THE DAILYALTS PLAYBOOK

March 2, 2020

Today, the DailyAlts Playbook talks about Tom Steyer’s Suspension, the ECB’s Self-Plagiarism, and Tough Times for Masayoshi Son.

PRIME OVERVIEW

We start Monday in Asia, where markets rallied despite weakness in the region’s manufacturing centers. The Markit/Caixin manufacturing Purchasing Managers’ Index (PMI) slumped to 40.3, well below the forecast of 45.7 in a Reuters poll. Meanwhile, the Purchasing Managers’ Index (PMI) slumped to a record low of 35.7 in February.

Anything under 50.0 signals a contraction in the sector. Despite this news, both the Shanghai Composite and the Shenzhen component gained more than 3.1% overnight. Japan and South Korean markets recovered slightly this morning.

However, in Europe and the U.S., it’s nice to have some cash available. Markets across Europe were in the red as investors speculated on the potential response from central banks to provide liquidity and support.

So far, coronavirus has produced more than 87,000 cases around the globe and more than 3,000 deaths. The U.S. experienced its second death over the weekend, while Rhode Island and New York reported their first cases.

On Friday, Federal Reserve Chair Jerome Powell said the virus “poses evolving risks to economic activity.” He said that the U.S. central bank would “use our tools and act as appropriate to support the economy.”

The Dow was off 145 points about two hours before the market opens, or 0.6%.

MORNING MOMENTUM

ECB UPDATE: The ECB released a statement this morning on coronavirus. “The Governing Council stands ready to adjust all its instruments, as appropriate, to ensure that inflation moves towards its aim in a sustained manner,” said ECB Vice President Luis de Guindos. Here’s the thing: This statement is almost identical to part of a warning statement from October 2019. And another from December 2019. Let’s be honest: They’re not really prepared.

CORONA KINGS: Hedge funds making bets against the global economy did quite well. Russell Clark’s Horseman Global Fund gained 6% in the seven days up to Feb. 26. Crispin Odey’s flagship European fund added 5% last week. Here’s an additional recap of who’s making money during this period of volatility.

BONDS AND OIL: The 10-year U.S. bond is now yielding 1.2%, a record low. Meanwhile, oil prices are acting as though the global economy is heading into a recession. This latter factor has fueled a sharp rise in bets against the oil-and-gas industry.

ACCRUED INTEREST

PAPER ROUTE: For the last few months, we’ve covered the increasing activism of Alden Global Capital, which has been snapping up shares in newspaper companies and then leading the charge to reduce staff and cut expenses at this company. Over the weekend, New York Daily News fan Sen. Charles Schumer took another shot at the hedge fund and demanded greater transparency from the firm. Schumer raised concerns that the bulk of the hedge fund’s capital comes from non-U.S. persons.

END OF AN ERROR: Tom Steyer had a plan to be president.

• Step One: He’d shower the nation with more than $100 million in advertising.
• Step Two: ?
• Step Three: Steyer wins 2020 in a landslide.

Over the weekend, however, Steyer’s vanity campaign came to a close. Despite a mildly successful finish in South Carolina, he is walking away. He said that if he didn’t see a viable path to winning, he would suspend his campaign. How did it take him this long to not see that path? In addition to Steyer, Pete Buttigieg announced he too was suspending his campaign ahead of Super Tuesday. This was more surprising given that Mayor Pete currently sat in third place in the delegate count.

CARRIED INTEREST

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

• Bank of England Deputy Governor Sir Jon Cunliffe is worried that cryptocurrency will destroy bank lending.
• It’s a tough time for SoftBank CEO Masayoshi Son.
• There are serious allegations against the family office, according to Business Insider. Charges range from physical assault to racism.
• What it’s like to have coronavirus.
• Altos Capital has a new flagship fund.

QUOTES OF THE DAY

“The fighter jet era has passed.”

That’s Elon Musk giving a fireside chat with U.S. Air Force Lt. Gen. John Thompson. Musk said that the future of aerial warfare belongs to drones.

“Gold is like a religion.”

That’s Sprott CEO Peter Grosskopf. Commodity fund managers – particularly those who sit on gold – still anticipate that we’ll have an inflationary event that drives the price of the yellow metal even higher. However, gold mining stocks are off about 70% since the huge run in 2011 that preceded the battle over a government shutdown.

ACTIVE MANAGEMENT

• Elliott Management Corp has built a large stake in Twitter (NYSE: TWTR). Now it has one objective: To remove Jack Dorsey as the CEO of the company. The activist hedge fund has also appointed four individuals to Twitter’s board.
• Meanwhile, Elliott Management is pushing SoftBank to disclose roughly $10 billion in assets that are currently sitting on its balance sheet.
• Clifton S. Robbins announced Friday that he will shutter Blue Harbour Group. This is one of those rare situations where a fund manager isn’t shutting the fund because of weak performance or a run on redemptions. Robbins reportedly just wants to do something else with his life. “Our investors are very happy, and my energy and productive years ahead still amply match my desire not only to identify and embark on new opportunities but also, importantly, to see them through to significant milestones of accomplishment,” he wrote to shareholders.

LIABILITIES

OLD PROBLEMS: Officials in London are digging into accusations against Lloyds Bank for fraud against a small business. This is a six-year-old case that Lloyds simply hasn’t been able to shake.

SOCIAL RESPONSIBILITY AND THE DAILYALTS PLAYBOOK

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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.