ECONOMY

Pandemic’s Effect on the Economy: Like Pineapple on Pizza

The gory details

The pandemic took out consumer spending, business investment, imports, and exports like cans at a carnival booth. Pick your superlative—according to various commentators, this recession is “the worst in our lifetime,” “the worst in the post-World War II era,” and “the sharpest in the U.S. since the Great Depression.”

• Consumer spending plunged 7.6%, the most since 1980. It accounts for ~70% of GDP.

Services dropped the most on record, driven mostly by one industry: healthcare. The pandemic required providers to pull back on profit drivers like elective procedures and routine visits. Meanwhile, costs for extra equipment like PPE climbed. It all added up to mass layoffs.

• 43,000 healthcare jobs were lost in March, per the Bureau of Labor Statistics.
• Nearly half of all medical practices have temporarily furloughed staff, while 22% have laid people off permanently, according to one survey.

That’s the bad news, here’s the worse news

Q2. After all, things were mostly fine in Q1 until stay-at-home orders pulled the rug out mid-March. Next quarter, economists are projecting at least a 30% annual decline.

• “We are going to see economic data for the second quarter that is worse than any data we have seen for the economy,” Jerome Powell said yesterday. So basically we’re looking at the worst economy ever.

Some glimmers of hope: Most analysts expect a bounce-back starting in July as states lift restrictions. Treasury Secretary Steve Mnuchin said he anticipates a quick recovery over the summer as government relief funds work their magic.

• But the Congressional Budget Office projected a more muted recovery in the second half of the year and a more sobering picture overall.

Bottom line: We keep saying it…because it remains true. Any economic recovery depends on ramping up testing and tamping down infection rates.

PHARMA

Remdesivir Is the Red Squiggly Line That Won’t Go Away

Remarking on new findings from the National Institute for Allergy and Infectious Diseases, the country’s top infectious disease official said, “The data shows that remdesivir has a clear-cut, significant, positive effect in diminishing the time to recovery.”

Why Fauci is excited:

• The results come from a randomized controlled trial in which 1,063 hospitalized patients participated.
• Coronavirus patients who took the drug recovered 31% faster than those taking the placebo—11 days compared to 15 days.
• The proportion of patients who died was also lower (8% to 11.6%), however that’s not a statistically significant difference.

In a separate study also released yesterday, Chinese researchers found that the drug was “not associated with statistically significant clinical benefits.”

Why remdesivir matters: 1) The FDA is likely to give emergency approval for the drug and 2) the markets react to any news about remdesivir in a big way.

EARNINGS

Executives on the Record

Facebook CEO Mark Zuckerberg: Reopening the country too soon will “almost guarantee future outbreaks,” he said on an earnings call. Despite that warning, Facebook reported a strong quarter and said the ad market had stabilized after an initial drop-off.

Tesla CEO Elon Musk: “FREE AMERICA NOW.” In a late Tuesday tweet, Musk took pretty much the exact opposite attitude from Zuck re: lockdowns. Tesla’s earnings were less controversial—it scored its third straight quarterly profit.

Airbus CEO Guillaume Faury: “We are in the gravest crisis the aerospace industry has ever known.” He also said the company is putting plans to reduce airplane emissions on the backburner.

Starbucks CEO Kevin Johnson: “We have all been in our homes for six weeks, we have got a little stir-crazy,” he admitted to Bloomberg a day after the company reported a 10% drop in global sales. Which is why Johnson thinks people will be eager to go out as Starbucks begins to reopen U.S. stores.

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In addition to the cult classics, we’ve been peepin’ their new Magnum Collection inspired by the 80s private eye series set in Hawaii.

SeaVees is actually the first footwear brand to be granted permission to use the same Hawaiian prints used in the show to complement one of the greatest mustaches of all time.

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AUDIO

Music to Spotify’s Earnings

Commutes go mute

Now that most morning commuters wear slippers instead of seatbelts, Spotify reported a decline in usage of its car, wearable, and web platforms. But its TV and game console audiences grew more than 50%.

We also got an update on Spotify’s adventure into podcasts, highlighted by last quarter’s $196 million acquisition of sports/culture content machine The Ringer—and its empire of 30+ pods.

• So far, so good: 19% of monthly active users engaged with podcast content, up from 16% last quarter.

Searches for “chill” and “instrumental” playlists were also up, as two-in-five consumers reported listening to more music than usual to manage their stress.

Bottom line: Spotify’s Q1 places it alongside streaming buddy Netflix as a rare bright spot in an otherwise dismal consumer environment.

POLICY

Your Quarantine Could Be Coming to a Close

It may be less exciting than it sounds. To comply with public health measures, restaurants will need to cap capacity and maintain distance between tables. Masks are required…everywhere. If you’re playing golf, you better not touch that pin.

To help you keep track of this quickly evolving situation, we’ve created a page that shows each state’s timeline for loosening restrictions. Check where your state stands.

WHAT ELSE IS BREWING

• Microsoft said COVID-19 had “minimal” net impact on quarterly revenue, but its cloud products like Teams did see a benefit from WFH policies.
• Boeing will shrink its global workforce by 10%.
• Lyft is laying off 17% of its workforce.
• The NCAA’s Board of Governors approved a plan to allow college athletes to be compensated for their name, image, or likeness.
• TikTok has passed 2 billion global downloads after the “best quarter for any app ever,” reports Sensor Tower.

