fortune--2020-05-12--How can the stock market be doing so well right now?

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I am not the first to ask the obvious question: How can the stock market be doing so well when the economy is doing so badly?
The Information’s Jessica Lessin wondered last week specifically about tech stocks. The Economist devoted a cover story to the topic. This weekend, Fortune’s Anne Sraders wrote a smart piece encapsulating all the arguments why stocks have been so resilient in the face of a massive and rapid economic contraction.
I’ll boil the key points down to two, with the proviso that the first makes sense as far as it goes and the second doesn’t hold up. First, because the Federal Reserve Bank has injected so much capital into the U.S. economy, most big companies that need capital have access to it. With money cheap, investors need to buy stock to earn returns. Second, as Sraders explains well, the market already plunged on the horrible news of widespread destruction. Now it is focused on the inevitable recovery.
This strikes me as wishful thinking. The virus is loose on the land, where 25 million people are out of work. Factories are shutting, planes are grounded, and government budgets large and small are busted. If you think everything is peachy simply because folks in a few states are getting haircuts again, you really shouldn’t be buying stocks.
The effects of an economy that likely will be down at least 5% on the year won’t vanish once a few more people get sick. Tech companies sell their wares in the real economy, the one where there are food lines and uninsured and unexpectedly unemployed people. And just because there’s a recovery doesn’t mean it will be like it was before. But I hope I’m wrong about this.
Adam Lashinsky
@adamlashinsky
adam.lashinsky@fortune.com
This edition of Data Sheet was curated by Aaron Pressman.
NEWSWORTHY
How soon is soon. A defiant Elon Musk tweeted that he was reopening Tesla's factory in Fremont, Calif., before local county authorities okayed the move. “I will be on the line with everyone else,” Musk wrote. “If anyone is arrested, I ask that it only be me.” Gov. Gavin Newsom approved the restart of manufacturing in the state as of May 8, but Alameda County, where the Tesla factory is located, had other ideas. Tesla filed a lawsuit against the county over the weekend in an effort to open the plant sooner.
There was this devastating satirical piece on that on the op-ed page of the Times. Speaking of mean tweets, Twitter said on Monday that it's implementing a new policy on harmful and incorrect posts about coronavirus. Some will be removed, others labeled as wrong. Asked whether the policy would apply even to the oft-misleading Twitterer-in-chief, the company said labels would go on "regardless of who the speaker is."
Full speed ahead, Mr. Parker, full speed ahead. Returning to the land of overhyped startups, the troubles at short video service Quibi are starting to gain attention. Former Dreamworks boss Jeffrey Katzenberg talked to the New York Times for a story in today's paper. It's not nearly as entertaining as the Adam Neumann chronicles yet, but there are still some luscious bits. What went wrong, KBerg? “I attribute everything that has gone wrong to coronavirus." Why is TikTok so successful, KBerg? "That’s like comparing apples to submarines. I don’t know what people are expecting from us. What did Netflix look like 30 days after it launched?" What, indeed?
Picture perfect. A.I. apps have gotten really good at learning from images, so Intel and Microsoft developed a clever new way to uncover rogue malware programs. The project, dubbed Static Malware-as-Image Network Analysis, or STAMINA, converts binary computer code into greyscale images and looks for patterns. The project accurately caught over 99% of malware samples, the companies say.
Future perfect tense. Futures contracts linked to bitcoin have been trading successfully for a few years now, so it's time for derivatives on the next most popular cryptocurrency, it seems. Digital currency exchange ErisX, which already offers bitcoin contracts, said it launched Ethereum futures contracts trading on Monday.
FOOD FOR THOUGHT
Researchers at Indiana University wondered about whether the designs of web sites have gotten more or less diverse. They studied over 1,000 top sites to determine if they were starting to look more similar—and they were. Sam Goree, one of the researchers, explains the study in an essay for The Conversation.
On the one hand, adhering to trends is totally normal in other realms of design, like fashion or architecture. And if designs are becoming more similar because they’re using the same libraries, that means they’re likely becoming more accessible to the visually impaired, since popular libraries are generally better at conforming to accessibility standards than individual developers. They’re also more user-friendly, since new visitors won’t have to spend as much time learning how to navigate the site’s pages.
On the other hand, the internet is a shared cultural artifact, and its distributed, decentralized nature is what makes it unique. As home pages and fully customizable platforms like NeoPets and MySpace fade into memory, web design may lose much of its power as a form of creative expression. The Mozilla Foundation has argued that consolidation is bad for the “health” of the internet, and the aesthetics of the web could be seen as one element of its well-being.
ON THE MOVE
The Libra Association, Facebook's digital currency effort, is getting a new boss with plenty of experience in regulatory matters. Stuart Levey, HSBC’s chief legal officer and a former undersecretary of the U.S. Treasury, will take over this summer...Zoom added former national security advisor H.R. McMaster to its board of directors...Lyft hired Sacha Arnoud to lead its advanced development team working on self-driving car technology. Arnoud joins from Waymo where he led the perception team and worked on machine learning infrastructure...entrepreneur Jeff Ma joined Microsoft as manager of its effort to reach out to startups. Ma previously worked as VP of analytics and data science at Twitter.
IN CASE YOU MISSED IT
Working from home during coronavirus is going so well that this Fortune 100 company is going to keep doing it—permanently By Lee Clifford
A look at the tech troubles plaguing the stimulus check and PPP small business loan portals By Rey Mashayekhi
Say Amazon actually buys AMC Theatres. What would that be like? By Aric Jenkins
How the coronavirus crisis influences Melinda Gates’ $1 billion commitment to gender equality By Emma Hinchliffe
How Mastercard’s CEO is working toward financial inclusion during the pandemic By McKenna Moore
Do U.S. markets still have an appetite for Chinese IPOs? By Lucinda Shen
(Some of these stories require a subscription to access. There is a 50% discount for our loyal readers if you use this link to sign up. Thank you for supporting our journalism.)
BEFORE YOU GO
If you have thus far not seen Lin-Manuel Miranda's hyper-entertaining and historically informative musical Hamilton, your wait may soon be over. Miranda took to Twitter this morning to announce that the movie version of Hamilton is finally near release: July 3, coming to a streaming platform near you.
Aaron Pressman
@ampressman
aaron.pressman@fortune.com


fortune--2020-05-12--The coronavirus downturn threatens to leave older women behind

Supreme Court appears likely to reject Trump ’ s claim he ’ s immune from criminal investigation

Good morning, Broadsheet readers! Coronavirus testing confusion sounds familiar to the Theranos whistleblower, face masks are mandated in France but burqas are still banned, and the economic downturn threatens to leave older women behind. Have a great Tuesday.
– No woman left behind. The April jobs report, with its confirmation of the gender gap in rising unemployment—women’s unemployment is at 16.2% to men’s 13.5%—included a remarkable statistic. Young women ages 20 to 24 face one of the highest unemployment rates of any demographic slice: 28% compared to 24% for men in the same age group, according to the National Women’s Law Center.
But another unemployment data point, though not as likely to grab headlines, is deserving of attention: the jobs crisis facing older women. According to the AARP, women over the age of 50 now face an unemployment rate of 15.5% compared to 12.1% for men in the same demographic.
AARP CEO Jo Ann Jenkins is working to make sure older women aren’t forgotten during this economic downturn. “Older women are likely to earn less than men, to have saved less, and to have longer life expectancies, with the health care costs that go with it,” Jenkins told me via email. “When and if she finds a new position, there’s also a likelihood the new job isn’t as good as her former one—a condition of underemployment, often related to age and gender discrimination, that worsens her long-term financial outlook.”
Many women who fall into this demographic took breaks from the workforce earlier in their careers because of caregiving responsibilities—a contributor to the pay gap that costs women as much as $1 million in lifetime earnings. That reality compounds the financial impact of job loss during a downturn. “For a woman to lose her job later in her career is a serious setback,” Jenkins says.
When older workers, including women, are unemployed during a downturn, they are likely to stay unemployed for longer; a woman is 18% less likely to find a new job when she’s between the ages of 50 and 61 than when she is between 25 and 34, according to a study by the Urban Institute. That challenge is especially concerning during an economic crisis in which recovery depends on public health.
This demographic analysis is one of many to parse from the BLS report; there is also, of course, the crisis facing women of color of all ages. Black women’s unemployment reached 16.4% and Latina unemployment hit 20.2% in April. In total, the economic crisis has wiped out the entirety of the 11.1 million jobs women gained in the last decade; men lost 85% of their jobs gained in the same period.
As lawmakers try to ignite an economic recovery and companies slowly begin hiring again, Jenkins has a plea: don’t leave older women behind.
Emma Hinchliffe
emma.hinchliffe@fortune.com
@_emmahinchliffe
ALSO IN THE HEADLINES
- Testing throwback. Coronavirus antibody tests, and accompanying confusion about what they mean, urgent need for testing, and possibility for financial gain, bring to mind, for some, another health-related diagnostic tool: Theranos's discredited blood tests. Tyler Shultz, who blew the whistle on Theranos founder Elizabeth Holmes, warned that Theranos would be "thriving" during the pandemic if it were still operating. Bloomberg
- Another Amazon. Tatyana Bakalchuk became Russia's first female self-made billionaire—and one of very few to achieve that level of financial success without ties to the Kremlin—after she founded the e-commerce site Wildberries. Bakalchuk started the business as a women's apparel online retailer while she was on maternity leave; today she's keeping the platform running through the increased demand of the pandemic. Financial Times
- Veepstakes. Will Joe Biden's VP selection be influenced by his own short time up against Sarah Palin? This NYT piece examines the influential chapter in the former veep's history. Plus, Stacey Abrams endorsed Joe Biden for president this morning.
MOVERS AND SHAKERS: The Bank of Japan appointed Tokiko Shimizu, head of its Nagoya branch, to a four-year term as executive director; she is the first woman to hold a top role outside the 138-year-old bank's policy board. Twitter adds Fei-Fei Li, former chief scientist of artificial intelligence/machine learning at Google Cloud, to its board of directors. Lambda School hired Molly Graham, former VP of operations at the Chan Zuckerberg Initiative, as COO.
IN CASE YOU MISSED IT
- Face coverings allowed? In France, face masks are now mandatory—but burqas are still banned. Muslim women and others object to what now seems like more of a double standard than ever. Washington Post
- Running a company. During the coronavirus pandemic, EY U.S. chair and Americas managing partner Kelly Grier has used her usual eight-mile weekend run to think through her decisions about the crisis. During one recent workout, she got so swept up in her internal debate that she accidentally ran 11 miles. Wall Street Journal
- Fighting chance. Scottish First Minister Nicola Sturgeon again clashed with U.K. Prime Minister Boris Johnson as he began the process of easing the country's lockdown, including a new slogan, "stay alert," which many criticized as confusing. Sturgeon said that mixed messages mean that "people will die unnecessarily." Guardian
-Rule-breakers. According to a new study out of the U.K., young men are more likely than young women to break social distancing rules. Out of 2,000 13- to 24-year-olds surveyed, half of the men ages 19 to 24 had met friends or family members they did not live with during the lockdown, compared to 25% of women in the same age bracket. BBC
ON MY RADAR
Betty Wright, soul singer who mentored a new generation, dies at 66 New York Times
A forgotten 20th-century photographer's wild portraits of women in nature The New Yorker
New podcast features archived audio of Barbara Bush reading children's stories People
#MeToo is at a crossroads in America. Around the world, it’s just beginning Washington Post
PARTING WORDS
"It is absolutely a political act to say, I have got to take care of myself so that I can continue to do the work that I hope will make this world a little bit better."
-Pulitzer Prize-winning journalist Nikole Hannah-Jones on the politics of self-care


