.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Thursday June 4, 2020:
Jun 4, 2020 4:06:40 PM
- The Center for Disease Controls and Prevention Director (CDC) believes the protests held in the United States and other parts of the world over George Floyd’s death could be a “seeding event” for more coronavirus outbreaks. Director Robert Redfield was speaking at a House Appropriations Committee meeting on Thursday and said he would like to see people who took part in protests to get tested for the virus over the next several days. Redfield has been concerned that the agency’s public health message for the coronavirus isn’t resonating with the American people pointing to protestors without masks, crowds gathering for Memorial Day and the SpaceX launch as recent examples.
- Canadian federal data over the last 14 days has revealed Ontario and Quebec have accounted for more than 90% of national COVID-19 cases. That revelation, along with several others was noted in a news briefing by Canada’s Chief Public Health Officer Dr. Theresa Tam on Thursday. The latest figures show Canada could see between 98,000-108,000 cases and 7,700 and 9,400 deaths due to the coronavirus by June 15th. The numbers also continue to show COVID-19 has hit the Canadian long-term care homes the hardest as those facilities represent 18% of total cases and an alarming 82% of Canada’s 7,495 deaths.
- In a United Kingdom led conference hosted by Prime Minister Boris Johnson, $8.8 billion was pledged by global donors to fund vaccination programmes for children in low income countries over the next five years. This funding is projected to save up to 8 million lives from diseases such as measles and cholera. As the world’s attention turned to the coronavirus, the support is made to reinforce routine immunization programmes and for those who have stayed away from vaccination clinics in fear of COVID-19. The conference also launched a new advance market commitment (AMC) for vaccines developed successfully for COVID-19, so that poorer countries won’t be left behind in a potential vaccine nationalism by wealthier nations.
- Spain had to walk back a comment made by its tourism minister that the country’s land borders would be open by June 22nd. The announcement made by the tourism minister caught neighbouring Portugal off-guard and Spain’s new stance is that they will reopen its land borders with coordination between Portugal and France.
- Dubai police have fined more than 100 people for visiting their newly reopened public beaches for failing to adhere to coronavirus safety rules. Dubai allowed public beaches to reopen on May 30th after more than two months of closure. Those not wearing masks and not social distancing by at least six feet were fined on the spot by police. Fines are $817 USD for anyone not wearing a mask in public or failing to maintain social distancing.
- Despite setting records of coronavirus cases on back-to-back days, Brazil is moving to ease restrictions due to the coronavirus. Earlier in the week, a number of non-essential businesses and venues in major cities such as Sao Paulo and Rio de Janeiro reopened for the first time in months. An epidemiologist at the University of Sao Paulo labeled the reopening an absurdity and outlook as awful. Not surprisingly considering his very public thoughts on the coronavirus, President Jair Bolsonaro seems okay with the reopening noting, “We are sorry for all the dead, but that’s everyone’s destiny.”
Covid-19 – Due Diligence And Asset Management
How a Hedge Fund Firm Sidestepped the First Quarter’s Market Carnage
Brief: Many hedge fund firms initially underestimated the threat of the coronavirus. Cinctive Capital was not one of them. Cinctive, founded by Diamondback Capital Management veterans Larry Sapanski and Richard Schimel, launched in September with backing from PAAMCO Launchpad, the joint venture between the Employees Retirement System of Texas and investment firm PAAMCO Prisma to seed and support emerging hedge fund managers. Cinctive, headquartered in New York City’s Hudson Yards, is a long-short equity fund using a multi-manager approach, with numerous investment teams covering roughly half a dozen sectors. One of those teams — a technology team focused on semiconductors and software — started looking into supply chain disruptions in China early this year. The team talked to factory workers and company managements based in China and shared their findings with Cinctive’s other sector teams.
America’s Billionaire Wealth Jumps by Over Half a Trillion During COVID-19 Pandemic: Report
Brief: The combined wealth of America’s billionaires, including Amazon.com Inc (AMZN.O) founder Jeff Bezos and Facebook Inc (FB.O) CEO Mark Zuckerberg, jumped over 19% or by half a trillion since the onset of the COVID-19 pandemic in the United States, according to a report published by the Institute for Policy Studies (IPS). During the 11 weeks from March 18, when U.S. lockdowns started, the wealth of America’s richest people surged by over $565 billion, while 42.6 million workers filed for unemployment, the report said. “These statistics remind us that we are more economically and racially divided than at any time in decades,” said Chuck Collins, a co-author of the report.During the 11 week period, Bezos saw his wealth soar by about $36.2 billion while Zuckerberg’s fortune surged by about $30.1 billion. Tesla Inc (TSLA.O) Chief Executive Elon Musk’s net worth also rose $14.1 billion.The past week also saw the wealth of U.S. billionaires jump by $79 billion, according to the report.
