“It’s a parade of absurdities that can hardly be taken seriously,” mumbled a masked Mitch McConnell, in the finest piece of political high art this century.
On the surface, the Senate majority leader was referring to Pelosi’s plan to spend another $3trln to resuscitate an economy they collectively killed. Even for politicians, $3trln is a lot of money to take, mask or no mask. In fact, it’s nearly as much as the Federal government collected in 2019 taxes ($3.4trln).
And this new stimulus is in addition to the first $3trln that’s currently being chaotically sprinkled onto bread lines and bailouts.
But of course, the big bucks flow toward special interests supporting both Mitch and Nancy. Which means that after yet another theatrical performance, the new $3trln plan will pass with a tweak or two.
And besides, there appear to be no adverse consequences for such unprecedented expenditures. There was a time, not so long ago, when a $1.5trln tax cut for corporations and the wealthy seemed legitimately unaffordable. But now, both parties have learned that printing/spending nearly 2yrs of tax receipts to offset a 100yr depression has resulted in 30yr yields plunging to 1.32% and the S&P 500 returning to levels from 9mths ago.
So why would Democrats hesitate to print and spend that amount again on their Green New Deal?
And why wouldn’t Republicans blow $6trln more on cutting taxes to zero? Maybe they should. Perhaps they will. Anything is now possible.
That’s the subtle point buried deep beneath the complex layers of meaning in Mitch’s performance art.
Things more outrageous than anything previously imaginable can happen now that we’ve come to realize we don’t understand the meaning of money.
And it is therefore today’s parade of absurdities that are to be taken most seriously.
via ZeroHedge News https://ift.tt/2LFOfxa Tyler Durden
Trump Admits To Taking Hydroxychloroquine With Zinc As Preventative Measure Tyler Durden
Mon, 05/18/2020 – 16:34
President Trump admitted on Monday taking Hydroxychloroquine with zinc as a precaution against coronavirus – telling reporters “I happen to be taking it,” and “I’m not going to get hurt by it.”
Trump said that while he hasn’t been exposed to the virus, he was given permission by the White House doctor to take the controversial treatment, and began taking it approximately 10 days ago – right around the time Mike Pence’s press secretary, Katie Miller, tested positive for the virus.
“I happen to be taking it,” says @POTUS of hydroxychloroquine . “I’m not going to get hurt by it.”
“A lot of good things have come out about the hydroxy. A lot of good things have come out. You’d be surprised at how many people are taking it,” said Trump.
While medical experts – including Dr. Anthony Fauci of the White House coronavirus task force have cautioned against taking the drug, Hydroxychloroquine and Zinc has been successfully used by doctors around the world, who claim dramatic improvement in patients with coronavirus.
“Every patient I’ve prescribed it to has been very, very ill and within 8 to 12 hours, they were basically symptom-free,” said Los Angeles doctor Dr. Anthony Cardillo, adding “So clinically I am seeing a resolution.”
Cardillo, CEO of Mend Urgent Care, says that the drug must be used in conjunction with Zinc, as the hdroxycholoroquine opens a ‘channel’ for the mineral to enter cells and prevent the virus from replicating.
Los Angeles Doctor, Dr. Anthony Cardillo speaks of potential benefits of Hydroxychloroquine combined with Zinc. pic.twitter.com/fQ68HpsKup
That said, the drug has been shown to raise heart risks and rates of death when combined with the antibiotic azithromycin, according to Bloomberg, which notes that it can interfere with the heart’s electrical signals in extremely rare cases.
via ZeroHedge News https://ift.tt/2LGQBvI Tyler Durden
Moderna expects to use the net proceeds of the offering to fund working capital needs related to the manufacturing of mRNA-1273, its vaccine candidate against the novel coronavirus (SARS-CoV-2), for distribution in the United States and outside the United States, assuming necessary regulatory approvals are obtained, and the remainder, if any, to fund clinical development and drug discovery in existing and new therapeutic areas; to fund further development of its mRNA technology platform and the creation of new modalities; or to fund working capital and other general corporate purposes.
Morgan Stanley is acting as sole book-running manager for the offering.
