THE DAILYALTS PLAYBOOK

April 3, 2020

Today, the DailyAlts Playbook Talks About Mark Yusko, Bill Ackman, Tiger King, and “Bringing Back Paper Bags…”

PRIME OVERVIEW

Good morning:

Markets are still locked in negative momentum.

Oil bouncing to $26. But are we really going to speculate on oil right now?

Perhaps… perhaps it’s worth looking at Tortoise Pipeline (NYSE: TTP) as a long while shorting the Alerian MLP (NYSE: AMLP) because the discount on the closed-end fund is so insane that it was trading like our entire pipeline system is going out of business.

I would argue that a few hundred thousand miles of pipeline would make for good scrap… but then again for what?

This is where liquidation models go out the window, and there’s really no reason to speculate.

Don’t start thinking like me. I’ve been stuck in a house for three weeks…

I’m still sitting about 98% in cash and holding two small speculative positions in the FAZ and DRV.

If you’re still in the market, I’d recommend reading what Mark Yusko said about what might lie ahead. I can’t jump on the gold miner bandwagon with him, but I’m on board with emerging markets.

If I’m going to gamble on anything, it’s on higher default rates and an ugly month for real estate.

I am sure that’s a crowded trade.

I told my colleagues up in Baltimore that I’d gladly sit in this house for another year if they found a way to start the baseball season tomorrow.

MORNING MOMENTUM

CORONAVIRUS: Johns Hopkins University reports that the number of global coronavirus cases topped 1 million on Thursday. The death toll around the globe now has topped 53,000 with the bulk of reported cases happening in the United States. Nearly 250,000 confirmed cases have occurred in the United States. Last night, Miami’s mayor asked the President to stop all air traffic into the top COVID-19 hotspots inside and outside the United States.

EXECUTIVE: President Trump has asserted his authority to force companies to help produce ventilator materials for suppliers of the machines. U.S. experts have said that the medical system will require tens of thousands of ventilators from General Electric (NYSE: GE), Medtronic (NYSE: MDT), Resmed (NYSE: RMD), Royal Philips (NYSE: PHG), Hill-Rom Holdings (NYSE: HRC), and Vyaire Medical.

SLUMP: Today ends 113 consecutive months of payroll growth for the United States. The U.S. Labor Department reported this morning that the unemployment rate hit 4.4% in March… and this is only the beginning. Economists worry that it is going to take years – potentially into 2023 — now for companies bounce back from this crisis and get the rate back down to 4.5%. JPMorgan and Goldman Sachs have recently projected that unemployment will peak above 30% at some point in 2020.

ACCRUED INTEREST

FRAUD: Aren’t we glad that we’re still listing Chinese companies in the U.S. markets? Yesterday, Luckin Coffee (NYSE: LK) stock fell more than 75% after an investigation determined that its COO had made up its sales. Hey, another company listed on the U.S. markets fleecing American investors for billions of dollars. CNBC called it a “painful reminder of the extreme fraud risk of some China-based companies.” They should change the word “some” to “all.” This has happened a lot. The Wall Street Journal attempted to make this a teachable moment about investing in China. Let me simplify: The lesson is don’t invest in China no matter how tempting the thesis is. Muddy Waters and Citron Research have been in a Luckin Twitter war for months.

DROP: GlobalData says that the number of announced VC deals fell by 22.5% for the week ending March 29, 2020. A new study shows that coronavirus has dramatically impacted the industry. Aurojyoti Bose of GlobalData said: “Deal activity plunged in most of the key markets during the week ended March 29, 2020, compared to the previous week. While the US witnessed a decline in deal volume by 33%, the UK witnessed deal volume declining by 34.8%. “However, China, which has also been witnessing a drop in VC funding activity, showcased signs of recovery with the deal volume increasing by 31.9% during the week ended March 29, 2020, compared to the previous week,” he added.

OIL GAINS: Crude oil prices have jumped more than 40% in the last 48 hours after President Donald Trump said that Saudi Arabia and Russia would cut global production by about 10 million barrels per day. OPEC nations and Russia plan to hold a meeting on Monday to discuss ways to cap production and add support to the market.