BREW’S BETS

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GUESS THE SKYLINE

GUESS THE SKYLINE ANSWER

LEGAL

What Are You Gonna Do, Sue Me?

Last week, U.S. Chamber of Commerce head Suzanne Clark told Axios that businesses are anxious about a wave of lawsuits from customers and workers who contract COVID-19.

Time for torts

Customers and employees can sue a business for lost wages, medical expenses, and other damages if they prove negligence, recklessness, or intentional disregard for their safety. But some recommended precautions for COVID-19 could run up against workplace protection laws, such as:

• Telling other employees when someone is sick (privacy violation)
• Requiring workers to test negative before coming back (discrimination and health privacy)
• Prohibiting at-risk populations like the elderly from coming to work (more discrimination)

Who’s taking care of this?

Last week, President Trump said his administration was exploring ways to help shield businesses. But experts think Congress needs to tap its interstate commerce regulatory powers for any meaningful changes.

• Congress already capped liability for businesses making desperately needed masks. Manufacturers have proposed extending those protections to other companies making PPE and essential items.

Some labor unions and Democratic leaders are pushing back, arguing that weakened labor protections would let employers skate by without providing basic protections. Numerous complaints have been filed over unsafe conditions for essential workers.

• The Occupational Safety and Health Administration (OSHA) has received 4,000 complaints against employers related to coronavirus but hasn’t issued any citations or fines, a labor leader told USA Today.

Looking ahead…the Senate resumes its session Monday, and Majority Leader Mitch McConnell wants to pass liability protections before tackling new relief packages. That might set up a fight with Democrats, who want billions for states, cities, and frontline workers.

EARNINGS

What’s Up, What’s Down

What’s up

 Personal safety gear: 3M, the maker of the N95 mask, said demand for food safety products and cleaning supplies was to thank for better-than-expected sales last quarter.

 The economy before COVID-19: Google parent Alphabet reported a strong first two months of 2020 before a “significant slowdown in ad revenues” in March. The company still beat revenue estimates.

What’s down

 Construction: Dad-approved heavy equipment maker Caterpillar reported a 21% drop in Q1 sales due to “lower end user demand.” About 75% of its primary production facilities are currently operating.

 New car smell: Ford posted a $2 billion loss in Q1 and expects that to more than double in Q2.

 Doctor’s visits: Drugmaker Merck expects the coronavirus to slice $2.1 billion off 2020 sales. Merck’s CFO said two-thirds of its products are administered by physicians.

 Awkward boarding interactions: Southwest Airlines reported its first quarterly loss since 2011.

ENTERTAINMENT

Universal Trolls the Box Office

• That’s more than the original made in five months in theaters.

The backstory: Studios and theaters were tussling over releases way before the pandemic struck. Theaters insisted on exclusive screening rights for at least two months before movies could debut at home, while Netflix insisted times have changed.

• Universal gets to keep about 80% of digital rental and purchase fees, compared to 50% of box office sales.

The pandemic and theater closures gave studio execs the opportunity to try something they’d been eyeing for a while—”PVOD,” or premium video on demand. Trolls World Tour dropped on April 10 on platforms like Apple TV, Xfinity, and Amazon Prime. It was so successful, NBCUniversal CEO Jeff Shell told the WSJ that after the pandemic, the studio would release movies both in-theater and via PVOD.

That poked the bears. AMC Theatres, the biggest chain in the world, said last night it would stop playing any of Universal’s films.

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CANNABIS

High Times Inhales Cannabis Stores

The short-term angle: The pandemic has been tough on publishing—High Times temporarily suspended two of its publications and laid off staff due to supply chain issues. But demand for cannabis is stronger than ever under lockdown. Sales were up 159% annually by mid-March, according to Headset.

The long-term angle: The legal cannabis market will grow from almost $11 billion globally in 2018 to a projected $50 billion by 2029, provided 2029 still happens, says Jefferies.

• A group of investors bought the 46-year-old High Times in 2017 and have been working to position cannabis as a high-end product. Their push into retail began in January with plans for two flagship stores in LA and Las Vegas.

Looking ahead…the companies plan to close the deal by June 30.

CITIES

Cities Dig up Their Jean Shorts

In the Lithuanian capital of Vilnius, cafés and restaurants will be allowed to set up tables in public areas. While the government has permitted those businesses to reopen with outdoor seating, in some narrow-streeted neighborhoods it’s not possible to operate in accordance with social distancing rules. So Mayor Remigijus Šimašius said plazas, squares, and streets are temporarily fair game for next-level al fresco dining.

Back here in NYC, the City Council had a similar brain blast. This week, the de Blasio administration said the city will open up at least 40 miles of streets to pedestrians and cyclists to promote social distancing among New Yorkers in our finest spring attire (all black, but with a hat).

We know you’re wondering…is city life even possible during the pandemic? Short answer: Yes, but different city life. Longer answer: You’ll find that in our Future of Cities series.

+ Friday quiz preview: We will ask you to name the capital of Lithuania. Not its mayor, don’t worry.