The shares are reportedly offered between $75 and $77.50 each, and MRNA shares are sliding after hours…
So MRNA manages to raise equity capital at a price 15-20% above its Friday close… Can anyone say “pump’n’dump”…
Well, one twitter user @TESLACharts who has obtained a large following for their incisive tweets about Tesla (and other valuation-related absurdities) tweeted a surprisingly detailed explanation of why investors should take today’s announcement with a massive grain of salt, and why – going forward – they should be wary of the company and any results from the trial, which is being carried out in partnership with NIAID.
As it turns out, not only has Moderna CEO Stephane Bancel (whose Moderna stake has made him a billionaire) been selling a surprising amount of Moderna stock, but a mysterious company called “Flagship Pioneer” that also happens to be Moderna’s largest shareholder has been selling large blocks of shares as well. That company, as @TeslaCharts explains, is controlled by Bancel.
1/ It is good to be Stephane Bancel, CEO of Moderna. He gets to go on @CNBC and pump interim Phase I partial data on a rona vaccine. Let’s have a closer look. $MRNAhttps://t.co/hj45UKbyGC
2/ Mr. Bancel is a prolific seller of his own company stock, with an aggressive 10b5 plan. He basically sells every week. What’s that green flag you say? Let’s have a look. $MRNApic.twitter.com/vuWwIIIrTR
Though he’s not well known to the wider public, Bancel was once compared to Elizabeth Holmes – and that was after the WSJ published its series of reports exposing Theranos as a fraud.
6/ It wasn’t that long ago that Mr. Bancel was being compared to Elizabeth Holmes. That’s nice. https://t.co/9Z2rhkAV2e
Another thing: Trump’s own Vaccine Czar owns a large slug of Moderna call options. Some have called for him to sell them because of the obvious conflict. But the fact hasn’t been widely discussed on Monday is surprising.
7/ Naturally, Trump’s vaccine czar owns 156,000 options in $MRNA. There are loud calls for him to divest these options because of obvious conflicts of interest. I’m sure he’ll be more than happy to do so at these prices. https://t.co/ycrZDHDABu
The Twitter user suspects that Bancel will continue selling tomorrow, guaranteeing that “whether or not his vaccine works” Bancel will be “quite rich either way.”
8/ As sure as the sun will rise tomorrow, Mr. Bancel will be selling $MRNA stock again very soon at even higher prices. I sure hope his vaccine works. Mr. Bancel will be quite rich either way.
9/ Just another day in Jay Clayton’s America. Special shout out to @BeckyQuick@andrewrsorkin and @JoeSquawk for helping out Mr. Bancel and the entire stock market. Great job! $MRNA
Highlights From Powell’s Prepared Remarks Before The Senate Banking Committee Tyler Durden
Mon, 05/18/2020 – 16:24
It has been a non-stop barrage of soundbites from Fed chair Jerome Powell over the past 24 hours, who triggered today’s record euphoric rally with his 60 Minute comments saying “I would never bet against the American economy or the American people. We have a great economy” and just in case we don’t, Powell said he was ready to print trillions more if he had to (he does) stating “we’re not out of ammunition by a long shot.” Then, at the close on Monday following a 900 points surge sparked by the Fed Chair’s Sunday comments, Powell’s prepared remarks ahead of his virtual hearing before the Senate Banking Committee were released, and it was more of the same, with Powell vowing to “to maintain near-zero rates until the economy has weathered the crisis” and repeating the “Fed will use full range of tools to support the economy.”
“We are committed to using our full range of tools to support the economy in this challenging time even as we recognize that these actions are only a part of a broader public-sector response, Powell said adding that “we expect to maintain interest rates at this level until we are confident that the economy has weathered recent events and is on track to achieve our maximum-employment and price-stability goals.”
So pretty much forever.
There were no surprises, however, as much of Powell’s prepared testimony was a review of programs put in place by the central bank.
Powell’s testimony will begin at 10am on Tuesday, and will also feature Treasury Secretary Steven Mnuchin as part of the Senate’s first quarterly CARES Act Report. Now that the Fed and the Treasury are joined at the hip in delivering “helicopter money” to the US, the central bank has launched “unprecedented support” – by monetizing trillions in US debt issuance – for markets and the economy since mid-March. It has slashed interest rates to nearly zero and unveiled nine emergency lending programs, supporting everything from corporate to municipal credit markets as it tried to stabilize access to financing.
