scare all of us.

    Second, many people older than David may object to his youthful presentation style but hopefully do not ignore the thoughtfulness of his POV.

  • JB

    Jason B.

    22 6 2018 06:40

    0       0

    A question to all viewers...
    I heard today that on Feb 14, 2018 that legislation was passed in Australia to allow banks to use savings accounts to bail them out should the need arise...

    Is this correct ?

    How many other nations has this legislation been passed ??

    Thanks

    • VV

      Vanessa V.

      22 6 2018 22:30

      7       0

      Hi Jason. Yes, that is correct, the Financial Sector Legislation Agreement Bill is now law giving APRA power to use bail ins to deal with a banking collapse. Many Australians believe that the Depositor Guarantee Scheme (Currently up to $250k) will protect (some) savings but it is inactive until such a time as the Government activates it when an institution fails. Basically this means that during a crisis APRA may have access to all savings to bail out banks before the Depositor Guarantee Scheme is implemented by the Australian Government. You can find out more on the APRA Financial Claims Scheme website, www.fcs.gov.au. Hope this helps.

    • GP

      Gordon P.

      23 6 2018 20:42

      4       0

      Jason,
      Canada has the same legislation as Australia -- only CDN government is very quiet about it

    • JB

      Jason B.

      25 6 2018 01:58

      0       0

      Thanks Vanessa and Gordon

  • ss

    sid s.

    22 6 2018 00:54

    0       6

    is this the guy you call to hear geopolitics for regards??

  • DM

    Davis M.

    21 6 2018 23:57

    5       0

    Enjoy the interview and really like David's enthusiasm. This is the second time I have heard the market is based on a credit cycle not a business cycle anymore. Basically, it doesn't matter how the real economy is doing (bad for most folks), it is all about the credit. This is changing fast and it is due to the fallibility of the CBs.

    I hope transparency becomes the norm of the day in the future but think it is the #1 enemy of government and they will not allow it (look at Assange). Where there are free markets (internet/technology) transparency will be gaining ground but do not see it in control or crony capitalistic markets or government (ie Obama's "people business" transparent government).

    • BC

      Burton C.

      23 6 2018 13:33

      0       0

      Yes, Richard Duncan makes the point that the cycle is based on credit growth primarily. When credit growth drops below 3% the economy goes into a recession

  • EL

    Eric L.

    21 6 2018 23:52

    3       0

    Thanks David that was a great interview. Novice millennial investor here. Learned tremendously. Your views on Europe being the epicenter of the next systemic crisis, resonates with many smart investors out there. How will this impact the dollar versus other currencies?

  • DS

    David S.

    21 6 2018 23:13

    1       1

    Few really believe that the central bankers are infallible. The central bankers only come to bat when Wall Street/Congress/President/lobbyist have put the country at risk of financial collapse. Central bankers are not the genesis of the wreck just the last inning before the market correction. DLS

    • CB

      C B.

      23 6 2018 01:31

      0       0

      Hey David, neat thought. You might like Ben Hunt and his description of “the missionary “ concept from game theory. He identifies a character Who has the large enough podium and microphone that they facilitate the change of consciousness.

    • BC

      Burton C.

      23 6 2018 13:37

      2       0

      Disagree, I think the average person out there does believe CB's posses a magic wand and have the ability to keep the ball rolling. Consider the faith in the housing market which is based on credit. Vast majority cannot conceive of credit contracting and therefore dive headlong into a high risk market.

    • DS

      David S.

      26 6 2018 21:15

      0       0

      Burton C. - I thing you are correct about the average person if they think about the central banks at all. Thanks, DLS

  • PW

    Phil W.

    21 6 2018 21:39

    3       0

    David what is your time horizon for your bearish view? eg: 6 months 1 to 2 years.

    Enjoyed your interview...……………. Thanks

    • DL

      David L.

      21 6 2018 21:46

      9       0

      My view is the crisis likely unfolds in the next 12 months and most likely before year end 2018. Europeans have kicked the can as far as they can. Perhaps they can delay slightly longer but I believe we saw a glimpse that the time is arriving in Italy in the last month.

  • bm

    brian m.

    21 6 2018 18:51

    2       0

    He sums up the best RV interviews over the last few years

  • MB

    Mark B.

    21 6 2018 18:33

    14       0

    Raoul in his update video asked for suggestions on how to improve Real Vision. So here goes:

    - Instead of one 'thumb' rating, provide two. One for how well the premise was presented, the other for if we agree or disagree.