fortune--2020-05-12--Oil-rich Norway will withdraw a record $37 billion from wealth fund as COVID-19 batters economy

Norway plans to draw a record 382 billion kroner ($37 billion) from its wealth fund, in a move that will force the world’s biggest sovereign investor to embark on an historic asset sale to generate cash.
The unprecedented withdrawal is more than four times Norway’s previous record, which was set in 2016. The development reveals the scale of the economic damage done by the twin crises of Covid-19 and a collapse in global oil markets, with western Europe’s biggest crude exporter now facing its worst economic slump since World War II.
For the first time, Norway’s government is set to withdraw considerably more than the $1 trillion fund generates in cash flow from dividends and interest payments. The fund hasn’t provided an estimate for its income this year, but has said it’s bound to be lower than previously expected, as companies slash shareholder payouts. The fund’s cash flow was 243 billion kroner last year.
With asset liquidation now an inevitability, the fund is likely to focus sales on its bond portfolio. That’s because it needs to increase its holding of stocks after the equity portfolio fell below a required 70% target of the total portfolio.
Norway’s government uses its oil wealth to plug budget deficits every year. Until 2016, the so-called structural oil-corrected deficit was covered by the state’s income from petroleum, namely taxes, stakes in offshore fields and dividends from Equinor ASA. As long as the government was generating a surplus, it could deposit money into the fund. In 2016 and 2017, deposits were replaced by withdrawals, as petroleum revenue dwindled due to a slump in prices. But the fund was still able to cover that easily with its cash flow.
In 2020, everything changed. The government now expects to spend a record 420 billion kroner of oil money on crisis packages to prop up its economy, with the collapse in petroleum revenue adding to the shock. The government predicts its net cash flow from petroleum activities will drop by 62% to 98 billion kroner, the lowest since 1999.
More must-read energy sector coverage from Fortune:
—Why the coronavirus crisis could make Big Oil greener
—Buccaneers of the basin: The fall of fracking—and the future of oil
—As lockdowns decimate energy demand, renewables come out ahead of coal
—The Church of England is going up against ExxonMobil on climate change. Can it win?—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Why the coronavirus crisis could make Big Oil greener
Subscribe to The Loop, a weekly look at the revolutions in energy, tech, and sustainability.


fortune--2020-05-12--Ford versus Tesla: design thinking and the return to work

This is the web version of Business x Design, a newsletter on the power of design. Sign up here to get it in your inbox.
On Monday, Detroit’s Big Three automakers will restart production lines shut down in March amid the spreading coronavirus outbreak. The agreement to reopen comes after weeks of haggling—among the companies, the United Auto Workers, Michigan’s Republican-controlled legislature, and the state’s Democratic governor Gretchen Whitmer.
The standoff was politically charged. But executives at the Big Three—GM, Ford, and Fiat-Chrysler—eventually persuaded union leaders that it could take steps to minimize the risk of infection on the job.
As they return, workers at Big Three factories will receive extensive health screening. They’ll be provided with masks and face shields or safety glasses, required to stand six feet apart, sanitize their hands. In some cases, employee workstations will be separated with clear plastic panels. Tools and equipment will be sanitized each shift. Ford is reportedly testing electronic wristbands that detect and alert workers when they are within six feet of someone else.
Design consultants, both internal and external, have been actively involved in thinking through these new ways of working. As I noted in this space two weeks ago, Ford CEO Jim Hackett is an ardent advocate of “design thinking,” an approach to problem-solving that emphasizes empathy and putting the needs of users first.
Iain Roberts, chief operating officer at IDEO, the global design consultancy that developed the design thinking approach and works closely with Ford, stresses designers can’t just dream up solutions in isolation. The key, he argues, is to engage stakeholders to devise solutions everyone understands, accepts, and is willing to implement. That’s a message I’ve heard from many designers over the past several weeks in return-to-work discussions.
“Ramping up internal communications is vitally important, including regular sharing of information about the company’s evolving knowledge of the crisis and how it is using that knowledge to protect employees and the organization,” declare consultants at McKinsey in a recent report on manufacturing in the COVID crisis. “The best communication is two-way, with managers answering questions and engaging in an open dialogue with employees at all levels.”
“You have to build trust,” says Adam Cutler, a top designer at IBM, which also champions the design thinking approach. “People don’t want decisions handed down to them. You have to give them the space to tell you what they’re feeling.”
And then there’s Elon Musk. In trying to restart production lines at Tesla’s sole U.S. plant in Fremont, California, the electric carmaker’s founder has engaged in a different kind of dialogue—one that’s not exactly from the design thinking playbook.
On Monday, without any consultation or approval from the state, Tesla ordered the plant’s 10,000 employees back to work. Musk has been a vocal critic of pandemic-related lockdowns, which he has called “fascist,” and argued that measures taken to combat the virus will prove more destructive than the infection.
The previous weekend, the headstrong CEO filed a federal lawsuit against Alameda County, which has ordered the plant closed as a non-essential business. For good measure, he threatened to move the factory to another state. In reopening, Tesla has announced a plan to ensure worker safety at the factory, including many measures similar to those being rolled out by the Big Three.
“We are taking the time we need to get our personnel properly trained before they begin work and all employees must complete an online video training before returning to work at any Tesla facility,” the company said, noting the prevention measures at its California plant are modeled on steps it has taken at its Shanghai Gigafactory.
It’s unclear whether those measures will be sufficient to reassure the plant’s workers. Tesla is the only large U.S. automaker that isn’t unionized. Vox reports that Musk has employed a host of different tactics to stop workers from joining the UAW. The Tesla founder’s latest pledge to stand with his workers may not put them at ease.
“I will be on the line with everyone else,” Musk tweeted. “If anyone is arrested, I ask that it only be me.”
Clay Chandler
clay.chandler@fortune.com
NEWS BY DESIGN
Twitter
Learn more
Twitter rolled out a new policy for how it flags and, in some cases, obscures tweets “containing disputed or misleading information related to COVID-19.”At its most basic, the system inserts a link that tells users to “Get the facts about COVID-19” and directs them to either a Twitter-run info page or a third party site.
Spot the dog
In scenes that prequel a Black Mirror dystopia, the Singaporean government deployed Boston Dynamics’ dog-like robot, Spot, to patrol one of the city’s public parks. The yellow quadruped broadcasts reminders on social distancing while signs tell visitors not to interfere with the robot’s work.
Go your own way
Speaking of Black Mirror: in 2018 the near-future sci-fi series developed a Choose Your Own Adventure format film for Netflix, called Bandersnatch. It wasn’t the first take on interactive TV—Netflix itself was already developing similar concepts for kids—but Bandersnatch was perhaps the most ambitious. Today, the Tina Fey comedy series Unbreakable Kimmy Schmidt launched an interactive film on Netflix, too. Will the novelty catch on?
Take to the streets
Transport for London (TfL) anticipates cycling in the UK capital could increase ten-fold once lockdown is over as the Mayor’s office seeks to reduce public transport usage. TfL announced last week it would fast-track a “transformation of London roads,” widening pavements and building new cycling routes to allow for social distancing. Other cities are pivoting towards pedestrians, too. Here’s a good read on how public space in the new world might look.
Starman
Last week I shared with you the Micrashell semi-hazmat for socializing during the pandemic. Continuing the trend: here’s an inflatable, cantilevered face shield that leaves space for food and drink (and, presumably, COVID-19) to enter your mouth; and a retro-futuristic space helmet that bubbles around your head.
EVENTS BY DESIGN
May: An extremely pertinent conference on the integration of technology and healthcare due to convene in Manchester, UK, next week has been postponed until after the summer. The Lodz Design Festival, also scheduled for next week, has been postponed until November.
June: The month-long London Festival of Architecture is running a stripped back event online this year, with the core public programme moved to (hopefully) later this year. The San Francisco Design Week, which starts June 16, has gone digital too. Also, London Fashion Week: Men’s would have walked June 12-14. Instead, it will sit online.
Ongoing: Virtual Design Festival, a collaborative effort from Dezeen, Dutch Design Week and Design Indaba continues to exhibit work from a global roster of designers; the Serpentine Gallery has taken Cao Fei’s Blueprints exhibition online.
QUOTED BY DESIGN
“I don’t know when it will be safe to return to singing arm in arm at the top of our lungs, hearts racing, bodies moving, souls bursting with life. But I do know that we will do it again, because we have to….We need moments that reassure us that we are not alone. That we are understood...And, most important, that we need each other.”
Foo Fighters frontman Dave Grohl writes in The Atlantic, yearning for the time when concerts can return. Grohl’s not wrong: the prolonged isolation of the pandemic is taking its toll on people’s mental health, and a slew of start-ups have risen to address that silent crisis, but people need to connect for real.
Fortune’s David Meyer reports live performances are already coming back to life in Europe. Concerts under the cloud of coronavirus, however, don’t look the same. Performers need to maintain social distance on stage, audiences are dancing in the confines of their own cars, and the organizers are still figuring out the economics of it. But all those layers of constraint are creating “new avenues for creativity.”
This week's edition of BxD was edited by Eamon Barrett. Email him at eamon.barrett@fortune.com


