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Our briefing for Monday July 13, 2020:
Jul 13, 2020 3:49:10 PM
- In the United States, Florida continues to be the new epicenter of the coronavirus in the country setting a single day record for coronavirus cases over the weekend. Florida health officials recorded 15,300 new cases on Sunday. According to data from Johns Hopkins University, if Florida was a country, the Sunshine State would rank fourth highest in reporting new cases and 10th overall in total cases. Florida has an estimated population of around 20 million people. At least 35 of America’s 50 states have seen a rise in new COVID-19 cases compared to the previous week.
- Canadian Prime Minister Justin Trudeau announced on Monday that the federal government would be extending its emergency wage subsidy program until December 2020. The program covers 75% of wages up to a maximum of $847 for workers at eligible companies and non-profit organizations. According to a CBC report, the program’s uptake has not been as robust as the government had hoped. As of July 6th, the wage subsidy had paid out just over $18 billion to over 252,000+ companies. Elsewhere in the country, Quebec Premier Francois Legault announced Monday that as of Saturday July 18th, people must wear masks in all public indoor spaces. The province is leaving the enforcement up to merchants and owners of the indoor public spaces and those who don’t comply could face fines ranging from $400, to $6,000.
- A United Kingdom study seems to mirror a study from Spain earlier in the month that suggests immunity to COVID-19 doesn’t last very long. The UK study released over the weekend noted antibody responses start to decline 20 to 30 days following the first symptoms of the coronavirus. The study’s sample size was fairly small taking into account 65 patients with confirmed COVID-19 up to 94 days after showing symptoms, along with 31 health care workers. The subjects had antibody tests conducted every one-to-two weeks between March and June.
- The Spanish region of Catalonia has reported more than 1,000 coronavirus cases in the past two days in an apparent COVID-19 flare up in the country. The region, located in Spain’s northeast, is known for its agriculture and attracts thousands of seasonal workers from all over the country. Over the weekend, a judge rejected the regional government’s attempt to reimplement home isolation for the area stating the measures would be “indiscriminate” and “disproportionate”.
- India has experienced four straight days of 26,000+ coronavirus cases. The increase of numbers has forced regions such as Kashmir and Bengaluru to reinforce lockdown restrictions. The country of over 1.3B people now has over 850,000 COVID-19 cases, which now includes three generations of Bollywood’s Bachchan family.
- The Philippines reported their largest daily increase in coronavirus deaths on Monday. A health ministry official reported 162 deaths, the biggest single day jump in Southeast Asia to date, along with 2,100+ new infections. Since President Rodrigo Duterte eased one of the toughest and longest lockdowns back on June 1st, the number of COVID-19 infections have tripled to 56,259. Health officials have warned of a risk of further fatalities and infections as the country struggles to verify thousands of suspected cases.
- In Brazil, President Jair Bolsonaro is adjusting to his first week of life with the coronavirus, trading in his rallies, mingling with local business owners and fans for isolation and video calls. President Bolsonaro received some good news though over the weekend as his wife and daughters have so far tested negative for the virus. According to a member of the presidential medical team, Bolsonaro took hydroxychloroquine last Monday to Friday. The drug touted by President Bolsonaro and United States President Donald Trump has no proven effect on the treatment of COVID-19 and its studies were recently put on hold by the World Health Organization (WHO). According to the WHO, Brazil and the United States have accounted for 50% of the world’s new coronavirus cases.
Covid-19 – Due Diligence And Asset Management
Wall Street Regulator Will Watch Markets From Home Until October
Brief: The U.S. Securities and Exchange Commission will allow most employees to continue working from home at least until October as the Wall Street regulator extends accommodations initiated in response to the coronavirus pandemic. SEC Chairman Jay Clayton said in an email to staff late last week that the agency had been functioning well with employees working remotely and that the extension would allow time to see how schools and other organizations approached reopening after the summer. The 4,000-person SEC in March was one of the first federal agencies to tell employees to stay home due to the public health emergency. “It makes sense to use our flexibility,” Clayton said in the July 10 email reviewed by Bloomberg News. “As just one of many potential examples, if in September your child’s school physically reopens in one form or another, I don’t want you to be unnecessarily distracted from dealing with that in the best way possible.” The move comes as schools grapple with how to resume classes in the face of a resurgence of Covid-19 infections across large swaths of the country. The SEC has offices in major cities including Washington, New York, Miami and Los Angeles. An SEC spokeswoman declined to comment.
NYC Hedge Funds Angle for Work-From-Home Windfall on Their Taxes
Brief: Hedge fund managers who fled Manhattan to work from their second or third homes this year could end up saving millions of dollars -- and cost New York City dearly. Investment firms that pay the city’s unincorporated business tax -- a 4% levy that brought in more than $2 billion last year -- may be able to slash their bills because, for the first time, most of their income is being earned outside Manhattan. The UBT is assessed on the bottom lines of businesses operating in New York City that aren’t organized as corporations. “The UBT isn’t imposed on all of a business’s income,” said Timothy Noonan, a partner at the law firm Hodgson Russ. “It’s only imposed on the portion allocated to the city. For service businesses, the rule is simple: You look to where the services are being performed.” Right now, plenty of those services are being carried out in tony enclaves where portfolio managers, traders and analysts own homes and often live, usually part-time. Think Greenwich, Connecticut, or Palm Beach, Florida. For New York City, which is already facing a severe fiscal crisis --- revenue has plunged $9 billion since January -- that may mean yet another financial hit. The city’s Independent Budget Office forecasts revenue from the UBT will fall 17% this year to $1.7 billion, a decline that could accelerate if many of the city’s most profitable businesses use work-from-home policies to save on taxes.
