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Our briefing for Monday October 5, 2020:
Oct 5, 2020 4:56:07 PM
- In the United States, with close to 7.5 million confirmed coronavirus cases, there seems to be only one dominating the headlines and that is President Donald Trump. The president tweeted late Monday afternoon that he plans to leave the hospital late this evening and to not be afraid of the coronavirus, or let it dominate your life. The fallout from the president’s positive COVID-19 test has been interesting to say the least. In the past three days we have seen a hospital trip via Marine One, multiple doctor news conferences and a motorcade parade around Walter Reed Medical Center with President Trump in the backseat of an SUV waving to supporters while he should have been inside of his hospital room. President Trump has been receiving a combination of three drugs for his COVID-19 symptoms and will continue his treatment from the White House. So far, the number of people in President Trump’s inner circle who have tested positive has now reached the double digits with his wife, aides, Republican Senators and the White House Press Secretary just to name a few.
- In Canada, two new benefits made available by the federal government are receiving new applications as of Monday. Canadians can apply through the Canada Revenue Agency for a new sick leave benefit and a new caregiver benefit for those forced to take time off to care for a dependent due to the pandemic. These benefits are part of Bill C-4, which will now replace the defunct $500-a week Canada Emergency Response Benefit (CERB). The CERB came to an end last week after helping almost nine million Canadians through the first few months of dealing with the coronavirus.
- The United Kingdom’s head of the government vaccine task force has tried to clear up the public’s “misguided” perception of the program’s end goal. Kate Bingham said Britons expecting everyone in the country to eventually get vaccinated against COVID-19 “was not going to happen” and added, “we just need to vaccinate everyone at risk.” Once a successful vaccine is found, the UK government is looking to vaccinate about 30 million people, compared with the actual population, which is about 67 million. Bingham said “there’s going to be no vaccination of people under 18. It’s an adult-only vaccine, for people over 50, focusing on health workers and care home workers and the vulnerable.”
- France has placed the Paris region on maximum virus alert as of Monday. The new restrictions will be in place for the next two weeks and will place bans on festive gatherings and require all bars to close, but restaurants will be allowed to remain open. Paris’ regional health director said there is about 3,500 new cases of the infection confirmed on average each day and 36% of ICU beds in the area are occupied by COVID-19 patients.
- A Bloomberg report on Russia via a statistics agency has stated the country’s death toll is double the amount of what the government has laid out. Rosstat, Russia’s federal statistics service said 45,663 people died from the coronavirus between April and August. Russia’s government virus-response staff puts the death toll at 21,475 from the start of the pandemic until October 4th. Rosstat includes deaths both directly attributed to the coronavirus and cases where it was listed as an “important condition” leading to the lethal outcome. Russia has reported the fourth-largest number of COVID-19 cases in the world, but their government death toll has them with one of the lowest death rates due to the virus. Rosstat figures put Russia’s COVID-19 performance more in line with other countries who have also suffered large outbreaks.
- China is set to expand its experimental coronavirus vaccine trials beyond frontline health workers as it looks to get a leg up on dominating the potential COVID-19 vaccine supply chain. Last month, a representative from state-owner China National Biotec Group, or Sinopharm revealed that hundreds of thousands of Chinese citizens have already taken the company’s two leading experimental COVID-19 vaccines. The program is now set to expand to include large portions of the population, including transit workers, people travelling to countries with high COVID-19 infection rates and staff in supermarkets or other enclosed spaces. Health experts say this is a high-risk strategy for vaccine developers to distribute and test products before they hit the global market.
Covid-19 – Due Diligence And Asset Management
Managers Find Personal Touch Vital Ingredient for Fundraising
Brief: Alternative money managers are finding it harder to attract investments from new clients in the era of virtual meetings despite strong interest in their strategies as asset owners resume investing during the pandemic. The problem, sources said, is the reluctance in most cases for institutional investors and managers to meet face-to-face given the global COVID-19 restrictions. Despite a much-improved facility by managers in presenting their investment strategies and providing information for due diligence checks via remote communication channels, industry observers said many asset owners still are not comfortable with a digital-only acquaintance. "There's an abyss that asset owners have to jump over when it comes to getting to know potential investment managers for your fund via a Zoom meeting. There's a natural human-comfort factor that comes from meeting in person," said James Neumann, a New York-based partner and CIO of investment consultant Sussex Partners U.K. Ltd., London. "There's a bias toward expanding relationships with existing managers because it's much harder to go from an initial call to hiring a new manager, especially in this environment," Mr. Neumann added.
JPMorgan Boss Jamie Dimon said up to 30% of Staff Could Work From Home Permanently
Brief: JPMorgan chief executive Jamie Dimon said that up to 30% of employees could work from home permanently. Dimon, who has been vocal in the past few weeks about the need to bring more staff back to the office in a bid to restore corporate culture and spur creativity, told the Sibos conference that the Covid-19 crisis is likely to lead to a proportion of JPMorgan’s staff to remain working from home on rotation. “There will be some permanent work from home, people who work from home or permanently rotate, or have a schedule of three days in and two days out, something like that,” he said during a virtual interview with Takis Georgakopoulos, global head of wholesale payments. “I don’t think it will be 100% of the population, I think it will be 20-30% ... and it’s got to work for the company and the clients. It’s not just whether we like it as employees,” he said. JPMorgan had 256,710 employees at the end of the second quarter. Daniel Pinto, the chief executive of its corporate and investment bank, told CNBC in August that staff could rotate between home and the office, but did not put a figure on his prediction. Dimon’s comments echo those of outgoing UBS chief executive Sergio Ermotti, who said in July that up to a third of the Swiss bank’s staff could stay home permanently.
