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Our briefing for Tuesday November 3, 2020:
Nov 3, 2020 3:20:08 PM
- In the United States, millions of Americans are heading to the election polls on Tuesday. More than 100 million votes have already been cast, either via mail, or early voting, which is needed as according to Johns Hopkins University data, 21 states hit records in the number of average daily new coronavirus cases reported. Key battleground states including Michigan, Ohio and Pennsylvania are among the 21 states with cases ranging anywhere from 2,300 to 3,500 per day. The coronavirus pandemic has become a defining issue for the 2020 election with health experts claiming the country is heading for a dark winter with a steady increase in cases, while the Trump administration is stating vaccines will be ready within weeks, which will be key to turning the corner.
- Canada’s opposition government leader is saying Justin Trudeau’s federal Liberal government support programs for COVID-19 still aren’t doing enough to help businesses and workers survive. Conservative Leader Erin O’Toole will present a motion on Tuesday demanding the government provide “additional flexibility” in the commercial rent subsidy, wage subsidy and other support programs. “We aren’t talking about enriching businesses here. We want to make sure requirements are made more flexible so businesses can simply stay open and their employees don’t lose their jobs,” said O’Toole. The opposition leader’s criticisms come one day after Finance Minister Chrystia Freeland tabled legislation to make changes to the commercial rent subsidy.
- The United Kingdom government announced they plan to test all residents and workers in Liverpool for COVID-19 – regardless of whether they have symptoms on Friday. The region was first to be placed on the “very high” tier by the Boris Johnson government’s COVID-19 alert system. The Liverpool mayor said the mass testing in a few days would help to quickly identify people who have the virus and reduce transmission. According to government data, the Liverpool region has some of the highest infection rates in Britain – weekly cases currently stand at 410.4 per 100,000 as of October 25th.
- In France, government officials are becoming increasingly frustrated with too many people ignoring COVID-19 lockdown rules as cases soar in the country. Therefore, government officials are considering reimposing a night curfew on Paris and possibly the surrounding region. “It’s unbearable for those who respect the rules to see other French people flouting them,” said a government spokesperson.
- In the Philippines, military camps will store coronavirus vaccines once they become available. President Rodrigo Duterte has chosen a retired general to lead efforts to secure and distribute vaccines. President Duterte has said in the past he will prioritize COVID-19 vaccines from China and Russia and wants soldiers to take the first inoculations.
- According to state media in Dubai, the Prime Minister and Vice President of the United Arab Emirates (UAB), Sheikh Mohammad Bin Rashid al-Maktoum has received a COVID-19 vaccine inoculation. Al-Maktoum shared the moment on social media, showing him receiving the shot from a medical worker, although it is unclear which vaccination inoculation he received. The country’s health minister stated UAB has approved China’s state owned Sinopharm vaccine for use on the country’s emergency frontline workers.
Covid-19 – Due Diligence And Asset Management
New Yorkers and Londoners are Ditching Cities for Suburbs
Brief: Real-estate companies are seeing clear evidence of New Yorkers and Londoners ditching city centers for suburbs as the pandemic changes the way people live and work. IWG Plc, which operates Regus-branded serviced offices in cities around the world, has seen a “a strong pick-up in demand” for suburban space versus major cities, especially in places reliant on commuting. While deals for its downtown New York offices have collapsed by 30% since the virus outbreak earlier this year, activity in southern Connecticut has surged more than 40%, according to a statement Tuesday. Across the pond, U.K. housebuilder Crest Nicholson Holdings Plc’s expected slump in full-year profit may not be as bad as previously flagged, partly thanks to developments in southern England outside of London, it said in a quarterly update. A “structural change to the balance of office and home working” featured strongly in customers’ buying decisions, it said. Shares in IWG climbed as much as 11% in Tuesday morning trading in London, while Crest Nicholson shares jumped as much as 22.5%, the most on record. The pandemic has turned the world’s financial capitals into ghost towns as nervous workers avoid mass commuting. While cities across Europe showed signs of recovery in the summer, a resurgent wave of the virus has prompted a series of new lockdowns in the region. New York is also tightening restrictions amid rising infections nationwide.
