Q1 2020 QUARTERLY LETTER – APRIL 2020 - Keebeck...KEEBECK QUARTERLY LETTER Q1 2020 1 Q1 2020...

KEEBECK QUARTERLY LETTER Q1 2020

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Q1 2020 QUARTERLY LETTER – APRIL 2020

COVID-19 The Near and Long-Term Impact COVID-19 is a global humanitarian crisis both for those whose health is directly impacted by the disease, as well as those impacted by the near-term economic consequences of it. Our thoughts and prayers are with everyone impacted thus far. We are in awe of the brave women and men on the front lines battling this insidious disease from the doctors and nurses to the front line grocery workers, delivery drivers, and food manufacturers risking their own lives to keep the planet running and all of us alive. You all are truly doing God’s work. Thank you! Be safe. It goes without saying, but we urge you to continue to be cautious during this time period. There is still much risk to all and it is imperative that proper social distancing continue, lest all the sacrifice thus far be for naught. Please stay up to date with the latest precautions at the CDC website. In time, we will get through this and heal. My personal blue-sky scenario is a time this fall when I can sit down, relax and watch both the Irish and Steelers play football. Actually, that’s not even realistic and never happened once last fall. With three kids (one a baby), a dog, my innate nervousness, and second guessing when it come watching both teams, it’s never relaxing. At best, it can be described as beautiful chaos. However, I’d at least like to have those games on in the background as my wife and I scramble between changing diapers, doing laundry, walking the dog, helping with homework, shuttling between the kid’s activities and church. You know, it’s funny as I think about it, because ironically, that “beautiful chaos” comprises the moments I’m missing the most during this time of quarantine. Those times seem frustrating and stressful in the moment, yet not being able to do them really makes me miss them. I’m sure many of you miss the grind as well. Yet, I also think we will look back at this time with a greater appreciation for our health, our families and our friends. We will also miss some of this time, really a once in a lifetime opportunity to connect or reconnect with your family on a much deeper level… maybe too deep! My wife and I continue to debate the long-term demographic impact of the COVID-19 quarantine and whether there will be a baby boom, or a baby bust from this time period. Will the family isolation have spawned a new batch of babies from that additional time with your spouse, or will the daily managing of those who already have children push those who were thinking of having more to say “Honey…I think we have enough kids already!” Only time will tell.

- Mathew Klody, CIO

https://www.cdc.gov/coronavirus/2019-nCoV/index.html


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Real Time COVID-19 and Economic Update In this letter, we will provide a real time update on COVID-19 and its impact, touch on the near-term projected economic impact, look at the fiscal and monetary response, provide a sober, objective range of timeframes for “normalization” and finally touch on some longer themes as we try to distinguish between what will go back to normal and what is likely permanently changed. The nature of this crisis and the extraordinary measures taken in response are likely to create major long-term implications for global supply chains, social policy, inflation, etc. At the time of writing, reported global COVID-19 cases sit at 1,563,847 and deaths total 91,830. There is no doubt that these numbers likely materially underestimate the actual number of cases and deaths.

https://www.buzzfeednews.com/article/peteraldhous/coronavirus-updating-charts-maps The primary response of populations globally in dealing with the pandemic has been social distancing which has shuttered large portions of the global economy. Never before in our nation’s history has our economic activity declined so steeply in such a compressed period of time, not in wartime, not in the aftermath of 9/11, and not even during the Great Depression. The spike in unemployment claims in the immediate aftermath of the public response has been unprecedented in American history.

https://www.buzzfeednews.com/article/peteraldhous/coronavirus-updating-charts-maps


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BREATHTAKING UNEMPLOYMENT CLAIMS

Source: Factset Wall Street firms have dramatically cut their projections of economic activity in response to the crisis. Estimates are frankly all over the place because nothing like this has happened in modern economic times and thus no one really knows for sure. On the conservative end is Goldman Sachs, which projects over a 34% decline in real GDP during the second quarter, followed by a sharp recovery in the third and fourth quarters of 2020.


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They see sharp the sharp contraction led by the service sectors (food, hotels, car rental, etc.) and manufacturing sectors (auto production).


