THE DAILYALTS PLAYBOOK

October 1, 2019

Today, the DailyAlts Playbook talks about Trump’s approval rating, Tom Barrack’s dealmaking, and why the Pope is worried about robots.

Good morning,

The Dow Jones projects a 50 point gain this morning as markets continue to monitor global trade. With the Chinese Communist Party celebrating its 70th Anniversary on Tuesday, tensions are high in neighboring Hong Kong.

• “NO FORCE” – Chinese President Xi Jinping issued a warning to the world. As his Communist Party celebrates its 70th anniversary, Xi said that no other force on earth would sway his nation’s development. While he didn’t mention any specific country (cough: The United States), he did say in the 10-minute speech that China would aim for peaceful development.
• TEAR GAS AND BULLETS – While Chinese President Xi Jinping calls for unification with Taiwan and Hong Kong, protests raged on for the 15th straight week in the latter region. This morning, at least one protestor was shot by police. Also, reports indicate that China has increased its troop presence near Hong Kong as geopolitical tensions rise.
• TRUMP’S TROUBLES – On the domestic front, President Donald Trump saw his approval rating hit an all-time low. A new CNBC survey shows Trump’s approval rating well underwater at 37%. However, good news does exist for the President. Less than half of Americans support the Democrats’ efforts for impeachment hearings (47%). Just 44% of Americans approve the impeachment hearings slated for this month.

ACCRUED INTEREST

• ULTRA WEALTH – A new report by Wealth X indicates that the richest 0.1% of humanity now controls $32 trillion in global wealth. Roughly 91,740 of this international cohort is based in North America, while 75,740 are located in Asia. To achieve membership in the 0.1% Club, you need to have at least $30 million in invested wealth.
• CRYPTO CON – Tether has generated a lot of controversy over the possibility that it has manipulated cryptocurrency markets given the expansion of global supply in the stablecoin. Now, according to the Blockchain Transparency Institute (BTI), new evidence suggests this to be the case. A new report indicates that Tether (USDT) has been used as a means to sway the ups and downs of the crypto markets. The report states wash trading accounted for 64% of all Tether trading activity. Here’s more.
• LIQUIDATION – For the fourth straight quarter, the number of hedge fund liquidations outpaced hedge fund launches. New data from Hedge Fund Research shows that 186 managers shut down their funds in the second quarter of 2019. That was lower than the previous two quarters; however, just 153 new funds opened during the same period. Check out the HFR Market Microstructure Report for more quarterly data.

CARRIED INTEREST

• CASH CRUNCH – Could this story offer a few clues into the recent Repo market efforts by the Fed. According to the International Monetary Fund, currency ratios don’t look very good for the U.S. dollar. While the U.S. dollar has been the leading reserve currency for a long time, the allocation of total reserves is falling. The IMF said that the dollar is at a six-year-low with an allocation of 61.63% of all reserves. China and Russia had a lot to do with this, as they dumped U.S. Treasuries and poured into gold.
• RAISING CASH – Tom Barrack’s Colony Capital had a busy 48 hours. The firm sold its Colony Industrial to Blackstone Group for $5.9 billion. It also wrapped another deal with Axa Investment Managers to unload NorthStar Realty Europe. Colony Capital has been stuck in limbo for the better part of two years with shares still off about half their value from 2017. The firm is ditching industrial and warehousing units in favor of digital real estate and infrastructure projects.

QUOTES OF THE DAY

“If mankind’s so-called technological progress were to become an enemy of the common good, this would lead to an unfortunate regression to a form of barbarism dictated by the law of the strongest.”

That’s the Pope. As in Pope Francis… raising his concerns about the future of Artificial Intelligence. Pope Francis delivered his warning to a room full of Facebook executives, Nobel laureates, Catholic ethicists, government regulators, internet entrepreneurs, and venture capitalists.

“Imagine what kind of fraud is behind these companies.”