SEC Enforcement Office Hits $4.7 Billion Record
Brief: SEC enforcement officials posted a record $4.7 billion in disgorgements and penalties in fiscal year 2020, the Securities and Exchange Commission reported Monday in its annual enforcement report for the period ending Sept. 30. Parties charged by the SEC were ordered to disgorge $3.6 billion and pay penalties of $1.1 billion, an 8% increase from the previous fiscal year. More than $600 million was returned to harmed investors. The fiscal year also saw a record for the SEC's whistleblower program, which awarded $175 million. The agency's 715 enforcement actions covered a range of issues, including issuer disclosure, foreign bribery, market manipulation and insider trading. The number of actions fell 17% as agency officials adjusted to COVID-19 work restrictions. Stephanie Avakian, SEC enforcement director, said in the report that one focus during the past year was accuracy in financial statements and issuer disclosures. Along with traditional sources for such cases, SEC enforcement officials also used risk-based analysis to identify potential violations, including earnings management practices that could be masking unexpectedly weak performances and disclosure of corporate perks.
Jeremy Grantham Says This Is the Solution to America’s Biggest Problems
Brief: There’s a “magic bullet” for some of the biggest challenges facing the U.S. economy, according to famed value investor Jeremy Grantham. In an investor note dated October 30, the GMO co-founder called for a “new Marshall Plan” to combat problems including “depressed” economic growth, rising wealth inequality, and climate change. “The economy of the developed world has been steadily becoming less dynamic for the last 50 years and the GDP growth of the developed world has fallen from over four percent a year to less than two percent a year,” Grantham wrote. “We need a long, sustained, and massive public works program — a second coming of the Marshall Plan, if you will — to jolt the U.S. and the global economy into a few decades of accelerated growth.” The Marshall Plan, also known as the European Recovery Program, was a U.S. foreign aid initiative to help rebuild Western European cities and infrastructure that were damaged during World War II. Grantham said a similar program could be enacted now to build green infrastructure that would mitigate climate change. “We face the shorter-term economic threat from Covid-19 and the long-term economic threat from climate change,” he wrote. “We have a clear incentive, I would argue an imperative, to produce a very large and sustained public works program.”
Remote Working Could Accelerate a Regionalisation of the US Hedge Fund Industry
Brief: Zoom has been the ultimate success story for 2020 as firms, globally, have adjusted to remote working. If I think about what the next best thing to Zoom will be, I would say it needs to be something that gives you the ability to walk into someone’s computer just as easily as walking into their office. At the moment, my experience of Zoom is that everything is still formalised and diarised…I’ll talk to you at 10am, let’s set the meeting for 5pm. What’s wrong with doing a quick meeting at 10.15? It still feels a bit regimented, in that regard. But Zoom and other platforms like Microsoft Teams have at least shown fund managers a glimpse into the future of how we might all be working. In the past months I have noted that firms have managed to transition far more seamlessly than they might have anticipated to being able to efficiently collaborate with their entire team connected only by their screens and telephones. One idea to help create community is conduct “office hours” on Zoom. When we are in our offices we are able to be seen either at our desk that may be in an open environment or if in an office through the glass walls. Anyone can see you as they walk by. Those spontaneous conversations are what is missing by members of the team working independently, remotely. Why should working outside of the office environment mean that no one can see us unless they arrange in advance and schedule it?
Private Equity Rides to Support European Firms
Brief: Private equity funds injected €36 billion into European companies in the first half of the year, helping them combat the “intense liquidity crisis” caused by lockdowns. The investment came as private equity funds in Europe raised €49 billion in H1, matching the previous half-year’s total. Invest Europe, an industry body, said the industry was on track to raise a sum of money for the full year that would be on a par with average fundraising levels achieved over the last three years. However, the overall figure for private equity investment was 17% lower in value . Invest Europe’s ‘Investing in Europe: Private Equity Activity H1 2020’ also shows that private equity backed 3,401 companies during the period, with about 60% of investment value going into follow-on investments. In addition, venture capital investment achieved a new half-year record with €5.6 billion invested into start-ups and scale-ups.
Oaktree Braces for Turmoil as Elections, ‘Economic Strain’ Loom
Brief: Oaktree Capital Management is warning credit investors to brace for unpleasant surprises in the fourth quarter, as U.S. elections loom amid the persisting pandemic. “More than ever, it is important to be wary of market exuberance and to avoid chasing risky investment opportunities to tighter levels or weaker legal protections,” Oaktree said in its third-quarter credit report, released this month. “September’s turbulence interrupted what had been a resounding recovery from the depths of the selloff in the spring, and markets now look to have entered a sideways period.” The alternative investment firm, co-founded by Howard Marks, cited its concerns over the rising cases of Covid-19, the U.S. elections, and Brexit. Industries are under stress as business activities fall off in the pandemic, while companies are shouldering heavier debt loads, the firm said. “The economic strain produced by Covid-19 will be felt for several more quarters, if not years,” Oaktree said in the report. “We remain focused on protecting the downside in our investments.”
