Hey Snackers,
If you start getting annoyed with your family mid-quarantine, just remember things could be worse: scientists discovered that black holes might be eating their (galactic) siblings.
Global markets jumped up on signs that the virus is peaking (aka, that the worst could be almost over) in some of the hardest-hit areas like Italy, Spain, and New York. The Dow closed up 1.6K points on investor optimism — its 3rd largest daily point gain ever.
Berkshire Hathaway sells a bunch of airline shares — "Smart Money" cuts its losses
Got that "finfluencer" clout... That's financial influencer (not to be confused with the much more prevalent fake influencer). And Warren Buffett's got a fat blue check mark as one of the biggest finfluencers on earth — investors closely stalk Warren's money moves. Now, his famous holding company Berkshire Hathaway just sold:
- 13M shares of Delta for $314M, or 18% of Berkshire's Delta investment. Delta stock plunged 7% on the news.
- 2.3M shares of Southwest for $74M, or 4% of Berkshire's total Southwest investment. The stock fell 5%.
Buffett's style is eyeglasses, khakis... and a long-term investment approach that involves "buying the dip." But fundamental facts around airlines have changed with the corona-conomy. Even though the government stands ready to bail them out (with strings attached), airlines are footing massive expenses while earning near 0 sales. Get these stats:
- TSA reported a 95% drop in travelers on Sunday compared to a year ago (122K vs 2.5M).
- Delta projects a 90% sales drop for the quarter — CEO Ed Bastian said the airline is losing over $60M in cash every day and "we still haven't seen the bottom."
- Airlines could lose up to $115B in revenue for the first half of 2020, as 93% of people worldwide are living in countries with travel restrictions.
This is a "hedge your losses" move... Not a "lost cause" move (for now). Berkshire still owns 82% of its pre-sale Delta holding and 95% of its Southwest one — but now it believes returns on these investments will be underwhelming (or non-existent) for a while. In the short term, Warren can use the proceeds of the sale to make higher-return investments. In the long-term, he's keeping a big old foot in the door hoping airlines will inevitably bounce back.
JPMorgan's double-crisis CEO finally speaks out
To quote Elton John... "I'm still standing." Works well for JPMorgan Chase CEO Jamie Dimon. He's the last remaining big bank CEO still on the job after the '08 financial crisis. He saw the Lehman Bros bankruptcy in '08, the economic tank in '09, and was there for the 10-year recovery. Now, Dimon is sharing a few thoughts about our current crisis:
- "A bad recession": He expects it's coming. Back in January, we learned that JPMorgan had the most profitable year of any American bank ever. Back then the unemployment rate was at a record low — things have deteriorated dramatically. Still, JPM is ready to face the thunder...
- "A port in a storm": What JPM has spent years preparing to be. Based on internal stress tests, the bank would be able to increase lending even if America's GDP dropped a whopping 35% for the rest of the year. It won't even consider cutting the dividends it pays to shareholders until a drop greater than that. Other major banks are also defending dividends.
Banks have changed since '08... They were fundamentally broken during the financial crisis — this time they're not. Intense regulation post-crisis helped banks emerge stronger than ever. They have to keep more cash on hand (to withstand a bad downturn) and abide by stricter lending rules (to avoid risky loans). That means more swagger for Dimon as his bank faces this crisis.
Banks are like the heart of the economy... They pump blood through the entire system and provide us with the cash money we need to perform life's functions. Banks are also crucial for withstanding economic crises: they're the ones doling out the lifeline loans for businesses to survive — and when the crisis is over, they'll be the ones offering the capital for businesses and consumers to rebuild. The fact that JPMorgan — the America's biggest bank — appears strong and healthy is a silver lining.
What else we’re Snackin’
- Launch: Mobile-only streamer Quibi ("quick bites") finally launches its highly-anticipated short video app with around 50 shows after raising $1.75B.
- Test: CVS launches drive-thru rapid COVID-19 testing in Georgia and Rhode Island, hoping to perform up to 1K tests per day.
- Warn: In private convos with Trump, top CEOs are reportedly pleading for a phased return to work to avoid the economic catastrophe that would result if too many businesses fail.
- Protect: Apple has designed a snazzy new face shield to protect medical workers — it plans to manufacture 1M a week.
- Surge: Wayfair's stock soars almost 40% after the ecommerce company said sales of its furniture and home decor have more than doubled through March.
Tuesday
- Earnings expected from Levi Strauss
Disclosure: Authors of this Snacks own shares of JPMorgan Chase, Delta, and CVS.
ID: 1143279