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In response, global governments and central bankers, led by the United States have implemented unprecedented fiscal and monetary stimulus (note these actions are incorporated in Goldman’s estimates above). Basically, with unemployment skyrocketing and your average American having very little in savings and living paycheck to paycheck, the government passed the COVID-19 rescue package to provide a lifeline to these families, particularly those asked to give up their employment so that social distancing could occur.


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The data keeps coming in and is likely to expand, perhaps substantially, but here is a rough outline below of monetary and fiscal stimulus announced to date. The United States is leading the charge thus far. While Europe has had enormous monetary stimulus from the European Central Bank (ECB) over the past decade, coordinated, large-scale fiscal stimulus has been limited due to political differences. Will the current crisis, where Europe is now the epicenter lead to a new era in European Union fiscal coordination? That will be a key area to watch.


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Source: Goldman Sachs

Source: Goldman Sachs

https://research.gs.com/content/research/en/reports/2020/03/27/0e5ff987-f932-4e89-b983-a3ea36ccf00c/_jcr_content/report/chapter_2/exhibitGroup_5/exhibit_5.img.png


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$2TN CARES ACT - GRAPHICAL DEPICTION

Source: reddit user SeventyandForty

Global Economy – Watch China Closely This crisis is global and below are the latest global economic projections from JPMorgan. What is interesting to note is the potential recovery in China projected for 2q20 after the shutdown in 1q20. China is projected to grow real GDP by 57% after declining over 40% in the first quarter. Will China be able to achieve this with many of its trading partners effectively locked down? If so, that will be quite impressive


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and provide hope for a more rapid recovery in the United State and Europe. It not, the recovery could be longer and more drawn out. Let’s keep a close eye on developments in China.


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How Long Until Life “Normalizes”? What Will Make People Feel Safe? What Needs to Happen? While we shared leading economic prognostications above, let’s consider the biological and behavioral elements that will ultimately dictate the timeframe for a “normalization” of activity. We have been listening to calls hosted by our partners providing access to leaders in the fields of medicine, biotech, and epidemiology among other fields. We boiled down our learnings to the following. What needs to happen to resume “normal” economic activity? The bottom line is that people need to feel safe. Economies are based upon human beings confidently interacting with one another. This biological crisis has placed a significant portion of that activity on hold. Regardless of what guidance any government provides, if enough people are getting sick, the public will respond in its own interest of self-preservation - for themselves, their parents, or other loved ones. The longer this lasts, the greater the economic damage and vice versa. So, we ask the simple question: what must happen for people to once again feel safe? People will feel safe once they aren’t afraid of being infected. People won’t be afraid of being infected if:

a. They have immunity due to: i. A vaccine ii. Prior exposure which has created antibodies to ward off future infection.

AND/OR b. The disease is no longer present in any material portion of the population.

At this, point, best estimates from experts indicate that a vaccine in unlikely to be ready for mass distribution prior to 2021. Widespread “herd immunity” will have only occurred if COVID-19 spreads throughout the population AND if it is proven that those who have had it and survived have immunity going forward. The data and science on this point is unclear thus far. Upside clearly exists should a breakthrough vaccine be developed in short order, but the trials necessary to prove vaccines do more good than harm make an overnight solution unlikely. Therefore, 2021 seems like a downside scenario at this point and a sustainable recovery will be 12-18 months out. What is a better scenario? Assuming the social distancing measures are effective in reducing and lengthening out the spread of COVID-19, AND we develop and mass produce widespread, immediate testing (positive news recently on this front) to rapidly identify emerging hotspots and isolate those individuals and regions, confidence to resume semi-normal activity may return later this summer. This is closer to a six-month timeframe. Note there is risk of a policy error (the administration luckily backed off the Easter timeframe for lifting distancing guidelines) which would be returning to work too soon and relaunching the disease. This would make a downside economic scenario worse.


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The last scenario is that we are unable to contain this and that it runs through the population unchecked. In this scenario, the global death toll would be immense and until we know there is herd immunity, we will still have uncertainty as to whether those already exposed have immunity as well. That is why at this point, the best solution for much of humanity is to continue to social distance in order to slow and reduce the spread until widespread testing becomes available.

