THE DAILYALTS PLAYBOOK

February 6, 2020

Today, the DailyAlts Playbook talks about Pershing’s Coffee Sale, Bernie Madoff’s Dying Request, and Tesla’s Pullback.

PRIME OVERVIEW

This morning, global markets are back in the green. The Dow Jones projected a 94-point gain this morning after China announced plans to slash tariffs on hundreds of U.S. goods by 50%. The total amount of goods impacted is about $75 billion.

The death toll around the globe due to coronavirus has hit 563. Total cases are now sitting at more than 28,000. The ongoing spread has forced Tesla Inc. (NASDAQ: TSLA) to close its stores in mainland China. Meanwhile, Chinese officials remain angry at other nations that have restricted travel due to the virus.

MORNING MOMENTUM

MORNING JOE: Pershing Square Capital has exited its stake in Starbucks Corporation (NASDAQ: SBUX). As we noted yesterday, Bill Ackman’s hedge fund announced the divestiture during an investor presentation Wednesday. The firm earned a 73% return in 19 months with this stock.

BEARS STRIKE: Shares of Tesla Inc. fell 17% Wednesday and continued to drop in premarket hours. The downturn follows a parabolic run by the auto stock that saw shares double in roughly a month. Yesterday, we broke down the call by a venture capital firm that set off the frenzy. While the squeeze on shorts has been one of the more epic stories of the year, it’s a reminder that this situation is nothing compared to what happened with Volkswagon in 2008.

ACCRUED INTEREST

PE BOOM: Private equity managers continue to pile up assets. According to Preqin, the industry hit $4 trillion in assets in 2019. Nine out of every 10 managers expect that PE assets will climb in the year ahead. The research firm expects that private equity AUM will top $5 trillion by 2022.

PRISON PLEA: Bernie Madoff – now 81 years old – is seeking a “compassionate release” from prison under the First Step Act. The former Ponzi Scheme mastermind has served 10.5 years of his prison sentence. However, lawyers say that Madoff is dying behind bars. This will be an uphill battle for Madoff, whose plea will fall on the desk of Circuit Judge Denny Chin. The judge previously called Madoff’s crimes “extraordinarily evil.”

DONOR PUSHBACK: Carl Icahn, Paul Singer, and other Republican donors linked to the hedge fund space are criticizing U.S. regulators this morning. The donors are fuming over the SEC’s proposal to place checks on proxy companies.

QUOTES OF THE DAY

“Should I buy Tesla?“

That was the No. 1 Google search term starting with “Should I” this week.

“Congratulating an employer for collecting the payroll tax is like congratulating yourself for breathing.”

That’s the Institute on Taxation and Economic Policy breaking down Amazon’s recent tax bill. The company paid a 1.2% tax rate on $13,285,000,000 in profit for 2019. Expect to hear a lot about this from Sens. Bernie Sanders and Elizabeth Warren ahead of Super Tuesday.

ACTIVE MANAGEMENT

BOARD MOVES: Elliott Management has reached a deal with coal producer Peabody Energy Corp. The deal allows Elliott to appoint Dave Miller, Elliott’s head of U.S. restructuring, and portfolio manager Samantha Algaze to Peabody’s board of directors.

VAMPIRE TAILS: Alden Global – which recently took a very large stake in Tribune Publishing (NASDAQ: TPCO) – has received the villain role from Vanity Fair. The story refers to the hedge fund as a “vampire” and a “synonym for evil.” The report comes the same day that Alden Global purchased a Minnesota media firm and its 11 newspapers.

LIABILITIES

TRIAL TROUBLE: Consulting giant McKinsey allegedly failed to disclose information about managed accounts in its internal fund MIO Partners. This has become a key development in a bankruptcy trial in Houston that pits the firm against Jay Alix, the turnaround pioneer and founder of AlixPartners.

INSIDER DEALINGS: Jurors in a Boston federal court returned a verdict against restauranteur Charlie Chen for illegal insider trading. Chen made over $800,000 trading on inside information linked to Vistaprint.

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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.