THE DAILYALTS PLAYBOOK

February 27, 2020

Today, the DailyAlts Playbook talks about Mike Pence’s Battle to Save the World, Climate Investment, ESG Naysayers, and “The Activists.”

PRIME OVERVIEW

Good morning,

We start today with the first U.S. coronavirus case of an unknown origin. The CDC is not aware of how a person in Northern California obtained the virus. However, they are now concerned about “community spread.” Last night, President Donald Trump attempted to ease concerns about the spread of the virus and said that the risk to Americans is still “very low.”

He then put Vice President Mike Pence in charge of the nation’s response to the virus.

The Dow slumped more than 250 points as the universal selloff continues around the globe. Around the globe, nations are taking precautions to address the spread. Japan has shut all of its schools.

Right now, South Korea is trying to reduce exposure after its confirmed cases topped 1,200. Italy has topped 400 cases. And the U.S. has about 60 confirmed cases for now.

The Dow is off more than 2,000 points (or 7%) in three sessions this week. Given that Fridays have been the worst day of the year for stocks, tomorrow might be another day of selling due to the uncertainty that follows into the weekend. The momentum for today is purely negative, so we could be looking at an even bigger correction by the time the week has finished.

MORNING MOMENTUM

REVERSAL COMING – Prior to this massive panic over coronavirus, investor sentiment had been quite high. State Street Global Markets said that the Global Investor Confidence Index increased to 77.9, up 2.5 points from January’s revised reading of 75.4. The North American ICI added 2.4 points to 68.6. The European ICI rose from 105.7 to 111.1, a 5.4-point gain. The sentiment, however, slumped in the Asian ICI. That reading dropped significantly from 95.5 to 83.6, a decrease of 11.9 points.

NOSEDIVE – Virgin Galactic (NASDAQ: SPCE) shares are slumping after Morgan Stanley and Credit Suisse both slashed their Buy ratings. Citing valuation, the two firms said that the stock was now too expensive. Shares have fallen nearly 10% this morning. Too expensive? They haven’t had a single tourist space flight and they are completely unprofitable. Anything over $3 seems expensive (Even though it’s totally ESG!).

POLITICAL TALK – Senator Elizabeth Warren – last seen hurling attacks on Michael Bloomberg – now has a new target: Larry Fink of BlackRock. The Democratic candidate is pushing for the BlackRock chief to do more in his firm’s pledge to address climate change. In a letter released today, Warren asked Fink to support her latest climate plan – the Climate Risk Disclosure Act. This bill would require all companies to reveal their business risks tied to climate change. Didn’t you hear? She has a plan. She has a plan. She has a plan.

MONEY, MONEY, MONEY – Hedge fund assets under management (AUM) reached an all-time high for the industry by the end of 2019. A new report by Preqin shows that assets reached $3.66 trillion thanks to strong performance offsetting redemptions. During the fourth quarter, Preqin says that outflows totaled $15.4 million. It was the seventh-straight quarter of outflows. For the year, total outflows reached $97.2 billion.

ACCRUED INTEREST

GREEN SLUMP – Cannabis stocks are collapsing. Short sellers are up more than $100 million on the year in the sector. And now that Cowen has downgraded a number of these firms, it’s going to be quite a challenge for a rebound.

NOT GONNA HAPPEN – At some point, we reach the definition of insanity. The SEC has rejected yet another proposal for Bitcoin exchange-traded fund. Yesterday, the agency rejected an application by Wilshire Phoenix and NYSE Arca to create a new ETF that held Bitcoin and short-term bonds. No deal.

WORKAROUND – Saeed Muhammad, commander of the Islamic Revolutionary Guard Corps, wants the nation to embrace cryptocurrency so that it can evade ongoing economic sanctions. If this sounds familiar, it’s because it came out of the playbook of Venezuelan dictator Nicolas Maduro for the very same reason.

CLIMATE INVESTMENTS – Andrew Chung, of 1955 Capital, says climate change is the perfect storm. The manager expects big demand for ClimateTech, a category of solutions that enable governments, companies, and individuals to combat climate change. Chung says that the once uncared for and given-up-for-dead moniker, “CleanTech,” could become a $4.3 trillion market by 2030 in its new avatar as “ClimateTech.”

CARRIED INTEREST

Here are three new funds that have reached their funding targets this week. It’s always important to know where people are pushing their money in these volatile times.

• Corsair Capital has raised $1 billion for its newest private equity fund. The process took two years to generate the funding. According to PE News, the firm has already finished six investments.
• Pictet Alternative Advisors (closed its first direct real estate fund. The group topped its €700 million ($765 million) capital commitments.
• Ridgewood Infrastructure has raised $600 million for water-related and other strategic infrastructure assets The firm is focused on the US lower middle market.

QUOTE OF THE DAY

“JPMorgan, by saying what they said, will be able to borrow billions of dollars from the ECB at negative rates … it doesn’t have to work, they don’t need to do anything, they are now getting free money from Europe for basically being able to say this.”

Social Capital founder and CEO Chamath Palihapitiya called ESG investing a complete fraud in an interview with CNBC. The CEO specifically called out JPMorgan, who recently made a series of new announcements around ESG investing. Palihapitiya will have you know he is not impressed.

ACTIVE MANAGEMENT

Moon Capital Management is pushing Indian media mogul Subhash Chandra to divest in his company’s education division. The hedge fund wants the firm to sell the majority stake that Essel Group owns in Zee Learn. The fund also wants a board seat.

Daniel Loeb isn’t too pleased with Japan’s government. Even though Prime Minister Shinzo Abe has courted activist manager, recent economic events have Japan getting cold feet about economic reform. Here’s more.

Sachem Head Capital Management is pushing director nominations at Olin Corporation. A new SEC filing shows that the activist fund now owns 14.95 million shares or 9.4% of Olin.

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.