1) Best Case – Social distancing reduces the spread, vaccine research goes as planned, instant testing becomes widely available, and herd immunity starts to take place.

2) Worst Case – Premature end to social distancing, vaccine research is delayed, herd immunity fails to take hold.

Markets – Near and Long Term Volatility returned in force during the first quarter of 2020. There were some historic moves during the quarter, with the VIX exceeding 80, a level not seen since the heart of the financial crisis.

Source: Factset After closing at a record on February 19th, most asset markets experienced a steep and rapid decline, with the S&P 500 finishing off 20% in 1Q20, the AC World ex-U.S. down 23%, Emerging Markets down 24% and the small cap US Russell 2000 down 31%


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No single month in the history of the stock market came close to matching the daily up and down movements of the market. March had three of the top 31 largest daily drops and six of the top 33 largest daily gains in the history of the stock market as shown in the chart below.

Source: Jim Bianco – LinkedIn


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While the clear catalyst for this decline was COVID-19, the market had been on a massive run and bullish sentiment was extreme. Markets rarely go parabolic for extended periods of time without check backs. The second complicating factor is that this rally was also largely based upon “not QE” (which we spoke about in our 4q19 letter) and more support from central banks versus improving fundamentals. We questioned the need for this unusual policy with unemployment at multi--generational lows and discussed the high levels of corporate debt and deficit spending at this stage of the cycle. There is little doubt that the level of volatility has been exacerbated by the circumstances coming into this crisis. Jim Grant recently summed it up well in a March 30th interview: “To be sure, the virus has caused a great deal of chaos, fear and disruption. Yet, it seems to me that the pandemic was not the fundamental cause of some of the financial disturbances we see. Rather, Covid-19 unmasked an essential weakness in American finance which is owed to the past ten years of artificially cheap credit. Of course, no financial system, no matter how conservatively financed, could weather this kind of a shock. But this blow has been especially traumatic in a system in which equity valuations and the quantity of debt, particularly low-grade debt in relation to earnings power, are at or near all-time highs.” Jim Grant Interview – March 2020 High-grade and high-yield corporate debt sold off sharply in the middle of March. Both have rallied back significantly on the back of the expansions of the Fed programs, some of which involve buying corporate debt directly for the first time.

Given the post-GFC macroeconomic and market backdrop coming into COVID-19, the unprecedented economic measures being taken combat it given the massive fiscal and monetary response, there is a very wide range of outcomes from this point in time and as it is impossible to predict precisely. What we find helpful is to lay out the upside and downside economic cases below. Note that these scenarios have very different ramifications for assets classes (i.e. the bullish

https://www.keebeck.com/wp-content/uploads/2020/01/4Q19-Quarterly-Letter-2.pdfhttps://www.keebeck.com/wp-content/uploads/2020/01/4Q19-Quarterly-Letter-2.pdf


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economic scenario isn’t necessarily bullish for all assets nor is the bearish economic scenarios necessarily bearish for all assets). There will be winners and losers in each.

What is the Bull Economic Case? V-Shaped Recovery & Upside Stimulus Lead to Global Growth The bull case is as follows:

1. The disease quickly passes due to some combination of distancing, widespread testing, herd immunity and a vaccine. People are confident to largely resume pre-COVID activity levels.

2. The COVID-19 crisis has created the political will - not just in the United States - but globally, to put partisan politics and nationalistic (in the case of Europe) politics aside and act decisively to inject record stimulus into the global economy in the form of direct aid to corporations, small businesses and individuals. Modern Monetary Theory (see 1q19 letter here) is here to stay. If we can print money and spend it indiscriminately, the country and world has changed forever. Already, there is immediate discussion of a Phase 4 stimulus package and the President has floated an additional $2TN infrastructure program.

3. The Fed’s independence has essentially been eliminated (see below) as part of this crisis and the Fed is now working directly with the Treasury to buy private securities. The printing press has been turned over to the people.

4. The reindustrialization of America (see section below) and rethinking of the global supply chain could come in conjunction with some sort of government stimulus or incentive plan.