WHAT ELSE IS BREWING

• President Trump said he’ll invoke the Defense Production Act to keep meat processing plants open during the pandemic. If you didn’t hear, there’s a looming meat shortage.
• Treasury Secretary Steve Mnuchin told CNBC the government will fully audit companies taking out $2+ million loans under PPP.
• Uber execs are considering laying off roughly 20% of employees, The Information reports.
• Tripadvisor is laying off ~25% of its global workforce.
• Sen. Elizabeth Warren and Rep. Alexandria Ocasio-Cortez are proposing a pause on big mergers during the pandemic.

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BREW’S BETS

• They post the same thing: Rise and shine sailers It be Monday/Congrats Sailer, You Made It To Friday and Is Today Ted Danson’s Birthday?
• Their parodies are on point: Kim Kierkegaardashian is dead/Kantye West and Cursed Architecture
• They keep us in-the-know: AP Planner and Live tweets from 1942
• They rate quarantine rooms on TV: Room Rater

Back by popular demand—the Brew’s style blog: In this month’s edition, resident grammarista Eliza Carter explains why we use the Oxford comma with joy, zeal, and relish, and challenges any of you who disagree to a duel. Read the post here.

Also back by popular demand—the Brew’s COVID-19 survey: Share how the coronavirus has affected your life in a super quick five-minute survey. We’ll return the favor by making sure we’re serving you content that’s as relevant as possible. Take the survey.

UFO TRIVIA

While going down a UFO Wikipedia rabbit hole (after those videos were released), we encountered a slang term that was used by Allied pilots in WWII to describe strange objects they saw flying around the skies. A famous rock band named itself after this two-word term. What’s the band?

UFO TRIVIA ANSWER

INVESTING

Can You Do This in ‘Fortnite’? The PIF Thinks Not.

One fund, many names

A sovereign wealth fund is a state-owned investment fund that can invest in pretty much anything you can think of, from natural resources to public companies. Saudi Arabia’s is called the Public Investment Fund (PIF), and it’s chaired by Crown Prince Mohammed bin Salman, whose name you’ve probably heard thrown around in conjunction with oil cuts in recent weeks.

But if oil is bad business right now, live concerts might be worse. After booking $11.5 billion in revenue last year, Live Nation expects a 20% drop in Q1 sales. The company’s stock price has also performed a stage dive, dropping over 40% as physical concerts take the year off.

The PIF’s play?

Focus on companies hit hardest by the coronavirus. Along with Live Nation, the PIF has made recent investments in battered cruise line operator Carnival as well as multiple European oil companies.

• Also in Europe: In a move supported by 97% of the club’s fans, the PIF is close to completing a $380 million deal to become a majority owner of the Premier League soccer club Newcastle United.

Worth noting: While Knicks fans understand Newcastle’s excitement for a change in ownership, other companies have been less inclined to take money from a regime deemed responsible by U.S. intelligence for the murder of Washington Post journalist Jamal Khashoggi.

• Endeavor, the parent company of the UFC and Miss Universe, returned a $400 million investment from the PIF following Khashoggi’s death.

Bottom line: After big money investments in Uber and SoftBank’s Vision Fund have yet to turn profitable, the PIF looks to be pursuing a different strategy—bargain hunting.

FOOD

Breaking: The Food Supply Chain

Zoom out: Tyson is one of several meat processors that have closed plants due to COVID-19 outbreaks among workers. Industry leaders Smithfield Foods and JBS have both powered down some U.S. facilities and warned about meat shortages.

• Nearly a third of U.S. pork processing capacity is currently offline.
• Factory closures have severe domino effects for rural communities. John Tyson explained that “farmers across the nation simply will not have anywhere to sell their livestock to be processed.” Some have been forced to euthanize their pigs.

Looking ahead…fear of shortages means a spike in prices. U.S. wholesale pork prices were up nearly 30% last week, Bloomberg reports, and wholesale beef hit a record high.

RETAIL

Testing, Testing…

Maybe the sequel will be better. On March 13, President Trump and major retailers including Walmart, Target, CVS, and Walgreens pledged to launch coronavirus testing in their parking lots. About 70 testing sites have opened at drugstores and retailers since then—not a significant amount.

• Along with Rite Aid, Kroger, and other chains, CVS aims to play a major role in the new rollout. As it ramps up capacity to process 1.5 million tests per month by the end of May, it will expand testing locations to 1,000 U.S. stores (provided it has sufficient supplies).

Bottom line: Public health officials and business executives agree the only way to get people back to work again is to test, test, then test some more. The U.S. needs to accelerate testing by about 200,000 tests per day to safely open up the economy, experts say.

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INTERNATIONAL

It’s Official: Vegemite Scares Away Coronavirus

With new daily coronavirus cases in the single digits, Australia plans to ease some restrictions in the coming weeks (but never one to miss the tail end of surf season, already opened some beaches). And New Zealand’s reopening schools, childcare, and some businesses after reporting just one new case on Monday. Prime Minister Jacinda Ardern declared “There is no widespread undetected community transmission in New Zealand…we have won that battle.”

• While South Korea might’ve resumed domestic tourism, Australia and New Zealand are considering one step further: reopening their borders and creating a tourism “bubble.” As each other’s largest source of hostel patrons, it could rekindle their waterlogged travel industries.

Looking ahead…New Zealand and Australia are taking a breather, but not relaxing. Contact tracing and testing programs will remain in place as they brace for a potential second wave in the winter.

+ While we’re here: Vietnam began opening restaurants and stores last Thursday after three grueling weeks of containment…and not a single COVID-19 death.