fortune--2020-05-13--Wall Street heavyweight to investors: the hopes of a V-shaped recovery is “a fantasy”

These stocks have been weakened by the coronavirus pandemic—and activist investors could soon pounce

Stan Druckenmiller said the risk-reward calculation for equities is the worst he’s seen in his career, and that the government stimulus programs won’t be enough to overcome real world economic problems.
“The consensus out there seems to be: ‘Don’t worry, the Fed has your back,’” said Druckenmiller on Tuesday during a webcast held by The Economic Club of New York. “There’s only one problem with that: our analysis says it’s not true.”
While traders think there is “massive” liquidity and that the stimulus programs are big enough to solve the problems facing the U.S., the economic effects of the coronavirus are likely to be long lasting and will lead to a slew of bankruptcies, he said.
“I pray I’m wrong on this, but I just think that the V-out is a fantasy,” the legendary hedge fund manager said, referring to a V-shaped recovery.
Druckenmiller’s remarks are among the strongest comments yet by a Wall Street heavyweight on the bleak outlook facing the U.S. They also stand in contrast to the optimism that has pushed the S&P 500 Index to rally almost 30% since its March low even as the pandemic has brought the economy to a standstill, seized up credit markets and ended the longest bull market in history.
The damage spurred the Federal Reserve to unveil a raft of emergency lending programs and Congress to unleash almost $3 trillion in stimulus funds. But those programs aren’t likely to spur future economic growth, Druckenmiller said.
“It was basically a combination of transfer payments to individuals, basically paying them more not to work than to work,” he said. “And in addition to that, it was a bunch of payments to zombie companies to keep them alive.”
Druckenmiller said he thinks that the current liquidity will soon shrink as U.S. Treasury borrowing crowds out the private economy and even overwhelms Fed purchases.
Druckenmiller, 66, the former chief strategist for George Soros, converted his hedge fund into Duquesne Family Office in 2010. His long-term track record, making returns of about 30% a year over three decades, established him as one of the world’s top money mangers. He has an estimated net worth of $5.8 billion, according to the Bloomberg Billionaires Index.
Like other investors and Wall Street executives, Druckenmiller agrees that the pandemic will lead to more regulation and higher taxes.
Other highlights from the Druckenmiller interview:


fortune--2020-05-13--These stocks have been weakened by the coronavirus pandemic—and activist investors could soon pounce

France is the one place where Amazon workers are winning

When there’s blood in the water, sharks start to circle. And when companies’ stock charts flash bright red, as the vast majority have done in reaction to the coronavirus pandemic, activist investors are more likely to bite.
Activists operate by amassing big stakes in companies and using the resulting leverage to pressure management to change strategy, often in ways designed to deliver quick returns to shareholders. Lower share prices, of course, make the first part of the strategy easier to execute. In 2007 and 2008, years when stocks plunged as a result of the financial crisis and Great Recession, the number of activist campaigns ticked up sharply.
The pattern may well repeat itself amid the chaos wreaked by COVID-19. The price/earnings ratio of the S&P 500 has tumbled from 23.5 in January to 20.9 today—hardly rock-bottom by historic standards, but cheap enough to bring out the market’s hammerheads and great whites. Dramatic moves in March by activist hedge fund Elliott Management, which elbowed its way onto Twitter’s board, and Carl Icahn, who put three allies on the board of Occidental Petroleum, were aided by the firms’ plummeting stock prices.
In the short run, successful dissident campaigns are usually good for other stockholders, as shares rise in anticipation of a turnaround. That means there’s potential profit to be made in expecting dissidents’ victories. And recent findings by a group of researchers from U.S. universities reveal a telling pattern: Activists are much more likely to win at companies in which actively managed mutual and pension funds already make up a high percentage of ownership.
228 Number of companies in the S&P 500 whose shares are down by 20% or more since Jan. 1, 2020. Source: Factset
Most activists, like most sharks, are pack hunters: They need to find allies among a company’s current investors who will get on board with their strategic reforms. To find out who those allies tended to be, the recent study looked at 188 activist campaigns from 2008 to 2015 that got as far as a shareholder vote. The researchers found that index-fund giants like Vanguard, BlackRock, and State Street were less likely to join the sharks in rocking the boat. Those companies’ stakes and clout have grown as customers have poured trillions into their market-tracking funds. But each sided with current management in a substantial majority of activist fights.
Active funds, on the other hand, were much more amenable to joining the hunt. On average, they supported campaigns at a rate more than 12 percentage points higher than passive funds. A few big players in active management, including Mutual of America, Gabelli Asset Management, and Goldman Sachs Asset Management, supported well over 60% of the campaigns.
When activists target firms, “the shareholder base clearly matters,” says Alon Brav, a professor of finance at Duke University and a coauthor of the research. And it stands to reason that managers of active funds, which—unlike index funds—have a mandate to outperform the broader stock market, would endorse strategies that could give a company’s shares a dramatic near-term boost.
Which of today’s weakened companies could get an activist bump? To dig into that question, Fortune looked at the companies ranked by research firm Activist Insight as most vulnerable to a dissident campaign, based on return on equity, stock performance, and other factors. We then sorted those companies by which had the highest share of ownership in the hands of active funds, to find businesses that might look tasty to a financial carnivore.
Clothing giant PVH (PVH, $46) owns several big-name brands, including Tommy Hilfiger and Calvin Klein, which account for about 85% of its sales. PVH has successfully integrated those brands under one roof, says Simeon Siegel, an analyst at BMO Capital Markets. But its reliance on a sprawling web of physical retail outlets—including struggling department stores and its own dedicated stores—was hurting its performance even before the pandemic erupted, and its stock is down 59% year to date. Closing some stores and pulling out of other retailers could help PVH become far more profitable. Reform-minded activists could find a receptive audience for such ideas: 39% of PVH’s shares are held by active funds.
67% Decline in American Airlines’ share price since Jan. 1. Source: Bloomberg
A global travel shutdown has devastated every air carrier, and American Airlines (AAL, $10) is burning cash at a rate of $70 million a day. The company reported $46 billion in revenue in 2019: David Vernon, an analyst at Bernstein, estimates sales will reach only 50% of that in 2021. American also took on $21 billion in debt to revamp its fleet not long before the crisis. That move seems spectacularly ill-timed, but it may leave American in a favorable position when travel recovers, since few other airlines will be able to finance similar overhauls anytime soon. That fact, plus a share price that has cratered by two-thirds over the past three months, could entice an activist. And the airline’s active-fund ownership, with 26% of its shares, might welcome fresh faces in the boardroom to implement post-pandemic reforms.
Like their peers, oil producer Noble Energy (NBL, $10) and oil-and-gas equipment supplier Flowserve (FLS, $27) are grappling with the near disappearance of oil demand. That crisis won’t last forever, but it could give management an opportunity to streamline operations, especially if dissident investors offer a nudge. Flowserve might consider reducing its footprint in Europe, where its manufacturing of pumps and valves was outpacing revenue long before the coronavirus crisis, says Nathan Jones, an analyst at Stifel. Noble, which has operations in the U.S., West Africa, and the Mediterranean, could focus more tightly on its recent oil find off the shores of Israel; Morningstar analyst Dave Meats says unusually low operating costs could make that field particularly profitable. With active funds accounting for over 30% in ownership of both companies, and both well under $5 billion in market capitalization, they’re textbook targets for an activist shake-up.
A version of this article appears in the June/July 2020 issue of Fortune with the headline “Activists get ready to pounce on weakened stocks.”


