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.
Mission Creep Impossible: The Impact of the Federal Reserve's Exploding Balance Sheet
Jeff Cox, finance editor at CNBC.com, joins Real Vision senior editor Ash Bennington to demystify the often opaque activities of the Federal Reserve. Cox shares his in-depth knowledge on the Fed's plumbing to shine light on how factors such quantitative easing and interest rate cuts impact the real economy as well as financial markets. Cox describes how the Fed's reliance on the Phillips curve, a theory which may be outdated, led the central bank to chronically undershoot inflation over the past decade—as a result, the Fed is now willing to let inflation "run hot," purchasing assets and suppressing rates in an unprecedented manner. Lastly, Cox shares his views on Modern Monetary Theory (MMT) and the growing debt levels of the U.S. government. Filmed on January 7, 2020. Key learnings: The commitment of the Federal Reserve to supply liquidity to the economy is stronger than ever. The fact that the Fed’s facilities are more effective at inflating financial assets than they are at supporting the real economy is not something that its leadership is sufficiently concerned about to bring about any meaningful change in policy.
Stephen Clapham on IPO Bubbles, Earnings Manipulation, and Balance Sheet Jiggery-Pokery
Real Vision editor Jack Farley welcomes Stephen Clapham, founder of Behind the Balance Sheet and author of "The Smart Money Method." Using the tools gained as a forensic accountant in the hedge fund business, Clapham analyzes the current ploys that companies use in order to flatter earnings, garnish cash flow, and hide risk. These hijinks include one-time charge-offs, stock-based compensation, and the widespread practice of listing "adjusted earnings" – the holy grail of financial chicanery. Clapham considers the flurry of IPOs and SPAC mergers, which he calls a "bubble," sharing his views on companies such as Nikola, Airbnb, and DoorDash. Clapham's article on stock-based compensation can be viewed here: https://www.behindthebalancesheet.com/blog-1/stock-based-comp-the-disappearing-expense. Filmed on December 15, 2020 Key learnings: IPOs and SPAC deals are in a bubble that reminds Clapham of the dot-com crash. Investors should be wary of adjusted earnings, but since almost every company in the S&P 500 employs that metric, research and prudence is required to separate the wheat from the chaff.
David Salem, managing partner of Windhorse Capital Management, welcomes Andrew McDermott, president of Mission Value Partners, an investment firm that invests almost exclusively in Japanese equities. McDermott argues that Japan is a hidden repository of balance sheet strength, and he and Salem discuss why Japan's business leaders seem not to exhibit the same bad habits that have ruined so many previously-great American companies, such as Intel and GE. McDermott breaks down his analysis of specific companies such as Hitachi, Sazaby, and Daiichikosho Co., and then he tells Salem about the time Warren Buffett called him to seek out his knowledge and advice on investing in Japan. McDermott and Salem also reflect on macroeconomic factors such as demographics and Japan's government debt burden. Filmed on December 14, 2020 Key Learnings: Japanese equities are one of the least-loved and arguably most misunderstood asset classes in the world. But they offer opportunity to the thoughtful investor, as the management of Japanese companies are more prudent and sensible with their allocation of capital.
Tyler & Cameron Winklevoss: Bitcoin Is The "Trade of the Decade"
Tyler Winklevoss, CEO and co-founder of Gemini, and Cameron Winklevoss, president and co-founder of Gemini, join Real Vision CEO Raoul Pal to discuss how they first discovered Bitcoin, their exploration into other crypto assets, and market psychology. They explain the importance of network effects for Bitcoin, noting that it is a type of social network. The Winklevoss brothers share their grand vision for Gemini and how they plan to shepherd the next wave of adopters away from legacy finance and fully into crypto. Filmed on December 7, 2020. Key Learnings: The crypto asset class is very small and, because of this, institutional investors have been unable to get exposure to it. Bitcoin is a very young asset with enormous upside potential. Many people are just starting to get their feet wet in crypto, and the Winklevoss brothers believe that eventually people will leave the legacy financial systems fully for crypto infrastructure with Gemini helping to facilitate this migration.
Howard Klein, founder and partner at RK Equity, joins Real Vision managing editor Ed Harrison to provide a strategic update on the battery market and specific lithium stocks such as Albemarle ($ALB), Livent ($LTHM), and Piedmont Lithium ($PLL). Key learnings: Lithium miners offer exposure to the electric vehicle sector but at tremendous discounts to EV manufacturers such as Tesla. Klein is bullish on mined commodities in general, but the inherent inelasticity of lithium makes it especially attractive. Over 80% of the world’s lithium hydroxide supply comes from China, and COVID-19 has brought the issue of supply chain resilience to the fore. Additionally, Klein discusses how lithium hydroxide is a faster-growing market than that for Lithium carbonate. Filmed on November 30, 2020.