AUTO

“Let’s See If I Remember Where This Goes…”

It’s not an easy transition. Managers were alarmed when workers began making sourdough instead of Jettas. And they’ll now be required to enforce 100 new policies to protect worker safety, CNN reports. Those changes include…

• Using elbows to open doors
• 8,000 production line workers per shift instead of the typical 20,000
• Workers are not allowed to hand each other tools
• No more water coolers, so they’ll have to find another place to discuss the trivia question in the Brew

Bottom line: The plant is back…but at 10%–15% of total capacity.

WHAT ELSE IS BREWING

• Boeing CEO to shareholders: Air travel demand will take two to three years to recover to 2019 levels.
• Tesla started pushing out a software update that allows its vehicles to recognize and respond to stop signs and traffic lights.
• Apple is delaying mass production of its latest flagship iPhones by about a month, the WSJ reports.
• The U.S. Supreme Court ruled that insurers are entitled to $12 billion from the government for losses sustained during the early years of Obamacare.
• Things to look forward to: YouTube is launching a digital film festival with 20 partners. And Star Wars: Rise of Skywalker is coming to Disney+ on Monday.
• The Los Angeles Lakers returned the $4.6 million they received through the PPP.

BREW’S BETS

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COLLEGE ROAD TRIP

COLLEGE ROAD TRIP ANSWER

ECONOMY

The Reopenings Are Here

Where things stand

Georgia, which already allowed businesses including gyms and hair salons to reopen on Friday, is extending that privilege to movie theaters and restaurants for dine-in service today. Tennessee is also letting people eat at restaurants today, and retail stores can open on Wednesday.

States including Montana, Colorado, and Minnesota are kicking off phased reopenings today, while stay-at-home restrictions expire for several other states this Thursday, April 30. Starting next Monday, “Almost every business in the state of Missouri will be able to open their doors,” the governor said.

This will not be business as usual. Let’s use Georgia’s restaurant restrictions as an example:

• At least six feet in between tables and bar seats
• 10 patrons per 500 sq. ft. of space
• No more than six people per party, no presetting of tables, and no salad bar

Is this…a good idea?

On the one hand you have an economy that’s deteriorating at a thunderous pace. 26 million Americans have filed for unemployment claims in the last five weeks, wiping out all of the job gains since the Great Recession. Business lobbying groups and some lawmakers are desperate to get people back to work.

Others, including many public health experts and big-city mayors, say these reopening plans are dangerous, arguing states don’t yet have the testing or contact tracing capabilities to prevent further outbreaks. Those outbreaks could force more shutdowns, so we end up in a maddening revolving door of self-isolation.

The big, final question: If you reopen, will they come? It’s not clear whether a nervous public—given the opportunity—will resume going to restaurants, bars, and gyms. This week will tell us a lot.

COVID-19

Snapshots From the Coronavirus Economy

Fitness: Last week, Peloton reported its largest streamed class ever with more than 23,000 participants. After a bumpy IPO last September, the at-home fitness company’s stock is up over 60% since mid-March.

Shopping: Online marketplace Etsy is trading near all-time highs while sellers pivot from craft quilts to face masks. 50,000 sellers have sold at least one mask on the platform, and 10,000 sellers have sold 100 or more, per the FT.

Space: NASA is asking the Elon Musk posse to enjoy the May 27 launch of SpaceX’s first crewed mission from home instead of trekking to Florida. This will be NASA’s first crewed launch from U.S. soil in nearly a decade.

Entertainment: A record 12.3 million concurrent players logged on to Fortnite to watch a Godzilla-sized Travis Scott perform a concert amid psychedelic explosions. Headphones on.

AVIATION

Boeing Is Taking the “No Shaking Hands” Rule to the Next Level

• The deal: Boeing would’ve taken an 80% stake in Embraer’s commercial jet arm and gained access to engineering talent to build mid-size planes to stand up against Airbus.

Embraer’s accusing Boeing of calling in with food poisoning just before the exam starts. It says Boeing repeatedly violated the agreement and is backing out because of financial strain from 737 Max groundings and *gestures at everything.*

• Boeing needs at least $30 billion in external financing to limp through 2020, per Moody’s. It’s secured about half that with a loan but is still figuring out the rest.
• Not paying $4+ billion for a slice of Embraer, a company that’s now worth $1.1 billion, might be a good start.

Boeing hasn’t detailed what conditions Embraer reportedly violated, and Embraer plans to talk to someone’s manager and make Boeing pay damages and a termination fee up to $100 million.

Big picture: Add this to the list of corporate deals crumbling in a pandemic economy.

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INVESTING

United We Stand, Dividend We Fall

As of last Friday, nine S&P companies (including bruised cruise operator Carnival Corp.) had suspended dividends in April, and a few others are reducing payouts, Barron’s reports.

• Dividends are one of the perks you can get by owning a company’s stock. Many corporations distribute them to shareholders each quarter.
• Dividends can be remarkably lucrative for investors. In the 30 years until this March, the compounding effects of reinvested dividends would’ve accounted for almost half the return of an S&P 500 index fund, per Bloomberg.

Big picture: After rising every year in the 2010’s, aggregate S&P dividends will fall 23% to $398 billion in 2020, Goldman Sachs projects.

