THE DAILYALTS PLAYBOOK

March 11, 2020

Today, the DailyAlts Playbook talks about Coronavirus Stimulus, Biblical Warnings, Vertical Hedge Fund Neighborhoods, and Why Kyle Bass is Sitting on the Sidelines Right Now.

PRIME OVERVIEW

Good morning:

U.S. markets are predicting a sea of red again Wednesday after yesterday’s remarkable afternoon rally.

The word of the day: Stimulus.

The White House is looking to throw the entire encyclopedia of fiscal strategies while pressuring the Fed on monetary policies to combat coronavirus.

Consumer spending in trouble? How about cutting payroll taxes to zero for the end of the year.

[Boy, would that be a big win for corporate America in an election season?]

Oil companies in trouble?

Well, how about extending small business loans and getting dangerously close to going full-scale Japan to prop up the industry?

That’s been kicked around too.

Today, however, it’s unclear what can and will be done.

Washington remains hyper-divided.

Republicans are pushing back on an oil-patch bailout.

Democrats appear more concerned about what to call the virus.

At the same time, the hero of the day is Dr. Anthony Fauci, director of the National Institute of Allergy and Infectious Diseases.

“We would like the country to realize that, as a nation, we can’t be doing the kinds of things we were doing a few months ago,” he said during a briefing yesterday.

“It doesn’t matter if you’re in a state that has no cases or one case, you have to start taking seriously what you can do now, if and when the infections will come, and they will come,” he added.

This statement appeared to address two things: That citizens and officials in cities around the country who are supposed to be leading are taking too little time in addressing a possible outbreak. We’re finally seeing cancelations and postponements of major events like NCAA games, concerts, and quarantines of areas of New York

Americans are avoiding cruises and planes. Social interaction is waning. People are listening to officials.

But one can’t help but wonder if he was also targeting Congressional officials who are infighting about the name of a virus instead of addressing it as a coordinated government. Washington was long broken before the arrival of Trump (that’s evident from previous pandemics).

The finger-pointing has gotten worse, and the capital offered to address this was too small.

Claudia Hahm – the former head economist at the Fed Board of Governors – has to have bitten her nails through her fingertips. In a conversation with Axios on Tuesday, she worried that stimulus efforts are in trouble because of Washington itself.

She called Congress’ $8 billion stimulus package “an insult.”

“It has to be hundreds of billions of dollars, and it has to be now,” she said.

“I want to see it — and maybe I will,” she continued. “But without that piece, we are in a recession before the end of the year.”

Failing to deliver the necessary capital to the CDC in stimulus because we don’t face problems until they’re at the break the glass point. We’ve seen this in every major emergency over the last 20 years. Then, people blame the other side because it makes for good theater for fringe voters.

But that’s the only inevitable thing from this slow-reacting tribe of careerist politicians who forget that politics isn’t supposed to be theater.

It’s time to grow up.

MORNING MOMENTUM

STIMULATE: The Bank of England announced its own emergency cut to address the economic impact of the global coronavirus spread. England currently has 382 confirmed cases of the virus and has announced a short-term funding program for small and mid-sized businesses. At its special meeting ending on 10 March 2020, the Monetary Policy Committee (MPC) voted unanimously to reduce Bank Rate by 50 basis points to 0.25%,” the Bank of England said Wednesday.

VIRUS UPDATE: U.S. coronavirus cases topped 1,000, according to Johns Hopkins University. Trump is considering a number of stimulus packages, including cuts to the payroll tax down to 0% for the balance of the year. The news comes at the same time that Bejing has started to tighten restrictions on travel across the country for inbound travelers. Total cases around the world have topped 120,000 and nearly 4,291 people have died from the virus.

FRONTRUNNER: Former Vice President Joe Biden has cemented himself as the new frontrunner and likely candidate for the Democratic nomination. Biden easily won the Michigan Democratic primary on Tuesday and issued a big blow to rival Senator Bernie Sanders (I-Vermont). Biden currently has a 836-686 delegate lead over Biden after also winning Missouri and Mississippi.

ACCRUED INTEREST

DEBT BOMB: We talked about the corporate debt bomb that has been looming for several years. It’s especially prevalent in countries where we’re seeing a lot of worries around coronavirus like China, England, Italy, and the U.S. Here’s a simple primer on the subject. But, again, I wonder how it is that media outlets are just getting around to this? It appears that the answer is linked to Google Searches from curious people who are hearing more and more about this – finally.

DATA BOOM: A new report from Opimas states that the value of ESG data could top $1 billion by next year. The firm’s newest report  ESG Data Market: No Stopping Its Rise Now, says that the market topped $617 million in 2019. The research group projects annual growth of 20%, and 35% growth for ESG indexes.

CONTACT: Multiple media outlets report that an employee at Point72’s Hudson Yard’s office has contracted Covid-19. The Wall Street Journal was the first to report the news, citing an internal email from the fund. The email says that the employee, who reportedly works in the firm’s back office, is “self quarantined at home, safe, and receiving ongoing care.” That news came before reports that a Wells Fargo (NYSE: WFC) contracted coronavirus in a building where many other banks also have offices.

CARRIED INTEREST

Here are the other headlines that have grabbed our attention this morning across the markets.

• JetBlue Air (NASDAQ: JBLU) leaders say that demand for flights has now fallen under the levels we saw after 9/11.
• Fox Business wants to talk to you about Carl Icahn’s net worth – for some reason.
• Was a vertical hedge fund neighborhood a good idea? Maybe not in the era of coronavirus.
• Here’s what Crispin Odey is buying… according to TipRanks.

QUOTES OF THE DAY

“If you’re asking for when the financial markets see peak virus, I think it’ll be about a month from now.”

That’s hedge fund manager Kyle Bass talking about what he sees on the horizon. He plans to sit on the sidelines and watch: “one of the most interesting financial collapses that we’ve seen in the past 15 to 20 years.”

“If central banks don’t inject enough liquidity and if governments don’t do enough to support companies and prop up the confidence of the public and investors, then there will be panic in markets and there will be larger [falls in] economic growth. This is a decisive hit to growth at a time of global economic vulnerability. The worst thing they can do is to do too little.”

Andrew Law of Caxton Associates had some rather Biblical language for central banks when it came to response to the Coronavirus.

LIABILITIES

FLORIDA FRAUD: The SEC has frozen assets and other emergency relief against Florida-based investment adviser Kinetic Investment Group and its managing member, Michael Scott Williams. The decision is tied to an alleged fraudulent, unregistered securities offering that raised approximately $39 million from at least 30 investors located mostly in Florida and Puerto Rico.

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ABOUT THE DAILYALTS PLAYBOOK

Garrett Baldwin is the author of the DailyAlts Playbook.

An economist and author based in Naples, Florida, Garrett has an extended history of financial analysis, business journalism, public relations and consulting experience in hedge funds, private equity, alternative investments, housing policy, commodities, and public equity coverage. He holds degrees from Northwestern University, Johns Hopkins University, Purdue University, and Indiana’s Kelley School of Business. He also has a Certificate in Global Business from Harvard Business School.

An avid Baltimore Orioles and Buffalo Bills fan, he would prefer to discuss other sports, please.