Bailouts - What's Coming

“It is time to show the world that nobody stays home & sits on the couch better than the goddamn United States of America” - Pablo Torre (ESPN)

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***Editor’s Note: There’s a lot to digest from the last 72hrs (e.g. Macron closing Europe). We think today’s most important topics are the virus & the coming bailouts; there are must-read discussions going on online, so we’ll lead with that***

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BAILOUTS / VIRUS.

Globally, getting the bailouts right is probably the highest stakes economic poker game since Deng Xiaoping opened up China’s economy to markets.

The winning hand is not obvious.

We’re still waiting for the flop.

But some have experience & proposals that are worth considering:

• From Bloomberg: Cliff Asness is back online - we respect Cliff & his opinion

• From WaPo: Flattening the Curve of the Virus

• If you missed it last week, read Tomas Pueyo’s piece

If you listen to podcasts, we strongly recommend these:

• This one is great on the virus / bailouts / the economy

• This is the best podcast focused solely on the virus

This anonymous analyst (we know him - he’s a real person) - has extensive experience in financial crises - he’s published a number of worthwhile threads over the past few days.

On Bailouts:

Inquisitive Investor @QuisitiveInvest

Airline industry employs 656,000 people. Wants $50 billion. Restaurants and retail employ 26,000,000, a cool 40 times more. Data available for download here: unhedged.com/exchange/5e6f7…

On the ‘08 Financial Crisis & Lehman Brothers:

Inquisitive Investor @QuisitiveInvest

1/ Brief thread on my experience shorting Lehman Brothers, the Great Financial Crisis, and my opinion on this crisis. I ended up with the short position on Lehman at Greenlight Capital. Was a couple unique circumstances that... Folder with sources here:

unhedged.comLehman

From Matt Stoller - publicly calling out Warren Buffett for the bailouts that he’s received in the past, and the ones that he’s likely to receive in the coming weeks:

Matt Stoller @matthewstoller

Berkshire Hathaway is the 1st or 2nd biggest shareholder of Delta, Southwest/United. The airline bailout will be Warren Buffett's third major bailout after Salomon in the 1990s & Wells Fargo, BofA, etc in 2008. Why do we keep bailing out one of the richest people in the world?

Bailouts & public discourse - in this age of social media populism - worries us.

Generally speaking, we’re concerned about the 2nd-order effects of the financial disruption that, for the Western World, largely began this past weekend -

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E&Ps.

The current state of Upstream Oil & Gas can be summarized in 2x stories:

• Exxon is cutting Capex

• Aramco is cutting Capex

When the big boys ease off the gas pedal, it’s time for everyone to slow down.

We had planned to discuss Oxy today, but in light of the headlines this weekend, we decided to delay until Friday -

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CRUDE.

• The crash in oil prices has already hit Iraq

• On the size of the coming oil demand contraction

• 13 GOP senators ask Saudi to hold back production

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That’s it for today - be safe & take care - we’ll be back Friday