Amid Pandemic, Wealthy U.S. Families Approved for Government Loans
Brief: Private investment firms that manage the fortunes of wealthy individuals and their kin were approved for millions of dollars in taxpayer-funded relief loans designed to help small businesses weather the coronavirus lockdown, according to a review of recently released government data. The companies - often referred to as “family offices” - approved for the forgivable loans from the Small Business Administration (SBA) included those that oversee money for the family that co-owns the National Basketball Association’s Sacramento Kings; the former manager of a multi-billion dollar hedge fund firm; and a serial Las Vegas entrepreneur. The new data from the U.S. Treasury Department and SBA shows only that the loans were approved from the Paycheck Protection Program (PPP) but does not say how much was disbursed or if they had been returned or forgiven. Still, it was not always clear why the families found it necessary to apply for emergency cash, usually for less than $1 million, given the substantial funds available implied by having private investing vehicles. “The PPP was meant for struggling small businesses who aren’t able to operate at normal capacity,” said Andrew Park, senior policy analyst at Americans for Financial Reform. “This is akin to dipping their hands into a charity jar.” Among those approved: Rothschild Capital Partners LLC, a New York-based firm that manages money for its chief executive, David D. Rothschild and others, got the go-ahead for a loan of up to $350,000 to retain eight jobs.
Pandemic Shifts Investor Perception of ESG and ‘Social’ Factor, Finds New Survey
Brief: Environmental, social, and governance (ESG) factors have grown more important since the onset of pandemic, with a new survey sponsored by BNP Paribas Asset Management showing the ‘social’ aspect coming into greater focus. The study, conducted by Greenwich Associates, showed that 81 per cent of respondents already take ESG considerations into account in all or part of their portfolios, with a further 16 per cent planning to do so. The leading reasons were to positively impact society or the environment (80 per cent), reduce risk (58 per cent) and meet stakeholder needs (47 per cent). Almost a quarter of respondents, 23 per cent, said that ESG has become ‘more of a focus/more important’ as a result of the Covid-19 crisis. French respondents led the way, with 42 per cent thinking that ESG has become more important; whereas the proportion in Germany was notably low at just 3 per cent. The ‘social’ considerations were deemed significant, with 70 per cent of respondents expecting it to become extremely or very important as we move forward. The importance of social criteria rose 20 percentage points from before the crisis, closing the gap on Environmental (up 11 per cent to 74 per cent) and Governance (up 4 per cent to 76 per cent) factors.
Wealthy Investors Worry About Lack of Cash if Pandemic Returns
Brief:The fallout from coronavirus has provoked fears among the world’s wealthy, with the majority planning to curtail travel and move closer to family in a world they see permanently altered by the pandemic. More than half of respondents in a survey of wealthy investors by UBS Group AG said they feared not having enough liquidity in the event of another pandemic, while a similar percentage expressed worry about leaving sufficient money to their heirs. The crisis “feels very personal,” said Bonnie Park, head of wealth planning for UBS in the Americas. “In the U.S. specifically, 82% of investors feel their lives have changed permanently.” To be sure, the poor and working classes have borne the brunt of the economic fallout from Covid-19, which has triggered the worst economic contraction since the Great Depression and resulted in tens of millions of layoffs. Of the wealthy investors surveyed, 70% said they’d been financially affected by the pandemic, with 36% of those describing the impact as “significant.” Younger investors indicated they were disproportionately affected by Covid turmoil. More than 70% of wealthy millennials said their finances were impacted by the pandemic and a similar percentage said they anticipated having to work longer to make up for the losses, compared with just 34% of Baby Boomers. Millennials were also twice as likely as boomers to have extended financial support to family and friends.
Wall Street Forges a New Relationship to Data in Coronavirus Age
Brief: Alternative data has been a buzzword on Wall Street for years. Never has demand been greater than during the coronavirus era. For many professionals, fundamental and technical stock analysis now take a back seat to epidemiological charts and real-time economic signals. Macro economists and money managers spend days tracking everything from Covid-19 reproduction rates to the number of restaurant reservations on OpenTable. When it comes to data on the virus itself, market operators have their own unique set of obsessions, often different than what the rest of the world is focused on. Relentlessly forward-looking, investors have become all but inured to the economic reports that once set Wall Street’s pulse. “Even though we’re going to have sharply down second-quarter GDP numbers, and down second-quarter earnings, people aren’t looking at the news that was. People are looking forward,” said Sandy Villere, a portfolio manager at Villere & Co. In 2020, that means new sources and new standards of interpretation. Following is a rundown of the coronavirus data investors say they’re most interested in, plus a sampling of high-frequency measures they track. And finally, views from a variety of strategists on why stocks haven’t turned south at the sight of rising Covid cases and a stalling real-time recovery.