What are the implications for asset classes in this bull economic scenario? Most equities win. Fixed income loses. All else equal, equities, particularly those that benefit from a rebounding consumer, should do quite well. Employment will be extremely strong in this scenario, as will consumer confidence. However, this isn’t likely to be a “buy anything” rally. Goldilocks is over in this scenario. In my opinion this scenario puts a dagger through the heart of the nearly forty-year long bond bull market. Why lend with low rates and limited upside in a currency where there is no cap on spending and nothing to anchor the currency to? Exploding government deficits, currency depreciation, and long-term fixed income instruments should do poorly by comparison as widespread printing of helicopter money ultimately has to be inflationary. Onshoring large portions of the supply chain will add to costs and inflation. One wants to own things that protect purchasing power and have pricing power in that scenario. Admittedly rising discount rates and compressed margins will offset some of the appreciation and one will need to be selective, but equities still do far better than fixed payments. The value of cash erodes rapidly on the other side, but not as rapidly as long-dated fixed income.

https://www.keebeck.com/wp-content/uploads/2019/04/Keebeck-Quarterly-Letter-1Q19.pdf


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US DEBT LEVELS ON TRACK FOR WORLD WAR II LEVELS

What is the Bear Economic Case? A Protracted, Erratic COVID-19 Recovery, Long-Term Deleveraging Cycle Overwhelms Fiscal and Monetary Stimulus While there are some things the government can fix, there are also many things the government cannot fix. One cannot prudently manage capital with the assumption that government bailouts and extreme monetary policy will continue to work. We were not in a normal world coming into the crisis. We were at the tail end of the longest, yet weakest expansion in US history that was stimulated by artificial, inorganic means masking price discovery. The world is already extremely leveraged, largely due to kicking the can down the road and socializing financial losses resulting from the GFC. Not only that, but many corporations leveraged balance sheets over the past decade (read our 3q19 letter here for more) due to share buybacks, acquisitions or LBOs. This has left little in the coffer for “rainy days”. Household balance sheets, while improved from the GFC, remain leveraged and the unfortunate reality is that many Americans live paycheck to paycheck. The remarkable fact is that this doesn’t merely apply to lower wage service workers, but high wage earners as well. The concept of living beneath one’s means hasn’t been adopted (nor encouraged) in the United States thanks to Keynesian theory which was widely adopted in the western economies. That is why the rescue package recently passed without much debate. Functionally, many households would quickly end up in bankruptcy and would have little funds to buy the necessities of life - food being the most important.

https://www.keebeck.com/wp-content/uploads/2019/10/3Q19-Quarterly-Letter.pdf


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Source: J.P. Morgan

There is a school of thought that the unwinding of this much leverage is largely beyond the control of central banks and governments. In fact, Ray Dalio of Bridgewater has repeatedly noted the leverage set up is eerily similar to the leadup to the 1930s and discusses the limits of monetary stimulus in a recent article (The implications of hitting the hard 0% interest rate floor). This implies low economic growth and a lack of inflation or outright deflation. What are the implications for asset classes in this bearish economic scenario? Cash (dry powder) & patience is a valuable asset in buying bargains, extremely high-quality fixed income holds up, equities do poorly overall, and low-quality leveraged securities face material impairment risk.

What is the market currently pricing in? At this point, the market is pricing in a recovery later this year or early next year, a lack of large-scale credit losses, fiscal or local government problems, and minimal inflation. The dollar remains the world’s gold standard and store of safety. The caveat to this is that given the interventions of the Federal Reserve in essentially all markets except equities, it is difficult if not impossible to know where the true price discovery lies, particularly in credit which has rebounded dramatically after the expansion of the Fed programs. For example, LQD (a large investment grade fixed income ETF) now trades above its recent historical range after the intervention.

https://www.linkedin.com/pulse/implications-hitting-hard-0-interest-rate-floor-ray-dalio


