THE DAILYALTS PLAYBOOK

April 13, 2020

The DailyAlts Playbook Talks About Academic Suppression, Cuban 2020, Loan Standards, and Daft Punk to DJ Shadow

PRIME OVERVIEW

Good morning,

We return from the holiday weekend with some greater confirmation that this virus likely didn’t come from a Seafood market in China.

Of course, we won’t ever be able to fully confirm anything.

China has said that any academic research must receive additional vetting before it can be submitted for publication. So, thanks to China, for everything.

You guys are the best…

The Daily Mail dropped a bomb yesterday that the U.S. government had given $3.7 million to the Wuhan lab that was performing experiments on bats and coronavirus. The speculation is that this has been in the lab for years. Bats studied a few years ago had viral traits that were nearly identical to COVID-19.

But, in today’s world, connecting the dots like this is venturing into conspiracy theory, according to CNN and Vox.

I have never been much of a Zero Hedge guy in my life, but the editors who are digging into this on a daily basis are starting to look like Woodward and Bernstein.

The Wall Street Journal also reported that these bats were the source of SARS and virtually every pandemic we’ve faced in the last 20 years.

We could all do the world a favor and stop playing with bats.

But don’t expect too much digging into this. It’s not politically expedient for media executives like Jeff Zucker, David Rhodes, or Channing Dungey.

MORNING MOMENTUM

CORONA: Johns Hopkins University reports that the number of U.S. coronavirus cases topped 550,000 on Sunday, with the death toll now above 21,000. On Sunday, White House health advisor Dr. Anthony Fauci offered “cautious optimism” That the number of cases is slowing across the country. Fauci suggested that the U.S. may begin to reopen the economy starting as soon as May.

CRUDE MORNING: Oil prices were up 1% Monday on news that the OPEC, Russia, and other producers have agreed to slash global production by 9.7 million barrels per day. That figure is much lower than analysts had anticipated (initial estimates called for 10 million to upwards of 20 million barrels per day.) However, Mexico refused to join a larger deal, driving down the final figure. Mexico plans to cut just 100,000 barrels per day, down from the requested 400,000 from agreement participants. The agreement will begin on May one and taper down to 8 million barrels per day starting on July 1 through the end of 2020. President Donald Trump said the agreement “will save hundreds of thousands of energy jobs in the United States.” Oil prices are off more than 40% since early March.

EARNINGS: This week is a very important one for Wall Street as companies start rolling out their earnings reports from the March-ending quarter. We’ll be looking for reports from a number of Wall Street banks, including Bank of America (NYSE: BAC), Goldman Sachs Group (NYSE: GS) and JPMorgan Chase (NYSE: JPM). We’ll also look for a critical report from Johnson & Johnson (NYSE: JNJ) on Tuesday. Finally, one of the most important reports of the week on Wall Street will come from alternative asset manager BlackRock (NYSE: BLK), who will likely provide a much-needed outlook on the global commercial real estate market for the year ahead.

ACCRUED INTEREST

IVY LEAGUES: We’ve argued that the biggest loser from coronavirus, in the end, might be higher education. Why pay $70,000 for an education you can get from home for free with a YouTube account and a solid understanding of SEO. So, it’s very interesting to see that Harvard University – the richest school in the United States – tap into the credit market for $1.1 billion to reduce funding costs. Harvard has an endowment of $40.9 billion by the way.

SENTIMENT: The markets have experienced about a 50% retracement from the March nadir. But it’s hard to find too many people who are overly optimistic about what comes next. With some banks now projecting a 40% downturn in GDP, we’re not starting to see some pretty profound sentiment toward the downside. As an economist, I’ve been asked a lot of questions over the last month – and I’ve asked myself a lot of questions. The one question that I return to on a regular basis is “what have I learned?” from all of this. The lesson is the reminder that the economy is not the market, and the market is not the economy. And damn, that is really a hard thing to take into consideration.

HOUSING: Fears of an economic downturn have banks tightening their credit standards. According to JPMorgan Chase (NYSE: JPM) any applicants for a new mortgage will require a 20% down payment on the loan in addition to a credit score of at least 700. The shift is a somewhat ominous warning about bank expectations for the housing market in the near future. JPM was the fourth largest provider of mortgage loans in 2019. [PS: Don’t be surprised if Mark Cuban hires an exploratory committee over a third-party run for president due to the bungled economic response to coronavirus.]

CARRIED INTEREST

Here are the other headlines getting our attention this morning.

• • Tail risk strategies continue to dominate…
  • Why is the stock market going higher?
  • The Aussie dollar is having a bad day…

QUOTES OF THE DAY

“It’s not going to be a light switch.“

That’s Dr. Tony Fauci on the timeline to reopen the U.S. economy. There has been chatter about a May timeline for our push back to normalcy. Fauci, however, says we need to temper expectations.

“Banks are playing themselves. They’re being banks and they’re trying to determine if the credits are good and that’s leading to a lot of small businesses that are left out in the cold.”

That’s Marc Cuban on Squawk Box. Find me the Vegas shop putting up odds on his 2020 candidacy. I know the odds are low, but I’ll take the bet on Cuban as the 46th President over the Tampa Buccaneers winning the NFC South.

RECORD HIGH

I don’t want to dig too much because of the Easter Holiday and Good Friday, but I have a few simple answers to continue our exploration into the sound from the 2000s. We’ll cut to the chase because we have so much ground to cover.

2013

Favorite Album: Random Access Memories, Daft Punk
Favorite Song: Rap God, Eminem (No one else could ever pull this marathon off… minute [4:26])
Underrated Song: Started from the Bottom, Drake (he didn’t really, but it’s fun, kids)
Underrated Album: A Lotta Sea Lice, Courtney Barrett/Kurt Vile

2014

Favorite Album: Tie: Lost in the Dream, The War on Drugs – Morning Phase, Beck
Favorite Song: Under the Pressure, The War on Drugs
Underrated Song: Mr Tempo, Damon Albarn
Underrated Album: Run the Jewels 2, Run the Jewels (Blockbuster Night… they’re the best).

2015

Favorite Album: Sometimes I Sit and Think, and Sometimes I Just Sit, Courtney Barnett
Favorite Song: TIE: “The Less I Know the Better” by Tame Impala, “Pretty Pimpin” by Kurt Vile
Underrated Song: “Elevator Operator” by Courtney BarrettUnderrated Album: The Magic Whip, Blur

2016

Favorite Album: Run the Jewels 3, Run the Jewels (Digitally released in December 2016)
Favorite Song:  “Decks Dark” by Radiohead (This is Radiohead at its finest… its finest.)
Underrated Song: “Come Down”, Anderson Paak (More channeling James Brown, please).
Underrated Album: “Blonde” by Frank Ocean – this is one for the ages…

Few other nods…

Nobody Speak, DJ Shadow (Featuring Run the Jewels) – NFSW, Seriously…
We Got It From Here … Thank You 4 Your Service, A Tribe Called Quest
Coloring Book, Chance the Rapper

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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.