THE DAILYALTS PLAYBOOK

February 19, 2020

Today, the DailyAlts Playbook talks about Big Bad Bill Barr’s Plans, The “Democratic Bachelor”, Milken’s Pardon, and Parabolic Space Companies.

PRIME OVERVIEW

We begin in Nevada, where the candidate who supported communism into his 30s has taken a double-digit lead over his Democratic rivals. A new NBC News/Wall Street Journal poll shows that Sen. Bernie Sanders (I-Vermont) controls 27% of the Democratic primary vote. That figure has largely remained unchanged since the onset of the race.

Meanwhile, Michael Bloomberg has siphoned significant support from former Vice President Joe Biden. Both men now sit at 14% and 15%, respectively. While Bloomberg rises, past audio is starting to come back to haunt him. He has made disparaging remarks about several different constituencies and could find himself on the defensive during the upcoming Nevada debate.

Bloomberg has spent more than $400 million on national and local advertising. That said, Democratic voters are more comfortable voting for a “socialist” than they are voting for someone who is self-funded “using hundreds of millions of their own dollars,” according to polls. This is all a contest for the right to endure the ugliest election season in recent memory.

Lyxor Asset Management explained how hedge funds have started positioning themselves ahead of the election. I’m preparing myself too. Now pardon me while I find a running stream, raw land, a tent, and a sleeping bag from which to operate from August to mid-November.

MORNING MOMENTUM

GROWTH WOES – The global coronavirus death total topped 2,000 this morning, but signs suggest that the outbreak is slowing. Chinese officials have been going door-to-door to survey citizens and contain the outbreak (but heaven help you if you sneeze in front of them). Bank of America has surveyed money managers on the state of the outbreak and the conclusion is nearly universal – growth in the region will fall by quite a bit. The outbreak claimed other victims on earnings, this time with Adidas and Puma expecting a huge drop in business due to store closings in China.

FUNDRAISING PIVOT – As coronavirus makes one-on-one meetings between VCs and startups more difficult in China, Sequoia Capital has gone the “online dating” route. The venture capital firm will set up online financing and investment matchmaking events for the first time in history.

PERFORMANCE AND PULLS – The Eurekahedge Hedge Fund Index increased by 0.14% in January, ahead of the underlying equity market as represented by the MSCI ACWI (Local) which lost 0.90% over the same period. The uptick links to abated tension across the Middle East and the signing of the Phase One trade deal between the United States and China. The increase comes a month after the hedge fund industry experienced about $29 billion in redemptions in December, according to BarclayHedge.

ACCRUED INTEREST

AND YOU WENT TO HARVARD? – MPI says that Ivy League endowments saw a large uptick in alternative investments last year. However, performance lagged. What hope is there for the rest of us, asks Julie Segal.

PARDONS GALORE – President Donald Trump has pardoned Michael Milken, who had received 10 years in prison in 1990. Milken – the so-called “Junk Bond King” – worked for Drexel Burnham Lambert, which collapsed into bankruptcy due to illegal trading. Milken pled guilty to six counts of securities laws violations and served two years of his sentence.

REALLY DOING IT – SoftBank is pumping $2.5 billion of its own money into new investments in order to attract capital to its Vision Fund 2. This week, we reported that large investors have been cautious about dipping a toe back into the SoftBank waters. Leading investors of the first Vision Fund remain concerned about the lackluster returns on investments like WeWork and Uber.

DISORDER IN THE COURT – The courtroom battle over Chatham Asset Management and the bankrupt McClatchy Co. is already turning into a made-for-TV drama. The U.S. government is raising concerns about a series of debt deals hatched by Chatham in 2018. The legal battle begins.

CARRIED INTEREST

TESLA TAKEOFF – A new CNBC report shows that 10 hedge funds and other investors who used fundamental strategies had more than $50 million in Tesla (NASDAQ: TSLA) stock at the end of the fourth quarter. Congratulations… Meanwhile, another stock with lofty ambitions, an eccentric leader, and a head-scratching balance sheet is up more than 200%. Richard Branson’s Virgin Galactic (NASDAQ: SPCE) stock is now going parabolic. CNN attempts to explain why.

NUMBER ONE – The top ESG stock of 2019: Microsoft Corporation (NASDAQ: MSFT). EPFR Data says that ESG funds held $2.3 billion in the software-and-cloud giant. No. 2 and No. 3 on the list, respectively, were Alphabet (NASDAQ: GOOGL) and Walt Disney (NYSE: DIS).

CENTRAL CONTROL – Keep an eye on the central banks Wednesday. The Federal Reserve will release minutes from its most receive FOMC meeting. Meanwhile, the Peoples’ Bank of China could provide additional easing measures to prevent additional damage to the economy. Reports indicate that the Chinese central bank could slash its interest rate and provide more mid-term lending for banks in the region. The nation may also inject cash into its struggling airlines.

QUOTES OF THE DAY

“No plans to resign.”

That’s Kerri Kupec, the spokeswoman for the U.S. Justice Department. The Washington Post had reported this week that Attorney General Bill Barr had threatened to quit over President Trump’s Twitter habits. Barr had told ABC News last week that Trump’s criticism of the Justice Department has made it more difficult for him to do his job.

“I feel like every single guy over there needs a beating. It’s wrong. They’re messing with people’s careers.” 

Former Baltimore Oriole and current Atlanta Braves outfielder Nick Markakis isn’t too pleased with the Houston Astros that their cheating scandal. This is the first time that I’ve heard Markakis talk since he broke his thumb ahead of the 2012 playoffs.

ACTIVE MANAGEMENT

IN THE PIPELINE – Evergy (NYSE: ENVG) is reportedly close to a deal with Elliott Management Corp to avoid a board challenge. The deal would reportedly provide Elliott with insight on board directors at the utility company.

TULLOW TUMBLE – Shares of Tullow Oil continue to tumble in Europe as short sellers pile on. The company abandoned a project off the coast of Peru after it failed to strike oil in the region.

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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.