High Yield & Income

Steven van Metre of Steven van Metre Financial interviews Michael Ashton, founder of Enduring Investments and a lifelong student of inflation—that famed economic phenomenon which pervades everyday life and yet is often difficult to truly understand. Ashton breaks down the Consumer Price Index, the most common measure of inflation, to its core, unscrambling its various inputs, evaluating its common criticisms (namely, that it fails to capture the magnitude of price increases in college tuition, healthcare, and housing), and comparing it to other alternative measures such as the Chapwood Index and ShadowStats.com. Van Metre, for his part, directs his gaze toward the macro issues such as the interplay between inflation and variables such as money supply growth, the velocity of money, and interest rates. Lastly, the pair look forward to see what inflationary (or, perhaps, deflationary) forces are on the horizon. Filmed on January 8, 2020. Key learnings: Ashton thinks that the Consumer Price Index is an imperfect metric but is nevertheless an optimal way to measure inflation. He argues that the extraordinary growth in money stock (induced by the Federal Reserve) will indeed augur inflation. Van Metre contends that various deflationary forces, namely the decrease in the velocity of money, will stop inflation in its tracks and could in fact bring deflation.

Byrne Hobart, writer at The Diff, joins Taylor Pearson, co-chief investment officer of Mutiny Fund, for a wide-ranging discussion on everything from monopolization within technological companies to "Straussian" readings of Jerome Powell and Anthony Fauci to what the 800-year chart of real interest rates indicates about the history of capital markets. Hobart scrutinizes what the tendency of technological firms to mimic the major winners in the space means for the future of technological innovation and the venture capital industry as well as the capital that tracks it. After Pearson asks Hobart about the notion of "optionality" as applied to Airbnb, they discuss their risk/reward analysis of Bitcoin as well as the recent companies that went public via special purpose acquisition companies (SPACs). Filmed on January 8th, 2021. Key learnings: This interview contains many contradictory propositions such as the notion that bubbles can be useful and that citizens living during the fall of an empire have a better quality of life than those that lived during its rise. Hobart argues that SPACs as a whole offer little upside and that Bitcoin has a favorable (if skewed) risk/reward profile.

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.

Sam Burns, chief strategist at Mill Street Research, joins Real Vision managing editor Ed Harrison to discuss debt monetization, bank lending, and the waning influence of monetary stimulus. Burns examines structural problems within U.S. banks such as declining net interest margins and the increase in securities rather than loans on the bank portfolios. He then looks at strenuous efforts by central banks to stimulate growth, lending, and even inflation, and he predicts that these efforts are "pushing on a string" and will have diminishing returns, thereby pushing the onerous of stimulative action onto fiscal authorities. He and Harrison explore issues such as deficit spending, potential tax hikes on high-earners, and how Burns’ macro views impacts his outlook for factors in assets such as growth, value, momentum, beta, size, and quality. Filmed on January 5, 2021. Key learnings: Monetary stimulus by central banks and the Federal Reserve has, to an extent, run its course, and the fate of the economy and markets is now in the hands of fiscal authorities such as the U.S. Congress. Concerns about inflation are overstated, and commercial real estate and utilities remain under risk. Emerging markets have capacities to do well but are highly subject to decision of policymakers.

Lyn Alden of Lyn Alden Investment Strategies shares her 2021 thesis for the U.S. dollar, interest rates, inflation, and growth, providing a strategic update of how her expectations for these key macro variables influence her outlook on assets such as commodities, EM equities, real estate, gold, and bitcoin. Alden evaluates whether her bearish view on the dollar, which has proven enormously successful over the past year, has now become a "crowded trade" that offers less upside than it used to. . With insolvency remaining a serious risk, Alden insists that when searching for individual securities, quality must be sought above all else. Looking beyond 2021, Alden evaluates the possibility of the fall of the dollar not just in value, but as a hegemonic reserve currency, and she weighs various replacements to the Petrodollar system, such as a multipolar currency regime, a digital Bancor system, and the possibility of Bitcoin becoming a reserve asset. Filmed on December 17, 2020. For Alden’s article, "The Fraying of the U.S. Global Reserve System," click here: The Fraying of the US Global Currency Reserve System (lynalden.com) Key learnings: Alden expects the U.S. dollar to continue to weaken against hard assets over the course of 2021, with a 3-6 month period of uncertainty. As nominal yields on the long-end of the U.S. Treasurys curve pick up, Alden continues, risk-assets broadly will perform well with equities and commodities outperforming bonds and value outperforming growth. Alden remains very bullish on Bitcoin.

