THE DAILYALTS PLAYBOOK

January 23, 2020

Today, the DailyAlts Playbook talks about the coronavirus outbreak, big losses for Tesla shorts, and why Bernie Sanders’ wealth tax will miss its target.

PRIME OVERVIEW

This morning, the Dow Jones is in reverse as President Donald Trump returns from Davos, Switzerland to Washington D.C. Once he arrives home, he will face the ongoing media circus around the Senate Impeachment trial. Before he took off from Switzerland, he had breakfast with U.S. CEOs, including Apple CEO Tim Cook, Microsoft CEO Satya Nadella, and Salesforce co-CEO Marc Benioff.

The Dow was off about 20 points two hours before the market opened. Today, at DailyAlts, we’ll be talking about a slew of new private equity and hedge funds, tap into the new eVestment report on capital outflows, and dig into a few new developments in the Fintech space.

MORNING MOMENTUM

OUTBREAK WORRIES: The Chinese coronavirus continues to spread ahead of one of the nation’s biggest holidays. The World Health Organization is attempting to calm concerns about an outbreak as the virus draws comparisons to the SARS outbreak of 2009.

SHORT STRUGGLES: Betting against Elon Musk has been hazardous to investors’ financial health this year. Since the start of the year, short positions are down $3.3 billion… and they’re still holding their positions. Tom Thornton of hedge fund Telemetry said that the fundamentals don’t support the recent rally. Traders don’t care so long as they’re not the only one without a chair when the music stops.

ACCRUED INTEREST

WARNING: Hedge fund manager Seth Klarman is the latest hedge fund manager to warn about the current market rally. In a letter to investors, he said that the ‘rocket fuel’ powering the recent rally will soon run out. His Baupost fund shifted to 31% cash at the end of December.

SKY TRADING: Wall Street innovation will tackle airline fares next. Airbus has partnered with the Nasdaq exchange to create airfare derivatives. You read that sentence correctly. The partnership will create a platform called Skytra. It will help airlines manage revenue risks by “trading futures and options contracts based on proprietary indices.” This has taken two years to develop.

CARRIED INTEREST

NO DEAL: Senate Minority Leader Charles Schumer (D-NY) said that a deal to put both Hunter Biden and John Bolton on the witness stand at the impeachment trial of President Donald Trump is off the table. The media continue to cover the Senate trial as if it is the Super Bowl – only this time we know the outcome of the event.

FUZZY MATH: Sen. Bernie Sanders (I-Vermont) has is leading some polls ahead of the Iowa Caucus. The Democratic Socialist has called for an immense tax on the wealthiest Americans to fund universal healthcare, public education, and other programs. However, the Wharton School released a study this morning explaining that his wealth tax would actually come up short by $1 trillion in funding.

QUOTES OF THE DAY

“Forget about ‘net zero’, we need real zero.“

Climate activist Greta Thunberg has been a popular subject at the World Economic Forum. This week, Thunberg argued that efforts to curb carbon emissions to ‘net zero’ levels were not enough to address climate change. The teen activist instead called for the elimination of fossil fuel investment.

“Who is that? Is she the chief economist?”

U.S. Treasury Secretary Steven Mnuchin didn’t care for Thunberg’s comments about eliminating oil and gas from the global economy. He also suggested that she needs to study “economics in college” before she criticizes countries over the climate.

ACTIVE MANAGEMENT

WALKING AWAY: Elliott Management divested its entire stake in Hyundai Motor Group companies at the end of 2019. The hedge fund was unable to obtain board seats and push through special dividends during its public campaign.

ROLE CHANGE: ValueAct founder Jeff Ubben announced plans to step down as the CEO of the activist hedge fund. He will remain on as the firm’s chairman and run its socially responsible fund.

LIABILITIES

ILLIQUID PROBLEMS: The SEC is examining the accounting practices of TCA Fund Management Group. The firm has shut its primary credit hedge fund after customers moved quickly to withdraw their money. The firm said it “received redemption and withdrawal requests in excess” of money in the fund, according to a letter seen by Bloomberg Law. Whistleblowers have also said that the company inflated the value and “returns” of the fund.

PONZI PROBLEMS: Another day, another Ponzi scheme. This time, Hal Brown in Asheville, NC pleaded guilty to running a $22 million Ponzi scheme. The 70-year-old defrauded 23 people, with several near retirement age. Charges included securities fraud and transactional money laundering.

SOCIAL RESPONSIBILITY

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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.