.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Friday October 30, 2020:
Oct 30, 2020 3:53:43 PM
- The United States reported over 90,000 daily cases for the first time on Thursday as 21 states reported their highest daily number of hospitalized COVID-19 patients since the pandemic started. More than 1,000 people died from the coronavirus in America on Thursday, the third time the country has hit that number in October. The spike in numbers is coinciding in what Republicans and Democrats are calling the country’s most important election in the U.S. history on Tuesday. Hotly contested states such as Ohio, Michigan, North Carolina, Pennsylvania and Wisconsin are among those dealing with the deadly spike in cases.
- In Canada, new federal modeling shows Canadians must reduce the number of close contacts they have with other people by 25% in order to suppress the second wave of the coronavirus. “If we increase, or if we even maintain our current rate of contact with others, the epidemic in Canada is forecast to continue increasing steeply,” said Chief Public Health Officer Dr. Theresa Tam. “To bend the epidemic curve and reduce transmission to lower levels… we must really reduce the number of contacts as much as possible.” Prime Minister Justin Trudeau echoed the sentiments of Canada’s chief health official, calling on Canadians to continue following public health guidelines – particularly physical distancing and reducing close contacts with others.
- According to a Bloomberg report, the United Kingdom’s drug regulator has started accelerated reviews of COVID-19 vaccines under development from Pfizer and AstraZeneca in hopes to get Britons inoculated as soon as possible. The U.K. Medicines and Healthcare Products Regulatory Agency have started a rolling review of the Pfizer vaccine in recent weeks, while also conducting an expedited review of AstraZeneca’s vaccine, which is being co-developed with the University of Oxford. Rolling reviews allows the regulators to see clinical data in real time, which allows for discussions with the drugmaker about potentially granting regulatory approvals more quickly.
- Slovakia is looking to take a drastic move to help stop the spread of COVID-19 in its country after cases have skyrocketed in recent weeks. Starting this weekend, the country is setting out to test almost everyone over the age of 10 for coronavirus. Slovakia’s population sits at 5.4 million people and was one of the most successful countries in Europe during the first wave, shutting down quickly in March. However, 80% of Slovakia’s 55,091 total cases were recorded this month, which has put enormous pressure on its health care system. China has tried similar testing strategies in hotspots of certain cities, but so far no other European Union nation has tried what Slovakia is about to attempt.
- Japan is also moving ahead with an interesting experiment this weekend over a three-day period which will see baseball games played in a 32,000-seat stadium that will be anywhere from 80-100% full. This is an exception to government guidelines that states sports venues should operate at half capacity. Japan is experimenting with their eyes looking ahead to the Tokyo Summer Olympic Games, scheduled to be in held in 2021. Engineers have installed dozens of high-resolution cameras and sensors at the stadium, which will monitor mask-wearing fans and their movements. CO2 detectors will also be used to measure crowd density. All of this information will then be loaded into Japan’s “Fugaku” – a supercomputer. So far, Fugaku has been used to simulate the spread of airborne droplets inside trains and classrooms, and also when people wear different kinds of facial coverings.
- As countries all over the world move forward with different stay-at-home measures to help bend the curve of the second wave – it should come as no surprise that one world leader is not a fan. Brazil’s President Jair Bolsonaro, a long-time critic of any lockdown measure that could hurt the economy weighed in with his opinion on Thursday stating it is “crazy” for countries to start locking down again to gain control of the coronavirus. During his statement, President Bolsonaro also reiterated that he will not pay for the Chinese vaccine that is under clinical trial in the city of Sao Paulo. “Find another. I am the government, the money is not mine, but the people’s. I am not going to buy your vaccine also. Find another to buy your vaccine,” said Bolsonaro.
Covid-19 – Due Diligence And Asset Management
KKR Invests Record $6.2 Billion With Turmoil Spurring Deals
Brief: KKR & Co. deployed a record amount of capital in the third quarter, taking advantage of turmoil spurred by the Covid-19 pandemic. The firm invested about $6.2 billion in markets across private equity, infrastructure and real estate, New York-based KKR said Friday in a statement. That figure surpassed its previous peak of $5.5 billion in the second quarter. This year “is on pace to be the most active deployment and fundraising year in our history,” co-Chief Executive Officers Henry Kravis and George Roberts said in the statement. KKR has been one of the industry’s busiest dealmakers during the pandemic and has said the crisis will be an inflection point for its business. In July, the firm agreed to buy retirement and life insurance provider Global Atlantic Financial Group in a deal that could be valued at more than $4 billion, giving it a major presence in the insurance industry and adding long-term capital.