Boaz Weinstein - Finding Relative Value Amid Credit Market Madness
Boaz Weinstein, founder and CIO of Saba Capital Management, made a name for himself at Deutsche Bank in the early days of credit derivatives. Since leaving to start his own fund he has continued to make a name for himself as a master of credit derivatives and relative value. In this interview with Real Vision’s Ed Harrison, Weinstein discusses how the current environment of tight spreads for pristine balance sheets and vulnerable companies alike is presenting some interesting relative value opportunities. Harrison and Weinstein also discuss Bill Ackman's recent reup on the same big CDS trade that has helped Saba return over 70% YTD, the Fed’s role in credit markets and credit ETF liquidity problems, and the opportunities Weinstein is seeing in closed-end funds. Filmed on November 23, 2020. Key Learnings: The credit of companies with close to zero percent chance of defaulting is trading at the same prices as companies with serious COVID risks is presenting RV opportunities. Closed-end funds trading at discounts to NAV are also presenting rare opportunities for yield in this low-rate environment.
What the Election Outcome Means for Markets and the Economy
As the dust settles and the smoke clears, Americans and the rest of the world are getting a clearer picture of who will be in control of the U.S. government over the next two to four years. Some questions still remain, but as we gain more clarity over the next few weeks and months, focus will shift from trying to determine who will be in office to the question of what the results mean for markets and the global economy. In this interview with Ed Harrison, David Metzner, managing partner at ACG Analytics, breaks down what the election results mean for infrastructure spending, COVID responses and the potential for lockdowns, and the size and speed of any potential stimulus measures. Metzner and Harrison also discuss the likelihood of increased antitrust regulation, deficit spending, and why Metzner thinks trade protectionism and China relations will be one of the lasting legacies of Trump's presidency. Filmed on November 5, 2020. Key Learnings: Although official results were not in at the filming of this piece, the key outcomes of the 2020 election seem to be clear. These results will have huge impacts on policy, markets, and the economy. Chiefly, the size of stimulus will likely be smaller with a split legislature, deficits will matter again as Republicans look to focus on core conservative values post-Trump, and antitrust regulation could spell trouble for the market's big tech darlings.
What role can U.S. infrastructure have in an investment portfolio? DJ Gribbin, founder of Madrus, an infrastructure consulting firm, and senior operating partner with Stonepeak Infrastructure Partners, a private equity firm, shares the thesis behind investing in infrastructure, specifically looking at assets with high barriers to entry, constant demand, and stability over the course of decades. He provides insight into public-private partnerships (P3s) and explains the difference between governmental infrastructure such as toll roads, water systems, and airports and non-governmental infrastructure like telecommunications, pipelines, and energy. He recently served as the first Special Assistant to the President for Infrastructure, where he led the development of the Trump Administration's $1 trillion-dollar infrastructure plan. Filmed on October 28, 2020. Key learnings: Infrastructure as a new asset class has several distinct and attractive investment characteristics. This interview highlights its potential to enhance returns and mitigate risk as part of a broader portfolio as well as provide high and stable cash flows. Infrastructure investments depend on investors' relationships with local regulators, customers, and communities.
"The Gold Bull Market Is Only in the Fourth Inning"
Kiril Sokoloff sits down with Raoul Pal to discuss why he believes the bull market for precious metals is only in its fourth inning. All-in costs of gold production are under $1000 compared to the current price of $1900, creating profit margins never seen before in the industry. In effect, the gold mining companies have become free-cash flow machines. With US federal deficits growing as far as the eye can see, and the US owing more to the rest of the world than any nation in history, a dollar crisis is brewing, which will launch gold on the next leg of its bull market. Filmed on October 16, 2020. Key Learnings: Gold and gold miners are under-owned, misunderstood, and the beneficiary of many other current economic and financial trends.
With a phenomenal investment track record greater than perhaps even Warren Buffett and George Soros, Joel Greenblatt is renowned as one of the world's greatest investors in history. Yet recently, he has turned his gaze beyond markets to focus his attention on fixing problems in society, ranging from banking and retirement to education and even immigration. In this interview with managing editor Ed Harrison, Greenblatt discusses his common sense solutions to society's ills, using the same analytical framework that brought him tremendous success in the investment world. Greenblatt also shares his investment philosophy and current market outlook. Filmed on October 19, 2020.
Senior editor, Ash Bennington, and managing editor, Ed Harrison, look forward to the relevant themes. Ed adds to David Rosenberg's recent comments that "organically, the economy is still in recession," and he and Ash reflect on the recent success of Sweden's pandemic shutdown response. They then put a week of bank earnings into context and analyze Warren Buffett selling the bulk of Berkshire Hathaway's holdings in Wells Fargo. In the intro, Ash speaks to Real Vision editor, Jack Farley, about "priming" in the markets for distressed debt. For reference, the video Ed discusses at the beginning can be found here: https://exchange.realvision.com/post/the-breakdown-what-all-financial-crises-have-in-common-5f89ad21d788a45104be209e.
David Rosenberg - In A Depression, Own What's Scarce
David Rosenberg, chief economist and strategist at Rosenberg Research Associates, sits down with Real Vision's Ed Harrison to discuss the case that the US and, more broadly, the world are in an economic depression. Rosenberg defines an economic depression as more than just a haircut on GDP, but a secular change in the attitudes in both the household and business sector. Together they address the risks to this thesis and dissect investment opportunities that arise in an environment that is scarce on both growth and yield. Filmed on September 30, 2020.