The Wall Street Journal - 03.04.2020

A8| Friday, April 3, 2020 ** THE WALL STREET JOURNAL.**

core part of our strategy, and
once again it is nice to see it
pay off when it matters the
most,” Mr. Hansen wrote in a
March 12 investor letter. That
letter told investors the fund
was up 25% before fees and
didn’t elaborate on how Val-
iant had scored those gains.
In addition to its stock bets,
Valiant also notched gains on
credit protection on global in-
vestment-grade and high-yield
bond indexes it had bought in
mid-February that became
more valuable as the likeli-
hood of corporate defaults
rose, one of the people said.
The fund had closed half of
that hedge a month later.

ContinuedfromPageOne

of claims is overwhelming

state labor department web-

sites and jamming phone lines.

Still, initial claims were

dramatically higher in many

states last week than two

weeks ago, a sign that some

states are making progress in

processing applications.

In California, about 880,

claims were filed in the week

ended March 28, up from

around 190,000 in the prior

week and the greatest number

filed among all states last week.

Pennsylvania and New York saw

the second- and third-highest

number of claims, respectively.

The record-setting claims

filed the past two weeks are un-

likely to materialize in Friday’s

March jobs report. The monthly

unemployment report offers a

more comprehensive view of

the U.S. labor market, but the

timing of the surveys for that

data preceded the virus’s wide-

spread impact on the economy.

Renee Munholand, a theater

worker who helps hang lights

and audio equipment for events

in Seattle, filed for unemploy-

ment after concerts and corpo-

rate events ground to a halt. She

received her first two unem-

ployment checks, which totaled

about $1,200, on March 24.

The money is helping, she

said, enabling her to make min-

imum payments on credit

cards, buy food and make rent.

Still, she said she is keeping her

heat turned down to trim costs.

“Depending on how long

this goes, it could eventually

start to be crippling,” she said.

Layoffs have been particu-

larly widespread among small

businesses. Such firms operate

on lower cash reserves and

quickly resorted to layoffs, re-

searchers at the University of

North Carolina’s Kenan-Flagler

Business School said. They es-

timated that up to 6.6 million

small-business employees were

immediately laid off when state

governments in March began

mandating businesses close.

Carol Schroeder, co-owner

of Orange Tree Imports, a

housewares shop in Madison,

Wis., laid off 20 employees last

week when the store closed.

“I told them to go apply for

unemployment insurance,” she

said. “We’ve paid into it for 45

years, now’s the time to use

it.” She plans to seek federal

loans so she can pay workers’

health insurance and said she

is confident they will return

when her business reopens.

The roughly $2 trillion stim-

ulus package passed by Con-

gress and signed into law by

President Trump last week is

intended to help ease some of

the financial pain many laid-off

Americans are experiencing.

Labor Secretary Eugene

Scalia said this week that

funds to increase unemploy-

ment payments by $600 a

week will be distributed to

states this week, but he didn’t

know when states would pay

individuals.

“The level of need for un-

employment benefits right

now is far beyond anything

we’ve ever seen in such a short

time,” said Gail Krumenauer,

communications director at

Oregon’s labor department.

—Rachel Feintzeig

contributed to this article.

transport patients is among

several challenges facing

EMTs, who are often the first

medical professionals to make

direct contact with sick pa-

tients. Officials who lead those

agencies say they are also

grappling with N95 mask

shortages and have largely

been overlooked in the coro-

navirus aid packages approved

so far by Congress.

“We’re worrying about the

patients getting what they

need, and we’re worrying

about ourselves,” said Robert

Barbosa, an EMT in Fort

Worth, Texas, who went into

THE CORONAVIRUS PANDEMIC

implementation of some of

these strategies by necessity,”

said Seth Hawkins, a doctor at

Catawba Valley Health System

in Hickory, N.C. Still, he said

making judgment calls about

which patients to transport is

a balancing act.

“From a social justice

standpoint, I feel like I have to

be very careful ever saying no

to people who have turned to

multiple other health-care ser-

vices who have also said no,”

he added.

Some hospitals in New York

and Los Angeles have asked

ambulance services not to

bring noncritical patients be-

cause they are so constrained,

said Matt Zavadsky, president

of the National Association of

Emergency Medical Techni-

cians. The pandemic is already

weighing on hospitals’ finances.

Many emergency medical-

services organizations are per-

forming more treatments in

place, such as providing insu-

lin and fluid to people with di-

abetes. Some groups are issu-

ing explicit new guidance to

emergency medical techni-

cians about whom to drive to

the hospital.