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Fed - No Longer Independent – What does this mean for the US budget, the dollar, price stability, longer term? As a side note, the most recent involvement of the Federal Reserve purchasing private debt is without precedent in the United States, in effect nationalizing some private markets. While these are exceptional times, our nation is based upon the concept of free speech and historically free enterprise. With that in mind, I want to share Jim Bianco’s recent editorial in Bloomberg on this topic… ”The Fed’s Cure Risks Being Worse Than the Disease.” After this crisis, it is important for democracy and free enterprise systems that these emergency powers be quickly rescinded, otherwise it fundamentally alters our entire political and economic landscape. If we do not go back to the pre-crisis standard then from an investor standpoint, now that we’ve opened the box to MMT and corporate debt funded by the Fed and global central banks, one would have to think that this is ultimately inflationary. As such, long-dated fixed income bonds, be it government, or low yielding investment grade, would hardly seem to return enough to warrant holding in an era where the value of money is materially and rapidly depreciated. At least one has a chance to keep up if they own companies that have the ability to adjust prices and maintain purchasing power.

Restructuring the Global Supply Chains? "If something cannot go on forever, it will stop.” Herbert Stein We have written extensively about the growing global imbalances and the economic and political implications that have been simmering near boil for some time. (Read our 3q19 letter and our 4q19 letter for more.) COVID-19 may well be the spark that changes everything. Shortages of critical medical supplies from masks to pharmaceuticals made abroad is creating front page mainstream headlines, raising the question: does it makes sense to have a lean, global just-in-time inventory supply chain? For decades, academic theory and famed CEOs, such as Jack Welch of GE, made this dogma. Well, with China shutting down in the first quarter and now other parts of the globe doing the same leading to shortages in key industries, there is increasing attention being placed on this issue. Then End of the Global Supply Chain – Boston Globe https://www.msn.com/en-ie/money/other/the-end-of-the-global-supply-chain/ar-BB11TLtv?li=BBr5KbJ

https://www.bloomberg.com/opinion/articles/2020-03-27/federal-reserve-s-financial-cure-risks-being-worse-than-diseasehttps://www.bloomberg.com/opinion/articles/2020-03-27/federal-reserve-s-financial-cure-risks-being-worse-than-diseasehttps://www.keebeck.com/wp-content/uploads/2019/10/3Q19-Quarterly-Letter.pdfhttps://www.keebeck.com/wp-content/uploads/2020/01/4Q19-Quarterly-Letter-2.pdfhttps://www.keebeck.com/wp-content/uploads/2020/01/4Q19-Quarterly-Letter-2.pdfhttps://www.msn.com/en-ie/money/other/the-end-of-the-global-supply-chain/ar-BB11TLtv?li=BBr5KbJhttps://www.msn.com/en-ie/money/other/the-end-of-the-global-supply-chain/ar-BB11TLtv?li=BBr5KbJ


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For 40 years, economists have promoted globalization based on supply chains that rely heavily on cheap nonunion Chinese labor — working without adequate safety or environmental protection — to assemble sophisticated parts from around the world that are made into final products and then reshipped largely to consumers in rich countries. This was said to be an ideal international division of labor that optimized returns to all participants. Usually unmentioned was the boost this supply chain model gave to corporate profits. As Stewart Paterson, author of “China Trade and Power,” notes: “This was the largest labor arbitrage in the history of economics.” Now, however, the hidden costs of globalization are becoming apparent. One is US dependence on China for critical pharmaceuticals and medical supplies, such as face masks and other personal protective equipment. The New York Times reported that while China makes half the world’s medical masks, it has refused to export them and is buying more on the world markets. Will coronavirus reverse globalization? - BBC News https://www.bbc.com/news/business-52104978 "Look at trade," he explains. "Once supply chains were disrupted [by coronavirus], people started looking for alternative suppliers at home, even if they were more expensive. "If people find domestic suppliers, they will stick with them… because of those perceived risks." The modern supply chain is now viewed to be literally costing American lives and I can only imagine that when the dust settles this will become a major issue going into the election. While I am not saying that global trade will go away, I think supply chains may come closer to home, especially for industries deemed national security related. Mexico could be a major beneficiary. As you can see in the chart below, the iShares Mexico ETF has been under severe pressure during this crisis. Perhaps there is opportunity here?

