.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Monday April 27, 2020:
Apr 27, 2020 4:18:31 PM
- As Johns Hopkins University reports more than three million coronavirus cases worldwide, one of the more high-profile recoveries returned to work on Monday. United Kingdom Prime Minster Boris Johnson reassumed his role as leader of the country. In his first comments since returning to work, Johnson warned the UK were at “the moment of maximum risk” and that lockdown measures would need to remain in place to avoid a second surge of infection. The UK’s lockdown measures are to be reviewed again on May 7th.
- In the United States, many regions of New York state will likely see their lockdown extend beyond their current May 15th deadline. During a news briefing on Monday, New York Governor Andrew Cuomo released new test results that showed nearly one-in-four New York City residents carried antibodies for the coronavirus, which means they contracted COVID-19 at one point or another. The state at the epicentre of the coronavirus for America has seen its cases drop recently, but still are recording roughly 1,000 new cases each day. The United States are closing in on 1 million cases and have over 55,000 reported deaths due to the coronavirus.
- In Canada, Ontario released their plan for reopening, but Premier Doug Ford refused to set hardline dates. Instead, Ford released a framework for a three-stage process in getting the country’s largest province back to some sense of normalcy. Ford stated Ontario must see a consistent two-to-four week decrease in new daily COVID-19 cases before the three-stage process can begin. A little further ahead in the recovery process, Quebec announced their plan on Monday of having elementary schools and daycares reopening on May 11 outside of its main city of Montreal. Elementary schools and daycares will open a week later in Montreal on May 19th. All other schools, including high schools, colleges and universities will remain closed until late August. Quebec’s Premier said the timeline is dependent on the COVID-19 infection rate remaining stable.
- Italy, the former centre of the coronavirus epidemic, saw its lowest daily total of deaths since March 14th. Prime Minister Giuseppe Conte plans to ease lockdown restrictions on Sunday May 3rd, with factories geared towards exports and public construction projects allowed to resume the following day. People will be allowed to travel within their regions to visit relatives, as long as face masks are worn, but movements between regions will still be banned unless for work, health, or emergency purposes. Schools will also remain closed until September.
- In Australia, the country has turned to technology to battle the coronavirus with more than a million Australians downloading an app designed to help medical workers and state governments trace close contacts of COVID-19 patients. Government officials noted the first one million downloads came within the first five hours of the app becoming available. Prime Minister Scott Morrison has seen his approval rating skyrocket 27 points since the first week of March, mostly due in part to the country’s response to the coronavirus. Australia, a country of 25 million people, has recorded just 6,700 cases and 83 deaths due to the coronavirus.
- New Zealand’s Prime Minister Jacinda Ardern claimed on Monday “there is no widespread, undetected community transmission in New Zealand. We have won that battle.” Therefore, after nearly five weeks of only essential services operating, New Zealanders will be able open up some businesses, takeaway food outlets and schools. The nation of five million people has seen 1,122 confirmed cases of COVID-19 with 19 deaths.
Covid-19 – Due Diligence And Asset Management
Jeffrey Gundlach is Shorting the Market, says a Retest of the Low ‘Very Plausible’
Brief: Jeffrey Gundlach, CEO of DoubleLine, said Monday that the stock market could sell off again to retest the low in March as he believes investors are too optimistic about the economic recovery from thecoronavirus pandemic. “I’m certainly in the camp that we are not out of the woods. I think a retest of the low is very plausible,” Gundlach said on CNBC’s “Halftime Report.” “I think we’d take out the low.” “People don’t understand the magnitude of ... the social unease at least that’s going to happen when ... 26 million-plus people have lost their job,” Gundlach said. “We’ve lost every single job that we created since the bottom in 2009.” The so-called bond king revealed he just initiated a short position against the stock market.
Oil ETF Wreaks Havoc on Already Volatile Crude Markets
Brief: The United States Oil Fund LP again roiled oil markets as it unexpectedly starting selling all of its holdings of the most active West Texas Intermediate futures contract, triggering a massive swing in the price relationship between the June and July contracts. The changes, detailed in a regulatory filing, are the latest in a series that have have wreaked havoc on crude prices. The fund said it’s moving its money to contracts spread between July 2020 and June 2021 due to new limits imposed upon it by regulators and its broker… The largest oil ETF has changed its investment policy five times in the last two weeks. It also warned investors its valuation may deviate significantly from the underlying oil price, in effect acknowledging that it’s momentarily less focused on the price of WTI crude.
Australia’s NAB Seeks $2.2 Billion from Investors, Slashes Dividend as Virus Halves Profit
Brief: The planned capital raising, via a discounted share sale, is the biggest by an Australian company since the virus outbreak, which has killed 83 people in the country and shut down large parts of the world’s 12th-biggest economy.The bank, Australia’s third-biggest, said it had decided to pay more than A$850 million in dividends, or about a third of what it paid last year, rather than scrapping it as it did not want investors who depended on the income to dump the stock.Its decision follows a regulatory directive to consider postponing shareholder payouts until the impact of the pandemic was better known.NAB, which brought forward its results by 10 days, is the first Australian bank to report earnings since the pandemic arrived in the country and so portends what could come from the rest of the sector.
New Hedge Funds Beg for Cash With Kids in Background
Brief: Warn potential clients about screaming kids. Clean up your house. Don’t forget to shave. These are the rules for wooing clients to a new hedge fund while in a coronavirus lockdown. As if starting a hedge fund wasn’t tough already, this year it’s going to be even harder. At least 10 firms opened on April 1, with more slated for this year. Most will begin with substantially less money than their founders were expecting before the world came to a standstill, according to people involved in fundraising… For much of the past decade, raising money has been a slog. The industry faced ridicule for high fees and low returns, and clients were more likely to pull money than to add. Now startups also have to deal with much of the world under quarantine, and a global recession or worse, creating the least welcoming money-raising environment in years.
Guggenheim’s Minerd Says Economic Recovery May Take Four Years
Brief: Scott Minerd, the chief investment officer of Guggenheim Investments, thinks it may take four years before the economy regains the level of activity it had before the coronavirus pandemic triggered a global crisis. “To think that the economy is going to reaccelerate in the third quarter in a V-shaped recovery to the level where gross domestic product (GDP) was prior to the pandemic is unrealistic,” he wrote in a note published on April 26. While governments are doing all they can to aid both businesses and individuals impacted by the virus shutdowns, Minerd said the help will likely be “insufficient, misdirected, and full of unintended consequences.” Many of the 26 million people who have applied for unemployment benefits over the past five weeks won’t be going back to work immediately even if the economy fully reopens, he added.
Global Macro Managers Tipped for 2020 Comeback
Brief: In recent months, global macro hedge funds, which profit from trading on big economic trends, have seemed terminally out of fashion. Long-term legends of the industry, such as Moore Capital’s Louis Bacon,called time on their careerslast year while global macro funds in general struggled to perform against a backdrop of perennially stable markets. Investors carried their concerns into 2020, yanking $22bn from global macro hedge funds in the first three months of this year, out of a total of $33bn pulled from the industry, according to data provider HFR. But times could be about to change. Volatility is back. And some asset managers who allocate money across different investment strategies say that global macro could be set for a return. Macro hedge funds are “very nimble and can weather periods of volatility”, said Karen Ward, chief market strategist for Europe, the Middle East and Africa at JPMorgan Asset Management.