Wall Street Warning to Corporate America: Get Cash While you Can
Brief: Bankers have a message for America’s debt-laden companies: raise money now, because things could get a lot worse. The gradual reopening of businesses after months-long shutdowns and a pick up in manufacturing activity have given investors reason for optimism in recent weeks. But underwriters who cater to heavily indebted corporations are offering their clients a bleak preview of what may lie ahead. The long list of worries includes a new wave of coronavirus contagion in the fall, an extended period of double-digit unemployment, a spike in defaults and a slower-than-expected economic recovery as businesses around the globe adapt to the realities of prolonged social distancing. Of course, pitching bond sales to companies is part of the job description, and corporate treasurers expect nothing less from bankers whose bonuses are tied to how many deals they do. Still, the grim warnings to stockpile cash reflect how the rally that credit markets have enjoyed since the Federal Reserve took action may be obfuscating an economic picture still fraught with risks.
Wall Street Week Ahead: Bond Investors Look for Fed to Justify Steepening Yield Curve
Brief: Expectations that the global economy has dodged the worst-case scenarios for the coronavirus pandemic have led to a dramatic selloff in U.S. government bonds from their record highs, pushing the yield curve to its steepest level since March. Investors will get a chance next week to see whether the U.S. Federal Reserve agrees with their optimism. The U.S. central bank is expected to hold a two-day meeting that will conclude Wednesday, the first since a meeting in April in which Fed Chair Jerome Powell said that the U.S. economy could feel the weight of the economic shutdown for more than a year. While the Fed could introduce additional bond-buying programs known as quantitative easing or yield-curve control measures to target short-term rates, some fund managers say they expect that yields would need to rise significantly from here to justify any intervention in the bulk of the curve. Instead, they are watching for hints that the central bank believes the worst part of the coronavirus crisis has passed.
Standard Life Tells Staff to Work from Home for Rest of 2020
Brief: Standard Life Aberdeen Plc told most of its U.K. staff to work from home for the rest of the year as other asset managers mull how the pandemic has reshaped the future use of their offices. The firm told its 4,900 U.K. employees that the majority shouldn’t expect to come into the office in 2020, according to a June 2 internal memo seen by Bloomberg. Janus Henderson Group Plc workers and BNP Paribas Asset Management’s London staff will also continue to work from home for the foreseeable future, while Baillie Gifford is planning a phased return of employees in coming months, according to representatives of the firms. “One of the consistent messages across the U.K. is that, where possible, people should work from home if they can and this very much applies to financial services,” Mike Tumilty, chief operating officer at Standard Life, said in the note. “It has become evident that while we may see some easing of working restrictions, we do not expect this principle to change materially for the foreseeable future.” While there are some signs of business slowly returning to normal as lockdown measures are eased, many financial firms are still keeping employees away from their offices.
GMO Says Stock Market Rally Has Gone Too Far
Brief: GMO has shifted its stance on equities since mid-March, when the firm was willing to wade into plunging markets to buy stocks globally amid the coronavirus tumult. U.S. and developed-market stocks have rallied too far from their 2020 low, according to Ben Inker, the head of GMO’s asset allocation team. The firm has reduced its equity exposure by shorting equity futures against the stocks it holds in those regions, while continuing to like its long bets in emerging markets, Inker said by phone. “Stocks in the U.S. and most of the developed markets look to us to be a pretty bad risk-reward tradeoff,” he said. “They’re already priced for the best outcome you could reasonably expect.” That’s a change from late March, when stocks globally, apart from U.S. large cap, appeared cheap or priced at fair value, according to Inker. The equities market went on to produce in two months the types of returns GMO would expect to see over five to seven years, he said, all while the prospects of the economy remain uncertain. “We are in the midst of the worst economic crisis the world has seen really since the Great Depression,” said Inker. “We’d love to see stocks priced for more potential pain.”
