.png?width=200&height=78&name=CH%20Diligence%20(thicker%20line).png "CH Diligence (thicker line).png")
Our briefing for Tuesday January 5, 2021:
Jan 5, 2021 4:16:55 PM
- In the United States, CNN is reporting on a study that says COVID-19 infections may have been four times higher than the cases reported. The study was published in the medical journal JAMA Network Open on Tuesday. Researchers tested randomly selected blood samples for the presence of COVID-19 antibodies in a series of surveys conducted in 10 states, as well as one nationwide. As of November 15th, about 10.8 million cases were reported to the US Centers for Disease Control and Prevention, but the study suggests the actual number of infections at that time was closer to 46.9 million. The study also suggests that approximately 35% of COVID-19 deaths may not be reported.
- In Canada, the leaders of Air Canada, WestJet, Air Transat and Sunwing have sent a letter to Transport Minister Marc Garneau to delay a new COVID-19 testing strategy for travellers for at least two weeks. As of right now, starting this Thursday, travellers five years of age or older must receive a negative result from the standard nose swab test within 72 hours of boarding a flight to Canada. The major airlines, along with two major trade associations said the timeline for implementing the new testing protocol isn’t feasible and should be pushed back to January 18th. Elsewhere in the country, Alberta’s Premier Jason Kenny’s response to his MLAs travelling abroad during the holidays was not enough to ease the concerns of the public, so he has now either demoted or in the case of his Chief of Staff, accepted their resignation. Premier Kenney originally said there would be no punishment for those elected officials who travelled outside of the country during the last few weeks.
- With the United Kingdom into their third lockdown and heading into a double-dip recession, Chancellor Rishi Sunak announced 6.2 billion USD of emergency support to help UK businesses. The retail, hospitality and leisure businesses will be entitled to one-off grants as much as 9,000 pounds to help with the crunch until the spring. The extra funds are on top of the 3,000 pounds per month businesses have received for shutting their doors because of the coronavirus restrictions. Chancellor Sunak said the following via a video message on Twitter: “This will help businesses to get through the months ahead – and crucially it will help sustain jobs, so workers can be ready to return when they are able to reopen.” Chancellor Sunak went on to say the budget in early March will set out the next stage in their economic response.
- The United Arab Emirates (UAE) have administered more than 826,000 doses of the COVID-19 vaccines they have been provided with, which accounts for 8% of its population. UAE has approved the Pfizer/BioNTech vaccine, as well as one by Sinopharm unit China National Biotec Group. With Israel taking the lead in vaccinating about 15% of its population since December 20th, the UAE plans the lofty goal of vaccinating 70 to 80% of its population by April or May.
- In Australia, the country’s most populous state – New South Wales – has called on residents in three of its cities to be tested for COVID-19 and isolate. The concerns are that a Sydney cluster may have spread to regional areas after a visitor from the city tested positive. The Australian cities told to get tested are Orange, Broken Hill and Nyngan. The state of New South Wales has been effectively isolated from the rest of the country after other states and territories closed borders or imposed 14-day mandatory quarantine rules.
- The World Health Organization (WHO) is said to be “very disappointed” that China has not authorized entry of their inspectors to Wuhan to examine the origins of the coronavirus pandemic. The WHO were set to go in this month to examine the root cause but learned on Tuesday that Chinese officials have not yet finalized the necessary permissions for the team’s arrival in the country. The United States have been critical of the handling of the coronavirus outbreak since the beginning, accusing China of covering up the extent of how bad the outbreak was and criticizing the WHO for allowing Chinese scientists to do the first phase of preliminary research into the cause of the coronavirus pandemic in Wuhan.
Covid-19 – Due Diligence And Asset Management
GMO’s Jeremy Grantham Warns: The Stock Market is in a ‘Fully-Fledged Epic Bubble’
Brief: "The long, long bull market since 2009 has finally matured into a fully-fledged epic bubble,” says GMO’s Jeremy Grantham. “Featuring extreme overvaluation, explosive price increases, frenzied issuance, and hysterically speculative investor behavior, I believe this event will be recorded as one of the great bubbles of financial history,” wrote the investor. He compares this period the South Sea bubble, the 1929 market crash, and the dot-com boom of 2000. “These great bubbles are where fortunes are made and lost – and where investors truly prove their mettle. For positioning a portfolio to avoid the worst pain of a major bubble breaking is likely the most difficult part,” he wrote. He warns the bubble will burst in due time, “no matter how hard the Fed tries to support it, with consequent damaging effects on the economy and on portfolios.” The markets had a wild ride in 2020, briefly going into a bear market after COVID-19 lockdowns were set in place. Soon after they recovered as the Federal Reserve made unprecedented moves to support the economy, and Congress passed a stimulus bill. “I am not at all surprised that since the summer the market has advanced at an accelerating rate and with increasing speculative excesses,” wrote Grantham.