In his testimony, Powell also urged Congress to consider even more fiscal support beyond the $3 trillion in aid already passed, and has said the Fed is willing to do more if needed to support the economy, by which he meant expanding QE even more.
Despite the Fed’s support, every indicator of the U.S. economy shows history-making declines as economic activity slammed into a sudden stop as households sheltered in place. Employers cut 20.5 million jobs last month, tripling the unemployment rate to 14.7%, the highest since the Great Depression. Powell said the scope and speed of the downturn “are without modern precedent and are significantly worse than any recession since World War II.”
Markets Go Manic Thanks To Money-Printing, Moderna, & Merkel Tyler Durden
Mon, 05/18/2020 – 16:01
“I mean, that really got out of hand fast…”
Futures show the mania started early (Powell), was extended before the open (Moderna‘s vaccine headlines), and extended around the EU close (Merkel & Macron)…Small Caps were the biggest gainers (futs were limit up just ahead of open) with Nasdaq the laggard on the day…a weak close was notable however…
But all major US indices (ex-Transports) are now green for May…
Source: Bloomberg
In fact, Powell’s promise to do “whatever it takes” sparked the greatest opening buying pressure in history at today’s open…(Who the hell was seriously surprised by anything Powell said?)
Source: Bloomberg
But the Moderna meltup really took it to ’11’:
*TRUMP SAYS TODAY WAS VERY BIG DAY THERAPEUTICALLY
*TRUMP SAYS TODAY WAS BIG DAY FOR CURES, VACCINES
*TRUMP SAYS THERAPEUTICS, CURES MORE IMPORTANT THAN VACCINES NOW
So, to clarify the day’s early action – we soared on the back of Fed fears and promises to print more due to bad news and we soared on positive vaccine headlines which would end the bad news.
Macron and Merkel made some promises they can’t keep alone (i.e. the Dutch among others have to agree to the joint debt malarkey) but that didn’t matter today. The euro soared and peripheral debt yields crashed…
Source: Bloomberg
Crude oil exploded higher into tomorrow’s June contract expiration, further reassuring stock market buyers that… well demand must be back, right? June WTI topped $33 intraday (the highs from before the crash) before fading into settlement…
Just feel sorry for all the muppetry who was buying USO and utterly failed to gain anything…
Source: Bloomberg
Gold and Silver were clubbed like baby seals on the Moderna vaccine news – after ramping higher after Powell’s promise to do more money printing…
Gold was down on the day…
But silver held on to its gains… even with the clubbing
And, aside from a brief spike, the gold/silver ratio continued to slide…
Source: Bloomberg
Bonds were a bloodbath today (all but 2Y now higher on the month)…
Source: Bloomberg
10Y Yields exploded higher today
Source: Bloomberg
Powell manage to reignite credit market exuberance…
Source: Bloomberg
The Dollar was also puked lower today (EUR strength)
Source: Bloomberg
Bank stocks ripped higher today…
Source: Bloomberg
The Virus Fear Trade (Long Food, Short Leisure) plunged…
Source: Bloomberg
Another new record highs for FANG Stocks…
Source: Bloomberg
Cryptos were bid…
Source: Bloomberg
Finally, it seems the market doesn’t need negative rates anymore…
Source: Bloomberg
And this made us wonder a little… after Dr.Scott Gottlieb came on CNBC and offered a sense of reality about just how modest this Moderna data is, the broad market didn’t even blink…
Source: Bloomberg
Remember Remdesivir…
Source: Bloomberg
via ZeroHedge News https://ift.tt/3cKmejE Tyler Durden
Stacey Abrams: Trump And Republicans “Deeply Afraid” Of Vote-By-Mail Due To COVID-“Incompetence” Tyler Durden
Mon, 05/18/2020 – 15:46
Former Georgia Democratic gubernatorial candidate Stacey Abrams says President Trump and Republicans are afraid of vote-by-mail because it would mean they are “held accountable for their mismanagement and incompetence” – the left’s favorite new talking point.
