The neoliberal model of free trade, open borders, and liberalized capital flows is under assault. Traditional economic models with rational agents and efficient markets don’t accord with reality, and people are starting to notice. Even recent advances in behavioral economics have failed to capture this disconnect. Mark Blyth, William R. Rhodes Professor of International Economics at Brown University, and Eric Lonergan, macro hedge fund manager at M&G Investments, explore and seek to resolve these conflicts in their new book, “Angrynomics.” Blyth and Lonergan examine how the outsourcing of economic management to grey-suited bureaucrats is fomenting a populist backlash that is redrawing political battle lines and molding the destiny of different asset classes in ways few fully grasp. They analyze the recent largesse of central banks as a sort of asymmetric put-option which rewards those who hold assets and punishes those who don’t. Blyth and Lonergan also explore potential solutions, which include dual interest rates, citizens’ wealth fund, and - yes - even helicopter money. Filmed on July 8, 2020.
You don’t hear “diversification” and “long volatility” often in the same sentence. Yet, their pairing is exactly what Jason Buck, CIO of Mutiny Fund, advocates as essential for all investors seeking to add long volatility exposure to their portfolios. Alongside Hari Krishnan, fund manager at Doherty Advisors, Buck advocates for an “ensemble” approach to anti-fragility. Buck and Krishnan rigorously examine the benefits of different long vol strategies, such as options, shorting indices, and relative value trades on the VIX. Krishnan explains his quantitative framework for evaluating options, and gives in-depth option trading insights based on their tenor and “moneyness.” Buck and Krishnan discuss how a diversified approach to long volatility can heighten the benefits of long vol exposure, especially during “Minsky Moments” such as coronavirus pandemic markets have been experiencing since earlier this year. Filmed on July 7, 2020.
By both surprise and necessity, Modern Monetary Theory is here at our doorstep. And with neither major party remaining as the party of ‘fiscal responsibility’, it seems there is little standing in the way of MMT becoming the premise for US government spending initiatives. That’s why it is more important than ever to understand the thinking behind MMT and the common misconceptions surrounding it -- and to prepare your portfolio for its increased acceptance by politicians who view it as an invitation to spend. In this interview with Marshall Auerback of the Levy Economics Institute, Stephanie Kelton breaks down the arguments put forward in her new book, “The Deficit Myth: Modern Monetary Theory and the Birth of the People’s Economy”. Together they discuss why MMT does not give governments carte blanche to spend indiscriminately. Kelton also articulates why comparing government debts to private debts is flawed. She explores the varying gradations of monetary sovereignty as it relates to constraints on countries potentially using MMT as an economic framework. Finally, Kelton touches on the ‘job guarantee vs. UBI’ debate and much more in this interview that is sure to be a learning experience for MMT skeptics and believers alike. Filmed on July 2, 2020.
COVID-19 and Financial Markets in a Post-Stimulus World
Dr. Z. Barton Wang of Barton Research joins Real Vision CEO, Raoul Pal, for a conversation about the lasting impact of COVID-19 on financial markets. Wang breaks down the institutional response from the Treasury Department and the Fed to the pandemic and considers that response's effect on financial markets. He points out several abnormal market drivers in order to explain how markets have behaved over the last few weeks and months. Wang also shares his view on the biggest risks to the market right now, including the roll-off of the CARES act and other stimulus packages, as well as provide his perspective on what could happen in the markets over the next few weeks, months, and years. Filmed on July 1, 2020.
The Highest Quality Macro Trades and the Impending End of U.S. Outperformance
Ben Melkman, CEO and founder of Light Sky Macro, returns to discuss the biggest macro themes and trades on the horizon with Real Vision CEO and co-founder, Raoul Pal. In this wide-ranging discussion, they examine everything from COVID and the effects of its handling by the U.S. and Europe to the probability of fiscal union in Europe as well as the potential outcomes of the U.S. election. Melkman and Pal agree that the combination of unprecedented fiscal and monetary policy has to have unwanted consequences somewhere and that this likely will play out in FX markets. Conversely, Melkman pushes back on Raoul’s dollar shortage thesis, arguing that the dollar is in store for a rough 2020 and makes the case for the end of U.S. equity outperformance sooner rather than later. Filmed on Wednesday July 1, 2020.
Market Irrationality, Monetary Confidence, and Systemic Change
Peter Atwater, president of Financial Insyghts LLC, joins Dee Smith of the Strategic Insights Group to break down Atwater's perspective on systemic fragmentation and how that will impact financial markets. Atwater breaks down the end of cycle phenomena of overconfidence, fraud, and an eventual recovery. He and Smith also discuss where market sentiment is headed from here. Atwater and Smith explain how markets act like the world's most expansive social network and the role of money, markets, and faith in making that network work. Finally, Atwater breaks down the relationship between inflation and narrative and why markets have not seen the level of inflation that many have predicted. Filmed June 30, 2020.
