THE DAILYALTS PLAYBOOK

February 11, 2020

Today, the DailyAlts Playbook talks about China’s Repo Dealings, Sycamore’s “Secret” Buy, Dalio’s Latest Warning, and the $100 Billion “Book of Mormon.”

PRIME OVERVIEW

China’s Xi Jinping swears that his nation is doing all it can to beat the spread of coronavirus. Over the weekend, the death toll from the virus topped 900 people. In addition, the total number of cases hitting the world’s second largest economy reached 40,000.

The People’s Bank of China pumped another 900 billion yuan ($128 billion) into the markets again on Monday as it attempts to provide support to the market. This follows an injection of $147 billion last week. However, it’s unclear if these steps will provide enough support to address the real concern:

The state of China’s economy. The pandemic has caused travel bans, businesses to close, and border shut downs – all things that will negatively impact China’s economy. New projections suggest that China’s economy could fall under 5% during the first quarter. In a sign of what’s happening on the ground, Foxconn announced that it was reopening a key Chinese plant with just 10% of its workforce.

MORNING MOMENTUM

BUDGET BLOWOUT – President Donald Trump has released the White House’s latest budget proposal and it’s something. The Fiscal 2021 budget projects a $1 trillion deficit and calls for a plan to extend tax cuts through 2035 at a cost of $1.4 trillion. The White House proposes about $4.4 trillion in spending over the next decade. The bulk of cuts come from a reduction in most social safety net programs, including reductions for food and housing assistance.

CENTRAL CONCERNS – On Tuesday, Federal Reserve Chair Jerome Powell will offer his semi-annual testimony before Congress. Meanwhile, ECB President Christine Lagarde will speak Tuesday before the European Parliament. With interest rates falling around the globe, investors are looking for any clues about what the central bankers plan to do to stave off global economic woes.

SECRET BILLIONS: The Wall Street Journal has revealed quite a secret at the Mormon Church. According to reports, Ensign Peak, the fund of The Church of Jesus Christ of Latter-day Saints, hid news that their fund had reached $100 billion. The fund was concerned that having a 12-figure cash pile would lead to a decline in tithing. Members of the Mormon Church must donate 10% of their income each year. A whistleblower issued a complaint to the IRS last year.

ACCRUED INTEREST

BARGAIN BRAS – Private equity giant Sycamore Partners is reportedly exploring a deal for the Victoria’s Secret brands. Reports indicate that L Brands (NYSE: LB) could agree to a deal with the private equity firm as soon as this week. L Brands stock has struggled over the last year due to the ongoing slide of brick-and-mortar retail, global trade tensions, and ongoing criticism of founder Leslie Wexman due to his relationship with the late Jeffrey Epstein.

CONTRARIAN BUY – In other deal news, Simon Property Group (NYSE: SPG) announced plans to take a 80% stake in Taubman Centers (NYSE: TCO) for $52.00 per share. That price represents a 49% premium to Friday’s closing price. The all-cash deal is valued at roughly $3.6 billion. Reports state that Taubman’s executive team will still manage the properties.

CARRIED INTEREST

BIG HAUL: Brookfield Asset Management (NYSE: BAM) has reached its $20 billion capital raise for a new infrastructure fund. That figure easily surpassed the company’s $17 billion target and surpasses its previous infrastructure fund’s 2016 raise of $14 billion. The company said that 75% of capital came from existing investors. The fund has already put about 40% of its cash to work starting with rail operations and natural gas pipelines in the United States and data infrastructure in South America, Europe, and Asia.

TESLA TROUBLES: The numbers are in for Tesla Bears. They lost $8.4 billion during the first five weeks of 2020. Now, shares are up another 9% this morning.

QUOTES OF THE DAY

“We’re at each other’s throats when these are the best of times. I worry about the bad times.“

A day after Parasite – a film about class and income inequality – won Best Picture, news of Ray Dalio’s children’s book hits the markets. Dalio has raised new concerns about the state of the global economy. He fears a return to the 1930s. Dalio has a net worth of $18.7 billion, and he recently put out a number for anyone to text him to help promote his book Principles.

“You won’t be able to recoup all of the negative impacts in the first quarter.”

That’s Diana Mousina, an economist at AMP Capital Investors. Mousina warns that the coronavirus will continue to negatively impact markets in the weeks ahead.

ACTIVE MANAGEMENT

CONCERNS: An activist battle has spiraled over NMC Health, a United Arab Emirates healthcare company. Czech activist investor and NMC shareholder, Krupa Global Investments, will likely file a complaint with the Financial Conduct Authority in the U.K. and the Federal Bureau of Investigation in the U.S. It will target Muddy Waters Capital, a short-selling titan targeting NMC stock.

GO GREEN – Elliott Management is still putting pressure on Evergy to shutter its coal power plants and put a greater emphasis on wind and solar. Elliott has also called for a “premium stock-for-stock” offer for the company. Various analysts have offered suggestions on which companies could justify a deal for Evergy. The name that has appeared multiple times is Ameren.

LIABILITIES

VARSITY BLUES: Former PIMCO CEO Douglas Hodge has been sentenced to nine months in prison. Hodge led the firm until 2016. However, he is now heading to prison for “paying $850,000 to secure his children’s admission to college,” according to U.S. attorney for Massachusetts. Here’s more.

CRYPTO CRIME: The total amount of crime around Bitcoin and other cryptocurrencies topped out at $4.3 billion in 2019. That figure was larger than the two previous years combined.

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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.