The home of stock ideas and strategies that run against the herd in search of undervalued companies cheap or ideas left for dead by other investors but which have the potential to deliver above average returns.
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.
The Wirecard Debacle: Shades of Enron and WorldCom
Individual market cycles, and particularly their crescendos and finales, have unique characteristics that we use to categorize and differentiate them from other past cycles – the dotcom bubble, the housing crisis, and now, potentially the COVID crisis. One thing that they all have in common, though, is the failure of major companies from either mismanagement or fraud. In this interview, Roddy Boyd of the Foundation for Financial Journalism and Real Vision’s Ed Harrison examine financial impropriety through the lens of Wirecard, the German mobile payments company that has transitioned from a source of German pride to an embarrassment, exposing shoddy work by the lawyers, auditors and regulators tasked with investigating potential frauds and protecting the public. Whether Wirecard is in fact a fraud seems to be clearer with every passing day, but many questions still remain – will the bad actors both inside and outside the company be held accountable, will the company go belly up or be saved by governments increasingly willing to protect companies that are “too big to fail”, and will Wirecard be another shining example of the malfeasance and mismanagement that always seems to be exposed at the end of a market cycle? Filmed on June 24, 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.
We are now more than a decade past the GFC, and Fannie Mae is finally exiting conservatorship – a legal concept where a guardian oversees the finances of an individual or company. Whitney Tilson, founder and CEO of Empire Financial Research, and Gabriella Heffesse, chief operating officer of ACG Analytics, take a deep-dive into Fannie Mae, the mortgage giant that securitizes just under half of all mortgages in the United States. They analyze the investment opportunity Fannie Mae presents, comparing the junior preferred shares to the common tier equity, and the different risk/reward proposition each level of the capital stack offers. Tilson and Heffesse review the history of Fannie Mae, from its being placed into conservatorship to the "net worth sweep" to the ongoing attempts to implement a "recap and release" plan. In addition, this serves as a timely case study on the multi-year playbook for government bailouts and conservatorship for national champion companies that could once again show up in Washington with outstretched hands and empty pockets. Filmed on June 10, 2020.
Stephen Clapham, founder of Behind the Balance Sheet, analyzes the unique challenges that companies worldwide are facing during the ongoing pandemic. Using forensic accounting, Clapham surveys the financial landscape to identify risks and opportunities. He argues that the crisis will force companies to prioritize shoring up their balance sheet, and that as a result, stock buybacks will be diminished and return on equity across various sectors will suffer. Clapham reviews how companies have been juicing their earnings with "adjusted" figures, and he argues that this pandemic is a catalyst for a "great reset" in which executives use the ongoing crisis as an excuse to accurately tally their companies' earnings. Across a longer time horizon, Clapham expects inflationary pressures to mount as central banks continue to monetize debt and as major players in consolidated industries – such as hospitality, retail, and airlines – gain pricing power. Find out more about Stephen Clapham's work at https://www.behindthebalancesheet.com/. Filmed on May 27, 2020.
Howard Marks of Oaktree Capital Management shares with Real Vision co-founder and CEO Raoul Pal his investing framework. He and Raoul explore just how late we are in the credit cycle and look at risks and opportunities that lie ahead. Marks discusses the principles that made him one of the world's greatest investors – discipline, contrarianism, and selectivity – and reflects how these principles serve as guiding stars during this time of unprecedented uncertainty. Marks' specialty is putting capital to work when others have lost their nerve – or, as he describes it, "to catch falling knives" – and he shares with Raoul how he plans on identifying and selecting value at a time when the Fed’s recent actions have clouded the investment landscape by artificially distorting security prices. Filmed on May 12, 2020.
The State of Global Macro through Coronavirus Chaos
Kyle Bass, founder and CIO of Hayman Capital, joins Real Vision's Raoul Pal to break down the state of global macro. Bass talks about the bifurcation between capital markets and the real economy due to unprecedented monetary policy response. Bass and Pal discuss both temporary and permanent behavioral changes in response to coronavirus shutdowns and the potential for the global economy to stave off an insolvency crisis. Finally, Bass shares his perspective on U.S. – China tensions and provides viewers with a few ideas for investments that can help portfolios navigate today's uncertain markets. Filmed on May 7, 2020.
Trevor Mottl, managing director at Lazard Labs, speaks to Real Vision CEO Raoul Pal about how machine learning and artificial intelligence (AI) can inform and transform the investment process – from idea generation to position sizing to risk management. He tells Raoul about the AI team he runs at Lazard Asset Management that uses machine learning to identify patterns in markets too complex for the human brain to recognize in order to reliably generate alpha too obscure for human investors to reliably capture. Mottl also breaks down his three-piece framework of finance – which includes pricing, time horizon, and liquidity – and explains how this framework has shaped his investment philosophy and informed his macro outlook. Filmed on May 5, 2020.
Trading Through Turbulence: Portfolio Management in Uncertain Times
If you can't sit on billions in cash like Warren Buffett or Sam Zell, what the hell should you do with your portfolio during all this uncertainty? Louis Llanes, CFA, CMT, founder of Wealthnet Investments, is here to help answer that question with a look at how he's been managing these markets. He explains his current perspective on aspects of risk management like position sizing and exiting active positions. He also provides a few examples of the types of companies and assets investors should be focusing on. Filmed on May 5, 2020.
James Aitken, partner at Aitken Advisors, joins Real Vision CEO Raoul Pal to discuss the intricate relationship between bond and FX markets and how this often overlooked connection is playing out at this critical juncture of the credit cycle. Aitken and Pal put the recently announced central bank policies – remarkably generous swap lines, sweeping repo facilities, and the revival of quantitative easing (QE) – in proper context and analyzes how central banks' commitment to be the "buyers of first resort" will affect cross-currency basis swaps, yields on corporates, and the U.S. dollar. Aitken also describes his investing framework to deploying capital in this unprecedented economic crisis.
What happens when an upheaval so massive forces financial markets, governments, and society to rethink how our systems work? Michael Krieger, author of the Liberty Blitzkrieg, joins Real Vision to explain what coronavirus and the response to the outbreak has revealed about the condition of American systems – from financial markets to the health care system. Tracing the story of financial markets and societal trends over the past two decades, Krieger outlines how our systems have been pushed to the brink – focusing on emergency policy responses and the everything bubble. He also provides viewers with potential solutions to the systemic decay that has been brought to the forefront by the coronavirus outbreak.
In the past few years, nobody could have predicted that a pandemic would be the catalyst sending shock waves through the entire global economy, plunging us into a bear market in record time. Some voices though have been screaming from the rooftops about the macroeconomic and structural weaknesses that left markets vulnerable to any potential disruption. One of those voices was Steen Jakobsen, CIO of Saxo Bank. In this interview with Roger Hirst, Jakobsen examines the weaknesses of a buyback-driven and debt-ridden market that have been quickly exposed by coronavirus. They also look into the future at how the crisis will affect real assets, the dollar, the banking system, and why, when all is said and done, we could see both inflation and deflation.