The Pandemic Has Only Increased Our Economic Growth Obsession
Brief: The coronavirus pandemic has shown that policymakers will sacrifice business activity if it’s necessary for public safety. Climate activists have warned for years that society’s quest for growth threatens our planet, and some economists encourage using different metrics to judge an economy’s success. So we asked an array of economic policy experts whether anything has really changed. This pandemic forces us to rethink economic growth and, in many respects, the way our economies and societies function. Artificial intelligence and major structural changes have to be taken into account, including working from home and relocalization of activities. Sustainability, mobility, resilience, fairness, and inclusiveness are key policy aims with enormous challenges in the years to come. But the logic of economic growth cannot simply be dismissed. Debts, public and private, have continued to grow in the past decade. The financial crisis has not reduced the propensity to borrow around the world. The pandemic has forced governments to increase their budget deficits and, consequently, public debts. I would add that the stock of debt will not be less of an obsession. The new context for monetary policy, due to substantially lower natural rates, should not make us complacent about the size of debts. Countries need to manage their debts over the long run. Moreover, markets discriminate among economies. And one cannot take low inflation as a given forever. Especially if monetizing debts will be resorted to, increasingly.
Managers not Scrimping on Tech Budgets
Brief: Despite an economic downturn as a result of the pandemic, money managers are committed to their long-term technology investment plans, migrating client and investment data to the cloud, enhancing remote work capabilities and automating more business operations for better efficiency, sources said. While some firms have attempted to wring out savings by renegotiating contracts with third-party service providers offering investment market data, research and cloud-sourcing arrangements, most global money managers are ultimately spending more on technology as they strive to meet new remote work demands, said Tyler Cloherty, senior manager and head of the knowledge center for Casey Quirk, a practice of Deloitte Consulting LLP, New York. "There's been increased costs for laptops and collaborative software, like Zoom and Microsoft Teams," Mr. Cloherty said. Additionally, costs have increased as money managers continue to make longer-term investments in migrating company data to the cloud and on research portals for investment team data sharing, he added. "I think during the initial downturn in March and April, there was a hesitation to embark on substantial new investments. Since the market has bounced back … third-quarter margin numbers are going to look much better," Mr. Cloherty said.
Goldman Sees ECB Boosting Pandemic Asset Purchases in December
Brief: Goldman Sachs Group Inc. foresees the European Central Bank boosting its pandemic bond-buying program by 400 billion euros ($470 billion) in December, after euro-zone inflation weakened further. The ECB is also likely to extend the emergency asset-purchase operation, known as PEPP, by six months through the end of 2021, analysts at the U.S. bank wrote in a note to investors Monday. Reinvestments of maturing assets under the plan should continue to the end of 2023, they wrote, adding that the central bank may also target high-yield bonds for purchase. “A PEPP expansion is likely to be more powerful in supporting the recovery of the euro-area economy -- particularly in southern Europe, where it is most needed -- than a rate cut or an expansion of the regular asset-purchase program,” Goldman analysts including Soeren Radde wrote. That’s because PEPP “would be more powerful in compressing credit spreads.” Speculation of further monetary easing has grown for a host of reasons -- from the recent uptick in coronavirus infection rates in Spain and France to a decline in euro-area core inflation to a record-low 0.2% in September. The latter prompted ECB officials to comment that they were uncomfortable with almost nil price growth. Goldman previously expected the PEPP -- with a current limit of 1.35 trillion euros -- to end in mid-2021 and for the ECB to provide additional support through its regular asset-purchase program launched in 2015.
Frozen Deal Market Turns Frenzied as Election Approaches
Brief: The frozen mergers & acquisitions market of just a few months ago has turned into a frenzy as sellers look to lock in capital gains before year-end. Company founders and CEOs are hedging their bets against any tax law changes, including the treatment of capital gains and carried interest, that could come in 2021 if former V.P. Joe Biden, the Democratic nominee, defeats President Trump in the November election. “It’s going to be a busy three months here before year-end,” said Art Penn, founder and managing partner of PennantPark Investment Advisers, which focuses exclusively on middle market lending. “It’s a combination of good asset values for sellers and concern about potential tax law changes next year if there’s a change in administration.” Not all companies will get sold. Companies that have been hard hit by the quarantine and slowdown caused by Covid-19 likely won’t have buyers right now, even if their sector is expected to improve once the economy returns to normal. A lawyer involved in a number of M&A transactions that haven’t yet closed said there’s too much uncertainty about a potential vaccine, government aid, and companies’ future growth projections. “There’s a real unease about what will be permanently changed by the coronavirus,” she said.