Goldman Money Funds’ Liquidity Buffer Swells Before U.S. Election
Brief: Two Goldman Sachs Group Inc money-market funds, whipsawed in March by billions of dollars of investor withdrawals, have steadily amassed a liquidity cushion much larger than rivals, as the $4.35 trillion industry braces for the outcome of the U.S. presidential election and another global surge in coronavirus cases. The funds’ weekly liquidity - a barometer of how quickly investments can convert to cash in a week - rose to 85% of total assets this week, according to disclosures here by the bank. That is about double the level when Goldman Sachs in March injected nearly $2 billion of the bank’s own capital into the funds to prevent them from falling below the regulatory weekly liquidity threshold of 30%. “We actively manage liquidity in our funds as dictated by the market environment,” Goldman said in an email statement. Average weekly liquidity at about 111 U.S. prime institutional money-market funds, like the Goldman funds, was 66% at the end of September, up from 54% in the year-ago period, a Reuters analysis of U.S. regulatory filings show. Those 111 funds hold about $300 billion in assets, or 9% of the $4.35 trillion in money funds.
What Investors Said – And Actually Did – During the Covid-19 Crash
Brief: There’s a mismatch between what investors say they believe and what they actually do with their portfolios. A new study from the National Bureau of Economic Research serves up a rare real-time analysis of how the stock market crash in March shaped investors’ expectations about the market and their subsequent trading behavior. “There are many studies on investors’ beliefs and many studies on trading. But, there’s no study to link the two,” said Stefano Giglio, professor of finance at Yale School of Management and one of the authors of the paper, called “Inside the Mind of a Stock Market Crash.” “The main results were striking,” Giglio said in an interview with Institutional Investor. As one example, he noted that investors’ overall beliefs about the probability of a large stock market drop went up enormously from 4.5 percent to 8 percent between February and April, while the perceived likelihood of a GDP disaster went up from 5 percent to 8.5 percent. Researchers surveyed investors about their views of the market and economy in February, before the Covid-19 crash and near the market’s record high. They polled investors again in March near the low as the pandemic shut down global economies, and in April when markets had recovered much of the initial loss. The researchers then looked at investors’ actual trading behavior over the period.
Brookfield’s Flatt Bets Offices Will Fill Again as Cities Revive
Brief: Working from home is overrated and everyone will be back in the office before you know it. In today’s climate, with an election just days away, that could be a political statement. But for Bruce Flatt, chief executive officer of Brookfield Asset Management Inc., it’s his contrarian outlook on the pandemic, and a rationale for why he’s ready to spend billions of dollars on real estate in the next 18 months. He dismisses the flight of young families to the suburbs as an “anomaly” and the permanent work-from-home policies popular in Silicon Valley as impractical because “the efficiencies are not even close” to being in a shared workplace. If anything, he said, tech companies are leasing or buying more downtown space, not less. Flatt -- who oversees some US$200 billion of commercial property, including dozens of office towers -- argues big cities are resilient: London survived the Blitz during World War II, and New York bounced back from the 1918 Spanish Flu, the terrorist attacks in 2001 and Hurricane Sandy in 2012. “People like to associate with other people, they like to be the ‘in’ thing, there are jobs and employment, they can walk to work, they can do all the things that come along with it, and this is not stopping it,” Flatt said in a Bloomberg Front Row interview. “These cities are not going away.”
Covid Isn’t the Only Big Fear for Investors
Brief: European shares have been pounded in recent days because of the tightening of lockdown restrictions in places such as France and Germany. The latter has suffered especially badly in the markets. The last eight trading sessions have wiped more than 10% off German equities. Understandably, investors are banking profits after a stellar run for the Dax index. It has been the best performer in Europe this year — up more than 50% since the March lows of the first Covid wave — driven by a resumption of exports to a resurgent China. But there is another contributor to the recent dip in European stock markets. While things do indeed look bleak again for the region’s leading economies, this drop is also being driven by a global de-risking by investors ahead of next Tuesday’s U.S. election. European bond markets aren’t reacting with quite the same concern. The havens of German and French bonds are barely changed in yield despite Wednesday’s announcement of effectively a second lockdown in both countries.
The Managers Who Found Unlikely Covid-19 Winners
Brief: The Covid-19 pandemic produced some obvious winners and losers for equity portfolio managers: Amazon and Zoom surged, while airlines and hotels tanked. But some enterprising fund managers have wound up picking winners that, at first blush, wouldn’t seem like safe bets in the middle of a raging viral outbreak. To wit: boating stocks. An environment in which 12.6 million people are unemployed and the Standard & Poor’s 500 stock index is up just 1.5 percent may not seem like a natural time for people to run out and buy boats, a particularly expensive hobby. (An old joke posits that “boat” actually stands for Break Out Another Thousand.) But Yaron Naymark, portfolio manager of New York based, value-focused hedge fund 1 Main Capital, was early to spot the potential for growth in anything related to outdoor activities as a result of the pandemic. With restaurants and movie theaters closed in many places, he reasoned, people would look for things to do outside — and away from crowds. Sure enough, sporting goods of all stripes have been booming this year. That’s anecdotally obvious to anyone who has tried to buy a bicycle in the past few months, but it’s also borne out by the numbers: Naymark cites Walmart earnings calls in which management reported big growth in sales of all-terrain vehicles, among other outdoor-centric items.