Looking ahead…all eyes on the energy sector, which is still shell-shocked from oil prices’ crazy ride into negative territory last week. ExxonMobil and Chevron are reporting earnings this Friday, and they have two of the top three dividend yields in the Dow.

CALENDAR

The Week Ahead

Monday: SXSW virtual film festival launches on Amazon Prime Video

Tuesday: Earnings (Alphabet, Starbucks, Caterpillar, Merck, Pfizer, UPS, PepsiCo, Southwest, UBS, AMD)

Wednesday: Q1 GDP; Fed meeting announcement; earnings (Boeing, Microsoft, Airbus, Facebook, Tesla, Qualcomm, GlaxoSmithKline, Mastercard, Anthem, Humana, Northrop Grumman, eBay, GE)

Thursday: Earnings (Amazon, Apple, Comcast, Gilead Sciences, Twitter, McDonald’s, MGM Resorts, Shell, Dunkin Brands, Cigna, Kraft Heinz, Kellogg, Molson Coors)

Friday: Take it away, Justin

Jive Records

It’s gonna be May; oil supply cuts officially go into effect; ISM manufacturing survey; earnings (ExxonMobil, Chevron, Clorox, Honeywell)

POKER TOURNAMENT

Are You Doing Anything Saturday?

We left you hanging a little bit at the top so here are a few more details:

• The qualifying round will begin Saturday afternoon.
• The top players from Saturday will get to play in the final round Sunday with loads of business legends. This might be your only chance to say you beat the former COO of Twitter at hold ’em.

How to get started: While any and all donations are welcome to the cause, $100 will get you a seat at the poker table. Sign up here.

WHAT ELSE IS BREWING

• U.K. Prime Minister Boris Johnson is going back to work today. He had been in the ICU a few weeks ago with coronavirus.
• Italy, Spain, and France are taking measures to ease lockdown restrictions. Spanish children were allowed out of their homes for the first time in more than six weeks.
• The NBA will allow teams to open practice facilities this Friday provided that doesn’t conflict with local restrictions, ESPN reports.
• Kanye West’s stake in Yeezy does, in fact, make him a billionaire, Forbes confirms.
• The Bill & Melinda Gates Foundation will give its “total attention” to the coronavirus pandemic, Bill told the FT.

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Kinda sad, but cool: Webcams showing live shots of famous places around the globe. Kinda sad because they’re all empty. Cool because you can see famous places from your computer.

BEYOND CROSSWORD

Beyond Crossword: April 27, 2020

Complete the crossword here.

BANKING

Let’s Try This Again

Now, you really have to try if you want to make people angry while doling out $350 billion in emergency cash, but the first edition of PPP managed to do that and more.

No room for VIPPPs

As if dealing with line-cutters at the grocery store isn’t bad enough, recent reports have exposed how big banks prioritized or offered unfair advantages to wealthy clients to secure PPP loans. Special treatment included “concierge” services and digital HOV lanes that zipped by clogged application portals.

• Loans of $1 million or more accounted for 45% of total PPP distributions…but ended up in the hands of just 4% of recipients.

This time around, $60 billion will be set aside for mom-and-pop shops without a direct line to Midtown East. Many small businesses had better luck going through smaller/local banks in V1.

Keeping things private

Publicly traded companies received almost $600 million in PPP loans—and a very public flogging for doing so. Some recipients, including Shake Shack and the owner of Ruth’s Chris Steakhouse, have agreed to return the money.

• Critics argue these companies can raise funds through other avenues unavailable to mom and pop. Just last week, Shake Shack was able to raise $150 million selling new shares.
• But…they technically weren’t breaking any rules. The National Restaurant Association lobbied and helped secure exemptions from Congress for restaurants and hotel chains to access the PPP.

Yesterday, the SBA closed the loophole and warned publicly traded companies they probably won’t qualify for the new funds. The Treasury Department asked public companies to return their loans before May 7, or else face charges they weren’t acting “in good faith.”

+ While we’re here: The SBA is currently not releasing detailed information about PPP recipients. However, the Fed (which also runs emergency small business lending programs) said yesterday it will disclose participants’ names, funding, and interest rates.

PHARMA

WHOops

• According to the summary, 13.9% of the patients who received the drug died after one month, versus 12.8% in a control group, the FT and health news site Stat report.

The twist: The summary was quickly removed from the website. A WHO spokesperson said it was posted by mistake.

The study, a first-of-its-kind clinical trial in China, was stopped early because it didn’t have enough patients, so Gilead argued its results are inconclusive. Although Gilead did say “trends in the data suggest a potential benefit” for the drug.

So…what does it all mean? Not much—no definitive thumbs up or down for remdesivir yet. Several other ongoing studies will hopefully offer more conclusions.

FUNDRAISE

Busy Borrowers

Netflix is offering $1 billion in junk bonds to feed its quarantine content machine. The company reported astounding subscriber numbers for Q1 when its home screen became the only game in town.

Snap, also looking to pounce on the best quarter for scrolling ever, is planning to raise up to $750 million in private debt.

Delta is planning to raise $3 billion in debt after forecasting a 90% revenue drop in Q2. On the other side of the battered travel sector, Expedia is pulling in $2 billion in new debt financing (along with $1.2 billion in private equity funding). The company also named vice chairman Peter Kern as CEO.