fortune--2020-05-13--France is the one place where Amazon workers are winning

If you want to take on a trillion-dollar company in the midst of rising unemployment and a deep economic slump, it helps to live in worker-friendly France.
That’s clear from Amazon’s French troubles this past month as two judges have ruled in favor of nearly 10,000 workers, telling the company that it failed to properly protect them from the coronavirus—echoing accusations from Amazon workers in the U.S. that the COVID-19 crisis has left them vulnerable to a deadly disease.
The battle in France has ground Amazon’s online ordering business in the world’s sixth biggest economy to a halt for four weeks—at the very time when its sales have rocketed across the locked-down, COVID-19 planet. Amazon stock is up nearly 30% this year.
Now, as Amazon tries to reopen its six fulfillment centers in France, perhaps as soon as this week, the labor unions are saying: not so fast.
“We have a really precise security plan to propose to Amazon, and if Amazon does not agree it could be very uneasy for them to open,” says Stéphane Enjalran, national secretary for the Solidaire Union, which sued Amazon France last month claiming that its members were at risk of being infected with COVID-19 because of risky conditions inside its fulfillment centers.
“We can go to court and denounce them,” Enjalran says.
Enjalran says “dozens” of Amazon workers have fallen ill with COVID-19 since the virus hit France, with one still in serious condition in a hospital south of Paris.
Almost as soon as President Emmanuel Macron declared a severe nationwide lockdown on March 17, Amazon workers complained of being unable to social distance in warehouses and about the lack of hand sanitizer and facial masks. Both items were in dire short supply across France until recently, and the government strictly restricted their sale. Back in March, Macron had instructed online retailers to remain open since almost all stores were shut until France’s lockdown ended on Monday.
Amazon insists that from the start it implemented COVID-19 safety measures that went far beyond the government’s guidelines. Those included social distancing of six feet, double the official one-meter rule, and issuing workers masks before most other companies. They also checked workers’ temperatures in warehouses and intensified cleaning procedures in the warehouses.
“We have put extreme measures in place to keep our people safe,” Julie Valette, Amazon spokesperson in Paris, says. Like all companies everywhere, she says, when COVID-19 hit, “there was no playbook.”
With many in the country of 67 million ordering everything from phone chargers to books to shampoo online, the company was going gangbusters, and the pace inside the warehouses hugely increased, according to Enjalran. Even Amazon’s stepped-up safety measures left workers facing big risks of infection, he says. “Each warehouse day after day was saying there was another colleague sick with COVID.”
Perhaps sensing their crucial role at a historic moment, Amazon workers sued for safer working conditions, and on April 14, a French judge ruled in their favor, ordering the company to deliver only essential items or risk being fined €1 million (about $1.87 million) a day.
Rather than having to figure out the necessity of each item ordered, Amazon instead halted its deliveries, and they remain at a standstill today. “It was absolutely not operational,” says Valette. “What was an essential product? Is a hairbrush essential? Is a condom essential?”
Amazon appealed the judge’s decision in late April and lost again, although this time, the judge cut the penalties to €100,000 (about $108,700) per violation and listed the items Amazon was permitted to ship. Even so, the company estimated that even tiny errors could cost it about €1 billion a week. Amazon last year became France’s biggest online retailer.
Enjalran concedes that in some ways, Amazon is a good employer. It is paying its French workers 100% of their salaries, despite the fact that they are idling at home.
Yet he was shocked to discover last week that Amazon had applied to the French government to cover its payroll costs, the country’s equivalent of the U.S.’s Payroll Protection Program.
Facing a 6% drop in GDP this year, French officials declined, saying that the provisions did not cover a situation like Amazon’s labor woes. The government also predicted the likely outrage that a loan to Amazon could ignite among the French—anger that Enjalran neatly summed up. “It was unbelievable,” he says of Amazon’s request for government help. “As I always say, Amazon does not know the meaning of the word shame.”
Seemingly out of options, the company appealed to the French Supreme Court last week to annul the ruling against it, arguing that it has instituted far-reaching safety measures.
It is unclear whether Amazon might finally prevail, and it could take weeks before the Supreme Court rules.
But Enjalran says workers have already won their case in one respect: their demand that union reps participate in determining Amazon’s COVID-19 strategy. That is now happening, according to Amazon. “We have started to consult with [labor] works councils and are calling for their progressive and positive input through this process,” Valette says.
For Amazon HQ, back in Seattle, its tussle with French workers has far wider consequences than reopening its six warehouses in the country. The outcome could inspire similar actions elsewhere among hundreds of thousands of workers—including in the U.S. The firing of American union activists during the pandemic has been widely publicized in France, as a mirror of what French workers have demanded—albeit in a country with far stronger labor protections. Amazon Vice President Tim Bray quit earlier this month, saying that the company had been “chickenshit” for firing the activists.
Enjalran says he and other union activists had closely followed Bray’s action.
“What we are doing was not only for Amazon and not only for French workers,” he explains. “We are connected to workers in the U.S. We are giving advice to Italian, German, British workers at Amazon.”
All the more reason for Amazon to fight to resolve its battle in France.


fortune--2020-05-13--Mystery coronavirus case ends Hong Kong’s 23-day streak of no local transmission

Hong Kong’s 23-day streak without a case of local coronavirus transmission has come to an end, reflecting the challenge of eradicating a virus that can spread undetected through carriers with no symptoms.
The case of a 66-year-old woman with no recent travel history becoming infected, confirmed by the government in a briefing on Wednesday, dashes hope that the city had successfully contained the virus after nearly four months of school closures and social distancing measures.
Her five-year-old granddaughter has also been confirmed to be infected, while six other family members have displayed symptoms and are now in isolation in hospital, said Chuang Shuk-kwan, head of the health department’s communicable disease branch.
The woman, who lives in the neighborhood of Tsuen Wan, first developed a fever last Friday and tested positive on Tuesday, she said. Officials don’t yet know how she picked up the infection.
The emergence of hidden local transmission chains is a setback to the government’s plan to reopen schools and loosen border restrictions with mainland China as cases dwindle. After months of social distancing measures, Hong Kong was on verge of reverting to normal life. Instead, the Asian financial hub now faces a potential resurgence of cases as it’s unclear how many people the woman came into contact with before her infection was identified.
Health officials are testing all residents in the two housing blocks that the woman visited, said Chuang.
Besides the woman and her granddaughter, a third case of a traveler returning from Pakistan was also reported on Wednesday.
“This is the challenge of Covid-19, the fact that so many cases are asymptomatic,” said Nicholas Thomas, an associate professor at the City University of Hong Kong. “Even though there have been no cases for nearly three weeks, that doesn’t mean that the virus is not in circulation. This is a problem not just for Hong Kong but for all countries as they seek to move out of lockdown and restart their economies.”
The resurgence of cases will complicate the political debate in Hong Kong on how quickly social distancing measures should be eased. While Hong Kong leader Carrie Lam’s administration eased limits on social gatherings to eight people earlier this month, the rule has come under pressure for being arbitrarily designed to forestall street protests, which in any case have re-emerged.
Separately, Hong Kong’s education chief said on Wednesday that the government wouldn’t push back the reopening of schools, currently slated to restart on May 27, for now.
“If the goal is just to eradicate the virus then Hong Kong should go back into shutdown mode,” said Thomas, who has edited an academic book series titled “Health Security and Governance.” “But it is about the virus against the backdrop of the economic and social needs of the community and for that reason this one case is unlikely to prevent the restarting of Hong Kong.”
Hong Kong’s been lauded for reacting quickly to the epidemic, which kept its outbreak small despite its proximity to mainland China. Many of its moves made as early as January — almost universal mask-wearing and the closure of schools and offices — have since been adopted globally as the pandemic widened.


fortune--2020-05-13--Hasty lockdown lifts could slow economic recovery—just ask Dr. Fauci