https://www.nytimes.com/2020/03/13/business/masks-china-coronavirus.htmlhttps://www.bbc.com/news/business-52104978


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ISHARES MSCI MEXICO ETF (EWW)

Source: Factset

Navigating the Path Forward - The Return of the Analyst A Long, Long Time Ago (before QE) in a Market Not So Far Away, there was something called fundamental business analysis - evaluating and pricing securities based upon a balanced assessment of risk and reward. Over the past decade, the value of that skill set has been called into question as steadily rising prices across most asset classes, and no drawdowns of any real consequence or duration has minimized the penalty for being a bad judge of risk. Rapid and excessive central banks responses to any dips have caused the analyst to largely die off or go into hiding just as the Jedi did when the Emperor rose to power in Episode III (“So this is how democracy dies, with thunderous applause” - Senator Amadala Revenge of the Sith). The job of a prudent investor is not to avoid risk at all costs. Investing is not without the absence of risk, but prudent investing means taking risk when one is sufficiently compensated for that risk. It is ok to take


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risk if the potential upside outweighs the downside. This quote says it well: “Courage is resistance to fear, mastery of fear, not absence of fear” – Mark Twain. In recent years, elevated pricings across a number of assets reduced the compensation one received to take that risk. This is why we have written cautiously with an underweight recommendation to most corporate debt at these minimal yield levels (see our 3q19 letter here). Should one lend to an “investment grade” business and receive 3% knowing that the business can conceivably go away overnight as shown by the recent crisis? Does that make sense? Many companies will now see the value in rainy day funds and better balance sheets. These are some of the things that will be rethought moving forward.

Source: J.P. Morgan

New global supply chains, a much greater involvement of government in private enterprise and public employment, potential game changing currency movements, inflation, and debt issuance are just a few of the major macro-economic items that must be digested in this new order. The 2009-2019 era of “buy everything” is likely over. While the near-term stimulus and QE kitchen sink will temporarily and perhaps for one last time, distort price discovery, the whirlwind has been unleashed and won’t be able to be put back into the box. Once upon a time, there were fundamental analysts who examined the securities of a business by touring the mines, the railroads, the oil and gas fields, the restaurants, and the malls. They looked at long-term economic and business cycles, margins, operating leverage and perhaps most importantly financial leverage. Their job was to assess all of these things and understand the risk involved and what price was fair for an asset to be priced at in order to compensate the owners for bearing that risk. Downside risk and price discovery was laid bare across all assets for a brief moment in time this past March. Look at the cues, take note and be prepared. It will take fundamental research and individual

https://www.keebeck.com/wp-content/uploads/2019/10/3Q19-Quarterly-Letter.pdf


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company analysis to choose between the winners and losers in this new world. The rediscovery of risk premium and the return of the fundamental analyst is necessary. I think we are going into an era where you need a scalpel and a surgeon, not a pickup truck to back up and buy everything. We look forward to the opportunities that environment will present.

Conclusion The positive side is that COVID-19 is not a Yellowstone erupting event or a nuclear attack. Our infrastructure has not been damaged. Airplanes will fly, cruise ships will sail, and people will dine out and go shopping again. For businesses which were overleveraged or not prudently financed, ownership may change, but that is the part of the risk and reward in a free market system. Our bankruptcy code provides for efficient restructuring of ownership. The other good news is that now some assets are more reasonably priced and offer a better long-term risk/reward ratio. We seek to participate in the recovery by finding these types of opportunities. Real credit and equity analysis will be required in this new world. The Fed put won’t be enough. This is also an opportunity to restore global imbalances that have developed that have clearly become unsustainable. Is now the time for the Chinese consumer to emerge onto the scene? Will China have a choice as the global supply chain is restructured? Will other emerging nations join? Will the strong developed market currencies decline, thereby providing more spending power to the emerging nations and restoring some wage power to middle class of developed nations? Much will change.