After playing a clip of President Trump saying “They had levels of voting, that if you ever agreed to it, you’d never have a Republican elected in this country again,” MSNBC host Joy Reid asked Abrams “Has it been as clear to you from Republicans that what they object to with vote-by-mail is the fact that more people would get to vote and that would hurt them in being able to win,” she replied:
“Yes, that has been the unequivocal statement not only made by Donald Trump, it was actually made in the state of Georgia by the speaker of the House. There was a reaction when the secretary of state in Georgia agreed to expand access to vote by mail by sending out 6.9 million ballot applications. The following weeks he created a voter fraud task force basically trying to use this to intimidate people out of using a right that they hold in the state of Georgia and have held since 2005. The challenge is this if everyone can participate, then choices we make will reflect the values and the needs of our communities. And because our communities have evolved, they’re more diverse, and they’re facing the consequences of COVID-19, not simply economically but physically, they are very afraid the Republicans are deeply afraid they will be held accountable for their mismanagement and incompetence, and that’s why they don’t want voting to be expanded to every eligible American voter.” (Via Breitbart)
Watch the rest of the interview here:
via ZeroHedge News https://ift.tt/3cM57Oo Tyler Durden
Despite Fed Chair Jerome Powell throwing cold water on the prospect of a quick economic recovery last week, there is still a lot of optimism out there. There is also an appalling lack of concern about all of the debt and money printing going on. In a recent podcast, Peter said nobody expects this to lead to an inflation crisis or a dollar collapse. But what can’t last forever won’t. And it won’t be a crisis — until it becomes one.
File this under another sign that we’re not in for a quick economic recovery. Another 3 million Americans filed for unemployment according to last week’s jobs report. Peter asked a pretty poignant question: if things were on the upswing, why would employers who have held on to workers this long let them go now?
They held off this long. Why are they still laying off so many workers? Clearly, employers are not sensing this huge recovery that’s around the corner, because if they did, they would be holding onto these workers. They wouldn’t be letting them go now after they kept them for these last couple of months. Obviously, if they’re laying them off now, they think this is going to be a much more protracted decline and therefore, we’re not going to get the back half of that V.”
Meanwhile, the Federal Reserve’s balance sheet swelled by another $212.8 billion to $6.934 trillion last week, as money supply surged another $198.6 billion. To put that into perspective, when the Fed did QE3 during the great recession, it was expanding the balance sheet by $80 billion a month. We just did over $212 billion in one week. The highest the Fed balance sheet got during the last crisis was $4.5 trillion. We’re now approaching $7 trillion with no end of QE in sight. Peter said this is inflation that is being generated on an unprecedented scale.
We’re doing the same thing that we did during the 2008 financial crisis, just on a much greater scale. And of course, we’re doing it in an economy that’s far more heavily indebted and in much worse shape structurally and economically than it was back then.”
During the 2008 crisis, Peter was talking about inflation, the possibility of hyperinflation and even the prospect of $5,000 gold. When that didn’t come to pass, he took a great deal of criticism.
I was right in that the Fed was creating inflation. What happened was that inflation just manifested itself in ways that people weren’t worried about because it showed up in stock prices and real estate prices and bond prices and things like that. It wasn’t showing up as heavily in consumer prices.”
On top of that, the Fed was able to convince everybody that it could normalize interest rates and shrink its balance sheet. Meanwhile, as the US was talking about winding down stimulus, the European Central Bank ramped it up. As Peter put it, that made the US look like the cleanest shirt in the hamper.
People started to have faith in the dollar, so we didn’t see the big increase in consumer prices that I was warning about. Well, we’re going to see it now. We’re going to see it much worse than what we would have seen had it started back in 2011, 2012, 2013. Because not only are we going to have to deal with the consequences of all the money the Fed is printing right now, we’re going to have to deal with the consequences of all the money that it printed earlier that temporarily went into financial assets before it migrates into consumer goods.”
There is always a lag between money creating and price inflation. The lag isn’t normally a decade. After 2008, we got an extremely long lag. Peter said we won’t get as long a lag with this massive money-printing expedition the Fed has embarked on – certainly not a decade lag.
The dollar is going to end up falling much further now than it would have fallen had it started to decline a decade ago. The impact on the bond market – the ultimate rise in long-term interest rates is going to be much bigger. And gold is going much higher. I used to be calling for $5,000 gold. We’re going to go much higher than $5,000. … All the things that I have been warning about — all of that stuff is going to happen. It’s going to happen in spades.”