This is the web version of CEO Daily. To get it delivered to your inbox, sign up here.
Good morning. David Meyer here in Berlin, filling in for Alan.
On Sunday I went for a run around my large local park, where hundreds of Berliners were enjoying the warmth. I had just read an article about how people exercising could pose more of a virus-spreading risk, so, though I have no reason to suspect I am infected, I wore a mask out of a sense of social responsibility. Pandemic etiquette, if you will.
I was the only runner there to do so and, among the not-very-socially-distant crowds on the grass and paths, I counted just six masks. It should have felt calming to see scant evidence of this pandemic, but it was mostly terrifying.
Germany is doing well, relative to countries such as the U.K., in how it is handling COVID-19—which is why so many people are watching our rollback of lockdown restrictions, to see what happens. But I fear comparative success is leading to complacency that could allow a severe second wave. Just because our shops and restaurants are cautiously reopening, that doesn’t mean the coast is clear.
My weekend experience sprang to mind when Anthony Fauci gave remote testimony to senators yesterday, issuing a stark warning about the consequences of moving out of lockdown too quickly.
Without being watchful and ready to respond to early signs of resurgence, the infectious-disease specialist said, “There is a real risk that you will trigger an outbreak that you may not be able to control, which in fact, paradoxically, will set you back, not only leading to some suffering and death that could be avoided but could even set you back on the road to try to get economic recovery.”
Fauci’s testimony spooked already-nervous markets, knocking 457 points off the Dow. In Europe, where second-wave fears are also taking hold—Germany’s infection rate is worryingly around the crucial threshold of 1—markets are also down this morning.
Our economies certainly need to be restarted, and we should do whatever we can safely manage in order to achieve that. But, to avoid the paradox that Fauci set out so plainly yesterday, we have to accept that baby steps may get us back to our destination of quasi-normality more quickly than bold leaps.
News below.
David Meyer
@superglaze
david.meyer@fortune.com
TOP NEWS
Ad pullback
Advertisers such as General Motors and PepsiCo are reportedly trying to back out of more than $1 billion in Q3 commitments they have made to broadcast and cable networks. The option for them to do so became available at the start of this month. That wouldn't just be another big blow to the media; it also implies that these consumer-goods firms are worried about a prolonged economic downturn. Wall Street Journal
Democrat stimulus
It's unlikely to get anywhere as things stand, but here it is anyway: the Democrats have unveiled a $3 trillion coronavirus stimulus bill called the HEROES Act (in full, the Health and Economic Recovery Omnibus Emergency Solutions Act). You probably don't have time to go through all 1,816 pages, so here's a quick take from Fortune's Nicole Goodkind and Sy Mukherjee: $500 million would go to states, $375 billion to local governments, $20 billion to tribal communities and $20 billion to U.S. territories. Individual Americans would also get another $1,200 in direct aid. Fortune
U.K. furloughs
The British government is extending its extraordinary wage-subsidy scheme for furloughed workers until the end of October. Some 7.5 million workers are currently having 80% of their wages (up to a £2,500/$3,070 cap) paid by the government, and until yesterday the scheme was scheduled to close at the end of next month. From August, employers will need to pay a share of that 80% payment. Guardian
Carolyn Reidy
Simon & Schuster CEO Carolyn Reidy died yesterday, at the age of 71, from a heart attack. Reidy had headed the big-five publisher since 2008, arriving to immediately steer it through the chaos of the financial crash. Journalist Bob Woodward, one of the authors in her stable, praised her as "one of the great publishers and book people of all time." Fortune
AROUND THE WATER COOLER
WFH
Twitter will allow its employees to work from home indefinitely, even post-lockdown, unless their jobs require a physical presence. A few other companies such as Nationwide have made similar moves. In Twitter's case, the company does not expect its offices to reopen until September anyway. Buzzfeed
Hamilton hurry
Disney has brought forward by more than a year the release of its filmed version of the Hamilton stage musical. The show will hit the Disney+ streaming service on July 3, effectively cancelling its planned theatrical run. Then again, Disney+ is scrambling to find subscriber-pulling content, seeing as production is suspended on key series such as the Marvel-produced Falcon and the Winter Soldier and WandaVision. The Verge
Goldman warning
Which commodity is as precarious as oil? According to Goldman Sachs, it's livestock, due to the havoc wreaked on the food industry by lockdowns. Goldman commodities research chief Jeff Currie: "[Livestock and oil] both share something in common: You do damage to the supply, it takes a while to bring it back online again." CNBC
Merkel's successor
The race to succeed Germany's outgoing chancellor, Angela Merkel, has been turned upside-down by the coronavirus pandemic. Markus Söder—the conservative Bavarian leader whom we called the wildcard three extremely long months ago—is suddenly the front-runner due to his strong performance in handling the pandemic, and despite the fact that he isn't even in Merkel's party. Meanwhile former favorite Armin Laschet, a relative liberal in the Merkel mold, has slipped into third place. Financial Times
This edition of CEO Daily was edited by David Meyer.


fortune--2020-05-13--Twitter CEO gives employees the choice to work from wherever they want—indefinitely

Twitter Inc. will let employees work from home permanently even after health authorities allow workers to return to their offices when the danger of the Covid-19 outbreak recedes.
Chief Executive Office Jack Dorsey told employees San Francisco-based Twitter was unlikely to open its offices before September, but that even when the company does so, most employees can work from wherever they want, according to a blog to be posted Tuesday. Buzzfeed earlier reported the policy.
“If our employees are in a role and situation that enables them to work from home and they want to continue to do so forever, we will make that happen,” Twitter said in the post. “If not, our offices will be their warm and welcoming selves, with some additional precautions, when we feel it’s safe to return.”
The company has more than 35 offices worldwide, including in Paris, New York and Toronto.
“We’ve been very thoughtful in how we’ve approached this from the time we were one of the first companies to move to a work-from-home model,” Twitter said in a statement. “We’ll continue to be, and we’ll continue to put the safety of our people and communities first.”
The announcement follows directives from Alphabet Inc.’s Google and Facebook Inc. that their employees should expect to work from home for the rest of the year. The clarity will help employees make longer-term plans about where they decide to live and what office equipment they choose to purchase for their homes.


fortune--2020-05-13--Global markets sink on fears of a choppy recovery and second-wave outbreaks

This is the web version of the Bull Sheet, Fortune’s no-BS daily newsletter on the markets. Sign up to receive it in your inbox here.
Good morning.
“My concern is we might see spikes that turn into outbreaks.” Those words by the Trump Administration’s top disease expert, Anthony Fauci, in Senate testimony, took the air out of yesterday’s rally. Fauci’s sober assessment is hanging like a dark cloud over global markets today. It’s a risk-off morning.
Let’s see if we can peer through the gloom.
Markets update
Asia
The major indices are mixed . Japan’s Nikkei is down while Shanghai and Hong Kong are clinging to gains.
. Japan’s is down while and are clinging to gains. There’s a new coronavirus hotspot in China: the northeast Chinese city of Jilin where authorities now say the outbreak risk level is “high.”
in China: the northeast Chinese city of where authorities now say the outbreak risk level is “high.” A bit of rare news now…China’s Dada Nexus plans to file an IPO in the U.S., looking to raise about $500 million.
Europe
European bourses opened in the red this morning, with the benchmark Stoxx Europe 600 down 1% at the open.
bourses opened this morning, with the benchmark down at the open. Shipping giant Maersk sees Q2 volumes falling as much as 25% as the economic fallout of the pandemic continues to decimate global trade .
sees falling as much as as the economic fallout of the pandemic continues to . Eurozone business investment has collapsed in recent weeks, signaling a deeper contraction is in the cards.
U.S.
The Dow , S&P 500 and Nasdaq futures are pointing to a flat open, doing little to recoup yesterday’s losses.
, and futures are pointing to a flat open, doing little to recoup yesterday’s losses. The V-shaped recovery “ is a fantasy ,” says Wall Street titan Stanley Druckenmiller, adding he’s not buying this rally.
“ ,” says Wall Street titan Stanley Druckenmiller, adding he’s not buying this rally. After the Fed warned of widespread business failures yesterday, the central bank’s chair, Jerome Powell, is due to speak today. He may urge policymakers to load up the bazooka again with more stimulus spending. On cue: the U.S. House has a $3 trillion plan looking for votes.
Elsewhere
Gold is down
is down The dollar is flat.
is flat. Crude too is sinking as recovery concerns persist. Brent sunk below $30/barrel, falling to a five-day low.
Inside the C-suite
In this space, we’ve been looking recently at investor and consumer sentiment. Today, let’s look at corporate sentiment.
Earlier this week, PwC released its latest CFO COVID-19 survey, polling 288 finance chiefs at U.S. companies. The survey was conducted last week, which was a disjointed one. There was brutal economic data, capped off by last week’s jobs report, and yet the markets were rallying. Even still, there was a clear trend that Corporate America feels the worst is behind us, according to the PwC data.
As the PwC chart shows, sentiment over the past month has improved in regards to outlook and in business investment. (Not shown: there’s renewed confidence in productivity in this work-from-home era). The bad news: all this improved sentiment comes from a point of abject pessimism in the C-suite. There are still plenty of doubts about the overall business climate. The best indicator for that is CFOs haven’t budged on their view of whether they’ll need to adjust full-year guidance.
There’s a lot of chatter about what shape this recovery will take. And here the PwC survey offers some fresh insights. “Over half of CFOs expect it to take their company at least three months to recover once the virus recedes,” the survey authors note. This take-away seems to underscore what the likes of Stanley Druckenmiller (mentioned above) have been saying all along: the best-case-scenario V-shaped rebound is “a fantasy.”
***
Have a nice day everyone. I’ll see you here tomorrow.
Bernhard Warner
@BernhardWarner
Bernhard.Warner@Fortune.com
Looking for more detail on coronavirus? Fortune’s Outbreak newsletter will keep you up to date on the latest news surrounding the coronavirus outbreak and its impact on business and commerce globally. Sign up here.
And, you can write to bullsheet@fortune.com or reply to this email with suggestions and feedback.
Today's reads
Coming for your ETFs. Yesterday, the Fed began its historic move to buy U.S. corporate bond ETFs. Select iShares and SPDR ETFs make the grade. Here's what happens when Uncle Sam comes in with unlimited funds to buy the same assets held in Americans' portfolios.
Lockdown with the tax man. The mega-rich have a somewhat unique problem with this pandemic. A number of them are stranded in high-tax regimes, and as each day of the calendar flips they're closer to becoming accidental residents—meaning paying tax in the countries where they're locked down. Not everyone is sympathetic to their plight. As one tax lawyer told Bloomberg, “Taxes are only going to go one way—up... Someone has to pay for all of this.”
"I cried all day." Speaking of stranded...There are 90,000 cruise ship employees still stuck at sea, unable to come home to port. 90,000.
(Some of these stories require a subscription to access. To enjoy unlimited access, subscribe today. Thank you for supporting our journalism.)
Market candy
Quote of the day
Pension contributions are pretty far down the list of things they want to pay for.
That was Don Boyd, an expert in public pensions at the University at Albany’s Rockefeller College. He acknowledged what's on the minds of a lot of retirees and pension fund managers these days. Pension fund losses are mounting, losing a median 13.2% in Q1. With dwindling revenues, cities and states have bigger obligations. Pension contributions aren't high on the list, as the Wall Street Journal reports.


