THE DAILYALTS PLAYBOOK

March 4, 2020

Today, the DailyAlts Playbook talks Super “Biden” Tuesday, Roaming Chickens, Fed “Fear”, and Why It Takes Zero Millennials to Change a Light Bulb.

PRIME OVERVIEW

We start Wednesday with Super Tuesday. Uncle Joe Biden has completed a stunning consolidation of support across the Democratic party and stopped the momentum of Senator Bernie Sanders. An NBC News poll shows that Biden won across the South in Virginia, North Caroline, and Arkansas. This would give him a lead in the delegate count. It also appears that he won in Massachusetts, Texas, Maine, and Minnesota. And although it appears that Sanders will win California, Biden came in second place and will be viable in that state (as in he will receive delegates).

The Health Care SPDR (NYSE: XLV) is up more than 3.3% this morning as a result. Increasing odds of a Biden nomination reduce the possibility of a “Medicare for All” push in Congress. Cigna Corp. (NYSE: CI) is up more than 7.2% this morning. It’s a good day to be an insurance company.

Meanwhile, the U.S. 10-Year bond fell under 1% for the first time ever on Tuesday. The Federal Reserve engaged in an emergency cut to interest rates to help support the U.S. economy.

However, the Dow still lost more than 785 points yesterday. The cut to interest rates has naturally altered the dynamic of the housing market. This week, mortgage refinancing has increased by 26%.

One small note: On Friday, I’m heading to Key West. Luckily, I broke my laptop on Monday, so I won’t be taking it. I don’t plan on hauling a desktop. I won’t be typing on my cell phone. So… please be advised that there will likely not be a letter on Friday. There are boats and Hemingway. There are roaming chickens and sleepy cats. Oh, and the rum. All of the rum.

MORNING MOMENTUM

GLOBAL RISK: Coronavirus is again leading headlines Wednesday. The UAE has announced a plan to shut down its schools for at least a month to prevent the spread of the virus. Italy is also considering a similar proposal as Iran continues to experience widespread problems in major cities. The nation made the rare decision to cancel Friday prayers ahead of time due to the spread of the virus. Meanwhile, Japan continues to shuffle the idea of postponing or outright canceling the 2020 Summer Olympics due to fears of the virus’ spread.

CHECKING EUROPE: The Fed isn’t the only central bank likely to take action due to coronavirus. The ECB and the Bank of England will likely announce stimulus efforts in the next few days. It will be interesting to see how economies expand from stimulus efforts when people are too panicked to go to the movies, a sports event, or a restaurant. But hey – central banks are going to centrally bank. If anything, we’ll just have some more money in the system to let people take on more leverage in the coming months and push stocks to new records when the fear subsides. By the time coronavirus is done and the central banks have pumped enough money into the system, unprofitably speculative stocks like Tesla Inc. (NASDAQ: TSLA) and Snap (NASDAQ: SNAP) will be trading at $1,000 and $25, respectively, because we’ll go back to suspending belief.

CONGRATS: Just a reminder: Michael Bloomberg has spent $600 million on this election. His prize: American Samoa

ACCRUED INTEREST

FUND PERFORMANCE: Jim Simons’s Renaissance Technologies experienced a 7% drop at its quantitative equity hedge fund in February. Elsewhere, Owl Creek Asset Management saw a 0.4% drop last month. Meanwhile, Riverbend Crossing Partners, an event-driven fund, gained 0.7& so far this year after a flat February. Bloomberg talks additional performance, here.

STUDY FINDS: I don’t even have the heart to summarize this. A lot of British millennials are incapable of changing their own light bulbs. “Unbelievably, some respondents even admitted to simply leaving a dead light bulb in place for more than three weeks before finally mustering up the courage to ask for some help. Other simple fixes that respondents said they can’t accomplish alone included putting up wallpaper, draining a radiator, painting, tightening up a loose cabinet door, and fixing a loose screw. Less than 25% of survey participants would call themselves “good” at DIY skills, and 13% (about 1 in 8) flat out said their skills are “poor.”

DONE DEAL: Blackstone (NYSE: BX) just announced that one of its Blackstone Energy Partners funds is buying NRStor C&I L.P. (“NRStor”). NRStor is a Toronto-based developer of battery storage solutions, targeting scale storage deployment opportunities in North America. Terms of the transaction were not disclosed.

CASHING OUT: Dyal Capital Partners will allow some of its investors to cash out and sell their stakes to firms like Vista Equity Partners and Silver Lake. That’s quite a rare situation.

CARRIED INTEREST

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

• Man GLG – part of the Man Group – launched a long/short equity strategy.
• Vertica Capital Partners has closed a $205 million private equity fund that will specialize in the software industry.
• Comgest has launched a “fossil fuel free” fund for the emerging markets. Initial seeding topped $250 million.
• RTP Global has launched a new venture capital fund that will focus on early-stage technology companies. The $650 million startup fund is backed by Russian entrepreneur and investor Leonid Boguslavsky.

QUOTES OF THE DAY

“When you have limited ammunition you have to conserve it. The Fed has limited ammunition with interest rates so low.  Interest rates don’t cure the #coronovarius and interest rates don’t repair supply chains.”

That’s Lawrence Summers complaining about the Fed’s decision to cut rates Tuesday. Summers has been busy over the last couple of months thinking about ways to raise taxes without incorporating a wealth tax. In an interview yesterday, he said that the Fed could start “Scaring people.”

“I’m now nervous. I’m more nervous than I was before.”

It’s clear that Jim Cramer was pretty scared about the rate cut yesterday.

ACTIVE MANAGEMENT

• We’ve discussed the ongoing battle between Elliott Management and Twitter (NYSE: TWTR). The Financial Times says that Jack Dorsey is facing a reckoning after years of an industry buying into the “cult of the founder.” Unfortunately for Dorsey, Paul Singer doesn’t drink Kool-Aid. The hedge fund is actively pushing for Dorsey to exit the CEO role. In fact, the fund is putting down $1 billion in a bet that it will be successful.
• We noted that Christopher Hohn is doing all he can to gut funding for coal-fired power plans. Now, two activist groups are taking aim at Australian super funds over fossil fuel holdings. Healthy Futures and Market Forces are pressing for UniSuper (a fund with 50.3 billion euros in assets) to divest from fossil fuels.
• Now that the Cayman Islands are on a blacklist from EU officials, Nordic funds are avoiding this area of the world. Funds in Denmark, Norway, and Sweden said they won’t invest in his jurisdiction.

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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.