Macy’s is in perhaps even more trouble. Using its inventory and real estate as collateral, it’s considering raising as much as $5 billion in debt, CNBC reports. Macy’s has furloughed most of its 130,000 employees while all of its stores have been closed since March 18.

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CONSUMER GOODS

Consumers Are Stockpiling and Stinky

First, Unilever

The maker of half your grocery store haul (including Dove, Lipton tea, and Ben & Jerry’s) said sales in North America grew 4.8% and online sales surged 36% as people restocked their cabinets. But in emerging markets, where airtight lockdowns dinged demand, sales dropped 1.8%.

• India, Unilever’s second-largest market, implemented some of the world’s strictest limits.

And…now that more people are WFH, consumers are buying less shampoo and deodorant. If that’s you, please reevaluate—your roommates may not determine your salary, but they have noses.

Second, the chocolate mongers

Hershey’s missed by a kiss on the top and bottom lines. It cut $271 million in profit, down from $304 million last year, though stockpilers gave it a nearly 11% retail sales boost in the four weeks before April 4.

• Plunging international demand + closed schools, restaurants, and malls = tough times.
• In even more bad news for the world’s roommates, Hershey’s gum and mint sales dropped 50%.

Looking ahead…Unilever CFO Graeme Pitkethly said he expects the shifts in consumer behavior to continue after lockdowns end.

QUIZ

Quizo Mode

1. Fill in the blank: ______ are payments sent by migrant workers back to people in their home countries. The World Bank estimates they’ll drop by 20% this year.

2. Emirates has released a plan to maintain social distancing measures when passenger operations pick back up. Which of the following is not part of that plan?

1. Blocked off middle seats
2. No magazines or other print entertainment
3. Crew/passengers required to wear masks and gloves
4. No bathroom access on short flights

3. Travis Scott debuted a song on his new tour that started yesterday. Where is the tour?

4. In YouTube’s 15-year history, which of these came first?

1. Justin Bieber makes his YouTube debut
2. Google acquires YouTube for $1.7 billion
3. “Charlie bit my finger” video goes viral
4. Susan Wojcicki becomes CEO

5. Which country has started to test a new digital currency in four of its cities?

Answers can be found at the bottom of the newsletter.

WHAT ELSE IS BREWING

• Bill Gates on the innovations we need to beat the coronavirus.
• U.S. states are starting to ease restrictions in a patchwork fashion. Georgia’s gyms, salons, bowling alleys, and tattoo parlors can open today (if they want, and with restrictions).
• Gap said it’s not paying April rent amid a rapidly deteriorating financial situation.
• LSU QB Joe Burrow was selected #1 by the Cincinnati Bengals in the first ever virtual NFL Draft.

BREW’S BETS

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FRIDAY PUZZLE

My friend Penelope, who is from La Jolla, went on a world vacation. She stopped in Santa Rosa, Toronto and Casablanca. What European capital did she also visit?

ANSWERS

Weekly News Quiz: 1. Remittances 2. Passengers will be allowed to use bathrooms 3. Fortnite 4. Google acquired YouTube first 5. China

• Lost debuted on TV
• Green Day released “American Idiot”
• Barry Bonds hit home run No. 700

Guess everyone was busy doing that.

COMMODITIES

We’re Gonna Need a Bigger Barrel

What happened

Prices of WTI, the U.S. crude benchmark, tanked on the backs of oil futures. Oil futures = financial instruments that let investors buy “abstract oil.” When a futures contract expires, that investment is converted into IRL oil.

• But investors typically sell before expiration, either 1) taking the profit/loss or 2) rolling their investment into next month’s futures contract.

May contracts expire today. But with the U.S. on lockdown and demand for oil near zilch, no one wants oil delivered. So yesterday, investors shed their May contracts ahead of expiration. x

Why can’t they hold onto it?

Marie Kondo can make 37 pairs of shoes disappear, but she can’t stuff millions of oil barrels into a wicker basket. There’s just no place to store the stuff.

Some traders are sending barrels on a leisurely cruise aboard very large crude carriers (literally, VLCCs). “Many traders are betting that the coronavirus pandemic will run its course and demand for oil will jump later this year,” the WSJ explains.

• Six-month VLCC leases have risen to an average of $100,000/day from around $29,000 a year ago.
• Sounds steep…but companies that have the liquidity and capacity could make ~$16 of profit per barrel after storage costs.

Big picture

Major oil producers recently struck a historic deal to cut daily production by 9.7 million barrels starting in May. But those reductions aren’t coming in time to trim the short-term glut.

The outlook? “Refiners are rejecting barrels at a historic pace and with U.S. storage levels sprinting to the brim, market forces will inflict further pain until either we hit rock bottom, or COVID clears, whichever comes first, but it looks like the former,” Michael Tran, managing director of global energy strategy at RBC Capital Markets, told Bloomberg.

COVID-19

Coronavirus Around the World

Georgia (the U.S. state): Gov. Brian Kemp said some businesses, including gyms and bowling alleys, can reopen Friday provided they comply with social distancing and sanitation measures. Tennessee and South Carolina also announced plans to ease lockdowns.

Minnesota: JBS, the world’s largest meat processor, has shut down its Worthington pork plant following an investigation that found 26 workers had contracted COVID-19. This plant accounts for about 4% of the U.S.’ pork supply.

