THE DAILYALTS PLAYBOOK

April 16, 2020

The DailyAlts Playbook Talks About How to Disappear, Ugly Economic Numbers, Rental Bailouts, and Just How Long Harvard Thinks We’ll Be Locked Inside Our Homes.

PRIME OVERVIEW

Good morning,

The economy is not the market… and the market is not the economy.

I have to write this on my hand nowadays.

While the Dow Jones just had its best one-week run last week in the 1930s, all hell is breaking loose due to social distancing in the economy. Are we getting to the point where the cure is worse than the disease? We’ll highlight a few numbers in a moment.

But I want to single out the Empire State manufacturing index. That fell by 56.7 points to a new record low. Oxford Economics put it bluntly: “Manufacturing has never been in worse shape. The sudden stop in economic activity is very damaging.”

Meanwhile, the Dow Futures projected a 100-point gain at one point this morning but is flat at the time of this writing.

The Fed will continue dropping money from the sky – but without their intervention, I’m seeing some estimates that the markets would be off 50% to as much as 80%.

Ezekiel Emmanuel – a public health expert and brother of former Chicago mayor Rahm – is saying that we’re not going to get back to large public gatherings until the Fall of 2021.

Hoo boy… That farmland is looking better and better…

MORNING MOMENTUM

JOBS: Last week, more than 6.6 million new workers filed for unemployment benefits. This week, the figure topped 5.2 million, bringing the total number of Americans unemployed to 22 million. We have formally wiped out all job gains since the end of the Great Recession.

NUMBERS: The U.S. Congress is working on yet another round of stimulus for the American economy. The coronavirus outbreak is having an extremely negative impact on the economy. In fact, economic data proves to be much worse than anticipated. The IMF now reports that Asian economic growth will fall to its lowest levels in 60 years – at zero percent. Meanwhile, March retail sales in the U.S. fell by their sharped level on record at 8.7%. Also, New York’s manufacturing levels plunged by their largest levels ever – even surpassing those witnessed during the 2008 Financial Crisis.

CORONAVIRUS: The number of global infections now sits around 2.1 million people, with at least 138,000 deaths tied to coronavirus, according to Johns Hopkins University. However, President Donald Trump claims that the U.S. has passed the peak of the disease outbreak. The President also said that he plans to unveil his guidelines to reopen the economy. However, he continues to face opposition from Governors around the country.

CRUDE NEWS: Oil prices have fallen to their lowest level in more than 18 years as global demand slumps and supply continues to build at a breakneck pace. West Texas Infrastructure prices fell thanks to the largest U.S. crude inventory levels on record. The International Energy Agency said Wednesday that nearly a decade of global demand evaporated due to the ongoing outbreak of coronavirus.

ACCRUED INTEREST

EARNINGS BEAT: The world’s largest alternative asset manager reported earnings before the bell today. BlackRock (NYSE: BLK) beat quarterly earnings with an EPS of $6.60. That topped expectations of $6.36 a share. The firm’s profits, however, were off about 23% year-over-year. Although it beat Wall Street revenue expectations and raised $35 billion in fresh capital, it remains cautious about “challenging times” ahead. In addition, its iShares ETFs was a solid profit center for the company, pulling in $10 billion for the quarter. “iShares ETFs have acted as a valuable market technology as investors once again turned to bond ETFs for price transparency and incremental liquidity in volatile markets,” CEO Laurence Fink said this morning. BlackRock has also announced its third energy infrastructure fund with $5.1 billion.

BAILOUT BLUES: Car rental giant Hertz Global (NYSE: HTZ) is reportedly seeking a big government check to avoid Chapter 11. The company has been a long-time favorite of corporate raider and hedge fund manager Carl Icahn – however, it has fallen on hard times in recent coronavirus outbreak. This is a tricky story – because a bailout would feel similar to the government bailing out the post office in the age of emails, or buggy whip companies about a decade after cars. Ridesharing has dramatically impacted the need for car rentals. Would a bailout here really SAVE the company? I guess this will come down to lobbying…

ALTERNATIVES: With the disconnect continuing between the economy and the broader market, perhaps we can look at some new numbers. The Chartered Alternative Investment Analyst Association (CAIA) now expects that alternative investments could comprise roughly 18% to 24% of the global investment market by 2025. The growth its mostly tied to pension fund growth as they seek new sources of revenue. The survey is the result of conversations with more than 1,000 CAIA members.

CARRIED INTEREST

Here are the other headlines getting our attention this morning.

