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Our briefing for Monday January 25, 2021:
Jan 25, 2021 4:26:17 PM
- United States President Joe Biden will officially reinstate the COVID-19 -related travel restrictions lifted by former President Donald Trump on Monday. The move will put back in place travel restrictions and includes non-American citizens who have been in Brazil, Ireland, the United Kingdom, much of Europe and a new entry – South Africa. Former President Trump had lifted those restrictions just days before Biden took office last week. According to President Biden’s Press Secretary Jen Psaki, also beginning Tuesday, international travelers to the United States “must provide proof of a negative test within three days of travel to airlines prior to departure.”
- In Canada, the country’s federal politicians returned to the House of Commons for the first time following their winter break and the leading Liberal’s COVID-19 vaccination program was front and center. Conservative Leader Erin O’Toole focused on Prime Minister Justin Trudeau’s promise of having a steady supply of the Pfizer COVID-19 vaccine over the first three months of 2021. That is now obviously in jeopardy with Canada receiving no doses this week of the Pfizer vaccine and a reduced shipment next week. O’Toole’s answer to jump-start the vaccination program was to encourage the Prime Minister to ask the Pfizer manufacturing plant in neighbouring Michigan, but that product is being used for the American market only for the first quarter.
- United Kingdom Prime Minister Boris Johnson said on Monday he is considering tougher border quarantine rules due to the risk of “vaccine-busting” new coronavirus variants. Speaking outside of a coronavirus vaccination centre in North London, Prime Minister Johnson said, “we have to realize there is at least the theoretical risk of a new variant that is a vaccine-busting coming in – we’ve got to be able to keep that under control.” Prime Minister Johnson said the British government was looking at the option of quarantine hotels – where inbound travellers will have to pay to be isolated at a hotel on arrival and must produce a negative COVID-19 test before they are released.
- Italy’s Prime Minister Giuseppe Conte faced pressure from his own coalition to resign on Monday and try to put together a new government. The request came after lawmakers warned the prime minister he faced defeat in parliament without an overhaul. According to Reuters, Italy has had 66 governments since World War Two, so while this is nothing new for the country, there is also no guarantee once a prime minster resigns, that a new coalition can form. Without a new coalition, an early election might be the only viable solution and in the middle of a pandemic, that too, is far from ideal.
- Bloomberg is reporting French President Emmanuel Macron is facing mounting pressure to impose the country’s third national lockdown this week. Doctors and researchers are raising concern that the new, more contagious coronavirus variants circulating in France are threatening to overwhelm the French hospital system. President Macron is trying to balance the current coronavirus strategy while looking ahead 15 months from now and a presidential race. Far-right leader Marine Le Pen is already emerging as Macron’s chief rival and Monday compared the government’s coronavirus strategy with the body of a dead dog drifting in water currents without purpose – an interesting analogy to say the least.
- In a tweet over the weekend, Mexican President Andres Manuel Lopez Obrador announced he is the latest world leader to contract COVID-19. The news came after the Mexican leader was on a trip over several days that took him to two states amid a surge of infections and deaths in the country. Mexico now has the fourth-highest number of fatalities due to COVID-19 only trailing the U.S., Brazil and India. Lopez Obrador, who is 67 years old, has said his symptoms are mild, but has experienced health issues in the past, including a heart attack in 2013. Mexico’s President was continuing on though with his duties including holding a call with Russian President Vladimir Putin on Monday and attending meetings remotely.
Covid-19 – Due Diligence And Asset Management
World Economic Recovery Delayed by Slow Vaccine Rollouts
Brief :The world economy is facing a tougher start to 2021 than expected as coronavirus infections surge and it takes time to roll out vaccinations. While global growth is still on course to rebound quickly from the recession of last year at some point, it may take longer to ignite and not be as healthy as previously forecast. The World Bank already this month trimmed its prediction to 4% in 2021 and the International Monetary Fund will this week update its own outlook. Double-dip recessions are now expected in Japan, the euro area and U.K. as restrictions to curb the virus’s spread are enforced. Record cases in the U.S. are dragging on retail spending and hiring, prompting President Joe Biden’s new administration to seek an extra $1.9 trillion worth of fiscal stimulus. Only China has managed a V-shaped recovery after containing the disease early, but even there consumers remain wary with Beijing partly locked down. High frequency indicators tracked by Bloomberg Economics point to a troubling start to the year with advanced economies beginning on a weak note and emerging economies diverging. “That’s a reflection of the hard reality that, ahead of widespread distribution of the vaccine, a return to normality is an unlikely prospect,” said Tom Orlik, chief economist at Bloomberg Economics. It’s a stark outlook facing policy makers after $12 trillion worth of fiscal support and trillions in central bank money printing failed to cement a recovery. Those from the Federal Reserve meet this week.