Singapore: The city-state now has the most reported cases in Southeast Asia after a flare-up among foreign workers. Singapore had been praised around the world for its initial response.

Denmark: As the country starts to ease lockdown restrictions, children are going back to school and—we will cry when this happens—people can get their hair cut professionally. But that’s all based on one precondition: The country will start testing anyone with coronavirus symptoms.

HOSPITALITY

Branson: I’ve Never Seen Anything Like This

As Branson notes, his constellation of companies operate in some of the sectors hardest hit by virus containment policies: leisure, travel, aviation, hotels, and cruises.

• A desperate Branson asked the U.K. government for a loan to keep his Virgin Atlantic airline afloat.
• He even said he’d offer up his famous Necker Island estate in the Caribbean as collateral to “save as many jobs as possible around the group.”

Zoom out: Branson spent a good chunk of the letter playing defense against critics who point out he hasn’t paid income taxes in the U.K. since decamping for the British Virgin Islands, yet now wants money from British taxpayers. Branson countered that he’d pay back any government aid and has already promised to pour $250 million of his own money into Virgin Group.

+ While we’re here: Virgin Australia, 10% of which is owned by Virgin Group, entered voluntary administration (aka bankruptcy protection) this morning.

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CURRENCY

China Leaves Wallet At Home, Doesn’t Care

Cash is already a rare sight in China. With popular digital services like Alibaba’s Alipay and Tencent’s WeChat Pay, China’s payment tech leapfrogged the rest of the world in sophistication and adoption years ago.

• Still without an official name, the new currency is referred to internally as “DC/EP” or “digital currency/electronic payment.”

Just don’t call it bitcoin. While the most famous cryptocurrency is both anonymous and decentralized, DC/EP is neither.

• China’s central bank has said DC/EP will protect users’ privacy and be designed to avoid inflation. However…
• The WSJ notes any digital yuan China creates “would be centrally housed and become part of China’s surveillance state.”

Bottom line: Chinese central bankers say the goal of DC/EP is to replace some of the cash in circulation and be ready for use by the Beijing Winter Olympics in 2022. There’s also a laundry list of other central banks looking to issue a general purpose digital currency in the coming years.

GAMING

Don’t Go Sicko Mode

That sentence will make even a millennial feel out of touch, and we haven’t even mentioned…

The “metaverse”

Fortnite parent Epic Games is attempting to build the “metaverse,” brick by virtual brick. Emerging Tech Brew writer Ryan Duffy calls the metaverse a “digital third place” where users socialize, exchange money for goods, and consume media…like Fortnite’s Marshmello concert or an exclusive Star Wars event in 2019.

Instead of packing a physical venue, fans of Travis Scott will enter Fortnite’s online universe to watch his virtual avatar perform a new track for free.

Bottom line: Scott may not be charging admission at the gate, but there’s real money on the line–after the performance, Travis Scott-themed items will go on sale in Fortnite’s online store, which generated $1.8 billion in revenue in 2019.

WHAT ELSE IS BREWING

• IBM reported higher cloud computing sales last quarter, but withdrew its annual forecast for 2020.
• United Airlines expects to report a pretax loss of $2.1 billion in Q1.
• The National Restaurant Association said U.S. restaurants could lose $240 billion by the end of the year.
• Amazon has installed thermal cameras in its warehouses to scan workers for coronavirus symptoms.
• Facebook and Carnegie Mellon released a map showing county-by-county reports of COVID-19 symptoms.

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BREW’S BETS

• This site has an added bonus for anyone who’s interested: You can create your own word bank. Failed startups-themed game, here we come.
• Not a Codenames fan? Here’s an exhaustive guide on how to use the Houseparty app, where you can play games with up to eight players. We’ve heard good things about Chips and Guac.

Video treat: This COVID-19 commercial compilation pretty much sums up marketing in 2020. *Somber piano music plays*

Podcast episode: Tomorrow is Earth Day. Do you know if your favorite corporate behemoth is celebrating? This week on our Business Casual podcast, Brian Deese, global head of sustainable investing at BlackRock and one of the architects of the Paris Climate Agreement, explains why investing with the climate in mind = stronger returns. Listen now on Apple / Spotify / everywhere else.

FROM THE CREW

Brew’s Q’s

Click here to vote.

MOTORCADE TRIVIA

1. President Trump
2. South Korean President Moon Jae-in
3. British Prime Minister Boris Johnson
4. German Chancellor Angela Merkel
5. Japanese Prime Minister Shinzo Abe

MOTORCADE TRIVIA ANSWER

1. President Trump = a Cadillac nicknamed “the Beast”
2. South Korean President Moon Jae-in = Hyundai Nexo SUV
3. British Prime Minister Boris Johnson = Jaguar XJ Sentinel
4. German Chancellor Angela Merkel = Audi A8
5. Japanese Prime Minister Shinzo Abe = Toyota Century Royal

CANNABIS

Pot: Can’t Live With It, Can’t Live Without It

Well…until a pandemic hits. Policies intended to curb the spread of COVID-19 are highlighting some of the peculiar paradoxes of industries that follow different rules at different levels of government—industries like cannabis.

• Recreational marijuana is legal in 11 U.S. states, and medical use is permitted in 33 (both are allowed in Washington, D.C.). Some states have deemed marijuana businesses “essential” and allowed them to stay open during the shutdown.
• However, cannabis remains illegal at the national level.