Hedge fund manager Kyle Bass wants the United States to crack down on the “insane” nature of Chinese business standards. Bass raised concerns in an interview with CNBC that Chinese firms shouldn’t trade on U.S. exchanges if they don’t adhere to the same standards as American firms. Bass wants the U.S. government to deregister several companies given that they are exempt from U.S. audits and Dodd-Frank laws.

ACTIVE MANAGEMENT

• ACTIVE ALPHA – Lazard’s Shareholder Advisory Group reports that activists are driving M&A activity across the globe. According to a report, roughly 46% of all activist efforts in the first half of 2018 incorporated an M&A angle. That’s up sharply from previous years. Between 2014 and 2018, M&A pushes comprised about 33% of all activist campaigns.

COUNTRY RISK

• BITCOIN OR BUST – This could soon become the official economic slogan of Venezuela at its current pace. A new Bloomberg piece suggests that Venezuela may use Bitcoin as a reserve currency. According to reports, the nation has increased its Bitcoin holdings. During the first half of the year, the country lost about $1 billion in gold reserves. Of course, the timing of this story and the recent downturn in Bitcoin prices is just a coincidence (or is it…)

LIABILITIES

• The SEC settled with cryptocurrency firm Block.one. The company will pay a $24 million settlement for conducting an unregistered initial coin offering (ICO).
• The SEC also charged Chicago-hedge fund adviser SBB Research Group and its two top executives with a multi-year fraud that inflated fund values. According to the press release, the firm overcharged clients by about $1.4 million.

BOOTSTRAPPING (PEOPLE ON THE MOVE)

• The Chicago Municipal Employees’ Annuity & Benefit Fund has appointed Dennis White as the new executive director of the $3.8 billion fund. White will replace Jim Mohler, who recently left the fund to take over the $1.3 billion Chicago Metropolitan Water Reclamation District Retirement Fund.
• Aberdeen Standard Investments appointed two individuals to build the firm’s Environmental, Social, and Governance (ESG) investment offerings. The firm has appointed Danielle Welsh-Rose as its new investment director for the Asia Pacific region. It also tapped Petra Daroczi as a new investment analyst for ESG and fixed income. Welsh-Rose has more than 17 years’ experience in ESG leadership roles. She will report Euan Stirling.
• Meanwhile, UBS Asset Management is shaking up its European property division. The firm has hired a new CIO in Jonathan Hollick, according to a company press release from Monda.  Hollick was previously a senior manager in the company’s UK property business. He is also a manager of the firm’s flagship Triton property fund, which has an AUM of £930 million.

For more, People on the Move, click here.

THE DAILYALTS UNIVERSE

• ALTERNATIVES – Franklin Templeton launches five liquid hedge fund strategies
• ARTIFICIAL INTELLIGENCE – Green’s Push Canadian Robot Tax to Combat AI
• DIGITAL ASSETS – Newly-formed Crypto Rating Council to Assess Digital Assets
• ESG – Credit Suisse Asset Management Makes ESG Announcement
• FINTECH – Revolut Taps Visa to Expand Its Global Market Reach
• HEDGE FUNDS –Crispin Odey dismisses talk of hedge fund influencing Brexit
• LIQUID ALTS – CI Liquid Alternatives Get Warm Reception from Investors and Advisors
• PRIVATE EQUITY – Blue Delta Capital quickly strikes $150m hard cap to close an oversubscribed second fund
• REAL ESTATE – Brookfield Asset Management Buys 61.2% of Oaktree Capital Management
• VENTURE CAPITAL – WeWork proves that (venture) capitalism works

SOCIAL RESPONSIBILITY

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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.

Garrett graduated from the Medill School of Journalism at Northwestern University. He later received an MA in Global Security Studies (Economic Policy) from Johns Hopkins University, an MS in Trade Economics from Purdue University, and an MBA in Finance from Indiana’s Kelley School of Business. He 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.