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Media worth consuming - March 2020

A monthly look at dozens of local and global media articles that often do not receive mainstream coverage in Australia.


US unemployment claims are pointing to a 2%+ spike in the unemployment rate in a month. China’s manufacturing and services PMIs hit record lows. Corporates are drawing down their full credit lines to stop banks blocking them with material adverse change clauses. Goldman Sachs has bailed out two of its money market funds. Korean brokers are panicking as the structured products they sold are cracking. The whole world has become a carry trade, which is now rapidly unwinding.

A US high-yield bond index now has a spread of over 10% above Treasuries, three times higher than a month ago. Americans are stampeding out of bond funds. US distressed debt has doubled in two weeks. Vanguard hiked the sell spread on an Australian bond fund from 0.15% to 1.79%. CLO structures haven’t contemplated the possibility of a negative Libor setting.

Coronavirus impacts could set off a wave of American corporate bankruptcies. Coronavirus might be allowed as an add-back in some leveraged loans. Prices of oil company bonds have gone from euphoric to depressed in two months. Most US shale oil producers have a breakeven price in the $40-50 per barrel range. Airlines are heading for a wave of defaults and bankruptcies with credit card companies increasing the portion of future sales they hold back from airlines in financial distress. After wasting billions on share buybacks, US airlines are now begging for a taxpayer bailout.

Renaissance Technology’s enormous run of profitability has turned into losses this year. Six weeks after saying “cash is trash”, Ray Dalio’s flagship fund is down 20% for the year. Hedge funds ramped up risk, right before the sell-off including piling into Virgin Galactic, betting that it will finally get flights off the ground. Risky parity funds have had a bad run with both stocks and government bonds falling. Hedge funds became forced sellers of US treasuries after their leveraged bets ran into margin calls. The spread between on-the-run and off-the-run US government bonds has blown out, just like it did when LTCM blew up. Some private equity firms are selling assets from their old funds to their own newly raised funds. Despite being highly paid, most private equity employees aren’t happy with what they earn.

The Fed is going to allow equities to be used as collateral as its balance sheet has exploded higher. You can blame the Fed for this crisis. The ECB’s latest bailout package includes buying Greek government bonds and allowing Greek banks to load up on the country’s sovereign debt. Citibank and JP Morgan together own 72% of the shares of the New York Federal Reserve.

One of the UK’s largest shopping centre owners is on the brink of bankruptcy. Deutsche Bank has opted not to redeem $1.25 billion of preference shares. Christine Lagarde initially threw Greece and Italy under the bus saying it wasn’t the job of the ECB to reduce credit spreads. Italy is suspending mortgage payments due to the Coronavirus. ASIC has conceded that Elvis Presley could be installed as a company director in Australia. Australia’s stock market has delivered the world’s highest return over the last 120 years.

Bitcoin slumped when shares slumped, destroying the safe haven claims made by its promoters. Online stock broker Robin Hood shutdown three times in a week during volatile trading. As Softbank is pulling back, a wide range of venture capital backed companies are failing to raise capital, closing down and laying off staff. Softbank’s 10 worst investments.

Lebanon opted to default on its March 2020 bond maturity and has moved to freeze the assets of 20 of its banks claiming they were involved in illegal transfers. A Brazilian re-insurer claimed Berkshire Hathaway had bought its shares, but their shares plunged after Berkshire Hathaway publicly denied it. India has nationalised and imposed withdrawal restrictions on its 4th largest bank, but the chaotic handling has spooked investors and depositors. Chinese banks are covering up non-performing loans with the approval of the Chinese government.

Politics and culture

What do people mean when they say “Democratic Socialism”? MSNBC broadcast a claim that Mike Bloomberg spent over $1 million per American in trying to win the Democratic Party’s presidential nomination, rather than a mere $1.53 per person. A collection of over 30 videos shows that Joe Biden is more than a little gaffe prone. Tulsi Gabbard was still running for President, but many Democrats were pretending she didn’t exist.

America’s great depression was started and prolonged by disastrous government intervention. Proponents of the “Green New Deal” seem to ignore that the last “New Deal” delivered a large increase in government debt and no reduction in unemployment. The priorities of the progressive left have become disposable luxuries when facing a pandemic. Politicians aren’t going to save you, so start fixing your own life. Politicians will turn to monetary and fiscal stimulus to buy votes, even though it is worse for the economy in the long term.

A Swedish citizen has been jailed in China for 10 years for publishing books that offended the government. The Chinese government has apologised to the wife of the whistleblowing doctor who raised the alarm on coronavirus.

Economics and work

Too few poverty programs focus on creating employment rather than giving goods away. Unemployment benefits need a looking for work test, otherwise some recipients will not bother to find another job. Many income inequality arguments ignore basic statistics. People often become poor as a result of a cycle of bad decisions, but the stress of being poor makes them more likely to keep making bad decisions. Singapore’s welfare system strikes a balance that encourages saving and work, whilst alleviating poverty.

Target increased its minimum wage but slashed hours and benefits to pay for it. Pub owner Merivale is facing a court case over alleged underpayment of staff totalling $126 million. Forcing employers to offer paid parental leave is a regressive policy that benefits higher income full time workers but does nothing for lower income casual workers.

They don’t teach university economics like they used to. Billionaires don’t hoard wealth, they invest it, spend it and give it away. American farmers are fighting for the right to repair their own tractors. Quotes from Adam Smith that shows why he believed in markets far more than government. Cruise lines pay very little tax and shouldn’t receive any form of taxpayer bailout.


A review of the 1918 Spanish flu including how flu passes from birds to pigs and then humans. A comparison of global pandemics. Using herd immunity against Coronavirus is hotly debated. Germany’s low coronavirus death rate of 0.1% is due to its much higher rate of testing. The arguments for shutting down the economy to stop Coronavirus. Norwegian Cruise Line gave blatantly false information to its sales staff to pass on to customers worried about Coronavirus. A conference about Coronavirus was cancelled because of Coronavirus. A Softbank owned patent troll is trying to stop Coronavirus testing.

Scientists are testing using Durian as a component in supercapacitors. Singapore is preparing now for sea levels to rise much higher than predicted. For a few hours, the Italian town of Castelvetro literally had wine on tap. Wendy’s burger chain loves to troll its competitors on twitter.

A minor league baseball team’s “OJ Trial Night” promotion has been cancelled, but it succeeded in getting the team national coverage. A car thief stole a hearse with a body loaded in the back. A twitter account that mocks self-congratulatory tweets of venture capitalists has divided the industry. A massive Disneyland fan had his streak of 2,995 consecutive visiting days broken by the park’s closure. A Zamboni driver stepped in as an emergency goaltender in an NHL game.


Written by Jonathan Rochford of Narrow Road Capital. Comments and criticisms are welcome.

This article has been prepared for educational purposes and is not a substitute for professional and tailored financial advice. The accuracy of the material cannot be verified in all cases. Narrow Road Capital advises on and invests in a wide range of securities, including securities linked to the performance of various companies and financial institutions.



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