To recap: necessary for people’s livelihoods in some states, breaking the law federally. Or as one law professor put it to the WaPo: “Yesterday’s vice is considered today’s essential service.”

Essential, but not eligible

While many cannabis companies saw a boom in the early days of lockdown, sales are now dipping. Many are experiencing additional financial pressures adjusting operations to delivery or drive-thru.

• However, because of their status at the federal level, marijuana companies were not eligible for any of the $350 billion in small business loans made available through the CARES Act.

Zoom out: Marijuana companies are used to being denied by large institutions: Big banks won’t touch the stuff, fearing legal blowback. Some small credit unions have stepped in, but the sector still mostly depends on cash transactions.

What’s next?

Pro-cannabis legislators and business owners are pushing for access to Small Business Administration funds that might be included in the next relief package. Also in play is the SAFE Banking Act, a bill that would keep federal regulators from taking any “adverse action” against financial institutions that work with cannabis companies. It passed the House last year but the Senate is a different story.

+ Want to learn more? Sign up for our newsletter Retail Brew, which is going into more detail on cannabis companies later today.

BANKING

PPPlease Fund

Yesterday, Treasury Sec. Steve Mnuchin and Democratic party leaders said the Senate could reach a deal as early as today and secure House approval Tuesday. The bill would also include $75 billion for hospitals and $25 billion for increased COVID-19 testing.

Will they work out Round 1’s kinks?

Banking execs compared PPP’s opening day to “a stampede through the eye of a needle.” Most small biz relief funds were accounted for within minutes, but demand hasn’t dropped off since PPP ran out of funding last Friday.

• JPMorgan disbursed $14 billion in loans (more than any other bank)…but still has about $26 billion worth of applications waiting for additional federal funding.

There’s been controversy. PPP was designed to help companies with <500 employees cover payroll, but several large chains with thousands of employees have secured maximum payouts. Potbelly, Ruth’s Chris Steak House, and Shake Shack received a combined $40 million in loans.

TRENDS

Our New World

Our takeaways:

We live in a virus’s dream world: More people are living in cities and traveling between cities than ever before. And viruses don’t need to go through customs.

Scientists are collaborating at warp speed: They’ve published around 3,000 papers on COVID-19, which is 20x the published research of other infectious diseases at the same point in the public health response.

Zoom has made history: Its surge ranks among the most remarkable growth stories in the internet age, outpacing even Instagram and Fortnite.

Federal relief was swift and massive: The U.S.’ $4.3 trillion of monetary and fiscal stimulus = 124% of government revenue in 2019.

Bond Capital

Looking ahead…“It’s hard to know exactly what return to work will look like.” While many businesses will never recover, “there will be new businesses that would have been inconceivable just a few years ago.”

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TESTING

Rhode Island: Short on Space, Big on Testing Capacity

Harvard researchers estimate states need to conduct 152 tests per 100,000 residents daily. But 34 states were conducting fewer than 50 tests per 100,000 people during the week ended April 15.

Just one state meets the threshold. Faced with the prospect of summer beach walks without Del’s frozen lemonade, Rhode Island mobilized. It’s been administering 185 tests per 100,000 residents.

• The secret sauce? On April 6, hometown hero CVS Health opened a rapid-testing clinic, doubling testing capacity. The state’s also the size of a U-Haul.

Zoom out: The debate around when to reopen is turning into a 2020 edition of the Federalist Papers. On Sunday, Vice President Pence called on governors to mobilize state labs. But Republican and Democratic governors pushed back, insisting they lack supplies needed for widespread testing, like swabs and reagents. Last night, Trump invoked the Defense Production Act to compel private manufacturers to make more swabs.

CALENDAR

The Week Ahead

Monday: Boeing resumes production in Washington state; IBM earnings

Tuesday: Existing home sales; earnings (Coca-Cola, Netflix, Snap, Chipotle, Travelers)

Wednesday: 50th anniversary of Earth Day; earnings (Delta, AT&T, Quest Diagnostics)

Thursday: Weekly unemployment claims; new home sales; NFL Draft begins; Ramadan begins; earnings (Intel, Eli Lilly, Domino’s, Southwest, Capital One, Blackstone)

Friday: Durable goods orders; earnings (Verizon, American Express, Sanofi)

WHAT ELSE IS BREWING

• Facebook will roll out a gaming app today to take on Google’s YouTube and Amazon’s Twitch, per the NYT.
• Bankruptcy watch: 24 Hour Fitness (potentially in the next few months) and Neiman Marcus (maybe this week).
• Matt Maddox, the CEO of Wynn Resorts, called on Nevada to conditionally reopen parts of the economy in early May.
• Walmart and Sam’s Club will require store workers to wear masks or face coverings beginning today.
• Marc Andreessen: “It’s time to build.”

BREW’S BETS

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[insert section 4]

Fun way to find new music: Radio.garden lets you listen to radio stations from all over the globe. Loving Philadelphia’s WXPN and whatever they’re playing in northern Finland.

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BEYOND CROSSWORD

You can complete the crossword here.

BEYOND CROSSWORD

Beyond Crossword

Toby Howell

Just call us the Brew York Times. Today, Beyond Crossword has graduated from its kindergarten roots to become a real life, 15×15 crossword puzzle thanks to Brew writer Toby Howell.

You can complete the crossword here.