But a lot of people in the mainstream are still convinced we can print all of this money and run massive government budget deficits with no problem because we’ve managed to get away with it for this long. After all, we’ve had massive budget deficits and money-printing for years. Since we’ve haven’t seen inflation, a weak dollar or high long-term rates, we can just keep on as we have. Peter called this a very dangerous assumption to make.
Just because we’ve gotten away with it for this long doesn’t mean we’re going to get away with it forever. … I think we’re very, very close to a major collapse of the dollar, a major breakout in the price of gold, to a breakdown in the bond market. And it isn’t going to happen overnight. It’s going to sneak up on people when they least expect it. … It’s not a crisis until it becomes a crisis. And then it becomes a crisis very, very quickly.”
In this podcast, Peter also talks about some of the other economic data that came out last week and discusses gold and gold stocks.
via ZeroHedge News https://ift.tt/3bHArg5 Tyler Durden
Faux-Libertarian Musk Criticizes Fed For “Massive Currency Issuance”, Says Bitcoin Looks “Solid By Comparison” Tyler Durden
Mon, 05/18/2020 – 15:17
If we didn’t know any better and we weren’t sure that every single thing Elon Musk does is solely to benefit himself and/or make himself look better, we’d be left guessing whether or not the embattled Tesla CEO was making the full-fledged leap to libertarian.
Musk first showed off his faux-libertarian side when he started advocating for the constitution and “freedom” on a Tesla conference call, stating that coronavirus lockdowns were “fascist” and should be lifted.
“It’s breaking people’s freedoms in ways that are horrible and wrong and not why they came to America or built this country. What the fuck. Excuse me. Outrage. Outrage,” Musk had said on the late April call.
Now, Musk is taking another page out of the “Libertarian for Dummies” handbook and roundly criticizing the Federal Reserve. The CEO came out and said he isn’t a fan of the Fed’s stimulus and that U.S. fiscal policy has become “detached from reality”.
Yes, this is coming from a CEO who just paid himself $700 million while laying off hundreds of workers from a company that has never turned an annual profit yet has a market cap of almost $150 billion. Talk about detached from reality.
He said the Fed makes bitcoin look “solid by comparison”, according to Forbes. Wait until he discovers gold.
“Massive currency issuance by government central banks is making bitcoin internet ghost money look solid by comparison,” Musk said on Twitter late last week, in response to Harry Potter author J.K. Rowling.
Pretty much, although massive currency issuance by govt central banks is making Bitcoin Internet 👻 money look solid by comparison
“I’m sure cryptocurrencies are fascinating. I’ve genuinely tried to grasp the very detailed information I’ve been sent tonight. But I’m afraid this is a total blind spot to me. I’m just about able to grasp a barter system. Talk of collectibles, tokenomics and blockchains and my brain just takes a walk,” Rowling responded.
There is a certain irony in the idea of Musk, whose company has been questioned non-stop by skeptics about its own financials (most recently David Einhorn), weighing in on macroeconomics. It’s even more frightening that Musk has arrived at the right answer: the Fed is completely out of control. Its just the way he got there that we have a gripe with: his stance is in his own self-interest.
Meanwhile, one social media user found Musk’s critiques to be especially hypocritical.
The irony of Elon Musk advocating for bitcoin because it’s a way to avoid the same Fed money printing system that constantly restocks the coffers of federal and state subsidies that Tesla and SpaceX need to survive, is blinding https://t.co/3kyq23PtsP
The US oil production slowdown, China’s domestic gasoline pricing policy, and power market outlooks on both sides of the Atlantic feature in this week’s pick of commodity market trends from S&P Global Platts editors.
1. US rig count declines slow as WTI rebounds…
What’s happening? Since oil prices plunged in mid-March, upstream producers have cut their capital budgets and sharply curtailed drilling activity, resulting in a collapse in rig counts. But oil rig count declines have slowed in recent weeks as WTI futures have climbed back into the mid $20/b range.
