Tuesday Apr.07, 2020

✈️ Buffett's "influencer" moves

"_On Wednesdays, we make market moves_"

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.

Influence

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.

Save

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

Latest Stories

Shein faces strictest EU regulations as officials crack down on mega-marketplaces

Nia Warfield

Read

Venice rolls out a Disneyland-style entrance fee, as hot destinations struggle with overtourism

Max Knoblauch

Read

The Summit

13h

Slipping off the mountaintop

Jack Raines

More Ads

14h

Tesla said advertising was useless. Then sales slowed down.

One year after starting to run ads, Tesla has yet to figure out its advertising strategy.

Everything Electric London 2024 At Excel London

Rich Juzwiak

Essential Expenditures

14h

I spend too much money on 4K UHD discs — but it’s worth it

There‘s something about physical media that justifies the cost.

The MLB’s see-through pants are getting benched

Sheer pants are going out of style (in baseball). According to a memo sent to players by the players union, the MLB plans to modify its heavily ridiculed uniforms that “everyone hates” by next year.

On the way out: too-small lettering, mismatched tops and bottoms, the opposite-of-sweat-wicking fabric, and the much-mocked nearly see-through pants that don’t fit.

The pants, likened to toilet paper at a highway rest stop, are reportedly thinner for performance reasons — but if performance is at the root of the redesign, they probably shouldn’t rip during games. Players largely aren't buying the rationale, arguing the jersey changes are a money-saving measure.

"This has been entirely a Nike issue," the memo read, laying blame for the uniforms, created by Nike and manufactured by Fanatics (which the league owns a small stake in), entirely on Nike. The company’s 10-year, $1 billion deal with the MLB and Fanatics began in 2020.

Nike expected to alter MLB uniforms by 2025 after complaints

2024-04-29-3-snaps-overseas-userbase-is-soaring

...while North American and European users are in ghost mode

Millie Giles, David Crowther18h

Tom Jones, David Crowther

Under pressure

18h

Lab-grown diamonds can now be made in 150 minutes

Innovation threatens the centuries-old diamond industry

The yen has dropped to its lowest value in over 34 years

William Coulman, David Crowther18h

Rani Molla

19h

After being discounted in the US, Tesla’s “Full Self-Driving” goes to China

Tesla just got the tentative go-ahead to bring its “Full Self-Driving” (FSD) feature to China, the Wall Street Journal reports. That’s a big deal because China is Tesla’s second biggest market and because the company’s driver assist features haven’t been having a good run in the US.

Two weeks ago the company cut the subscription price for FSD in half, to $99, to get more people to use it.

Last week the National Highway Traffic Safety Administration closed a probe that tied the company’s driver assist feature to hundreds of crashes and dozens of injuries and opened a new probe into whether its fix for the December recall of the software did enough. The company also posted terrible earnings last week (thought that didn’t seem to bother anyone in the market).

The stock was up more than 14% Monday.

Musk Wins China’s Backing for Tesla’s Driver-Assistance Service

Two weeks ago the company cut the subscription price for FSD in half, to $99, to get more people to use it.

The stock was up more than 14% Monday.

Rani Molla

21h

AirPods

The winning products that are constantly lost

Rani Molla

21h

Investors bought 1 in 4 single-family homes

Last quarter investors snatched up 25% of single-family homes sold in the US, potentially making it more difficult for families to own homes.

Wall Street firms have been buying up homes in order to rent them out, which critics say is “distorting the market,” driving up prices and making a notably tight housing supply worse. Regular would-be homeowners struggle to compete with investor resources like all-cash offers.

The Wall Street Journal reports that politicians across the US have proposed laws that would force some of these bigger investors to sell to family buyers.

Wall Street Has Spent Billions Buying Homes. A Crackdown Is Looming.

The Wall Street Journal reports that politicians across the US have proposed laws that would force some of these bigger investors to sell to family buyers.

David Crowther

23h

Endowment funds are now flash points at elite universities

Protesters at elite universities such as Harvard, Yale, UC Berkeley and Columbia have turned their focus onto the multi-billion dollar investment vehicles at each college, demanding that the funds cut investments tied to Israel and weapons in Gaza, according to reports from Bloomberg.

For many elite universities, endowment funds have quietly become vital sources of funding. Harvard, America’s oldest university, has the largest pot — a sprawling portfolio that has grown significantly since 2000, totalling some $50.7B at the latest count.

The fund has little direct exposure to public equity markets, and is instead substantially invested in private equity (39% of assets) and hedge funds (31% of assets). Last year, Harvard’s endowment distributed $2.2B to the university itself. That was the largest single source of revenue for the college, accounting for 37% of Harvard’s total.