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Our briefing for Thursday April 15, 2021:
Apr 15, 2021 3:47:58 PM
- In the United States, the fight against the coronavirus took a political turn Thursday with White House advisor Dr. Anthony Fauci, CDC Director Dr. Rochelle Walensky and Biden administration COVID-19 response chief science officer, Dr. David Kessler all taking questions in front of the House Select Subcommittee on the United States’ coronavirus response. Dr. Kessler noted Americans should expect to receive booster shots to protect against coronavirus variants as they could “challenge” the effectiveness of the current inoculations. The political fire was left for Dr. Fauci, who has bridged both the Trump and Biden administrations in the fight against the pandemic. Republican Senator Jim Jordan and Dr. Fauci engaged in a back-and-forth verbal battle, debating when Americans can get back to normal and Dr. Fauci countering that the representative from Ohio’s questioning was making this “a personal thing”.
- With Ontario breaking another daily coronavirus record with more than 4,700 cases on Thursday, Canadian health experts are calling on the federal and provincial governments to curb interprovincial and international travel. For instance, while the B117 strain is driving much of the third wave in Ontario and elsewhere, the P1 variant, associated with Brazil, is surging in British Columbia and spreading in Alberta and Ontario. Early research in a non-peer reviewed study from Brazil, suggests the P1 variant is as much as 2.5 times more transmissible than the original virus strain. Dr. Srinivas Murthy, an infectious diseases and critical care doctor in Vancouver, British Columbia, said now is the time for provinces to limit travel to only the “absolutely essential” and the federal government should consider limiting domestic flights.
- In the United Kingdom, London residents new-found freedom might be short-lived, a disease expert has warned. Professor John Edmunds, an epidemiologist at the London School of Hygiene and Tropical Medicine, and a member of Sage, said it was not yet clear whether the testing of hundreds of thousands in multiple London boroughs would be enough to stop a cluster of cases growing. Surge testing has been ramped up in London in order to stop the spread of a South African variant of the virus. Professor Edmunds stressed mass testing is needed as the “vast majority” of the population would have to be vaccinated to “keep a lid on this epidemic more or less permanently”, which would take a “long time”.
- Bloomberg is reporting Italy’s debt in 2021 will exceed the country’s previous record, not seen since the aftermath of World War I. The new borrowing tally of 159.8% of Italy’s GDP was ratified by Prime Minister Mario Draghi’s cabinet on Thursday and exceeds the probable all-time high of 159.5% achieved in 1920. Italy is the European Union’s third largest economy, and its spending is backed by the European Central Bank, which is buying up government bonds to keep spreads between countries under control and make pandemic-era debt less expensive to service.
- India recorded more than 200,000 new COVID-19 cases on Thursday, which marks the highest one-day surge since the pandemic broke out. The country of close to 1.4 billion people, has recorded more than 14 million cases with over 173,000 dying from complications caused by the virus. India’s capital – New Delhi – has announced movement restrictions in order to try and curb the recent spread. Already with a nighttime curfew in place, authorities announced that all malls, gyms and spas in the city would close and restaurants would only be allowed to make deliveries.
- After hitting the 100-day mark until the Tokyo Olympic Games are set to begin, a Japanese government official sowed doubts they might get cancelled for a second time in two years. Toshihiro Nikai, secretary general of the ruling Liberal Democratic party told broadcaster TBS: “If it seems impossible (to host the Olympics) any more, then we have to stop it, decisively.” Nikai went onto add, “if the Olympics were to spread infection, then what are the Olympics for?” The comments are the first sign of change from the Japanese government who, along with Olympic organizing officials, have been steadfast that the Games would go ahead later this summer after being cancelled in 2020.
Covid-19 – Due Diligence And Asset Management
Lending Slump Worries Investors as U.S. Bank Profits Soar
Brief : Investors are signaling fresh concern about when the largest U.S. banks will get back to their bread-and-butter business: lending money. JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon’s statement about “challenged” lending -- a word he quickly said he regretted using -- pressured share prices, as did shrinking quarterly loans across banks. Bank of America Corp. reported a 14% decline in loan balances in the first quarter from a year earlier, while Citigroup Inc. said Thursday that loans tumbled 10%. Those dropoffs followed the 4% slump in loan balances at JPMorgan and the 9% decrease at Wells Fargo & Co., reported Wednesday. Executives from all the companies struggled to provide precise targets of when they expect loan balances to increase or by how much, while expressing optimism about economic growth coming out of the pandemic. At the four largest U.S. banks, the lending slump and low interest rates combined to sharply cut net interest income -- what lenders make from borrowers minus what they pay depositors -- even as their trading and investment-banking businesses sent earnings soaring.