Darius Dale, managing director of Hedgeye Risk Management, joins Real Vision managing editor Ed Harrison to share his outlook for 2021. Dale provides a strategic update on growth, inflation, the U.S. dollar, and interest rates, describing how his views on these macro variables affect his analysis on bonds, equities, credit, and emerging markets stocks. Filmed on December 18, 2020. Key learnings: For the near-term, bond yields will likely rise as the economy enters a "Quad 2" regime (where growth and inflation are accelerating at the same time), and as such, equities and credit will perform broadly while duration-sensitive equities could "get smoked." However, a slowdown in growth in the third quarter of 2020 could derail a market rally and separate stocks with true and lasting earning potential from those who were merely "riding the down-dollar wave." Looking farther afield, Dale sees sustained risks for the U.S. dollar and accordingly is bullish on emerging markets such as Brazil and India.

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.

Kiril Sokoloff interviews Dr. Lacy Hunt of Hoisington Investment Management, the world's greatest monetary economist and expert on bonds, on the most important issues of the day. Dr. Hunt explains in very lucid language why many of today's beliefs about the global economy are incorrect: The Fed is not printing money now. QE1, QE2 and QE3 were also not printing money. The current massive U.S. fiscal programs will not stimulate the economy, only accelerate its long-term downward-growth trajectory. The productivity of debt has fallen sharply, and with it, the velocity of money. The best that can be expected from global growth post-COVID is 1% in real per-capita terms. Having reached the zero bound, current monetary policy may be counterproductive. The U.S. has no net national savings and is dissaving for the first time since the 1930s. This means there will not be capital to invest. Based on an examination of 24 over-indebted economies between 1900 and 2008, the over-indebtedness was solved through austerity. The Fed has the power to lend. It does not have the power to spend. However, if the Federal Reserve Act is changed to give the Fed the power to spend, it would result in hyperinflation. The early warning signs are there. The Bank of England may have crossed the Rubicon by giving £500 billion to the UK government to pay its bills. Filmed May 18, 2020.

Real Vision Managing Editor Ed Harrison talks to Richard Koo, Chief Economist at Nomura Research Institute. Koo is famous for his work on balance sheet recessions, a rare type of recession where drastic liquidity injections fail to increase the money supply because they remain trapped in the financial system, as there's no low demand for loans since companies focus on minimizing debt rather than maximizing profits. He and Harrison discuss this framework in detail, and use it to analyze our current economic crisis the world faces. Koo draws a contrast between the traditional balance sheet recession, where a bursting of a debt-financed bubble causes a collapse in asset prices and an emergence of debt overhang, with what he refers to as a "pandemic recession," where an exogenous collapse of economic activity leads to disappearing income and a tightening of financial conditions. Koo and Harrison also discuss the various toolkits available to central banks and fiscal authorities worldwide, and Koo shares what he thinks what a sound policy response might look like. Filmed on May 7, 2020, over Skype. To view more of Koo's charts, click here: https://rvtv.io/Koo

Jeffrey Gundlach, CEO of DoubleLine Capital, has evolved his investment style over the years, and although he is still the "bond king", increasingly he has become multi-asset with a focus on getting the macro right. In this interview with Real Vision CEO Raoul Pal, Gundlach explains how he thinks about time frames, position sizing based on asset class, and how his style changes based on whether the market is alpha or beta driven. He also provides his current outlook, arguing that there is not much opportunity in this environment and that the most important thing at the moment is managing risk while patiently waiting for the next big trade. He also touches on timely topics like the potential for a wave of insolvency, why he believes we are in the midst of The Fourth Turning, his skeptical view of bitcoin, and why he is bullish on the dollar in the short term despite his highest conviction macro view being pronounced dollar weakness. Filmed on October 1, 2020.

Roy Niederhoffer, president of R. G. Niederhoffer Capital Management, joins Jason Buck of The Mutiny Fund to share the lessons Niederhoffer learned during his fruitful career as a systematic trader and portfolio manager. Niederhoffer tells Buck about his journey from being a high school entrepreneur to a trader at his brother's firm to then developing his own systematic trading algorithms and ultimately starting his own firm, R. G. Niederhoffer. Using vivid examples from financial crises such as "Black Monday" in 1987, 9/11, and the 2008 Great Financial Crisis, Niederhoffer discusses the advantages of systematic trading as a way to avoid behavioral traps that humans fall into. Niederhoffer provides insights on the nuances of risk parity, particularly the waning correlation between stocks and bonds, before sharing with Buck his views on monetary debasement, inflation, and Bitcoin. Filmed on December 15, 2020. Key Learnings: Negatively correlated assets are crucial to hold as they reduce volatility within a portfolio. Systematic trading (as opposed to discretionary trading) is an effective way to exploit emotional foibles of other market participants and not fall victim to your own. The negative correlations between stocks and bond prices is not an unmoving axiom of financial law, but rather a feature of the last four decades which may no longer be true.