Deciding whether or not to

quarantine while awaiting the

results of a Covid-19 test after

coming into contact with a

high-risk patient. That was be-

fore his agency put in place

more stringent patient-screen-

ing procedures for the personal

protective equipment workers

must wear on such calls. The

test came back negative and he

was able to return to work.

Some emergency medical

services are funded solely by

transport payments from

Medicare and many insurers,

while others receive taxpayer

funding and are embedded

with other public-safety agen-

cies like fire departments.

MedStar Mobile Healthcare

in Fort Worth now transports

only 68% of the patients it

treats, down from 82% before

the pandemic. The change is

chipping away at its revenue

because it is funded solely by

the trips it makes, said Mr. Za-

vadsky, its chief strategic inte-

gration officer. That loss of

funding comes as MedStar is

paying more for personal pro-

tective equipment for staff—in

some cases $7 or more per

mask, versus their typical

price of 67 cents apiece.

“When someone calls 911

they expect someone to come,

and if we can’t put an N

mask on we’re not going to

come.That’sakamikazemis-

sion,” he said.

The Centers for Medicare

and Medicaid Services, or

CMS, issued a waiver Monday

saying emergency medical ser-

vices would still be paid for

transporting patients sus-

pected of having Covid-19 to

urgent care centers, doctor’s

offices and other emergency

medical facilities

That waiver, however,

stopped short of allowing

emergency medical-service

agencies to be paid for treat-

ing at home patients who

aren’t suspected of having the

infection, as many providers

trying to do for those needing

treatment for diabetes or

heart conditions.

“There’s enormous cost in

that,” said Asbel Montes, se-

nior vice president of strategic

initiatives and innovation at

Acadian Companies in Lafa-

yette, La., who is pressing the

federal government to further

adapt its rules.

A CMS spokesman didn’t

respond to a request to com-

ment.

Overcrowded hospitals and
supply shortages caused by the
coronavirus crisis are creating
financial and ethical quandaries
for emergency medical workers
who respond to 911 calls.
As the respiratory illness
spreads, ambulance services
are increasingly weighing pa-
tient needs against the risk of
contaminating more people,
further packing already
strained facilities and using
precious face masks and
gloves in transporting noncrit-
ical patients to hospitals. They
are trying to treat more peo-
ple with common ailments or
mild symptoms of Covid-19—
the disease caused by the
novel virus—in their homes.
At the same time, emer-
gency transport services get
paid only when they bring pa-
tients to hospitals, leaders of
those agencies say. Raising the
threshold for a hospital trip
means sacrificing revenue.
Some efforts to loosen guide-
lines for Medicare reimburse-
ment might offer some relief.
“What many of us hope in
this experience is that it
pushes the envelope on the

BYSARAHKROUSE

Crisis Makes EMTs Rethink Hospital Trips

Paramedics clean a gurney outside a New York City hospital.

SPENCER PLATT/GETTY IMAGES

People waited for help with unemployment benefits at the One-Stop Career Center in Las Vegas on March 17. A record 6.6 million Americans applied last week.

JOHN LOCHER/ASSOCIATED PRESS

force has filed for jobless ben-
efits in the past two weeks, up
from 0.3% at the end of Febru-
ary, showing the toll from the
coronavirus is gripping an
ever-larger share of the U.S.
economy. States indicated peo-
ple from industries including
restaurants, retail, trade and
construction sought unem-
ployment benefits last week.
“The speed and magnitude
of the labor market’s decline is
unprecedented,” said Constance
Hunter, chief economist at
KPMG LLP. Ms. Hunter said she
expected millions more claims
will be filed in the coming
weeks and projects 20 million
jobs will be lost.
“We didn’t see this in the
global financial crisis. We
didn’t see this in the Great De-
pression. There’s been a total
decimation of consumption,”
Ms. Hunter said.
The Congressional Budget
Office updated economic pro-
jections Thursday based on the
jobless-claims data and recently
enacted stimulus measures. It
expects U.S. unemployment to
exceed 10% in the second quar-
ter and gross domestic product
to fall by more than 7%.
“Those declines could be
much larger, however,” the
CBO said, adding that its esti-
mates are “highly uncertain at
this time.”
There are several reasons
why unemployment claims are
likely to stay high in coming
weeks. For one, the federal res-
cue package signed into law last
week raises the pool of workers
who can tap benefits by making
independent contractors and
self-employed individuals eligi-
ble. Further, states have tight-
ened lockdown measures, driv-
ing more consumers to stay
home and more businesses to
close or limit operations.
Some people have been un-
able to successfully apply for
unemployment insurance be-
cause an unprecedented level

ContinuedfromPageOne

U.S. Jobless

Claims

Skyrocket

The returns for Valiant

mark some of the best returns

in the hedge-fund industry

through the market tumult to

date.