What’s next? Total US crude output averaged at 11.6 million b/d in the week ending March 9, down 1.5 million b/d from its mid-March peak and the weakest since December 2018. Crude output declines have accelerated, with weekly output falling by 300,000 b/d in the week to May 8, up from 200,000 b/d the week prior, and around 100,000 b/d for most of April. This trend is likely to face headwinds as rig declines slow.
2. … and crude storage race pauses after drive to shut in production
What’s happening? As the global pandemic killed global crude demand, there was a race to turn off the production taps in US shale before crude storage volumes could hit their capacities, especially in the benchmark storage hub of Cushing, Oklahoma. But, with Cushing 80% full and largely contracted out, commercial crude inventory levels actually dipped slightly for the week of May 8, according to the latest EIA report on Wednesday.
What’s next? The brief pause on the rush to fill up crude storage means more crude is sitting in floating storage offshore or being exported. And even though refinery utilizations remain low, producers have largely succeeded in shutting in wells in response to the global demand collapse. Still, crude storage volumes are expected to keep rising moving forward and the weekly inventory report will remain a key barometer to watch.
3. China cautious on gasoline pricing policy as economy slows
What’s Happening? It has been widely expected that some of the top Chinese policymakers and politicians may propose to remove or lower the floor prices set for various oil products during the annual “two sessions” starting from May 21, in order to lower consumer cost burden during the global economic slowdown, according to industry officials and market sources. The “two sessions” are the plenary session of the National People’s Congress, or NPC, and the annual session of the National Committee of the Chinese People’s Political Consultative Conference, or CPPCC.
What’s Next? China is unlikely to remove the current retail fuel price floor mechanism, as this could jeopardize Beijing’s push for green energy. “We will see some proposals about the floor price mechanism, but cutting retail fuel prices will encourage more oil consumption, which is not in line with China’s long term green energy development target,” a senior government official said. State-run and independent refiners would breathe a sigh of relief if the price floor mechanism remains, as they have benefited from high domestic refining margins in recent months. In Guangdong province, 10 ppm 92 RON gasoline retail price has been set at Yuan 6,900/mt or $65.5/b, unchanged since March 18. In contrast, S&P Global Platts assessed the Mean of Platts Singapore 10 ppm 92 RON gasoline at $27.09/b so far this month.
4. EU power market jumpy on drip-drip of EDF nuclear guidance
What’s happening? French Q4 2020 power prices climbed over 40% after EDF slashed its 2020 nuclear output target in April, but some of these gains were lost last week as Q4 availability improved in the latest maintenance adjustments, and EDF management hinted the current maintenance schedule was not set in stone, with winter supply security of overriding importance.
What’s next: Almost anything EDF says about nuclear is market moving and sure enough, the generator’s May 14 comment that its dire winter reactor availability outlook was “cautious” sliced around 12% off the fourth quarter French power contract. Traders must be exhausted by the eternal vigilance required as EDF pumps out daily updates on reactor availability, but there is no let-up in view. This is partly because of other hard-to-predict outcomes relating to the easing of lockdowns and the timing of new interconnection projects between France, the UK and Italy. The 2-GW IFA2 link between the UK and France remains on course for Q3 testing, potentially doubling trading capacity and easing supply concerns – if schedules hold together.
5. Texas power market’s reserve margin grows, but record peakload forecast
What’s happening? The Electric Reliability Council of Texas (ERCOT), which manages the power market for about 90% of Texas load, has increased the estimate for its summer 2020 reserve margin – resources in excess of forecast peakload – to 12.6% from December’s forecast of 10.6%. Factoring the coronavirus pandemic’s power demand reducing effects, ERCOT cut its summer peakload forecast by 1.5 GW, but still expects to hit a new record of 75.2 GW, up from last August’s 74.8 GW.
What’s next? A recent change in the Operating Reserve Demand Curve (ORDC), which ERCOT uses to enhance pricing during supply scarcity, may more than counteract the price-suppressing effect of demand reductions tied to the pandemic. The change is designed to have the ORDC price adder deployed more often at higher levels. Uncertainty about the pandemic’s longer-term effects prompted ERCOT to not revise its forecasts for 2021 and beyond.
via ZeroHedge News https://ift.tt/36b71Wi Tyler Durden
SoftBank’s Latest Presentation: A Surreal Slideshow Of Unicorns Running, Plunging, Flying Tyler Durden
Mon, 05/18/2020 – 14:45
Going into today’s Softbank results, we knew they would be catastrophic, and sure enough the company did not disappoint (the bears), when the poster child for all that is wrong with the central banks’ “everything bubble” (and the company which last October we said would be the “bubble era” short of the century) reported this morning that it lost 1.9 trillion yen ($17.7 billion) in 2019 after writing down the value of its numerous “unicorn” investments, including WeWork and Uber Technologies.