fortune--2020-05-13--‘No one wants to be tested:’ Social stigmas are crippling coronavirus containment

Public health officials around the world have agreed that testing and contact tracing are vital to containing the coronavirus pandemic. But for many people, coming forward to get tested — let alone revealing the personal information of friends, family and close associates — is more terrifying than getting Covid-19.
In South Korea, where gay marriage is illegal and homophobia is common, officials are struggling to reach thousands of people who may have been exposed to the virus at gay nightclubs in Seoul. In Malaysia, undocumented immigrants and foreign workers say they fear detention or deportation. In India, real and suspected virus patients say they’ve become targets of on- and offline harassment.
Governments around the world have released unprecedented amounts of information about actual and potential Covid-19 cases — ages, neighborhoods, travel patterns — all in the name of public health. But it’s also emboldened a new kind of vigilantism and threatened personal privacy, and experts worry harassment and prejudice could undermine the goals of all the disclosure in the first place: containing community spread.
“It’s all become too scary,” said Deepak Saxena, a professor at the Indian Institute of Public Health in Gujarat. Health authorities across India say patients have fled hospitals ahead of their test results, fearing the physical abuse and social ostracism that might accompany a positive result. “No one wants to be tested. People will do anything not to be on one of those lists that are circulating,” Saxena said.
Vulnerable Groups
Even prior to the outbreak connected to Seoul’s nightlife scene, a positive coronavirus diagnosis carried deep stigma in South Korea. In a survey conducted by Seoul National University’s School of Public Health, 62% of people reported they were more afraid of the social consequences of getting the virus than they were of the potential health risks.
The number of confirmed cases linked to the Itaewon district, which is home to several gay clubs, rose to 119 on Wednesday, up from 109 the day prior. Mobile operators SK Telecom, KT and LG u+ have provided contact information for 10,950 people who were in the area between April 24 and May 6, so the city could text them to encourage them to go through testing. The government has promised that anyone who may have been in affected can get tested anonymously, no questions asked.
“The virus outbreak is bringing up many social issues that have been unresolved in South Korea for a long time,” said Ki Moran, an epidemiologist at the National Cancer Center. “Homosexuality is one of them, and public disapproval is now testing the nation’s ability to get those who fear that stigma to be tested.”
People have lots of reasons for wanting to remain anonymous. The Malaysian government has detained hundreds of undocumented immigrants and imposed stricter restrictions in areas that are home to mostly foreigners. The crackdown has also affected the 180,000 people recognized as refugees by the United Nations, though not by Malaysia, which isn’t a party to international refugee agreements.
The news of mass arrests in early May was “counter-productive and clearly a step backward in the ongoing public health response to the pandemic,” the Human Rights Commission of Malaysia said in a May 3 statement. “As a consequence, one can expect these vulnerable people will be less willing to come forward for any tests or medical treatment, regardless of the argument or persuasion for them to do so.”
Personal Attacks
Others fear vicious personal attacks. Varun Vig found himself a target within hours of landing in New Delhi on March 22. After the New York-based graphic designer arrived at the empty suburban apartment he’d chosen for his mandatory home quarantine, neighborhood chat groups began reporting the surreptitious arrival of a coronavirus-positive “patient.”
That was the first thing the nosy Parkers got wrong — Vig didn’t have the virus — but it wasn’t the last. They said he’d escaped from virus-ridden Rome with his infected Italian girlfriend. He’d reportedly evicted his grandparents to take refuge in their home. Maintenance staff soon refused to clear his “contaminated” trash, and police came knocking.
“I want to spend these 14 days in peace, not being harassed by cops, not being harassed by security guards and by other building residents,” the 23-year-old pleaded in an Instagram video post.
Still others have more pedestrian reasons for wanting to maintain their privacy. In the central Japan city of Gifu, at least 30 infections were eventually traced to one of the city’s hostess clubs. While such clubs, where female employees flirt with and entertain the mostly male clientele, are entirely legal, discretion is part of their business model. Customers — and employees — may not be known by their real names.
“World over, an unfortunate consequence of an event of this magnitude is that privacy is sacrificed in the name of public health,” said Nikhil Narendran, a partner in the telecommunications, media and technology practice at the Indian firm Trilegal. “It’s going to be very difficult to regain lost ground.”


fortune--2020-05-13--Round 2 of stimulus checks? House plan would send $1,200 per person—including children

How accurate are the coronavirus tests used by the White House ?
A new report is raising questions

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With the coronavirus pandemic continuing to ravage the U.S. economy, more stimulus checks could be in the cards for American taxpayers.
Democrats in the House of Representatives unveiled a new $3 trillion economic stimulus package yesterday, and they’re calling for yet another round of stimulus payments meant to alleviate the economic burden on U.S. households.
How much would the next round of stimulus checks be worth?
Like the CARES Act, the $2.2 trillion coronavirus aid package signed into law in March, the new bill—known as the HEROES Act—calls for direct payments of up to $1,200 for Americans earning up to $75,000 per year and $2,400 for couples earning up to $150,000 annually.
But the HEROES Act would also provide significantly more money to families with children—potentially up to $6,000 in total for a household with three dependents. Whereas the CARES Act allowed parents to claim an additional $500 per child, the HEROES Act would bump that up to $1,200 per dependent (including adult-age dependents) for up to three dependents.
Would unemployment benefits be extended in the next stimulus?
The proposed bill would also further expand the CARES Act’s historic unemployment insurance measures. It would extend the federal government’s $600 weekly unemployment benefit through January 2021 (it’s currently slated to expire at the end of July under the CARES Act) and would maintain unemployment benefits for part-time workers, independent contractors, gig workers and the self-employed through March 2021 (instead of through the end of this year).
But while House Democrats are eager to bring the HEROES Act to a vote, it’s likely that the bill will look drastically different by the time the legislative process is all said and done—if it passes at all. Senate majority leader Mitch McConnell has already cast doubts on the need for an additional coronavirus relief measure, while House minority whip Steve Scalise described the bill as a “non-starter.”
More politics coverage from Fortune:
—Saving lives vs. saving the economy is a false tradeoff, economists say
—Trump’s demand that China pay coronavirus reparations evokes an ugly history
—McConnell focuses Senate on conservative judge appointments rather than coronavirus
—Real unemployment rate soars past 24.9%—and the U.S. has now lost 33.5 million jobs
—Listen to Leadership Next, a Fortune podcast examining the evolving role of CEO
—WATCH: Fortune’s top 10 heroes of the coronavirus pandemic
Subscribe to How To Reopen, Fortune’s weekly newsletter on what it takes to reboot business in the midst of a pandemic


fortune--2020-05-13--Wall Street heads toward a second day of sharp losses following pessimistic comments by Fed chief

Wall Street is falling toward a second straight day of sharp losses Wednesday, weighed down by worries about a slow recovery for the economy.
The S&P 500 was down 2.1%, as of 3 p.m. Eastern time, with the sharpest losses hitting stocks that most need a healthy economy for their profits to grow. The Dow Jones Industrial Average was down 567 points, or 2.4%, at 23,194, and the Nasdaq composite was down 2.2%.
Treasury yields were also lower in another sign of pessimism, after Federal Reserve Chair Jerome Powell warned about the threat of a prolonged recession. He said the U.S. government may need to pump even more aid into the economy, which is bleeding millions of jobs every week as collateral damage in the battle against the coronavirus pandemic.
The market has been wavering the last couple weeks after coming off its best month in a generation, as optimism about reopening the economy collides with worries about the dangers of lifting restrictions too soon.
”At this stage now, we think there are more risks to the downside than the upside,” said Liz Ann Sonders, chief investment strategist at Charles Schwab.
”Consumers in general are going to be more wary and more interested in boosting savings rates and are unlikely to come back to a world of consumption anywhere near what it looked like before,” she said.
Worries that the economic recovery may not be as strong or as rapid as investors had been banking on just a week ago hit oil companies and banks particularly hard.
Energy producers in the S&P 500 fell 4.8% for the biggest loss among the 11 sectors that make up the index. Financial stocks were close behind with a 3.2% loss. Those two areas of the market have been some of this year’s biggest losers this year on expectations for less demand for oil and lower profit from making loans.
Earlier in the day, strength for technology stocks had helped to steady the market momentarily. Tech stocks have been among the market’s few clear winners this year, as investors hunt for companies that can profit even in a stay-at-home economy. But the gains for tech quickly faded, and 90% of the stocks in the S&P 500 were down in afternoon trading.
Trading was erratic again, and the S&P 500 went from an early loss of 1.1% to a gain of 0.1% and back to more losses, all in the span of 90 minutes. The volatility echoes Tuesday’s action, when the S&P 500 was close to flat for much of the day before a sudden slide in the last hour of trading left it down 2.1%.
Analysts say they expect the market to remain in a wait-and-see approach for weeks as investors gauge how economic reopenings underway in areas around the world are going. Many countries and U.S. states have begun lifting restrictions on businesses that were meant to slow the spread of the coronavirus outbreak but have also sent the economy into a severe recession.
Hope that the reopenings will allow growth to resume later this year have helped drive the S&P 500 up 25% since late March, but worries have been rising recently that premature liftings of lockdowns will cause resurgent waves of infections.
Many professional investors were already skeptical of the rally, saying it was overdone given how much uncertainty exists about how long the recession will last. Worries about a resumption in trade tensions between the United States and China have also weighed on markets around the world recently.
On Tuesday, the top U.S. infectious diseases expert, Dr. Anthony Fauci, warned that if the economy reopens too soon, it could cause a backtrack in the “road to try to get economic recovery.”
In China, where the virus first surfaced, authorities announced seven new cases on Wednesday. Six were in Jilin province, in the northeast, where alert levels were raised and rail connections suspended. South Korea reported 26 additional cases of the coronavirus over the past 24 hours amid a new spike in infections linked to nightclubs in Seoul.
In Asian stock markets, Japan’s Nikkei 225 slipped 0.5%, the Hang Seng in Hong Kong lost 0.3% and South Korea’s Kospi rose 0.9%. In Europe, Germany’s DAX lost 2.6%, and France’s CAC 40 dropped 2.9%. The FTSE 100 in London lost 1.5%.
The yield on the 10-year Treasury fell to 0.64% from 0.69% late Tuesday. A barrel of U.S. oil to be delivered in June fell 49 cents, or 1.9%, to settle at $25.29. Brent crude, the international standard, fell 79 cents, or 2.6% to $29.19 a barrel.


