THE DAILYALTS PLAYBOOK

March 23, 2020

Today, the DailyAlts Playbook talks about Helicopter Money, Amazon’s New Mission, and the Crash that “No One Called”

PRIME OVERVIEW

Good morning:

I wrote a rather lengthy piece last night on Neel Kashkari and the 60 Minutes interview last night in which I discussed his take on helicopter money. Then my internet went down, and I went to bed. It appears that my commentary didn’t save when my updates installed.

That’s okay because a lot has changed between 1 a.m. and 9 a.m.

I’ll keep it brief because I have a mountain of reading to start on this new stimulus program.

Last night, the Minnesota Fed Bank President talked about how the Federal Reserve would do all it could to support the U.S. markets. At first, I thought he was being overly optimistic when comparing the pending crisis to 2008. His worst-case scenario was something similar to the fallout of the Great Recession. (Last night, I said I expected it to rival 1937 if we were going to try to compare this to anything).

This morning, the Fed announced that it will provide unlimited support to the markets. The futures market went from “Limit Down” last night to a 600-point gain by 8:30 a.m. The central bank will buy assets “in the amounts needed.” The New York Fed will buy $75 billion in Treasurys on a daily basis and $50 billion a day in MBS. This is the commitment to QE Infinity that so many had predicted in the past. The Fed is throwing almost everything it can to prevent the market from tanking. The only thing they didn’t announce was that every member of the Fed would get their own furloughed jumbo jet, seize the controls, and start dumping cash out of the sky.

Meanwhile, corporate America will likely find the balance sheet of the U.S. government a potential option in the months ahead. U.S. Treasury Secretary Steven Mnuchin said this morning that the U.S. government could consider taking stakes in some U.S. companies. So, we are considering the Japanese route? It appears that we might be moving from uncharted waters into the Fourth Dimension.

What do ordinary Americans get?

Well, Congress is still haggling over that in Washington. It’s staggering how bad Congress is at dealing with crisis until it winds up on their lap. Last night, the Senate failed to pass a bailout bill, and another vote is scheduled for noon today. Like always, they’re like shareholders in a bankruptcy settlement. Last in line.

MORNING MOMENTUM

EPIDEMIC: The coronavirus continues to spread around the globe at a breakneck pace. Global cases topped 343,000 people on Monday with at least 14,790 deaths. In the United States, Johns Hopkins University says that at least 35,224 cases are reported. This morning, Roche announced that broad testing for every American could be weeks if not months away from deployment.

BOMBS AWAY: The fallout from the coronavirus appears to be extreme. Morgan Stanley (NYSE: MS) has projected that U.S. GDP growth will slump by 30% over the second quarter, which would bring it to its lowest levels in 74 years. This comes a few days after Goldman Sachs projected a 24% decline and 50% slump projection by the Federal Reserve Bank of St. Louis chair James Bullard. Morgan Stanley does not expect that a depression will arrive in the United States.

CRUDE REALITY: Meanwhile, U.S. oil prices were ticking slightly higher after the Federal Reserve announced plans to provide support for the markets. Prices have been under extreme pressure due to the ongoing spat between Russia and Saudi Arabia. The latter country recently announced it was calling off a deal to cap production. The Saudis will now increase production and aim to capture as much market share as possible. That said, oil remains in low demand with the coronavirus spreading around the globe.

QUOTES OF THE DAY

“The crash that no one called has investors calling back to earlier cataclysms, grasping for historical threads that can serve as a guide. Plenty say there’s no relevant precedent, but that shouldn’t stop the search for historical touchstones. New column.”

That’s CNBC’s Michael Santoli on Twitter yesterday. “No one called.”

“Once a pandemic spreads to my neck of the woods, I’m not going to be doing anything in the company of strangers.  No shopping, no going to restaurants, and especially no traveling in closed up metal tubes with recirculated air (i.e. planes and trains).”

That’s Chris Martenson on January 24 talking about the threat of the coronavirus. He dedicated two months talking about how this was going to hammer the global markets.

“I can tell you that there’s a lot I don’t know about everything. One of those things is where a large place like China stops slowing during a national virus lock-down. Markets don’t know where the #slowing will stop either.”

That’s Hedgeye CEO Keith McCullough on January 31, 2020.

“Global markets have not priced in the severity of the coronavirus at all. Expecting them to go into full-on risk-off mode next week.”

That’s angel investor Qiao Wang on January 26, 2020.

There are countless other people who “called” this. JD Henning at Seeking Alpha and his momentum models called the exact moment to get out of the market on February 21. He recommended that 10,000 people move to cash by February 24.

And Chris Irons at QTR Research. His Twitter feed, dating back to December, documented the outbreak in China and questioned everything about what was coming.

He’s been talking about the “Bull#$@$” economy for a long time.

It’s not so much who called it that matters, but the fact that they did and the reasons behind those calls.

The things that go ignored in mainstream outlets because you’re not allowed to do anything except cheer for rallies.

Because when it comes to contrarians, the mainstream calls them crazy when they don’t like extreme predictions or attention to the tails on the bell curve.

But then, the mainstream hates them when they were right and try to explain why they were right all along and what cracked in the system revealed themselves.

CARRIED INTEREST

Given the computer glitch, we’ll discuss the other headlines that we’re reading this morning.

• Jeff Bezos wrote a letter last night to his employees explaining that they are shifting their entire business to focus on addressing the coronavirus. “My own time and thinking is now wholly focused on COVID-19 and on how Amazon can best play its role,” he wrote. By the time this is over, Amazon will dominate the entire U.S. supply chain.
• Hedge funds that shorted airline stocks were quite successful in March.
• Everything you need to know about Impala’s fight with Harley Davidson.
• Gold prices won’t go higher if everyone is desperate for cash.

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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.