Oaktree, Centerbridge to Back AMC Loan Staving off Default
Brief: AMC Entertainment Holdings Inc. got support from private investment firms including Oaktree Capital Management and Centerbridge Partners for a loan that will help the cinema chain avert bankruptcy, according to people with knowledge of the situation. Oaktree and Centerbridge, which specialize in lending to troubled companies, led firms providing the 400-million-pound loan (about $547 million) tied to AMC’s Odeon Cinemas in Europe, the people said, asking not to be identified discussing a private matter. The new loan will be used to refinance existing debt and provide liquidity to cash-strapped AMC, whose audiences have all but vanished amid the Covid-19 pandemic. The deal is part of $917 million of funds assembled since mid-December by the world’s largest movie theater chain as it tries to stay solvent until vaccines bring back customers. Talks are underway with creditors about more financing and waivers, and while AMC said it has enough cash to stay in business through July, company filings show it still may face default claims from lenders and landlords. Representatives for Leawood, Kansas-based AMC didn’t immediately provide a comment. Oaktree and Centerbridge declined to comment. “Success breeds success,” AMC Chief Executive Officer Adam Aron said in an interview Monday. “The reason bankruptcy was on the table was because people were afraid that we would run out of cash. Now that we’ve raised so much cash, bankruptcy is no longer an option.”
Top Hedge Funds Earn $63.5 Billion in 2020, Highest in a Decade
Brief: The world’s 20 best-performing hedge funds earned $63.5 billion for clients in 2020, setting a record for the last 10 years during a chaotic time when technology oriented stocks led a dramatic rebound from a pandemic induced sell-off, LCH Investments data show. As a group, the most successful managers earned half of the $127 billion that all hedge funds made last year, LCH Investments, a fund of funds firm that tracks returns and is part of the Edmond de Rothschild group, reported. Despite the pandemic that triggered a historic stock market sell-off in March, shut down large sectors of the economy and swallowed up millions of jobs, the 20 best hedge funds topped their 2019 returns of $59.3 billion. That was despite 2020 not being as profitable as the previous year for hedge funds as a whole, which saw earnings fall from $178 billion in 2019. The average hedge fund returned 11.6% in 2020, according to Hedge Fund Research data, lagging behind the S&P 500 index’ 16% gain. “The net gains generated by the top 20 managers for their investors of $63.5 billion were the highest in a decade. In that sense, 2020 was the year of the hedge fund,” Rick Sopher, LCH’s chairman, said in a statement. Last year’s biggest earners include Chase Coleman’s Tiger Global, which earned $10.4 billion, Israel Englander’s Millennium, which earned $10.2 billion and Steve Mandel’s Lone Pine with $9.1 billion. Andreas Halvorsen’s Viking Global Investors earned $7.0 billion and Ken Griffin’s Citadel earned $6.2 billion, according to LCH data.
Bridgewater’s Dalio sees U.S. Divided, in ‘Terrible Financial State’
Brief: Bridgewater Associates founder Ray Dalio wrote on Twitter on Sunday that the United States is still in a “terrible financial state” and remains “terribly divided”, but added he liked what he heard from President Joe Biden at his inauguration. The hedge fund billionaire wrote that the question was whether the president and both parties in Congress would work together “for peace and prosperity that addresses the big wealth, values, and opportunity gaps we’re now seeing.” Dalio has previously criticized here a widening wealth gap and under-investment in public education in the United States, which he has linked to lower high school graduation rates, greater disparity in test scores, and lower teacher pay.
World’s Richest Shake off Crisis in Record Setback to Inequality
Brief: The world is witnessing the greatest rise in inequality on record, with the poorest likely to feel the effects of the COVID-19 pandemic for years to come while the “mega rich” have already bounced back, according to Oxfam. That’s the conclusion from a report by the charity, which charts the wealth effects of the deepest slump since the Global Financial Crisis as widespread shutdowns of businesses lead to rising unemployment. “The pandemic has hurt people living in poverty far harder than the rich, and has had particularly severe impacts on women, Black people, Afro-descendants, indigenous peoples, and historically marginalized and oppressed communities around the world,” Oxfam said on Monday. “It is likely that almost every country will see an increase in inequality, the first time since records began.” The report follows in the footsteps of similar analysis by the World Bank, which has warned that the economic crisis is sending a new generation into poverty and debt turmoil. The International Monetary Fund has warned that developing nations may be set back by a decade. Oxfam is urging governments to do more to address inequality, including making tax policies more equitable and canceling developing countries’ debts. The study -- entitled ‘The Inequality Virus’ -- is being published in tandem with the World Economic Forum’s virtual conference, at which politicians and business executives are set to discuss the state of the global economy.
Aaron Stern Launched His Fund During a Pandemic. The Former Fir Tree Partner Says His Timing Was Just Right.
Brief: Not many people would want to leave a steady job to start a new business during a global pandemic. For former Fir Tree partner Aaron Stern, that kind of counterintuitive thinking is par for the course. Stern, who ran distressed, special situations, and event-driven investments at Fir Tree before launching Converium Capital Management last year, says he’s been a contrarian since his father introduced him to investing and let Stern manage the family’s college savings when Stern was still in his teens. “I’m a contrarian and problem solver by nature,” said Stern, in his first interview about Converium, a multistrategy and opportunistic manager based in Montreal. “I’m drawn to companies and situations that are going through changes. When something bad happens, the folks who are closest to the situation, the experts, tend to be the most negatively impacted and don’t want to touch it.” That creates a vacuum that investors like Stern can fill, and it’s a perspective that shapes the new firm’s investment philosophy, he said. Converium has the flexibility to make event-driven investments around the globe, depending on where the team sees opportunities at any particular time. Investments could include, among others, activist situations, distressed debt, and sovereign debt.
