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[In]Securities Guest Blog: Who's Zoomin' Who by Aegis Frumento Esq
March 19, 2020
[In]Securities
a Guest Blog by
Aegis J. Frumento, Partner, Stern Tannenbaum & Bell
Aegis J. Frumento, Partner, Stern Tannenbaum & Bell
Who's Zoomin' Who
Samuel Johnson said that "when
a man knows he is to be hanged in a fortnight, it concentrates
his mind wonderfully." Fortnight is one of those words that we've abandoned in
our quest for precision over poetry, like "score" for 20 and "stone" for 14
lbs. A fortnight is 2 weeks, which seems a long time to contemplate one's
demise, but maybe only because these days so few of us even do.
In a fortnight, if current models of the coronavirus spread remain unaltered, there will be about 2,300 dead from the virus in the US, and about 150,000 known to be infected. We won't know how many are actually infected, or were and recovered. We are blind -- not only for lack of good test information, but also for not having a familiar context. The last time anything like this happened was in 1918, and there's no one around now who remembers it. But Samuel Johnson's dictum is true, and we see it in the markets. Our collective minds are being concentrated on what matters.
Take, for instance, one of my pet peeves. Bitcoin is selling this morning at about $5,300, almost half its value a month ago. Compare that to the S&P500 (down a quarter, though it depends on the day and the hour), silver and platinum (down a third), or gold (down 7%). Sure, oil is down more, but that's manipulated. Hmmm . . . .
But I'm more interested in the counter-examples.
Consider what happens when a large chunk of the country is forced to work from home, and can only attend meetings remotely. Or when the country's students all need to attend classes on line. Well, what happens is that a mobile app that was popular among high school video bloggers and chatters suits up to shoulder an adult challenge. Zoom Video Communications is poised to be the leading facility for work-from-home learning and conferencing. https://www.investors.com/research/breakout-stocks-technical-analysis/zoom-stock-ipo-leads-coronavirus-stock-market/ Its stock went up 20% in the past month.
Or consider when not enough
coronavirus test kits renders us ignorant of how to manage the pandemic. A
small company in Utah with a COVID-19 test kit gets emergency approval to make
and ship it. Co-Diagnostics Inc. will ship 50,000 test kits a day for the
foreseeable future. https://www.deseret.com/utah/2020/3/17/21182512/covid-19-testing-co-diagnostics-testing-kits-fda-approval-utah-tech-community-silicon-slopes.
Its stock price went from $3 to $10 a share in a month, a 248% increase.
http://www.brokeandbroker.com/5100/aegis-frumento-insecurities-covid/. Not even the Spanish Flu pandemic of 1918 caused the markets to quaver like they have today. I suggested from that historical perspective that something else was at play this time. The fate of bitcoin offers a clue: unlike in 1918, too much of today's economy is built on sand -- on unessential goods and services. The hospitality industry, for example, may lay off 4 million workers in the next few days. That's 2.5% of the US labor force. The ripple effect of those job losses could easily result in an increase in unemployment of over 8%. That will put us almost back where we were during the Great Recession a dozen years ago.
We lived
differently in 1918. There were bars and restaurants, of course, but the
hospitality industry was not as large or as consequential as it is today. Most
people did not live in cities, and most ate and entertained at home.
ABOUT
THE AUTHOR
Aegis Frumento is a partner of Stern Tannenbaum &
Bell, and co-heads the firm's Financial Markets Practice. Mr. Frumento
represents persons and businesses in all aspects of commercial, corporate and
securities matters and dispute resolution (including trials and arbitrations);
SEC and FINRA regulated firms and persons on regulatory compliance issues and
in SEC and FINRA enforcement investigations and proceedings; and senior
executives of public corporations personal securities law and corporate
governance matters. Mr. Frumento also represents clients in
forming and registering broker-dealers and registered investment advisers, in
developing compliance policies, procedures and controls, and in adopting proper
disclosure documents. Those now include industry professionals looking to adapt
blockchain technologies to finance and financial market
enterprises.
Prior to joining the firm, Mr.
Frumento was a managing director of Citigroup and Morgan Stanley, a partner and
the head of the financial markets group of Duane Morris LLP, and the managing
partner of Singer Frumento LLP.
He
graduated from Harvard College in 1976 and New York University School of Law in
1979. Mr. Frumento is a frequent author and speaker on securities law issues,
and is often quoted in the media on current securities law
developments.
NOTE: The
views expressed in this Guest Blog are those of the author and do not necessarily
reflect those of BrokeAndBroker.com
Blog.