THE DAILYALTS PLAYBOOK

May 15, 2020

DailyAlts Playbook: What Dalio is Buying, Davey Day Trader Global, and Restarting the Trade War

PRIME OVERVIEW

Good morning,

A few minutes past deadline… but it is hard to find quotes of the day sometimes…

We start this morning with a report on what people really care about:

Sports.

Though I’ve been pretty able to stay sane despite the lack of baseball, I am eager for teams to get back to whatever format is necessary to start a season.

There could be one problem, according to David Lampitt at Sportradar AG.

We could have too many sporting events in the second half of 2020.

The “huge pent-up” desire for live sports entertainment has built to the point that every league is going to try to push back into the public eye right away.

We could have MLB games competing with a delayed NHL and NBA season.

“There will be a … huge supply of live sport compressed into that second half of the year,” he said. “It’s going to be interesting to see how all of those sporting events compete with one another at that point.”

ESPN is 24 hours of sports.

Will 24 hours be enough? Will we see ESPN 4, 5, 11 to cover all of these sports?

One of the things I’ve felt is that there has always been an oversupply of sports, hence the justification of ESPN’s existence on top of the thousands of blogs and channels. There are so many “Sports Shouting” shows on TV of people talking over one another that I’m stunned that there are enough advertising dollars.

But there are… at least there have been.

My friend in London and I have always asked what business we could have started that would have been successful today.

The answer – and we missed the window – was to try to build a media business that competed with ESPN.

Of course, we probably not the people who could have accomplished it. I do wonder now if ESPN will face a challenge from another media outlet at its size and scale.

I am hoping for Barstool Sports.

After all, Davey Day Trader Global has to be eager to get back to sports after learning that day-trading is unforgiving.

That said, he’s still 100 times more entertaining than most of the people on the financial networks and has about the same recommendation performance.

If you haven’t followed Portnoy’s descent into day trading, watch it in the link above.

MORNING MOMENTUM

THE BATTLE: The Dow shed 200 points this morning, and while I’m usually not overcommitted to what the Dow is doing, I am looking at geopolitical tensions. We’re back into a barking match with China – this time because the White House has blamed its rival for the spread of COVID. That said, Chinese media are now arguing that if the U.S. blocks supplies of semiconductors to tech firm Huawei, China will launch its “unreliable entity list” and “restrict or investigate” companies like Apple, Cisco, and other tech firms. They will also stop buying Boeing planes (spoiler alert, no one is buying Boeing’s planes right now).  The news pummeled U.S. companies operating in China. This is the kind of news that has me eyeing industrial real estate like Stag Industrial (NYSE: STAG), because U.S. production is going to need to move back here to prevent the coming long winter in economic tensions between the two nations.

THE DEAL: In Washington, Nancy Pelosi and friends will try to toss $3 trillion out of a helicopter with their latest stimulus relief plan. The bill would send $1,200 to every American, boost support for state and local governments, and probably help push Bitcoin prices higher as an unintended consequence. The U.S. Senate would likely challenge most of the provisions, which includes a variety of things they oppose – like bailing out the postal service and increasing SNAP benefits. That said, President Donald Trump reportedly supports sending another round of stimulus checks to Americans and may be more willing to provide support to local and state governments. The impending finger-pointing on Capitol Hill comes as U.S. coronavirus cases topped 1.4 million on Friday. Roughly 86,000 Americans have died from the virus.

THE DATA: On the data front, no news would be good news. Unfortunately, we learned today that U.S. retail sales plunged by a record 16.4%. That was way higher than what economists had anticipated (12.3%) and raises new concerns about how deep the downturn in GDP could be during the second quarter. Roughly 68% of U.S. GDP comes from consumer purchases. This retail downturn is the largest since we started keeping track back in 1992.

ACCRUED INTEREST

THE HOLDUP: Things are getting a bit dicey over at PointState Capital. The hedge fund has locked down more of its investors’ money as it faces a wave of redemptions. The firm saw about $2.1 billion of investor cash vanish in Q1. It’ll face about $150 million in redemption requests this quarter. The main fund lost 12% through April according to Bloomberg.

THE TARGETS: Today and early next week, we’ll be diving into 13Ds and other filings to get a sense of “Who” is “Buying What” on Wall Street. But we can start the discussion this morning on news that Ray Dalio’s Bridgewater was active during the first quarter. The firm announced that its top purchased during Q1 were McDonald’s Corp., UnitedHealth Group Inc., Lockheed Martin Corp., Phillip Morris International Inc. and Abbott Laboratories.

THE NEW KID: While Bitcoin prices try to punch above $10,000, people need to pay attention to Visa Inc. The payment processor just filed a patent to create its own digital currency on blockchain.

THE BOOM: We might be facing yet another round of tensions between China and the U.S, but I’m watching one story that fits into our long-term thesis here on real estate. Companies are going to move production here in droves. Aside from the geopolitics, I expect 5G run supply chains are going to be more localized and require more best-in-time production and delivery. That said, the sector we’ve been watching the most has been actions by the semiconductors. So, I look forward to digging deeper into the decision yesterday by Taiwan Semiconductor (NYSE: TSM) to announce that it will spend $12 billion to build a semiconductor factory in Arizona – with production starting in 2024. Secretary of State Mike Pompeo took a victory lap on the deal over Twitter.

THE GLOOM: There could be a lot of retail space available by the end of 2023. Office Depot is the latest retailer to announce huge job cuts in an effort to save capital. The firm will slash about 13,000 jobs and shutter locations across the country. I don’t know if this company is going to survive given the debt load. This was always a company that probably could have done well if matched with a firm like Herman Miller that could raise its profile. But it is such a 1990s name and brand that it really never translated to the 21st century digital economy. I’ll miss wandering through the store looking at all of the different types of pens and yellow pads – as finding the perfect matching set has always been a challenge.

QUOTES OF THE DAY

“TSMC’s announcement comes at a critical juncture, when China is competing to dominate cutting-edge technology and control critical industries. The TSMC facility in Arizona will increase U.S. economic independence.” 

Secretary of State Mike Pompeo has taken his victory lap. How long that lap will be is… well…

“If you’re going to ask your staff to give up salary, so should you. The question is, how will the rest of the pay package play out?”

Charles Elson, director of the University of Delaware’s center for corporate governance. Bloomberg offered a brutal story this morning about the number of corporate executives who are keeping their bonuses while laying off workers. This is catnip for Elizabeth Warren.

CARRIED INTEREST

• Goldman Sachs was the top M&A advisor in Q1. “Involvement in some of the big-ticket deals helped Goldman Sachs top the list. The firm advised on 18 deals worth greater than or equal to $1 billion,” said Aurojyoti Bose, Financial Deals Analyst at GlobalData. It seems like they never win anything, right? Good game, good game.
• SHORT: It’s interesting to see that Millenium International Management has raised its short bet against the Bank of Ireland. In fact, they doubled down.
• DATA: CTAs gained 1.43% in April, the Barclay CTA Index speaketh.
• LOSSES: Catalyst Capital’s third fund lost 60% last year. A bad bet on casinos, rental cars, and more seem to be the culprit.
• BOOTED: San Francisco’s retirement system has booted three equity managers.

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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.