• Deal Blues: Private deal-making is off sharply due to coronavirus… Global Data says that just 899 deals were completed for the week ending April 12. That figure is a 17.2% decline from last year.
• Opalesque: The Eurekahedge Hedge Fund Index reported its best outperformance of underlying markets since October 2008. It beat MSCI AC World Index by 9.22% in March. “Preliminary estimates showed that 81.8% of the hedge-fund managers were able to outperform the global equity market in March,” Eurekahedge said in a statement.
• Money: Greenlight Capital and David Einhorn are holding up just fine, thank you.
• Principles: Ray Dalio’s Bridgewater Associates gained 14.6% in 2019. Elsewhere, Dalio said that anyone who is holding government bonds right now is “crazy.”
• Dumping: Iran’s social security fund – needing cash – has dumped 10% of its stock holdings.

QUOTES OF THE DAY

“All the toilet paper in the world can’t clean up this report.”

That’s JPMorgan Chase chief U.S. economist Michael Feroli. He puts the retail industry during the first quarter into perspective. He now estimates that the U.S. GDP fell 10.8% in Q1. That would be the “worst quarter ever in data going back to 1947.” JPM expects Q2 GDP to decline by 40%.

“Intermittent distancing may be required into 2022 unless critical care capacity is increased substantially or a treatment or vaccine becomes available. Even in the event of apparent elimination, SARS-CoV-2 surveillance should be maintained since a resurgence in contagion could be possible as late as 2024.”

That’s from a research team at Harvard T.H. Chan School of Public Health. If we’re talking about dates that far into the future, I need to start campaigning to turn Southwestern Florida into some variation of Monaco when the New World emerges.

RECORD HIGH

We are winding down this little experiment in music before we finally launch our expanded version of the DailyAlts Playbook on Monday. You won’t have to listen to me go on and on about music. But it’s been a fun experiment, and I’ve given my daughter 21 years of music to listen to… all archived in a simple way. Looks like I’ll be inside for another 21 days, but we will find interesting things to tackle. Today, we’re onto 2019. We conclude tomorrow… promise

Lana Del Ray’s Norman F-ing Rockwell was the best album of 2019 – although I can understand America’s obsession with the winner (who I’ll address in a moment) …

But F-It I Love You, Doin Time (a Sublime Cover), The Greatest, and the other 11 songs are all incredible. It’s an album with a theme, a beautiful vibe, and one that creates an experience.

It also has the best song of the year…

That said, it was a really good year for young musicians with a new sound.

Billie Eilish’s When We All Fall Asleep, Where Do We Go? is the real deal. She won everything. Here song Bury a Friend is lethal – a hypnotizing force restructuring the chorus of The Doors’ People are Strange to design something I haven’t heard before… Trent Reznor meets Fiona Apple is my lazy, ineffective, weak comparison… but I can’t really put a finger on it. The rest of the album isn’t like this, but all of it deserved every award. I just liked Lana a little bit more…

Maggie Rogers also put out her first album last year… and it’s quite good. She received a best new artist nomination, but she was up against Eilish – and that wasn’t going to happen. Alaska is a terrific song – one that made her famous after a demo left Pharrell Williams speechless. It’s worth a watch. The song is a memorable story, and she’s got a gift as well at a young age.

I’ll also throw in Lil Nas X as well for “Old Town Road” – which came out of nowhere to blend several unique styles. The fact that he wasn’t allowed on Billboard’s country charts is a serious problem…

Gary Clark Junior’s This Land is an incredibly important album… everything he touches is gold.

LCD Soundsystem’s Electric Lady Sessions is worth it for the Chic cover of “I Want Your Love.”

Finally, I didn’t realize it, but Caravan Palace put out a new album in 2019. It’s called Chronologic. This is a very interesting band – a French electric band with a lot of swing and jazz intertwined. They’re very popular in Europe but never caught on here. Their album <|°_°|> – Robot Face – is really enjoyable from 2015. I listened to Miracle, its lead song, last night, and it’s like getting a surprise visit from an old friend. While reviews look mixed, we’ll give it a go.

My favorite song of the year is How to Disappear by Lana Del Ray… It’s a song that barely gets mentioned besides the others that had videos and received radio time. Well, okay then.

I have commented before that it is possible in 10 years that it becomes my favorite song of all time. Sleighbells make any song better… and when they hit in this song, you are transported to a better place. This is a nostalgic love song that beckons for a different time – perhaps whatever is most different from now.

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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.