fortune--2020-05-13--How accurate are the coronavirus tests used by the White House? A new report is raising questions

Wall Street heads toward a second day of sharp losses following pessimistic comments by Fed chief

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The coronavirus test from Abbott Laboratories used at the White House to get rapid answers to whether someone is infected may miss as many as half of positive cases, according to a report from New York University that the company immediately disputed.
The analysis, which has yet to be confirmed, found that Abbott’s ID NOW missed at least one-third of positive cases detected with a rival test and as much as 48% when using the currently recommended dry nasal swabs, according to the report on BioRxiv, a server where researchers post early work before it has been reviewed by other scientists.
Abbott said the researchers didn’t use the test as intended and that the false-negative rate, as reported to the company, is 0.02%.
Shares of the company fell 1.6% to $92.35 at 1:28 p.m. in New York. They are up 6.4% this year.
The White House is frequently testing staff, governors, lawmakers, reporters and others who come in close contact with the president using ID Now. The testing machine, which is roughly the size of a toaster, is portable and doesn’t require deep nasal swabs, about which President Donald Trump once said there is “nothing pleasant.”
Trump touted the Abbott machine with great fanfare in the White House Rose Garden after the Food and Drug Administration approved it for emergency use, saying it could be a godsend for hospitals and workplaces because it “delivers lightning-fast results in as little as five minutes.”
“That’s a whole new ballgame,” the president said at the March 30 event.
The results of the NYU study, if confirmed, indicate the test may still suffer from high false-negative rates despite changes recommended by the company to avoid such a problem. In April, after other academic researchers raised concerns about the issue, Abbott told clinicians to avoid storing samples in so-called transport media, a liquid used to hold the sample, as that might dilute the test and lead to false negatives.
But when the NYU authors attempted to account for changes and avoid false negatives by using dry swabs, the performance was even worse. It missed the virus in 48% of the samples that were positive using Cepheid GeneXpert, a standard reference test sold by Danaher Corp. The NYU study hasn’t yet been reviewed by outside experts or published in a scientific journal.
Abbott said its scientists are still reviewing the 12-page paper. It has distributed about 1.8 million ID NOW tests and said it hasn’t found the problem identified by the NYU report.
“It’s unclear if the samples were tested correctly, and we’re further evaluating the results,” said Darcy Ross, an Abbott spokeswoman. “The test is performing as expected when it’s used correctly.”
On-site test
Abbott’s ID NOW is a point-of-care test that can be done quickly in a health-care setting. Other tests require a sample to be shipped to a lab, with results available after several days. The rapid approach has been widely viewed as a key to ramping up hamstrung U.S. testing efforts, giving answers more efficiently and directing resources to those who are truly sick.
Concerns about false negatives, though, call into question whether the Abbott test will be able to alleviate the strain on U.S. testing efforts as intended.
Scientists have developed a variety of tests to detect the novel coronavirus,
and some haven’t been vetted with the usual rigor by federal health regulators. It is also still unclear at what point in the incubation period of the virus any test is most likely to produce an accurate result. Enough information about the virus is simply not yet known.
Several tests have sparked concern about false negatives. Doctors have reported patients with obvious signs of the disease testing negative. While the scale of the problem hasn’t yet been determined, experts agree that it is prevalent.
False negatives can hinder diagnosis of disease, obscure the full scope of an outbreak and raise the potential that sick people could unknowingly spread a pathogen.
Doctors at hospitals around the country have reported patients testing negative sometimes multiple times before eventually testing positive. Some doctors have instead at times turned to other methods of diagnosis, such as chest X-rays or CT scans.


fortune--2020-05-13--HBO Max sets release dates for second slate of original series

HBO Max, the soon-to-release streaming platform from AT&T’s WarnerMedia, unveiled the release dates for its second wave of original shows to hit this summer.
The first of the slate’s programming arrives on June 18, weeks after HBO Max’s launch on May 27, and continues throughout the summer. Among the offerings: a second season of DC Comics web series Doom Patrol, a third season of the TBS comedy thriller Search Party, an Amy Schumer docuseries charting her pregnancy, and a Seth Rogen comedy feature An American Pickle—the streaming platform’s first original film.
This second wave of shows follows HBO Max’s initial rollout on the 27th, spearheaded by the Anna Kendrick-starring, Paul Feig-produced series Love Life. Also included: a new Looney Tunes Cartoons series from Warner Bros. Animation and Sesame Workshop’s The Not Too Late Show with Elmo.
Altogether, the upcoming programming ensures that HBO Max is outfitted with original content to sustain its launch during a dry-up of film and television production amid the novel coronavirus pandemic.
“Shortly after the initial launch our monthly strategy kicks in, as we introduce great new originals every month throughout the year,” Kevin Reilly, HBO Max’s chief content officer, said in a statement announcing the summer slate programming.
HBO Max is the latest gamble from a traditional media giant to launch a premium streaming service as consumers increasingly cut the cord and spend subscription dollars on Netflix and Amazon Prime. After AT&T acquired Time Warner for $85 billion in 2018, it spun Warner Bros., HBO, and Turner Broadcasting into a new entertainment conglomerate called WarnerMedia.
Former Hulu CEO Jason Kilar was recently hired as WarnerMedia’s chief executive with the hope that his digital experience will guide the telecom giant into the streaming age. With the combined TV networks, film studios, and popular franchises, AT&T hopes it can compete with new and established competition alike.
Comcast launched its own streaming service, NBCUniversal’s Peacock, exclusively to Xfinity subscribers in mid-April. The platform will roll out to all nationwide on July 15. Meanwhile, Disney launched Disney+ in November and has already amassed 50 million subscribers. The company is bundling the service with ESPN+ and Hulu, which it now has majority control of after acquiring 21st Century Fox for $71 billion in 2019.
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—Is star-studded Hollywood talent agency Endeavor in trouble?
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—What would an Amazon-owned movie theater look like?
—Europe is staging live music events again, but there’s a catch
—What to watch this weekend, according to the experts


fortune--2020-05-13--‘It’s just unprecedented’: Counterfeit face masks are reaching frontline health care workers in U.S.

