Here’s why the Treasury’s record-breaking borrowing won’t dampen Wall Street’s mood, says JP Morgan

Could the U.S.’s fiscal deficits drain liquidity from Wall Street as the Federal Reserve puts the brakes on its bond-buying and investors are forced to absorb the trillions of debt sold by the Treasury this year?

For analysts at JP Morgan, the answer is no.

In a note penned Friday, JP Morgan’s quantitative and derivatives strategy team argue the supply and demand imbalance for government bonds have little to do with liquidity — the potential pool of money that can be injected into the economy.

“By themselves higher government deficits or bond supply do not create or subtract liquidity, as they shift cash from bond investors to bond issuers which is then spent by the government to support the economy as income to consumers and businesses,” they said,

Some have looked at the potential mismatch between the Federal Reserve’s bond buying, as the pace of its operations taper off, and the Treasury Department’s record-breaking issuance this year as a sign that the U.S. central bank’s actions, on net, may not add liquidity to the financial system.

The Congressional Budget Office forecasts the U.S. to run a budget deficit of almost $4 trillion this year, while JP Morgan estimates the Fed will buy $4.2 trillion of assets this year.

See: Fed’s balance sheet tops $7 trillion, shows increased buying of corporate bond ETFs

This line of questioning takes issues with the widely held belief that the Fed’s push to boost credit has restarted the corporate bond market and was partly responsible for the S&P 500 index’s

recovery from its March lows. The broad-based benchmark is up around 34% from March 23, this year’s nadir.

But JP Morgan argued central bank quantitative easing still increases the supply of money circulating in the financial system by boosting bank reserves.

Still, the growing need to save by households, businesses and investors may mean much of this liquidity will be withheld. The uncertainty around the COVID-19 pandemic’s impact has frozen industrial and consumer activity as individuals curtail spending across all sectors of the U.S. economy.

Yet for JP Morgan, this only adds fuel to their bullish thesis that the upbeat sentiment in Wall Street and rally in asset prices has further room to run.

“As the need for precautionary savings subsides over time this liquidity force would become more intense as more of the extra cash that was previously injected would start circulating in search for yield, chasing non-cash assets such as equities and bonds,” they said.

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Congress could kick China listings off U.S. stock exchanges, but it won’t happen overnight

The bill rushed unanimously through the U.S. Senate and spun into the news cycle as if it were a certainty.

As the thinking goes, the House and then the president will shuffle this legislation into law, forcing Chinese companies listed on U.S. exchanges to play by the same transparency rules as those from other parts of the world.

Senate bill would require Chinese companies to establish that they are not owned or controlled by a foreign government and submit to an audit that the Public Company Accounting Oversight Board can review.

Normally, powerful entities would make the passage of this “anti-China” bill an uphill battle. The Nasdaq
the NYSE
the Securities and Exchange Commission and Wall Street in general largely oppose the move and the yanking of billions of dollars from their pocketbooks. And House Speaker Nancy Pelosi said Thursday that her side of the Capitol was willing to look at the issue, but no vote was promised.

But the legislation comes amid a striking U.S. political competition of sorts to show who is toughest on China — and during the crucial few months before the presidential election.

Also from Tanner Brown:U.S.-China relations are bad and getting worse, with major ramifications for trade and investment — and the U.S.’s presidential election

Even if a variation of the bill does eventually pass, already-listed firms will have three years to comply. That is ample time for China to increase the attractiveness of its own bourses, and for Chinese companies to prepare for a relatively smooth landing back home — likely Hong Kong for larger already-listed companies, and the growth boards for smaller startups, according to Peking University’s Paul Gillis.

China has already opened more attractive doors for public fundraising. After the decade-old Nasdaq-like ChiNext welcomed tech startups in Shenzhen, neighboring Shanghai learned from the pains and successes of that venture and unveiled the Science and Technology Innovation board, or Star Market, last year. Its niche is profit-losing tech-focused startups that show promise and otherwise might list in New York.

As of now, some 200 Chinese companies are listed in the U.S. — some in ways more transparent than others — possess a total market value of more than $1.8 trillion, according to the U.S.-China Economic and Security Review Commission.

Their departure would represent a big flight of capital from U.S. exchanges, a diminution of U.S. tax revenue, a loss to investors and, some would argue, a prestige hit for Wall Street as the center of global finance.