    I don't know how to rate something like this presentation. I may feel that David Levine's premise is well stated and makes sense, but I may disagree with it. Is that a thumb's up or thumb's down? (Just using this as an example, I actually think he may be right, but that's beside the point).

    I'd find this useful to help me decide where to spend my time. I might actually be *more* interested in listening to someone who presents their premise well but has a large number of people who *disagree* with it. Helps me to avoid confirmation bias.

  • DW

    DANIEL W.

    21 6 2018 16:45

    12       0

    Maybe I've just had bad 'click-luck' lately, but after watching a string of very disappointing content on RV, good lord this was refreshing. Discussions like this are why I subscribe. Interesting views and I love his approach. Hope to see more of David in the future. Thank you.

  • VP

    Vincent P.

    21 6 2018 13:22

    5       0

    Very nice job David and please come back for a follow up!! Enjoyed the energy in your presentation. Was once a ZH follower and almost got caught in it's bearish journey down the rabbit hole but still think TD brings an occasional good article. Just have to "careful", LOL.

  • SH

    Steve H.

    21 6 2018 11:58

    6       0

    Great interview.

    The global financial system is clearly broken, and the primary responsibility for this lies with the central banks. There will have to be some type of 'reset' within the next few years, but what form that will take is anybody's guess at the moment. One of the few justifications for owning (certain) stocks is that cash-rich brand-name corporates with meaningful 'moats' around them might be amongst the few safe-havens when that reset occurs - especially given that government debt, except perhaps in the initial stages of a panic, is no longer fit-for-purpose.

    Mr. Levine's analysis of Europe is perceptive, but I wonder if yesterday's new ECB initiative paving the way for perma-QE if/when needed might warrant a reassessment of the thesis that Draghi has limited power to control yields and credit spreads. I'm not convinced there's much limit at all on how much more damage the man can do in his final year at the helm.

    • DL

      David L.

      21 6 2018 12:48

      4       0

      Thanks Steve. See your point about the “perma QE” potentially giving Draghi more wiggle room. My sense is this is primarily focused on maturities and only rumored to expand the Capital key. The primary constraint on any policy changes remains German Constitutional Court review (they are already suing over current QE policies). Thus, it seems Draghi will remain constrained in any scenario. My primarily concern is that a momentary fight overwhelms his buying power in the very short run causing immediate and extreme Credit Market Volatility. What we saw a few weeks back was a very small glimpse of what might happen. Some very smart people agree with you so perhaps Draghi has more power than it appears. Time will tell.

  • GM

    Greg M.

    21 6 2018 11:45

    5       0

    I enjoyed the interview. David some constructive criticism. Work on cutting the word "like" from your speech. It is just a filler word. Overall you did a good job. Lots of passion and good energy.

    I fully agree with your analysis of being optimistic over the long term. The way things have changed over the past 10 - 20 years has been remarkable. How everything unfolds in the future is going to be interesting.

    • DL

      David L.

      21 6 2018 12:48

      4       0

      Thanks for that feedback. Still new at these TV interviews!

  • VV

    Vanessa V.

    21 6 2018 07:59

    8       1

    During a recent speech in Sweden Chairman Powell spoke about the "intense scrutiny and declining trust in public institutions" around the world due to the "extraordinary actions taken by central banks in response to the GFC". Clearly the rise of populism and political risk is a concern. Some great insights. Thank you, David.

  • VR

    Vincenzo R.

    21 6 2018 07:09

    5       0

    Great interview. I agree with the political risk in Eurozone, in particular, the one coming from Italy. The mix of high debt, small growth, and populism will create soon higher asymmetries in the wealth distribution: the 2 main parties with the flat tax and citizenship income are not sustainable in the current framework and soon or later the friction between Italy and Germany will explode.

  • KS

    Karen S.

    21 6 2018 06:29

    4       0

    This was great.

  • AC

    Allen C.

    21 6 2018 06:01

    5       0

    I really enjoyed this one, hope to see David back in the future.

  • PN

    Philip N.

    21 6 2018 05:39

    8       0

    I'm sort of left thinking David had an hour worth of thoughts and he tried to fit them into 30 minutes. I enjoyed the interview none the less and hope he could return in conversation with one of the better interviewers and a little more time.

  • GG

    Gary G.

    21 6 2018 01:53

    6       0

    Loved it!!!!

  • mc

    michael c.

