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Recession
Recession
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What to own when the market crashes? TAIL RISK PART TWO: Breaking down Jason Buck's interview with Meb Faber (feat. never-before-seen charts 📈)

Hello fellow hive members 🐝, @Nick Correa and I are back at it again, probably with the best edition of "The Breakdown" we've ever done. We explore the treasure trove that is @Jason Buck's interview with Meb Faber of Cambria Investments, and define what "tail risk" is, its uses, and how various assets such as bonds, gold, real estate, and foreign stocks perform during immense drawdowns of the S&P 500. We explore Meb's Tail Risk ETF ($TAIL) and break down how its various holdings help achieve its mandate of negative correlation with the S&P 500 with not too much "bleed" during normal times.

We had fun with this one and hope you do too! (charts below)

Link to the original interview:

https://www.realvision.com/shows/the-interview/videos/meb-faber-a-framework-for-outperformance

@Jeremiah S @John Ahearn @Jaymes Rosenthal @Moritz Heiden @Matt Daniell @Craig P @Bradley Snyder @Sam Colt @Theodore Boydston @thomas cullis @Aneil Pokharel @Dennis Jarvis @Konrad Zawadzki @Joseph J @James J P Mulholland @Xavier Mejido @Master Of Money @Tom Catternan @Kewal Mistry @Jehan Hiramanek @Sean Morgan @Sam Mitchell @John Ahearn @Dan Little @Matthew Lansing @Matthew Lansing @Adam Toth-Fejel @Theodore Freysen @Seahyung Park @Sean Morgan @Bryce G @Dean W @ALLEN AZAR @Oliver Anderson @Andreas Niederberger @Cristofer Atiencia @Lemony Snicket @Brian Caputo @Brian Lee @brian barry @bill foord @Georgii Verbitskii @Max Wiethe @Stefan Clulow @John Fadool @Collin Velarde @James Clark @Daniel Olarte @Paul LaRue @Chris Clark @Roo Larson @Lars Andersson @Matthew Larkin @Larry Lawhorn @Larry Stein @larry cooper @Christian Petersen @Philip Peterkin @David Douglas @David Lack @David Sharp @David Douglas... (More)

Quant-Inspired ETFs Are Breaking Records and Beating the S&P 500

Does anyone understand what's in them?

Systematic strategies wrapped up in exchange-traded funds -- known as smart-beta products -- took in a record $28 billion in March, according to Bloomberg data. After luring almost $7 billion so far this month, total assets are at the highest ever.

https://www.advisorperspectives.com/articles/2021/04/16/quant-inspired-etfs-are-breaking-records-and-beating-the-s-p-500

The Logic of the Yield Curve (Explaining Mike Green's Interview with Harley Bassman)

  1. Joined by special guest Max "I Left My Heart in Cleveland" Wiethe, @Nick Correa and I investigate Harley Bassman's view of the yield curve, which he shared with Mike Green in his latest interview. @Max Wiethe explains why an inversion of the yield curve can be a portent of a recession. We also broach other topics like: maturity, convexity, mortgage-backed securities, and quantitative easing. "Jack's cola" may or not make an appearance.

    Hope you enjoy! @Jeremiah S @John Ahearn @Jaymes Rosenthal @Moritz Heiden @Matt Daniell @Craig P @Bradley Snyder @Sam Colt @Theodore Boydston @thomas cullis @Aneil Pokharel @Dennis Jarvis @Konrad Zawadzki @Joseph J @James J P Mulholland @Xavier Mejido @Master Of Money @Tom Catternan @Kewal Mistry @Jehan Hiramanek @Sean Morgan @Sam Mitchell @John Ahearn @Dan Little @Matthew Lansing @Matthew Lansing @Adam Toth-Fejel @Theodore Freysen @Seahyung Park @Sean Morgan @Bryce G @Dean W 
     
https://vimeo.com/522919372/842f740b2e

Here is a link to the original interview:

https://www.realvision.com/shows/mike-green-in-conversation/videos/the-right-price-for-bonds-demographics-and-inflation-and-cheap-bets-on-volatility?source_collection=8e80b18fdb074555bdd47d97e73fbe91
 

And here are some of Harley's charts that we discuss:

Recession signals

In any other environment I would say we are definitely entering a recession from recent data, I am only hesitant to do so now because of the enormous base effects coming into the next quarter but here is the basic case.

  1. Total employment stalled out in November at 10 million below the pre pandemic level. Total employment basically always flattens at the beginning of a recession (though not all flattening leads to recession), it flattened in Dec 2007, Feb 2001 and Jul of 1990. Yes Covid had a resurgence but the growth rate was slowing into November, there is an enormous amount of slack to be picked up, there was a 10% boost in income and a 2.5% boost in spending thanks to the $600 checks and there has been a housing start boost.
  2. The yield curve steepening off flat or inversion has preceded each of the past 3 non Covid recessions. The laze description is that inversion = recession and reversion = growth, but the reality is that inversion has preceded the past three recessions and reversion has started a few months before the official recession with steepening through and past the recession. Recovery has been associated with the slow flattening. This one looks different because the short end is staying flat while the long end increases and previous issues had the short end falling faster than the long end, but if we look at real rates using the 2 year treasury minus the 5 year break even rate... (More)