But it would also mean those willing to buy into U.S.-listed firms from China wouldn’t be duped like they were recently by Luckin Coffee, whose shares

resumed trading this week after a six-week freeze. Luckin’s American depositary receipts tumbled 36% on Wednesday from their closing price on April 6, after which trading was halted by Nasdaq. The stock plummeted 89% in the first quarter of this year. It ended the week at $1.38, against a closing level above $40 as recently as March 6.

Nasdaq has informed the onetime Starbucks

rival that it faces delisting after it disclosed that some employees fabricated $300 million in sales. Luckin is appealing the decision, but if it’s delisted investors would lose essentially all equity, a “wipeout” for which one analyst warned investors to prepare.

A Luckin Coffee location in Beijing on Jan. 15, before the fast-expanding chain — billed as a potential Starbucks slayer — was engulfed by controversy.


Opinion:Luckin Coffee shows how risky Chinese IPOs can be, but investors are just not listening

“A lot of these companies, by the way, have already had scandals and cost investors a lot of money, because of their failure to be transparent in their reporting,” White House economic adviser Larry Kudlow told Fox News. “The Chinese government forbids that kind of transparency.”

The painful delisting decision may still be bothering Wall Street and the SEC, but lawmakers appear ready for action.

“We want investors to understand what they’re investing in,” said Sen. John Kennedy, a Louisiana Republican and a co-sponsor of the Senate bill. “And those reports have to be accurate or you get in a lot of trouble.”

Tanner Brown covers China for MarketWatch and Barron’s.

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Washington probably won’t deliver another coronavirus aid package, says Republican senator

‘We may not be able to pass another bill. I think it’s less than 50% chance of passing another bill.’

— Republican Sen. John Kennedy of Louisian

That line above came Tuesday from GOP Sen. John Kennedy of Louisiana as Republicans and Democrats in Washington consider what could go into another coronavirus aid package.

The senator said there will be “serious pushback” for “a variety of reasons” from lawmakers in both parties to “whatever deal” is reached by congressional leaders and the Trump administration. He added that he could “be wrong, but I doubt it.”

While Kennedy is sounding downbeat on the prospects for the next bipartisan measure, analysts have been expecting that a new package will be signed into law in June or later.

Kennedy’s comments came as he spoke in support of his legislation that would give state and local governments more flexibility in using aid already provided by the $2.2 trillion CARES Act.

“Why would we not allow states — without appropriating any new money — to use that money to address revenue shortfalls that you and the chairman of the Fed both agree are going to exist and be substantial?” the senator asked Treasury Secretary Steven Mnuchin during a virtual Senate hearing on relief programs.

Read more:Powell, Mnuchin testify on coronavirus relief — live blog

And see:Mnuchin, Powell to face Senate grilling on coronavirus loan programs

Kennedy’s bill aims to let states and localities use the CARES Act’s money for operating expenses unrelated to the coronavirus, but not allow officials to spend the money on shoring up their pension funds. Democratic lawmakers have called for more aid for state and local governments, while Republican are concerned about helping states with underfunded pension plans.

Mnuchin said he appreciates Kennedy’s legislation, adding that he and President Donald Trump will look to see if it gets bipartisan support.

Now read:Sen. Brown asks how many workers should die to boost the GDP or Dow

Another aid package would follow last month’s $484 billion measure that has been described as Washington’s “Phase 3.5” response to the coronavirus crisis. It also comes after the $2.2 trillion CARES Act that passed in late March, a mid-March package costing an estimated $192 billion, and an $8 billion measure that was finalized in early March.

The Democratic-run House of Representatives on Friday night approved its $3 trillion coronavirus relief bill. The measure represents an opening offer in talks with the Republican-controlled Senate and the Trump administration.

U.S. stocks


are trading well below their February peaks after the coronavirus pandemic forced the shutdown of businesses and travel, but they have rallied from their March lows thanks in part to optimism around Washington’s aid efforts. The Dow Jones Industrial Average and S&P 500 were mixed Tuesday after closing sharply higher on Monday.

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The doctor will see you now. But it won’t be face-to-face as telemedicine becomes the new normal

Telemedicine is no longer just for millennials.