Solomon Sees Vaccine Bringing Goldman Staff Back by End of Year
Brief : Goldman Sachs Group Inc. Chief Executive Officer David Solomon said he expects to have all his employees back at their offices by the end of the year as the vaccine rollout ramps up. “The big focus right now is we’ve got to get people vaccinated -- we’ve got to get to the other side,” Solomon said in a Bloomberg Television interview Tuesday. “I certainly would expect a lot of Goldman Sachs employees back in full by the end of the year. We will get through this, and I’m really hopeful that over the course of the next six months we see a real improvement.” The Goldman CEO said he’s encouraged by the amount of vaccine production, but flexible, efficient ways need to be found to get shots distributed, which he believes will be the biggest challenge facing President-elect Joe Biden’s administration. In addition to government actions, the private sector can play a role in speeding up vaccinations, he said. “There’s still work to be done,” he said. “And once we deal with the vaccine and the virus, and people feel safe, we’re still going to have to deal with the economic consequence of the shutdowns and the impact on our economy that this pandemic’s had.”
Pandemic-Spurred Policy “Revolution” Will Continue to Drive Asset Allocations in 2021, says BlackRock
Brief: The world’s largest asset manager, BlackRock, has predicted that the “revolution” in monetary and fiscal policy spurred by the Covid-19 pandemic will dampen government bond real yields in 2021. The asset manager favours inflation-linked bonds, as well as risk assets such as equities and high-yield credit. Central banks across the world responded to the coronavirus crisis last spring by lowering interest rates and buying bonds, totalling 190 rate cuts and USD1.3 billion spent every hour since March 2020 on asset purchases. Interest rates are expected to enter an era of “lower for longer”, despite the potential for rising inflation as vaccination programmes are rolled out and the global economy continues its recovery in 2021. BlackRock Investment Institute writes in a recent market note: “A key takeaway is how swiftly macro policies can evolve and the lasting impact this can have on market dynamics. The policy revolution that started in 2020 is still a key driver of our investment views for this year.” The Federal Reserve has already outlined plans to allow US inflation to exceed the 2 per cent target temporarily, without hiking rates, in a new monetary policy framework.
Bill Ackman’s Billion-Dollar Year
Brief: No one in the investment world appears to have mastered the tumultuous pandemic year as well as Bill Ackman, who banked more than $1 billion in 2020. Ackman’s billion-dollar pay day is based on the gains of the shares he owns of Pershing Square Holdings — his publicly traded hedge fund — as well as estimates of performance fees and a few private investments. The 54-year-old hedge fund manager declined to comment on his spectacular year, saying he did not want to “gloat.” “Happy New Year,” he added, on the record. Pershing Square’s publicly-traded fund, now its largest, gained a net 70.2 percent in 2020, a record for the firm and multiples of the returns of the broader market and other hedge fund legends, many of whom nursed steep losses until markets began to recover from their March swoon. Ackman owns 45 million shares, or 23 percent, of that fund, earning him $720 million on the gain in the stock alone. It gained 86 percent, including dividends, for the year. But he's been uncharacteristically shy about his winnings. “It’s hard to talk about success when a lot of people are suffering, and many more have died,” Ackman told investors in a recent call.
Hedge Fund Raise Mining Shorts as Vaccines Seen Tamping Gold Gains
Brief: Hedge funds increased bets against major gold miners, filings reviewed by Reuters showed, as COVID-19 vaccines weakened expectations for the yellow metal after a year of record gains. Gold prices have dipped from last year’s record highs above US$2,000 per ounce as vaccines deployed against the coronavirus encouraged investment in assets that perform well during periods of economic growth. “While we are by no means out of the woods in our view, the light at the end of the tunnel means that gold markets should begin to see an unwind of the trends that became quite exaggerated over the course of 2020,” Royal Bank of Canada analysts said last month. The bank cut its 2021 forecast for gold to US$1,810 per ounce from US$1,893. Short trades as a percentage of total traded volume for Barrick Gold rose to 24.8 per cent for the second half of last month, from approximately 14.9 per cent for the first half of December, according to filings reviewed by Reuters. Newmont Corp. saw an increase to 11.4 per cent, from 8.8 per cent, over the same period, while trades in Kinross Gold rose to 20.6 per cent, from 18.2 per cent, according to the data.
FE Survey: Covid to Accelerate Restructuring of Australia’s Pensions Industry
Brief: Testing financial conditions during 2020 have added to the pressure on Australia’s superannuation industry to deliver better investment outcomes and greater cost efficiency, according to Funds Global Asia’s 2020 Australia survey conducted in partnership with Calastone. Respondents predict that this will accelerate mergers between superannuation funds, while placing fresh demands on fund providers to offer wider product choice to scheme members. The Australian pension fund, or “superannuation”, sector, has been under scrutiny from financial regulators over the past four years as part of a far-reaching review of pensions and wealth management provision. The Australian Royal Commission on Misconduct in the Banking, Superannuation and Financial Services was established in 2017 to investigate misconduct and poor standards in the financial services industry. Publishing its findings in February 2019, the Commission identified “cultural failings” in the superannuation, banking and wealth management sectors and highlighted a need to reform governance, fee structures and remuneration policies which often worked to the “financial detriment” of scheme members.