How the Pandemic Impacted Gold Prices
Brief: Just over a year from the first UK lockdown, Covid-19 has upended day-to-day life and financial markets on an unprecedented scale. And the gold market was not immune. The last twelve months have been a rollercoaster for the asset class, categorised by a series of records triggered by the pandemic. Despite this, the benefits of gold have been borne out. Clearly, at a time of such market turmoil, gold has spent much of the last 12 months fulfilling its traditional role as a hedge against uncertainty. In many ways, the pandemic drove gold to new heights as it put the asset class front and centre of investors’ minds as they sought refuge from the financial fallout. As such, investors flocked to gold-backed ETFs in 2020, with a record 877 tonnes added to global holdings, the equivalent to US$48 billion (€40 billion). Heightened risk and uncertainty weren’t the only drivers of higher investment demand. Ultra-low interest rates, which reduced the opportunity cost of holding gold over competing assets such as bonds and fiat currencies, and fiscal expansion drove investment flows higher.
IACPM: Credit Managers See Stabilizing Effect from Stimulus Programs
Brief: Credit portfolio managers feel their portfolios are stabilizing thanks to the liquidity provided by government stimulus programs, according to the first-quarter survey from the International Association of Credit Portfolio Managers. Rising liquidity has helped allay fears of rising corporate credit defaults, particularly in North America. In the first quarter, 25% of surveyed managers forecast rising credit defaults in the region over the next 12 months, well down from 63% in the fourth quarter. Som-lok Leung, IACPM's executive director, said in a phone interview the new positive outlook is due to government stimulus. "It's definitely a significant shift, and I think the comments from our members are certainly that the default situation has been pretty good," Mr. Leung said. "Defaults have been relatively low with some exceptions here and there, but overall, I think government stimulus — not only in the U.S., but in multiple countries — has had its predicted effect."
Guggenheim’s Minerd Moves to Miami as Firm Eyes Flexible Work
Brief: Scott Minerd, the chief investment officer of Guggenheim Investments, is moving to Miami, the latest high-profile finance executive drawn to a state with no income tax. Minerd, who has lived in the Los Angeles area for years, purchased two penthouses for $12.5 million and plans to combine the properties. That would create a 22,547-square-foot condo that would be the largest in Miami-Dade county, according to Jonathan Miller, president of Miller Samuel. Minerd will keep his mansion in Marina del Rey, but plans to become a Florida resident, according to a person familiar with the matter. The move comes as Guggenheim Investments shifts toward a flexible work arrangement. “We are planning to have flexible use of all our offices to permit people to work and live where they want,” a representative for the firm said in a statement. “This also includes facilitating people living where they wish to live while continuing to serve our clients with excellence.” Finance titans have increasingly been drawn to Florida to escape high taxes in the northeast and California and Wall Street firms have been looking south for office space.
LPs Eye Investments in Venture Capital and Growth Equity Amid Record VC Dealmaking
Brief: At this point in the pandemic, institutional investors are ready and willing to make additional investments in private markets, particularly through venture capital and growth equity investments, according to Eaton Partners. The fund placement agent, which is part of Stifel Financial, on Wednesday released its latest limited partner pulse survey, which questioned LPs about their views on alternative investments. When asked about how soaring public market valuations have impacted their opinions of private market investments, over half of participants reported that private markets look more attractive to them now. This figure indicates a shift from the firm’s September 2020 pulse survey, which found that nearly half of investors were not currently looking to make changes in their capital market allocations. According to the new survey, investors are increasingly looking to buyouts, growth equity, and venture capital above other private asset classes. Sixty-one percent of survey respondents reported plans to up their buyout allocations, roughly consistent with the proportion who planned to do so in September.
Flexible Working is More than Just a Laptop at Home, survey says
Brief: Employers risk creating an unhealthy working culture in the post-pandemic world by embracing remote work without true flexibility, a survey led by King’s College London found. Businesses need to avoid giving the illusion of flexibility while still expecting staff to put in long hours and be responsive at irregular times, according to research by the Global Institute for Women’s Leadership at KCL and employee advisory firm Karian and Box. Almost all organizations polled said they are planning for a future involving hybrid work -- split between home and office locations -- though just 36 per cent are redesigning job roles with more flexibility in mind. Without more targeted support, parents and carers in particular risk erasing the boundaries between work and home life and seeing their workload increase, the survey said. Workers and employers around the world are grappling with new ways of operating after a year that has seen many step away from the office to slow the spread of COVID-19. About a third of working adults in the U.K. are currently operating full-time from home, according to Office for National Statistics data. Of the 254 organizations surveyed by King’s College, 90 per cent said they had increased support for working at home, with about three quarters doing more to help their staff work flexibly.
