THE DAILYALTS PLAYBOOK

March 19, 2020

Today, the DailyAlts Playbook talks the Surge in Corona Cases, Warnings from 2012, Universa’s Massive Win, and Party Bros

PRIME OVERVIEW

Good morning:

This morning, markets are trying to find any momentum a day after another round of panic selling in the market. I’m currently looking at Tanger Factory Outlet Centers (NYSE: SKT) because it tells the story of both the selloff and the effort to get people to stop an outbreak.

This is a REIT that recently hiked its dividend and traded at $15.95 on January 6. It’s currently trading at $6.49 right now. It’s trading like it’s going out of business. It looks mighty attractive, but momentum signals still remain negative, and I’m not going to be the first person over a wall chasing real estate right now. So, we’ll wait.

On the social side, there is a Tanger outlet location about a mile from my house in Florida.

Since we started hunkering down, it has remained absolutely packed.

I drove passed it on Saturday, the last day that I was out – and there were cars lined up and people shopping. I’ve been told that people are still running around and buying discount golf clubs and all the other stuff you’ll find there. It’s clear that people aren’t really taking this seriously, so it’s starting to become more micro-focused when it comes to containing an outbreak in Florida.

Homeowners’ associations and the boards of residential buildings are cracking down on people down here. I just received an email from my mother about her home in SW Florida. The board of directors there have basically implemented a policy that rivals visiting hours to that or Menard State Penitentiary in Illinois.

Yesterday’s dramatic trading day was highlighted by one person in the hedge fund space: Bill Ackman.

The infamous “Hell is coming” quote beams across CNBC.com this morning. Ackman wants the President to simply shut down America and keep everyone at home for 30 days. His theory is that the U.S. capitalistic system can survive a 30-day shutdown.

However, he argues that 18 months – which was part of a government emergency plan released this week – would provide a deathblow to the U.S. economy. “The hotel industry and the restaurant industry will go bankrupt first, Boeing is on the brink, Boeing will not survive without a government bailout,” he said.

It’s grim. It’s blunt. But it might not be wrong. The swiftness of this event is unrivaled.

Back in 2012, Rand Corporation warned that only a pandemic could create an existential danger to our system and that they were “capable of destroying America’s way of life.”

Finally, a large pack of college kids will be flying home from spring break very soon. Way to go, party bros, we hope it was worth it. [/sarc]

MORNING MOMENTUM

DOW DIPS: The Dow Futures were off 427 points this morning despite news that the European Union had introduced an $820 billion program to combat the economic fallout of coronavirus. In addition, President Trump signed a relief plan that will extend $100 billion in new aid, including emergency paid leave and free testing for the disease. Trump is also pushing for upwards of $1 trillion, including direct payments to Americans, to combat coronavirus. Meanwhile, the Fed has invoked emergency authority to provide support for prime money market mutual funds.

CORONA CASES: The number of U.S. cases for coronavirus surged 40% in the last 24 hours. Johns Hopkins University reported that about one-third of these new cases came from New York. At the moment, there are more than 9,400 cases and 150 deaths. At the moment, New York City is still not under a “shelter” order. Although Mayor de Blasio – who just can’t get out of his own way – said that citizens of the city should prepare, Governor Andrew Cuomo has objected to such an order. The New York Stock Exchange, however, will close its trading floor on Monday after two people tested positive at screenings this week. There is good news: the Chinese city of Wuhan has reported no locally transmitted cases for the first time that it struck the city last December.

RECESSION IS HERE: Bank of America is the latest institution to declare that the U.S. is in a recession (joining UCLA’s business school). The firm “officially” declared that we have joined the rest of the world in this economic downturn and offered very little optimism about the state of affairs. In a research note, BoA said that “Jobs will be lost, wealth will be destroyed, and confidence depressed.” It projects that Q2 growth will slide by 12%,

ACCRUED INTEREST

3,000%: Reuters reports that a Universa Investments client saw gains of about 3,000% due to the market shock. Mark Spitnagel said through a spokesman that “this has been a great period for our clients.” There have been several firms that have had big months. This includes 280% gains at Capstone Investment Advisors and possibly much larger gains at Boaz Weinstein’s Saba Capital.

BUYERS RUSH: Managers are bullish about the long-term prospect of the markets. So, they’re getting ready for another quick round of fundraising. Citadel is looking to raise money for a relative value fund. Meanwhile, Sequoia Capital is pushing to raise $7 billion to tap into technology startups in the U.S. and Asia.

GETTING REAL: In the real estate market, things are going as expected in a crisis. Janus Henderson, Columbia Threadneedle, Aviva Investors, Aberdeen Standard Investments, BMO GAM, and LGIM have all placed restrictions on trading at their funds. Aberdeen Standard, for example, suspended two large funds.

CARRIED INTEREST

Here are the other stories that we are watching on Thursday.

• Quant shops are getting hammered.
• Ray Dalio is still warning about greater uncertainty in the markets and society. He thinks corporate losses will top $4 trillion.
• Danish pension managers think that the downturn won’t last too long.

QUOTES OF THE DAY

“A pandemic disease is the most predictable catastrophe in the history of the human race, if only because it has happened to the human race so many, many times before.”

That’s Ezra Klein in 2015 talking to Bill gains about how quickly a new flu strain can transmit across the world. Uri Friedman takes us on the “hindsight” journey of the Black Swan event to say that we had been warned. Alarms started ringing in 2012 when the Rand Corporation said that only a pandemic is “capable of destroying America’s way of life.”

“If I get corona, I get corona. At the end of the day, I’m not gonna let it stop me from partying.”

Brady Sluder will forever be linked to this statement whenever an employer searches his name on the internet. Yolo!

ACTIVISTS

BUYING PIZZA: Browning West sees the recent dip in the markets as a reason to put money to work. The firm has bought about 4.7 million shares of Domino’s Pizza in three different tranches. Browning’s founder and CIO is a non-executive director at Domino’s.

GIVING UP: Meanwhile, the ongoing downturn has some activists dropping their battles with corporate boards. Elliott Management has dropped its opposition to Altran Technologies’ buyout of Capgemini. The public battle had carried on for months.

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.