THE DAILYALTS PLAYBOOK

February 24, 2020

Today, the DailyAlts Playbook talks Commodity Swings, Public V. Private Gains, Cannabis Expectations, and Why You Shouldn’t Hide Important Financial Documents in Your Fishing Gear.

PRIME OVERVIEW

Good morning,

We start today with the coronavirus. The Dow Jones is off 700 points, gold prices are soaring, and the 10-Year Treasury Bond is now trading under 1.4%. The 30-Year Bond is also trading at all-time lows around 1.83%.

New cases have emerged in Iran and Italy and raise the stakes about the ability to contain the virus. Italy now has reported 150 cases and four deaths.

In response to the Iranian patient, Turkey reportedly closed its border with the country. The ongoing worries about coronavirus have a number of leaders speculating over how nations will respond.

U.S. Treasury Secretary Steven Mnuchin said that he anticipates that central banks from Europe to China will likely provide additional stimulus to beat back any reduction in growth across the globe. However, he also said that it will still take “three to four weeks” before U.S. officials have a better understanding of how the virus’ spread will impact the economy. The odds of another U.S. rate cut in March have hit 23%.

MORNING MOMENTUM

MORNING TRADE — Gold prices rallied another 2.5% this morning as coronavirus fears continued to drive the flight to safety. The price in euros topped an all-time high as markets fear massive supply chain disruptions and a potentially devastating impact on GDP.

FEELIN’ THE BERN — Over the weekend, Vermont Senator Bernie Sanders (I-Vermont) won the Nevada caucus, a victory that has confirmed his status as the frontrunner for the Democratic nomination. Sanders easily beat centrist candidates and has sparked significant concerns among more moderate members that he could lock up the nomination and fail to build a coalition against the Trump administration.

OIL DUMP — Oil prices are off the most in three weeks on Monday. Brent crude had fallen more than 3% in Asian markets as “demand shock” continues to drive global prices lower. We’re still two weeks away from OPEC leaders meeting in Vienna to discuss further production cuts. And despite last week’s small pop in crude prices, hedge funds continue to make aggressive bets that prices will continue to erode.

ACCRUED INTEREST

BET ON BORIS — Blackstone Group will invest in the U.K. following Boris Johnson’s win in Britain. The company will use about $14 billion from a Saudi infrastructure fund instead of focusing on the U.S. The firm also plucked Johnathan Kelly away from Brookfield to run a team that will search for deals across the European continent.

VENTURE SPIKE — A new Preqin report shows that the total value of VC deals for American companies hit all-time high of $104 billion in 2019. However, the number of deals actually declined by 18% year-over-year.

FINTECH FILINGS — Intuit (NASDAQ: INTU) – the firm behind Turbo Tax and QuickBooks – is buying tech portal Credit Karma. The Wall Street Journal reported Sunday that the two companies could announce a roughly $7 billion deal today. A lot of people are asking: “Why?” – particularly at a valuation that has jumped 70% in two years.

PUBLIC BEATS PRIVATE — A new Bain report shows that 10-year public market returns topped private equity returns for the first time.

CARRIED INTEREST

Here is a slate of headlines gaining our attention on this Monday.

• Swiss banks are still very secretive.
• The European “Green New Deal” will make rich people richer.
• Carlyle Group has delayed the IPO of chemical giant Atotech
• South Korea had a Lime problem before a Coronavirus problem.
• Cronos Group (NASDAQ:CRON) has delayed its earnings release.

QUOTES OF THE DAY

“Don’t be greedy, be realistic.”

That’s Kevin McGovern, chairman of McGovern Capital. While attending the Northeast Cannabis Business Conference in Boston, McGovern was one of many cannabis investors seeking a reality check among cannabis executives in the wake of slumping stock prices.

“I feel very good about the banks we own. They’re very attractive compared to most other securities I see.”

That’s Warren Buffett on CNBC. The Oracle of Omaha engaged in a lengthy discussion with CNBC today on coronavirus, his issues with Wells Fargo, Bloomberg vs. Sanders, and succession at Berkshire Hathaway. Buffett really likes banks stocks for the long haul.

ACTIVE MANAGEMENT

WORK IT — Following the sale of a majority stake in  Victoria’s Secret, Sycamore Partners has its work cut out for it. But it appears that L Brands (NYSE:LB) investors are counting on the private equity firm to do what Les Wexler couldn’t do: Turn the firm around.

DIVEST DEMANDS — Yale activists are pushing for the university’s endowment to divest from fossil fuels and Puerto Rican debt. Endowment chief David Swensen isn’t planning any changes to the portfolio.

LIABILITIES

BITCOIN BLUES — An Irish drug dealer had 55 million euros in Bitcoin, so he hid the password on a paper scrap inside of a fishing rod case. Then, he was arrested. He was jailed. And his landlord cleared out his house and threw away his possessions. This makes the fishing rode case the most expensive one on the planet – and it is likely sitting in a Galway landfill.

REGULATORS – Investors in three Luxembourg-based funds that collapsed have accused the nation’s regulators of putting the country’s “bank-friendly” image ahead of their interests.

SOCIAL RESPONSIBILITY AND THE DAILYALTS PLAYBOOK

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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.