    21 6 2018 00:40

    3       22

    We need an editor. 1% of what he said I agree with. But it’s consensus. 99% of that was a waste of time. Thanks for Wifi.

    • RK

      Robert K.

      21 6 2018 15:56

      1       0

      not getting this. you say 1% of what he said you agree with and is the consensus?

  • RK

    Robert K.

    20 6 2018 23:16

    4       0

    Nice one! Good to see sober thought is not dead yet.

  • SP

    Steve P.

    20 6 2018 23:08

    6       0

    Hit on some great concepts. VERY interesting conversation. Thanks David.

  • JV

    John V.

    20 6 2018 22:54

    2       0

    Clear enough! Brought those fears/risks in the back of my mind, to the forefront! Thank you David, hope you are back with more soon. JV

  • SC

    Scott C.

    20 6 2018 21:33

    7       10

    And so like, and they're like, you know like.

    • VV

      Vanessa V.

      22 6 2018 23:30

      6       0

      The challenge with the internet is that sometimes we default to quick, knee jerk reactions versus considered responses that take into account our shared human experience. We are all a work in progress, after all. Whilst your insight may be valid (and I am sure David is tough enough to handle it), feedback given constructively is generally more effective. Out of respect for RV participants please could we all consider the manner in which we offer our insights.

  • DS

    David S.

    20 6 2018 19:56

    4       3

    Mr. Levine you have worked hard to be one of the smartest, quickest persons in the room. I like your enthusiasm, but I suggest you add an additional goal of being one of the wiser persons in the room also. I am retired and living on a small island in the middle of the Pacific. I give this as gentile advise and wish you all the best. DLS

    • DS

      David S.

      20 6 2018 20:11

      2       1

      Mr. Levine: I am sorry. I meant gentle advice. As you can see I am no longer the smartest, quickest person in the room. DLS

    • DL

      David L.

      20 6 2018 22:02

      6       1

      Thanks DLS.
      Wisdom is one of my core values and I appreciate you sharing yours.
      Enjoy the peace of the waves.
      -DAL

  • TE

    Tito E.

    20 6 2018 19:36

    6       0

    The transparency concept is compelling

  • GF

    Gordon F.

    20 6 2018 18:41

    9       0

    There is a greater division between strong likes and strong dislikes on this interview than on any others in recent memory. Personally, I find David's thesis fascinating, but remain unconvinced. If he is right, and the central banks lose control, starting with the ECB or wherever, I agree that it will be catastrophic. However, I have been surprised at how long they have kept this dance going, and it may well be that something else will break the system before they lose control.
    Actually, I would consider that a bad outcome, because the central banks are desperate to lay the blame elsewhere, and thus retain their power and influence. Thus, I find David's thesis appealing, as I am firmly convinced that no one can print wealth, and the central banks should get the blame. But just because I would find it satisfying doesn't mean it will happen.

    • VP

      Vincent P.

      21 6 2018 13:18

      0       0

      Pavlov is dug-in by Central Bank influence, so yes, it is likely the Black Swan remains unknown.

  • CB

    C B.

    20 6 2018 18:19

    7       2

    Really excellent. You can see David focusing on the reaction function of market and societal participants. I think examining the behavior and the likely reactions is the right framework for projecting price action. I agree that one day market participants will wake up and say, "the central banks did not create more wealth, they created more claims on existing wealth." It will be a crisis of realization. The transparency theme is also identified very nicely. This one I am less certain about because powerful people and entities naturally attempt to insulate their information advantage. So I see this as a longer term theme, which perhaps is consistent with the long run bull view. Very creative and interesting talk. Thank you.

  • NF

    Nat F.

    20 6 2018 16:57

    4       1

    Amazing, loved that. More please !

  • ET

    Eduard T.

    20 6 2018 16:53

    3       0

    Great interview!

  • Jc

    Justin c.

    20 6 2018 16:51

    8       20

    I don't normally do this, but I am at the 18:00 at it so bad. He has basically said nothing and thinks his audience is stupid.

    • Jc

      Justin c.

      20 6 2018 17:12

      10       12

      I made it to the end, although it was very difficult. He was unable to coherently communicate a potential counterpoint to any of his beliefs. Equity markets are going down 40-50% because governments have intervened. THAT'S THE STORY. THANK YOU. I think there is a little more nuance to form any valid investment philosophy around this theme.

    • CB

      C B.