The coronavirus pandemic is driving a surge in companies offering online medical consultations as patients and health care workers are forced to seek new ways of interacting.

And the big winners will be private equity and venture capital firms that have already identified the subsector as a lucrative target to juice their returns for investors.

In recent weeks, dozens of companies across Europe which provide patients with a range of services from virtual checkups, to making payments, receiving prescriptions and giving doctors easy access to medical records have recorded a spike in registration numbers and revenues.

These include General Atlantic-backed Doctolib, Sweden’s Kry International, which recently raised money from the Ontario Teachers’ Pension Plan, and UK’s PushDoctor, which counts Celeres Capital and Oxford Capital among its investors.

For some investors, the concern will be whether these businesses can sustain the uptick in revenues once lockdowns are lifted and patients choose to return to seeing their doctors in person.

But for now, the numbers look encouraging. In just four weeks, France-based Doctolib, which started out as a scheduling platform before offering online consultation services, has seen the number of video consultations spike from 1,000 to 100,000 a day. As of 22 April, patients had booked 2.5 million consultations on Doctolib.

In Sweden, Kry has seen the total number of consultations surge by a massive 163% from 1 February to 27 April across all its markets. The company has also recently expanded into the U.S.

In Britain, PushDoctor has increased the number of partnerships it launched with NHS providers by 62% — a record—in April.

“The European health care market is at a digital inflection point,” Chris Caulkin, managing director and head of technology for EMEA at General Atlantic, said. “We believe technology is in the early innings of transforming how patients and doctors engage with health care, and that there is significant potential to improve the service delivery model and overall access to health care,” he added.

General Atlantic invested in Doctolib in March 2019. The company offers its technology and services to every doctor and other health care practitioners allowed to practice medicine by the French and German medical chambers.

The doctors pay a monthly fee of €79 — but the service is free during the crisis. All health care professionals, from midwives to pediatricians can offer video consultations.

Caulkin said that since offering its telehealth platform for free during the crisis in early March, the team has brought on over 30,000 doctors.

“Before our partnership, we were very impressed by Doctolib’s progress in only five years. Their approach to health care digitization has delivered concrete results.”

Stanislas Niox-Chateau, co-founder and president of Doctolib said video consultations had been widely adopted and is now becoming “essential.”

“It will never replace physical consultation—it will probably represent between 15% and 20% of the activity of user physicians, as it is already the case in Scandinavian and some Asian countries, where the practice is more common. It must be a tool available to physicians enabling them to monitor their patients as part of the traditional health care pathway.”

Doctolib has made several add-on acquisitions, including the takeover in 2018 of its main competitor Mon Docteur, to grow its business. It will explore similar deals that help expand its geographical reach and services. An internal survey by Doctolib found that 80% of patients and 74% of GPs would like to continue using the online consultation service after the pandemic ends.

Even before the crisis, telemedicine was growing in popularity. The companies say they can help reduce wait times, provide access to specialists when travel is expensive or inconvenient and reduce health care costs. While more startups are launching such services, the ones that have received the most investment include Doctolib, Kry International and Babylon Health in the U.K., which last year raised $500m in a round led by Saudi Arabian sovereign wealth fund PIF.

“Early indications have shown that demand for digital doctor services have surged in the past few weeks in Europe due to the highly infectious nature of Covid-19 in medical institutions,” noted data provider PitchBook in an analyst note.

“If demand continues to rise, with hospitals and general practitioner surgeries remaining off-limits to other patients, these digital health care startups could demonstrate significant revenue growth quickly.”

Venture capital firms have poured more than £1bn since 2014 in telemedicine startups in Europe, according to PitchBook. Healthcare private equity buyouts surged to the highest ever disclosed deal value in 2019—313 deals worth $78.3bn compared with 316 deals worth $63.6bn in 2018, according to Bain & Co.

Those numbers could quickly be surpassed.

“More PE firms will go into this area,” said Franz-Robert Klingan from Bain & Co. “You can see by the multiples and how well some of those assets have held up more recently, that the durability is very good, there is lots of resilience.”

As appetite for deals in the sector increases, some startups and investors could fast-track bidding rounds to quickly grab assets ahead of competitors, analysts at PitchBook said.