The company posted an overall operating loss of 1.36 trillion yen in the 12 months ended March and a net loss of 961.6 billion yen, confirming preliminary earnings results released last month. The losses are the worst ever in the company’s 39-year history.
As Bloomberg adds, the company’s $100 billion “unicorn incubator”, the Vision Fund, went from the group’s main contributor to profit a year ago to its biggest loser. Uber’s disappointing public debut last May was followed by the implosion of WeWork in September and its subsequent rescue by SoftBank. The plunge in Uber’s share price was responsible for about $5.2 billion of Vision Fund’s losses in the period, while WeWork contributed $4.6 billion and another $7.5 billion came from the rest of the portfolio, SoftBank said. The $75 billion the Vision Fund has spent to invest in 88 companies as of March 31 is now worth $69.6 billion.
Indicatively, WeWork’s valuation is now $2.9 billion, down more than 90% from its peak. SoftBank has invested more than $10 billion in the company, which means it is underwater by about $7 billion on the office subletting company whose future is now more opaque than ever.
To be sure, Son has been struggling with the impact of the coronavirus on the portfolio of startups weighted heavily toward the sharing economy which have been crushed by imposed social distancing norms and regulations. Son’s investments in hotel-booking service Oyo Hotels & Homes and Uber, among the biggest in his portfolio, have also fared poorly. Oyo, in which SoftBank invested about $1.5 billion, last month furloughed employees in countries outside its home market of India as it struggles to survive the virus. Uber’s shares are trading about 28% below its IPO price.
Having learned from the “best” – such as Boeing – Son responded forcefully in preempting another plunge in Softbank stocks, unveiling two share buybacks in rapid succession. The first 500 billion yen repurchase announced in mid-March initially failed to lift SoftBank’s stock. When the shares plunged more than 30% in the week that followed, Son unveiled a 2 trillion yen follow-up. Hilariously, SoftBank has already used roughly half of the first allotment. The company said on Friday that it had bought 250.6 billion yen of its own stock since March 13 under the original re-purchase plan.
Which, naturally means, it’s time for #3: before the earnings were announced on Monday, the company said it plans to spend up to 500 billion yen more to buy back shares through next March. The announcement is part of a broader plan to sell assets to raise as much as 4.5 trillion yen over the coming year to buy shares and slash debt. SoftBank is likely to raise the funds by selling its stakes in Alibaba Group Holding Ltd., Japanese telecom unit SoftBank Corp. and the company that results from the merger of Sprint Corp. and T-Mobile US Inc.
But while none of the above will come as a surprise to anyone, investors were still eagerly expecting today’s earnings if for no other reason than to see what slides Masa Son would stuff in his presentation.
As a reminder, in the past the Japanese billionaire, perhaps unaware that he moonlights as a comedian, added slides such as the following which were probably meant to telegraph a deep sophistication and to confuse the dumbest money, when in reality the slides were simply idiotic :
Masa did not disappoint, and prefacing by saying that “the situation is exceedingly difficult,” Masa said that “our unicorns have fallen into this sudden coronavirus ravine. But some of them will use this crisis to grow wings.”
And then, perhaps in hopes of killing Q&A time with five (5) surreal slides meant to provoke awkward silence and also to show to everyone precisely what goes on inside his brain, Son showed just what he meant:
Which unicorns will successfully “fly” out of the coronavirus valley? Why obviously those who overcome these two modest “challenges”: collapsing demand and a cash inferno.
Son’s parting words of wisdom: where manufacturing, electricity and food processing pulled the global economy out of the Great depression…
… this time it will be such ‘revolutionary’ services as online meetings, food delivery, online shopping and video streaming that will bail out the global economy….
… resulting in that utopia for every Ponzi scheme: “happiness for everyone.”