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On a day when COVID-19 cases soared, healthcare supplies were scarce and an anguished doctor warned he was being sent to war without bullets, a cargo plane landed at the Los Angeles International Airport, supposedly loaded with the ammo doctors and nurses were begging for: some of the first N95 medical masks to reach the U.S. in almost six weeks.
Already healthcare workers who lacked the crucial protection had caught COVID-19 after treating patients infected with the highly contagious new coronavirus. That very day an emergency room doctor who earlier texted a friend that he felt unsafe without protective supplies or an N95 mask, died of the infection. It was the first such death reported in the U.S., according to the American College of Emergency Physicians.
But the shipment arriving that night in late March wasn’t going to solve the problem. An Associated Press investigation has found those masks were counterfeits — as are millions of medical masks, gloves, gowns and other supplies being used in hospitals across the country, putting lives at risk.
Before the pandemic, federal trade law enforcement agencies were focused on busting knockoffs such as luxury goods and computer software, mostly from China. As America fell sick, the mission shifted to medical supplies. To date, Operation Stolen Promise, spearheaded by Immigration and Customs Enforcement’s Homeland Security Investigations, has netted 11 arrests and 519 seizures. And yet counterfeit goods continue to pour in — not just masks, but also mislabeled medicines, and fake COVID-19 tests and cures, according to the agency.
“It’s just unprecedented,” said Steve Francis, HSI’s assistant director for global trade investigations. “These are really bad times for people who are out there trying to do the right thing and be helpful, and they end up being exploited.”
The story of how one brand of counterfeits has infiltrated America’s supply chains illustrates how the lack of coordination amid massive shortages has plunged the country’s medical system into chaos.
Ear loops
AP identified the counterfeit masks when reviewing film of the Los Angeles shipment. The telltale sign: these masks had ear loops, while authentic ones have bands that stretch across the back of the head, making for a tighter fit.
The blue and yellow boxes being unloaded in a Southern California warehouse bore the name of the Chinese factory Shanghai Dasheng. The masks inside were stamped as if approved by the U.S. National Institute for Occupational Safety and Health — signifying they had been certified by the U.S. government as safe for workers in health care settings. N95 masks filter out 95% of all airborne particles, including ones too tiny to be blocked by looser fitting surgical masks.
But the day before they arrived, the U.S. Centers for Disease Control and Prevention issued a very specific warning: all Shanghai Dasheng N95 masks with ear loops were counterfeit.
Ear loop masks are less expensive to manufacture because the straps are attached with glue to the face covering, while headbands on genuine N95s, also called respirators, must be stitched, stapled or soldered to establish a tighter seal over the nose and mouth.
And even if the electrocharged fibers in the fabric are the same, masks with ear loops are not as effective because tiny airborne droplets carrying the virus can get sucked through the cracks.
“Fluid follows the path of least resistance: If someone is breathing and the respirator doesn’t have a good fit, it will just go around,” said infectious disease expert Shawn Gibbs, the dean of Texas A&M University’s school of public health.
AP tracked other shipments of Shanghai Dasheng ear loop N95 masks as they entered the vast U.S. medical system. Shipping labels and invoices, certified letters and interviews with more than a dozen buyers, distributors or middlemen pointed to the corporate headquarters and busy factory of Shanghai Dasheng Health Products Manufacture Company.
The company did not respond to AP’s queries about its masks. And AP could not independently verify if they are making their own counterfeits, or, as the CDC said in a published warning, someone is using Shanghai Dasheng’s certification numbers “without their permission.”
The CDC separately told AP it has been in talks with Shanghai Dasheng about authenticity issues.
“Recently, NIOSH has received reports stating there is product being obtained directly from the Shanghai Dasheng factory, labeled as NIOSH-approved, with ear loops,” said agency spokeswoman Katie Shahan in an email to the AP. Shahan said Shanghai Dasheng’s N95s with ear loops are counterfeit.
On their own website, Shanghai Dasheng warns: “WE DON’T HAVE ANY DISTRIBUTORS, DEALERS OR BRANCH FACTORIES. BEWARE OF COUNTERFEIT!”
The Chinese Ministry of Foreign Affairs said in a statement Tuesday that the country has provided a robust and high quality supply of medical items for global pandemic prevention and control.
“So far, only a few of the exported products have encountered quality or standard problems,” said the ministry.
Florida-based importer Mark Kwoka said he believes the Shanghai Dasheng masks with ear loops that he obtained came from their factory, based on information he received from his partners in China.
“This is kind of getting out of control,” said Kwoka, who made a career in bridal gown design and manufacturing in China but turned to masks earlier this year.
On a recent spring day, hawkers outside the guarded gates of the factory were offering to take orders for U.S.-approved, medical-grade N95s. It wasn’t clear whether the sellers were getting their products from inside. A security guard told a reporter that he believed the sellers were peddling counterfeits, but police at a nearby station weren’t able to confirm that. The security guard ordered the journalists to leave.
Shanghai Dasheng is one of the largest manufacturers of authentic N95s in the world and one of only a handful in China certified to make NIOSH approved, U.S. medical-grade N95s.
In normal times, Shanghai Dasheng was the gold standard for N95s, according to several brokers who work in China. But in the rush of this pandemic, several said cheaper masks are proliferating.
Meanwhile, Shanghai Dasheng is holding itself up as a vital part of the pandemic response.
Just days into a weeklong New Year celebration in January, company chairman Wu Shengrong called back employees and then joined cleaners, cooks and a skeleton crew of workers for long days and nights on assembly lines. Eleven days into the manufacturing blitz, Shengrong invited in a group of journalists and said his company had bumped daily mask production from 40,000 to 70,000, and aimed for 200,000 once back at full strength.
“I am not a learned man,” Shengrong said at the time, “but as a Communist Party member and army veteran, I am a patriot and Dasheng is just a drop of water in China’s ocean of private enterprises.”
The front lines
One recipient of the Shanghai Dasheng ear loop masks was Direct Relief, an international humanitarian aid organization in Southern California.
Like other buyers AP contacted, Direct Relief at first thought the factory inadvertently sent the wrong mask model and set aside the entire shipment. But after reading the CDC’s warnings, CEO Thomas Tighe said they had come to believe they were counterfeit and reported them to the federal government.
“It’s a little scary that it had gone through what we understood was an aggressive customs investigation for export, and an aggressive customs import by the U.S. and still got through,” Tighe said. “It’s been a real lesson.”
Direct Relief has since caught even more poorly constructed masks donated to their warehouse.
Even for those looking out for fakes, it has been difficult to keep up with changing federal guidelines for medical-grade masks.
Citing an acute shortage of N95 masks, government officials relaxed standards in March. The U.S. Food and Drug Administration announced that other, unapproved medical masks with ear loops were appropriate for COVID-19 care.
But government testing of newly arrived models found most were substandard, and on May 7 the agency banned mask imports from 65 Chinese factories.
Shanghai Dasheng is among 14 that remain on the approved list.
For more than four weeks, millions of masks now considered inadequate for medical protection entered the U.S. and are now in use.
Meanwhile state and local governments, hospitals, private caregivers and well-wishers have spent hundreds of millions of dollars on the flawed masks. Before the pandemic, N95 masks sold for about 60 cents each. Today they’re priced as high as $6 apiece.
“It’s terrible, just terrible,” said David Schildmeier, spokesman for the Massachusetts Nursing Association.
He said Lawrence General Hospital, which had solicited mask donations online, handed out ear loop Shanghai Dasheng-labeled masks to as many as 40 nurses in a COVID-19 unit before someone noticed.
In West Virginia, the state passed the masks to thousands of paramedics and firefighters, prison guards and hospital workers. State officials knew of the CDC warnings about Shanghai Dasheng’s ear loops, but dismissed concerns saying that, with a proper fit, they would be safe.
In a letter to first responders, Jeff Sandy, the state’s secretary for Military Affairs and Public Safety, said he reviewed the packaging and the masks, checked with the vendor, the importer, the Chinese exporter and — through a lawyer — Shanghai Dasheng itself. He wrote he is certain the 50,000 N95 masks with ear loops that the state provided are “genuine products” that provide adequate protection.
Some first responders disagree.
“While trusting the equipment to protect them, our members may have unknowingly placed themselves in situations that put them at further risk,” said West Virginia State Firemen’s Association President Jerry Loudin.
Some of the masks were purchased by charities or well-intentioned community members who held online fundraisers.
One Southern California marketing consultant, frustrated with reports that frontline medical workers didn’t have N95 masks, had a client who makes custom, re-keyable locks in China. That client said he had sources who could get legitimate N95s, and so she launched a fundraiser, and within weeks delivered a shipment of the Shanghai Dasheng ear loop masks to caregivers.
The consultant, Wendy Chou Le, said the nurses she gave them to near Los Angeles have been grateful and didn’t raise concerns.
Tyler Alvare, a pediatric physician’s assistant in Alexandria, Virginia, had run his own fit tests on the masks when they arrived. But after talking to the AP and reviewing the federal warnings, he said he grabbed all the Shanghai Dasheng ear loop masks he had left and notified everyone he gave them to.
He said the government should have taken responsibility for providing enough protective equipment as soon as the shortage of masks became apparent instead of having every medical provider figure it out themselves.
“It’s really outside of our area of expertise,” he said.
But even experts were caught off guard.
Franco Sagliocca, Mount Sinai procurement director, was working 18-hour days, seven days a week, to keep enough safety supplies in the hospital system’s ERs and ICUS as COVID-19 overwhelmed New York. He was searching, ordering and hustling for N95s, and was planning to buy from Shanghai Dasheng.
“Our sourcing lead said, ‘Wait a minute guys, this is something we don’t want,'” Sagliocca said.


fortune--2020-05-13--Endeavor: Reports of our demise are greatly exaggerated

For months, rumors have swirled in Hollywood circles that Endeavor Group Holdings, the Beverly Hills talent agency led by Ari Emanuel, was in danger of disintegrating.
Those rumors couldn’t be further from the truth, its executives say.
“We’re not hiding from the fact that we are making cost cuts,” president Mark Shapiro told the Los Angeles Times on Monday, adding that reports about the company’s demise were a “fiction.”
Founded in 1995, Endeavor—formerly named William Morris Endeavor after it acquired the famous William Morris Agency last year— has recently been on a tear to transform itself into an entertainment, media, and sports powerhouse.
With financial backing from private equity firm Silver Lake Partners (and to a smaller degree Softbank), it has plowed money into an array of different companies—IMG Worldwide Holdings, Ultimate Fighting Championship, the Miss Universe pageant, streaming company NeuLion, hospitality and live events outfit On Location Experiences, Fortnite publisher Epic Games, and others—as it heightened its competition with rivals Creative Artists Agency, United Talent Agency, ICM Partners, and Paradigm Talent Agency.
Nearly all of this activity was intended to culminate in a since-abandoned initial public offering that was expected to raise upwards of $600 million, valuing Endeavor at $8 billion.
Then the novel coronavirus pandemic hit, sending the broader entertainment industry into disarray. Theaters were shuttered. Concerts were canceled. Sporting events were scrapped. Movie productions were mothballed.
Like its peers, Endeavor has engaged in cost-cutting maneuvers impacting hundreds of its workers and the salaries of its top executives. But the company’s expansion efforts—and its substantial debt—have led some to conclude that Endeavor was in a more precarious position.
Standard & Poor’s downgraded Endeavor’s credit rating to junk last month. Wrote the credit rating agency: “The burden on financial risk and liquidity elevates the risk that WME IMG’s capital structure could become unsustainable over time.”
Correction, May 13, 2020: Due to an editing error, an earlier version of this article mistakenly described the remarks of Endeavor’s executives, which accurately followed.
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