Real Vision CEO and founder Raoul Pal is with venture capitalist Bill Tai, discussing what excites them for the future. Tai says that data is very exciting to him. He says that there were multiple waves of digitization, that even led to the internet. He says digitization has left its mark all the way from places like Walmart to Uber. He says even humans have been digitalized. They discuss the “Zoom Revolution.” He believes that humanity is returning to where it once was thousands of years ago, with most content being free. He believes all goods will need to be tracked and identified at all ties, and we’re just at the start. Tai ends on discussing blockchain and asset tracking.
Venture capitalist, Bill Tai, has been at the intersection of venture capitalism and innovation since the early days of Silicon Valley before the orchards were replaced with technology company corporate headquarters. He joins Real Vision’s Raoul Pal to provide his uniquely qualified perspective, having experience on both the technology development and financing sides of Silicon Valley. Tai and Pal discuss data science, Tai’s explanation of the “waves of innovation,” and where Tai sees the next wave of innovation currently developing. Tai also talks about his early investment in Bitcoin, his view of digital assets separate from Bitcoin including CryptoKitties, digital currencies like Libra, and what he calls “the Electrodollar.” Filmed on May 27, 2020.
Dan Rasmussen, founder and CIO of Verdad Advisors is with Greg Obenshain, Verdad Advisors director of credit. They begin by talking about credit markets, and the “fools yield.” Obenshain believes over the last 12 months, the best you could do was a 4% return. Bonds that are trading as riskier have lower returns, and they end on the double b to single b split.
Dan Rasmussen and Greg Obenshain go back to the beginning and talk about investment opportunities right now. Obenshain still says he is watching the high yield market He believes that is not a hard investment to get. He says this is a very difficult market to predict, and we have no idea what is going to happen. They discuss people’s apprehension in buying into the market right now due to current world conditions. They conclude by talking about income portfolios and the possibility behind them.
Dan Rasmussen and Greg Obenshain discuss what is the biggest factor in determining corporate credit rates. In short, they agree that market efficiency plays a huge role in determining corporate credit rates. They agree it is interesting that yield is deemphasized, but what actually matters is if the credit is getting better or worse. They agree that the area with the highest potential for upgrades is just below triple b. The conclude by going back to shale, which they discussed back in the previous chapter.
Dan Rasmussen and Greg Obenshain continue talking about the current view of energy credit. They relate debt to high yield in energy, but that it is not in oil. However, Obenshain believes there was issues in energy prior to this crisis.
Dan Rasmussen and Greg Obenshain discuss the potential for return after the current COVID-19 crisis. They discuss valuation levels, and how coming into the crisis the market was quite unusual, with some sectors of the market being “overpriced” according to Rassmussen. They discuss how the Russell comes back before the S&P 500, and how corporate credit obligations pose a risk.
Dan Rasmussen and Greg Obenshain continue their discussion on yields, more specifically what area of the market will be hit the hardest. Obenshain believes that private equity funding will be hit among the hardest because they will need to take on new debt or restructure their debt to survive. He believes that companies with a lot of debt will have a tough time. They end by discussing leverage and how tough it will be.
Roger Hirst and Jharonne Martis, Director of Consumer Research at Refinitiv, talk about the findings of a recent Refinitiv survey that looked into the patterns of consumer behavior. The consumer has always been a key barometer of the health of the US economy but are there any permanent changes in the way consumers are purchasing goods?
Former Xerox CEO and the first black woman CEO of a Fortune 500 company, Ursula Burns, talks to CNN's Poppy Harlow about how Corporate America can address issues of racism and diversity.
Dan Rasmussen, the CIO and Founder of Verdad Capital Advisers, speaks with his colleague Greg Obenshain, Verdad's director of credit, to examine the credit market sell-off over the past two months. They focus on the recent widening of spreads and other areas of financial markets hit hardest by the recent acceleration. Rasmussen asks Obenshain what the biggest factors for returns in corporate credit are, the turmoil in the credit markets has impacted the energy sector, and where they see the biggest opportunities for investors will be coming out of the crisis. They also update Verdad's Fool's Yield thesis that the company has been writing about since January 2020 and that Rasmussen has presented to Real Vision members in the past few months. Filmed on March 17, 2020 over Skype.
Real Vision founder and CEO Raoul Pal is with Trevor Mottl discussing how AI can influence investment decisions. They go into the benefits of AI with regards to the advantages AI poses in modeling and analyzing. They discuss data sets, both public and private and how widespread data sets are throughout the financial industry. Mottl talks about his philosophy with regards to data and how they test possible pursuits. They conclude by discussing Mottl’s view on how he uses AI as an analyst.
Roger Hirst and Phil Cotter, Managing Director of Refinitiv's Risk Business, talk about money laundering and how new techniques are constantly evolving with new technologies because an increasing number of financial transactions are taking place online.
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.
Raoul and James Aitken end their conversation with a discussion on how to deploy capital in a crisis. They discuss credit and equities, and Aitken believes that energy is within his circle of confidence. They conclude by talking about companies that we need to be able to restart the economy at a good place.
Raoul is back with James Aitken and they are back talking about the “liquidation phase.” They speak about what will happen if growth continues to trend down. There are fears of the largest “insolvency event.” They go into discussing the difficulties that bars and restaurants will face when deciding to reopen, and how we are looking for recovery. Aitken believes the global economy has turned off, and 1 billion people are waiting for a bailout at home. They end by discussing the possibility of state and local bailouts within the United States.
Raoul is back with James Aitken and they are discussing the currency markets. They discuss the US dollar and the Fed, and why the dollar isn’t weakening. Furthermore, they discuss the flow of dollar securities and the flow of them. They end by taking about Aitken’s trip to China, and the interesting aspects of the Chinese banking system.
Real Vision’s own Raoul Pal and James Aitken discuss the ECB, and the future plans for preventing fragmentation in Europe going forward. Aitken elaborates, saying that the ECB is receiving very cheap funding, and talks about their balance sheets. They then talk about bonds, and how there is a “colossal” amount of bonds to be issued. Aitken and Raoul discuss how the next few quarters are likely to be tough ones, with the possibility for Great Depression like numbers. They end by discussing a variety of topics, such as treasury securities and yields.
This week Real Vision use Refinitiv's best-in-class data to look at the latest conversations about monetary policies that continue to stack the rebound in favor of risk assets and large corporates, at the expense of the real economy. Are these policies continuing to damage the economy despite the recovery in equities? The Chatter looks at the sell-off in the US dollar and puts the bull vs bear debate in historical context. The Whisper looks at the potential rise of both bankruptcies and the zombie company.
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.