“Lengths of lockdowns are currently unknown, and once lifted, the public may demonstrate stickiness with virtual services as major benefits include ease of use, time saved traveling and ultimately no risk of spreading or catching diseases. We believe rounds could be focused around telemedicine as a subsector over the next year,” the analysts said.

One hurdle is a myriad of regulatory obstacles stand in the way of buyout funds trying to scale these businesses and harvest high returns.

The General Data Protection Regulation introduced in 2018 across the EU carries a significant penalty if breached. That means online health care businesses that are just starting up have to be extremely careful not to fall foul of the rules that protect patients’ privacy, and need to ensure they have robust systems that will prevent any data breaches.

In addition, not all countries around the EU have the same reimbursement rules when it comes to telemedicine. If the services aren’t 100% covered by the state, the prospect of paying for such a service can easily keep patients at bay.

Telemedicine businesses can experience problems expanding into different countries when they need to change language and reimbursement systems, according to Bain’s Klingan.

“In Europe they have suffered from the scaling question. The regulation is different in every country, and they have been quite protective,” Klingan said. “What the crisis tells us and sets precedent for, is many of those services can be delivered in a safe and compliant way even though certain elements of historic regulation had to be dropped in view of the crisis.”

These restrictions may be eased as the pandemic prompts some governments to loosen existing regulations, giving the sector a major boost.

The French government relaxed the reimbursement rules for patients using telemedicine to facilitate the use of online consultations during the pandemic. During this period, the consultation will be reimbursed entirely by the National Health Insurance, as opposed to the usual 70%, and patients will no longer need to see a doctor at least once in the year preceding the teleconsultation to demand the reimbursement.

In Germany, new legislation that came into effect at the start of the year has allowed reimbursement for online consultations. In addition, health care providers are now allowed to actively promote their digital services to patients on their website.

In the U.S. policy makers and insurers across the country are eliminating co-payments, deductibles and other barriers to telemedicine for patients stuck at home and who need to see a doctor.

Buyout groups are hoping that, even if some telemedicine companies see a drop off in demand from older patients who prefer in-house visits once countries start to ease lockdown restrictions, they will be able to depend on a wider generational shift for future revenues.

The majority of millennials—typically defined as those born between 1982 and 1996—expect convenience, speed, and transparency from services they purchase and health care is proving to be no exception. That should stand buyout groups’ investments in good health for the foreseeable future.

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This frighteningly packed flight out of Newark has doctor saying he won’t fly again anytime soon

A San Francisco doctor returning from volunteering at a New York City hospital to help fight the coronavirus says he was forced to endure a packed flight on United Airlines — despite the carrier’s promise to enforce social distancing.

Dr. Ethan Weiss, a University of California-San Francisco cardiologist, shared a photo Saturday of nearly every seat full on the plane out of Newark Airport in New Jersey.

“I guess @united is relaxing their social distancing policy these days? Every seat full on this 737,” Weiss wrote.

There were many passengers on board who were “scared” and “shocked” by the airline’s lack of social distancing measures, he said.

“They could have avoided this by just communicating better,” Weiss wrote of the airline. “They literally just sent an email 10 days ago telling all of us the middle seats would be empty.”

Weiss said he was traveling with around 25 other nurses and doctors who have been volunteering on the frontlines of Big Apple hospitals for the past few weeks.

He noted that he previously praised the airline for flying medical workers there for free, but said the nightmare return trip was the “last time I’ll be flying again for a very long time.”

Just days before flying, he had told ABC7: “I’m scared of getting on the airplane on Saturday. I’ve been taking care of COVID-19 patients for the last two weeks, and I’m more scared of getting on the airplane on Saturday than I’m walking into the hospital.”

Another physician returning home, Dr. Rebecca Palvin, also blasted the airline for not doing more to protect travelers.

“Hey @United: I appreciate you getting us home from New York, but I’d prefer there be some level of #socialdistancing,” she wrote.


responded to the frontline workers’ complaints in a statement, saying it can no longer guarantee all customers will be booked next to an empty seat.

“Last month, we began limiting advanced seat selection for adjacent seats in all cabins, including middle seats where available and alternating window and aisle seats when seats are in pairs,” the company said in a statement to ABC7.

“Though we cannot guarantee that all customers will be seated next to an unoccupied seat, based on historically low travel demand and the implementation of our various social distancing measures that is the likely outcome.”

This report originally appeared on

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