Rethinking Risk Management: Avoid Surprise, Not Risk
With recent market moves like the VIX spiking from 15 to 80 in a matter of weeks or oil futures trading at preposterous negative levels, taking even the most experienced professionals by surprise, many individuals and firms lucky enough to have avoided total collapse are rethinking their approach to risk management. In this interview, risk management consultants Brett Friedman of Winhall Risk Analytics and Michael Miller of Northstar Risk reexamine the recent carnage, with a particular focus on how variance swaps got a handful of sophisticated investors with well-established risk management practices in a world of trouble. Together they discuss why systematic vol selling has become the flavor of the day, debate whether these complex products are suitable for pension funds regardless of their sophistication, and put forward the idea that unbiased post-mortem trade analysis is as important for winning trades as it is for losing ones. Filmed on June 23, 2020.
David Rosenberg of Rosenberg Research joins Real Vision managing editor, Ed Harrison, to break down his view of the economy, financial markets, and their direction over the next six to eighteen months. Rosenberg notes the success of working from home and the negative implications it has for commercial real estate – both residential and office. He points to internet infrastructure, consumer staples, healthcare, and big tech as sectors that are poised to do well over the next year and predicts that elevated personal savings rates, a reduction in capital expenditures, and a credit downgrade cycle will contribute to weaker GDP numbers for 2020. He argues that the Fed has enabled the zombification of the corporate sector though artificially low interest rates, and Rosenberg and Harrison consider whether the actions of the Fed could trigger insolvency and liquidity crises by suppressing price discovery in the market. Rosenberg also touches on Japan, Canada, and gold in the context of COVID-19 and monetary policy responses to the pandemic. Filmed on June 23, 2020. To register for Rosenberg Research’s free trial, visit https://www.rosenbergresearch.com/clients/register.
While many are focused on making sense of equity markets, attributing daily moves to capricious COVID headlines and an army of retail investors hungry for risk, Jeff Snider of Alhambra Investment Partners is avoiding the noise and focusing on unemployment and the bond market. To him, both of these indicators suggest that V-shaped recovery is not the base case for the businesses and large financial institutions that are most affected by the pandemic. As well, Snider touches on important topics for Real Vision viewers like the effectiveness and consequences of recent Fed stimulus measures, the risks of inflation, and the health of the global dollar system. Filmed on June 19, 2020.
Brent Johnson, CEO of Santiago Capital, joins Lyn Alden of Lyn Alden Investment Strategy for an in-depth discussion on the fate of the world's most important currency: the U.S. dollar. Johnson gives a strategic update on his "Dollar Milkshake" thesis and explains his bullish long-term view of the dollar, based on the outstanding glut of dollar-denominated debt. Alden considers this analysis and introduces a less bullish view, which she bases on the U.S.'s high trade deficit and negative net international investment position (NIIP). Using many detailed charts, Alden and Johnson compare their ideas and reach something of a synthesis between their two views. The pair also reflect on the dollar's status as the world's reserve currency, and they also explore whether a move to a multipolar currency world is possible. Filmed on June 16, 2020.
The U.S. dollar may be the most important "security" in the world and the cycle of its relative strength is a fantastic indicator of global economic health and the performance of a handful of asset classes. That's why Julian Brigden of MI2 Partners has been using this cycle to inform his outlook for decades. In today's interview, Brigden updates viewers on the dollar cycle and argues that we are entering a period of sustained dollar weakness. He examines dollar charts showing the technical support levels that are dangerously close to breaking, explores correlations with other major indicators, and breaks down the fundamental backdrop of fiscal and monetary excess that all seem to point to a dollar downturn. Filmed on June 10, 2020.
Niall Ferguson -- Investing at the Intersection of History, Politics, and Markets
Niall Ferguson, a senior fellow at The Hoover Institution at Stanford, is widely respected as a premier thought leader when it comes to combining historical, political, and economic perspectives to understand markets. In this interview with New York Times best-selling author and The Bear Traps Report founder Larry McDonald, Ferguson argues that COVID-19 and social revolution are both symptoms of a networked world and that although comparing 1968 and 2020 can be useful for historical comparison, it is certainly not one-to-one. As well, Ferguson and McDonald discuss probable political outcomes for 2020 and debate the great question of whether inflation and the market paradigm shifts that result from it are finally on the horizon. Filmed on June 8, 2020. Find more information about Larry McDonald's work at http://www.thebeartrapsreport.com.