      20 6 2018 18:26

      6       0

      I'm not sure that your interpretation is capturing the ideas in the video. In fact, if you read between the lines a bit perhaps you will observe a classical Austrian story line here. The central banks have created currency and allocated that capital using a non economic decision making matrix. There is a probability that this capital will be destroyed because it is unproductive.

    • DL

      David L.

      20 6 2018 18:58

      26       1

      Hi Justin. Sorry you didn’t like the talk. I promise you I don’t think the Real Vision audience is “stupid”. Quite the contrary.

      Clearly my talk didn’t resonate with you or convey the thoughts in a way you could appreciate.

      If you are in NYC I’m glad to meet and/or chat if you care to learn more. Otherwise perhaps we can email.

      I’m reachable very easily on Twitter @davealevine or @paranoidbull.

      Good luck.

    • DB

      Douglas B.

      21 6 2018 20:11

      5       0

      David L. You’re a classy guy. Loves your thoughtful presentation and insights.

  • AA

    Aymman A.

    20 6 2018 16:14

    5       2

    Excellent!

  • FB

    Fernando B.

    20 6 2018 15:55

    8       4

    David Lavine nailed it! Excellent interview!
    Thanks guys

  • BK

    Brian K.

    20 6 2018 15:07

    4       0

    "BOJ, there's not really much limit to their power because they have a unified
    this is why really, really smart people who have been really, really wrong about Japan are wrong because it's really, really hard to fight the BOJ because the BOJ has, in a way, unlimited power because of the unified nature of their politics. "
    - So he is basically saying ECB will have problems purely because each country does not have their own central bank. Cross country turmoil will be the issue.

    • SS

      Sam S.

      20 6 2018 17:56

      1       0

      EU was setup as trade union, has become a political mess and I'm not sure, but I don't think they can print money. Plus the debt of the EU nations was never converted to Euro's when created. EU in deep shit.

    • BK

      Brian K.

      20 6 2018 18:16

      1       0

      They cant print money? Who is rapid fire - purchasing corporate bonds then ?

    • CB

      C B.

      20 6 2018 18:28

      1       1

      BOJ has a greater level of control and thereby they may be able to maintain the illusion for a longer period.

    • ww

      will w.

      22 6 2018 02:35

      0       0

      I THINK (but of course must't put words in David's mouth) that David is thinking of Japan's (vastly) greater societal homogeneity and social cohesiveness - a characteristic i know from personal experience to be the case. This is in stark contrast to the situation in Europe, where the "ordinary" people's desire to maintain their cultural/ national distinctions is at great odds with the elites' also-strong desire for unity (by which the elites hope to avoid any more dreadful internecine wars).

    • BK

      Brian K.

      30 6 2018 14:39

      1       0

      I AGREE that is his point as well. My point is that it is self inflicted. I think the ECB could ease way more like Japan if needed but the political strife my hinder it.

  • LT

    Lucas T.

    20 6 2018 14:45

    11       3

    Great Interview...but that guy was high AF

    • SS

      Sam S.

      20 6 2018 17:51

      1       0

      Triple Expresso!

    • CB

      C B.

      20 6 2018 18:30

      3       1

      Silicon Valley is now famous for micro dosing LSD. They say it increases their creativity

  • SS

    Sam S.

    20 6 2018 14:33

    7       0

    Interest rate increases to protect the Pension System modeled on 6-8 percent growth rate, but had their heads handed to them over the course of the no-to-low interest rate world. Government debt growing in expenditures to pay the higher amounts created by a rise in interest rates, pretty much confirms Mr. Levine's presentation that political/government will be the driver of the next crisis. I'm just saying.

  • PM

    Patrick M.

    20 6 2018 14:04

    6       8

    Thumbs way up!

  • RR

    Rex R.

    20 6 2018 12:30

    5       15

    The Best Presentation I have seen on RealVision. Awesome.

    • BT

      B T.

      22 6 2018 02:35

      2       0

      Seriously? Many others have like than this but I did think it was ok. I appreciate his perspective and agree that the homogeneous society of Japan is way different for the ECB but, beyond that message it was many words, less depth and rationale. He is smart, yet I think drafting a script beforehand would have helped vs. freewheeling.

  • RM

    Ronnie M.

    20 6 2018 12:15

    20       16

    Like totally love this guy! Bring him on for a longer interview, please.

  • PB

    Pieter B.

    20 6 2018 10:39

    7       4

    Very interesting presentation David! Thank you and thank you RV!