THE DAILYALTS PLAYBOOK

May 8, 2020

DailyAlts Playbook: Unemployment Woes, Economic Experiments, M&A Woes, and China… China… China.

OPENING BELL

Good morning,

Good morning,

There is one figure – and one figure only that matters today. And the U.S. Labor Department reported it before the bell. The agency said that the U.S. unemployment rate hit 14.7% in April after a decline of 20.5 million jobs during the month. However, the report also indicates that the overall rate would have been five percentage points higher if the department computed individuals who were absent from work “for other reasons.”

CNBC’s Steve Liesman and Becky Quick were just as confused as I was when he read this before the bell.

The news comes as JPMorgan projects that it could take up to 10 years until the U.S. unemployment rate ticks back to pre-COVID levels. Market cheerleaders are calling on the government to provide more economic relief (read: stimulus and money printing) to help reduce the burden. According to The Hill, Democrat leaders are pushing “big, bold action” that would include “Franklin Rooseveltian-type” policy. Democrats are pushing for billions more in spending for education, state and local governments, and sanitation workers.

For some reason – the author at The Hill argues that the Great Depression ended in 1939.

I don’t have time to fully tear that myth apart today.

I’ll just quote Henry Morgenthau, Jr, Secretary of the Treasury for the whole of Roosevelt’s presidency. He testified the following to the House Ways and Means Committee on May 9, 1939:

“We have tried spending money.  We are spending more than we have ever spent before and it does not work.  And I have just one interest, and if I am wrong … someone else can have my job.  I want to see this country prosperous.  I want to see people get a job.  I want to see people get enough to eat.  We have never made good on our promises … I say after eight years of this administration [worryingly Morgenthau said ‘eight’ when it was actually ‘six’] we have just as much unemployment as when we started.  And an enormous debt to boot.”

The April jobs report doesn’t include what will occur when we the eight-week, PPP loan period expires. What happens then?

My guess is more stimulus and the complete suspension of disbelief.

MORNING MOMENTUM

Thursday was a bit more productive for U.S. Treasury Secretary Steven Mnuchin than the previous day. Rather than get into a Twitter war with Guns N’ Roses front man Axl Rose (which he did two days ago), Mnuchin spoke with China’s Vice Premier. He and U.S. Trade Representative Robert Lighthizer discussed COVID-19 and progress on the trade deal that both sides signed in January. He said that he expects both sides “to meet their obligations” despite the ongoing pandemic.

Johns Hopkins University reports that global coronavirus cases topped 3.8 million on Friday. While cases continue to abate in hotspots like New York City and Detroit, the virus continues to spread across various areas of the country – particularly on the East Coast.

Today, states across the U.S. will continue to reopen their economies. In California, retailers that sell books, sporting goods, and clothing can offer curbside pickup. Tesla Inc. (NASDAQ: TSLA), which owns a production facility in the state, told its employees that it plans to restart operations on a limited basis. Meanwhile, its rivals General Motors (NYSE: GM) and Fiat Chrysler (NASDAQ: FCAU) plan to reopen production facilities in Michigan on Monday. Ford Motor Company (NYSE: F) also announced it plans to restart North American operations on May 18.

ACCRUED INTEREST

DEAL DROP: GlobalData reports that the number of M&A deals dropped in North America in the first quarter. The report shows that Q1 deals fell from 1,178 in January to 1,024 in February and 820 in March. Deal values came in at $48billion in January and $69.6 billion in February. Total deal flow dipped $60.5 billion in March. Naturally, we can blame COVID for the shift.

BOUNCEBACK: April turned out pretty well for Third Point, Sculptor, and Renaissance Technologies. After a brutal March, the hedge funds are reporting solid April results thanks to the market rebound. The same goes for alternative funds at BlackRock and Lee Ainslie’s Maverick. Here’s more.
https://www.businessinsider.com/big-name-hedge-funds-rebounded-quickly-april-after-disastrous-march-2020-5?IR=T

BITCOIN: Paul Tudor Jones is now buying Bitcoin and comparing it to the gold trade of the 1970s. He called Bitcoin a global hedge against inflation and the ongoing efforts of central banks to print money around the world. Bitcoin is pulling back from its $10,000 level as the halving approaches this weekend.

QUOTES OF THE DAY

“Chinese consumers remain fearful of going out in public, shopping, going to movies and enjoying activities that put them in close proximity with their neighbors. Consumer behavior is not all that dissimilar in populations subjected to an unprecedented shock in their health security.””

That’s former Morgan Stanley Asia chairman Steve Roche. He doesn’t expect that the U.S consumer is going to magically return to malls and shopping centers. It turns out that Chinese consumers are a lot more like Western buyers than we thought. And if we follow similar patterns, it will be a long winter.

CARRIED INTEREST

• ALTERNATIVES: Bulldog Versus the SEC
• HEDGE FUND: CenterPoint Energy Gets Pump from Elliott
• LIQUID ALTS: Global Jets ETF a Buy?
• DIGITAL ASSETS: Crypto Market Pumps $13 Billion Higher
• SOVEREIGN: Norway is still selling assets
• REAL ESTATE: Updates on COVID and the Private Market

AN INTERVIEW WITH TOBIA CARLISLE

Did you miss yesterday’s news?

Tim Melvin sat down with Tobias Carlisle, founder of The Acquirer’s Multiple®.

Tobias is also the founder of Acquirers Funds.

Tobias Carlisle is best known as the author of the #1 new release in Amazon’s Business and Finance The Acquirer’s Multiple: How the Billionaire Contrarians of Deep Value Beat the Market.

He is also the author Amazon best-sellers

• Deep Value: Why Activists Investors and Other Contrarians Battle for Control of Losing Corporations (2014),
• Quantitative Value: A Practitioner’s Guide to Automating Intelligent Investment and Eliminating Behavioral Errors (2012); and,
• Concentrated Investing: Strategies of the World’s Greatest Concentrated Value Investors (2016).

He has extensive experience in investment management, business valuation, public company corporate governance, and corporate law.

Prior to founding the forerunner to Acquirers Funds in 2010, Tobias was an analyst at an activist hedge fund, general counsel of a company listed on the Australian Stock Exchange, and a corporate advisory lawyer.

As a lawyer specializing in mergers and acquisitions, he has advised on transactions across a variety of industries in the United States, the United Kingdom, China, Australia, Singapore, Bermuda, Papua New Guinea, New Zealand, and Guam.

He is a graduate of the University of Queensland in Australia with degrees in Law (2001) and Business (Management) (1999).

You can hear the interview, right here.

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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.