SLUMP: We’ve noted that sovereign wealth funds around the globe are facing a wave of forced selling. SWF reported this morning that the stress is really hitting these funds. Norway’s sovereign fund lost a whopping $114 billion in Q1 due to the stock market crash.

CARRIED INTEREST

Here are the other headlines getting our attention this morning.

• Plastic bags aren’t banned anymore. But reusable ones are. We are in the Twilight Zone.
• Storms are a’ coming.
• Keith Meister – an Icahn protégé – is first over the wall on MGM Resorts.
• As we said, activists are going to show us who they are this year. Starboard is moving ahead with a battle against GCP Applied Technologies.
• Valiant Capital had a very good month due to the selloff.
• Bill Ackman just keeps winning.
• Michael Hintze had a bad March.
• Yusko might not be bullish, but a survey of other institutional investors suggests a sharp bounce back for the markets.
• Private equity firms are calling capital.

QUOTES OF THE DAY

“China bureaucratic ass-covering is a national sport.”

John Sexton at Hot Air. I read Vox for the left-leaning perspective and HotAir for right-leaning opinion. Then I ponder that reality is somewhere in the middle. I don’t go further to the fringes. Sexton is from the latter, and I love this line. He’s citing a New York Times report that explains that the CIA is trying to get an accurate picture of how many people died in China because of Coronavirus. I would suggest: Start with the 21 million phone subscriptions that disappeared in Q1 and work backward.

“‘Tiger King’ star Joe Exotic is in coronavirus isolation in jail, husband Dillon Passage says.”

I’m calling it now. This is a Peak 2020 headline right here.

RECORD HIGH

When I was 25, I rented the fastest car I could at LAX and ripped up Pacific Coast Highway to visit Malibu. I wasn’t allowed to go to Pepperdine. But it was worth the view.

I spent the day finishing a book at Inn of the Seventh Ray, where Jack Nicholson had reportedly been drinking wine to excess not long after I arrived. I wrote my first book’s last sentence there. The album I listened to on the ride was Beck’s 2006 release: The Information.

It’s good not great. The first five songs in a row I enjoy. Promise. Ignore the last 10.

My favorite album of the year is Amy Winehouse’s Back to Black and then it’s 20 miles of dirt before we get anywhere. Whatever People Say I Am/That’s What I’m Not by the Arctic Monkeys, Gnarls Barkley’s St. Elsewhere, and FutureSex/LoveSounds by Justin Timberlake.

Two. Three. Four. YouTube is free, and there are great songs across the board here.

Still, all four of them are rather mainstream for that year. So, let’s get a little more arcane.

10,000 Days by Tool.

At War with the Mystics by the Flaming Lips was a very political album, and they put on a hell of a show in NYC when I lived there. Best song is “Mr. Ambulance Driver” but it is also the lowest energy song of the album. This is an album where nine of 12 songs are wonderful.

Nothing beats the repetition and joy of “Over and Over” on the underrated Hot Chip’s The Warning. I love musical minimalism mixed with hypnotism. This is an experience… Not even a great fiction writer can come up with this. I appreciate that what I could never create. (Their best song is in 2008, so that will be a weekend matter.)

Finally, I’ll throw some credit to a few of the pre-iPhone era. Silent Shout by The Knife, Ghostface Killah’s hyper-versatile Fishscale, Ratatat’s Classics, and The Roots’ Game Theory.

Song wise – Naïve by the Kooks is a great standalone song from the year. Been there. Love being on this side of life’s lessons and looking back and learning that lesson. So is Lazy Eye by the Silversun Pickups, a tune that many people confuse for Smashing Pumpkins.

I know who Muse is, but we were just drifting at different directions at that point. I will say, I trust bands with a forward-leaning female bassist. Lazy Eye is an extremely underappreciated song that should unite nations. And if the nations don’t like it, goodbye nation.

My friend in Chicago will still say that the High School Musical soundtrack is the best album of the year. In fairness, he is still long Disney and holding UVXY since 2012. That’s fair.

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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.