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Keebeck Viewpoints Note that we are refining and updating some of our specific views: • Overweight international and emerging markets and non-dollar securities Mexico could benefit in a shift of production from Asia, Prefer Asian consumer to industry • Underweight corporate debt and heavily leveraged securities • Underweight private equity Distressed opportunities may emerge depending upon the trajectory of the recovery/markets • Overweight value vs growth Non-financial cyclicals screen quite cheap historically, especially compared to large growth • Overweight short duration vs long duration • Overweight domestic housing Demographics continue to favor a multi-year expansion subject to macro conditions • Overweight energy Specifically, upstream natural gas which may benefit as oil production (and associated gas) declines

Sincerely,

Mathew T. Klody, CFA Chief Investment Officer Keebeck Wealth Management, LLC [email protected] * As this newsletter is for informational purposes, the strategies and opinions included herein may not be reflected in the management of your specific investment account(s). We manage accounts on an individualized basis, taking into consideration each client’s unique financial situation. If you have any questions regarding your investment accounts or our specific investment strategies, please contact us.

mailto:[email protected]:[email protected]


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Biography Mathew T. Klody, CFA is the Chief Investment Officer at Keebeck Wealth Management, LLC. Mathew is also an adjunct professor of finance at the University of Notre Dame. Prior to joining Keebeck, Mathew was the Founder, Managing Partner and Portfolio Manager of MCN Capital Management, LLC, the advisor to a private long short investment partnership. Mathew was the Senior Vice President and Analyst at Chicago-based Sheffield Asset Management, a long/short equity hedge fund from 2007-2012. From 2003-2007, Mathew was an Investment Analyst at the holding company of Alleghany Corporation (ticker "Y") covering the equity portfolio, corporate development and the reinsurance portfolio. Mr. Klody began his career as a credit analyst at the Global Corporate and Investment Bank at Bank of America. Mathew has been selected to speak at a number of industry events, including the Spring 2017 Grant’s Interest Rate Observer conference, Invest for Kids - Chicago (Fall of 2017), and the MOI Global - Best Ideas Conference (2018). He has served as a guest lecturer to the Notre Dame Institute for Global Investing, the Behavioral Finance and Applied Investment Management programs at the Mendoza College of Business. He serves as a member of the Parish Council at St. Joan of Arc Church in Lisle, IL. Mathew graduated summa cum laude from the University of Notre Dame with a degree in finance and business economics. Mr. Klody is a Chartered Financial Analyst.

DISCLOSURES Content should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors

on the date of publication and are subject to change. Content should not be viewed as personalized investment advice or as an offer to buy or sell, or a solicitation of any offer to buy or sell the securities mentioned herein.

Past performance may not be indicative of future investment results. Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment or strategy will be suitable or profitable for your investment portfolio. All investment strategies have the potential for profit or loss.

Charts and graphs do not represent the performance of our firm or any of our advisory clients. All information is based on sources deemed reliable, but no warranty or guarantee is made as to its accuracy or completeness. Projections and estimates are based on assumptions that may not come to pass. Changes in investment strategies, contributions or withdrawals, and economic conditions may materially alter the performance of your portfolio.

Real Time COVID-19 and Economic UpdateBreathtaking Unemployment Claims$2TN CARES Act - Graphical Depiction

Global Economy – Watch China CloselyHow Long Until Life “Normalizes”? What Will Make People Feel Safe? What Needs to Happen?Markets – Near and Long TermWhat is the Bull Economic Case? V-Shaped Recovery & Upside Stimulus Lead to Global GrowthUS Debt Levels On Track for World War II Levels

What is the Bear Economic Case? A Protracted, Erratic COVID-19 Recovery, Long-Term Deleveraging Cycle Overwhelms Fiscal and Monetary StimulusWhat is the market currently pricing in?Fed - No Longer Independent – What does this mean for the US budget, the dollar, price stability, longer term?Restructuring the Global Supply Chains?IShares MSCI Mexico ETF (EWW)

Navigating the Path Forward - The Return of the AnalystConclusionKeebeck ViewpointsConclusionBiographyDisclosures

Q1 2020 QUARTERLY LETTER – APRIL 2020 - Keebeck...KEEBECK QUARTERLY LETTER Q1 2020 1 Q1 2020...

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