A low-profile investor who

is known on Wall Street for

short selling and investing in

private companies, Mr. Han-

sen is better known in some

quarters for his yearslong ef-

fort to bring a professional

basketball team to his home-

town of Seattle.

He was a blunt messen-

ger when it came to the cor-

onavirus. At a Jackson Hole,

Wyo., investment conference

on March 5, he told an audi-

ence of wealthy families and

private investors to go to cash,

stock up on medication and

prepare for the pandemic to

fundamentally alter life.

“He was speaking to an au-

dience of 80 or 90 people and

said that 10 to 20 of us will

likely contract the virus and

several of us will, statistically

speaking, die,” said Matthew

Lusins, a partner at real-estate

private-equity firm Conver-

gence Investments, which or-

ganized the charitable con-

ference.

Mr. Lusins said Mr. Hansen

asked for a list of interna-

tional attendees before agree-

ing to speak at the conference

and didn’t mingle afterward.

Shorting companies and

hedging portfolios became

unfashionable over the last

decade as low interest rates

propelled stock markets to

historic highs.

While hedge funds betting

on and against stocks aren’t

expected to keep up with a

roaring bull market, sus-

tained periods of underper-

formance can lead to investor

frustration and defections.

Valiant, founded by Mr.

Hansen in mid-2008 after he

left hedge-fund firm Blue

Ridge Capital, wasn’t immune

to the pressure to keep pace.

The fund had notched gains

of 8.2% and 13.1% in 2008 and

2011, respectively, and made

money 73% of the months the

S&P was down, according to

investor documents. But, its

investor base had shrunk as

its focus on shorting compa-

nies it believed were fraudu-

lent, or deceived regulators

and shareholders, hurt re-

turns.

Valiant also holds the stock

of about two dozen companies

at any given time and holds its

biggest positions for an aver-

age of more than five years. In

separate structures, it invests

in private companies, mainly

in the U.S. and India.

But the fund continued to

short individual stocks and

pay for hedges—moves that

turned out to be profitable in

the market tumult this year.

When stock markets started

their roller-coaster ride in late

February, the $1.4 billion stock

hedge fund also began profit-

ing on bets it had made

against companies it viewed as

fraudulent or fragile months

or,insomecases,yearsago.

The firm also has cashed in

put options, contracts that

give the owner the right to

sell shares by a certain date at

a specific price, it had bought

on the cheap against stock in-

dexes in the U.S. and India, ac-

cording to people familiar

with the firm.

Valiant bought additional

puts on stock indexes starting

in late January as it became

more concerned about the vi-

rus, said a person familiar

with the firm.

That move pushed the size

of its index hedges to a his-

toric high. At their peak, the

notional value of the options

contracts were between $1 bil-

lion and $2 billion—a hedge

equivalent to the size of Val-

iant’s portfolio.

China’s mass quarantining

of Wuhan starting on Jan. 23

and later that month of the

Hubei province, where the cor-

onavirus first emerged, was a

key signal that the virus was a

serious threat, one person fa-

miliar with the fund said.

The fund also was influ-

enced by Harvard epidemiolo-

gist Marc Lipsitch and other

health-care experts, who were

sounding the alarm as early as

January.

The stock market’s blithe

climb upward even as China

shut down and the virus

spread to South Korea and It-

aly recalled other moments of

extreme dissonance to the

team at Valiant, such as the

housing-market crisis or the

internet bubble, the people fa-

miliar with the firm said.

Mr. Hansen in recent weeks

has told investors Valiant has

little edge on the virus now

that it has reshaped daily life

and the economy so dramati-

cally.

This Hedge

Fund Saw

Risk Early

Valiant bet against

companies it viewed

as likely to be hurt by

economic slowdown.

Labor Data Won’t

Reflect New Reality

Record-setting unemploy-

ment-insurance claims that

were filed in the past two

weeks are unlikely to material-

ize in Friday’s March unemploy-

ment report.

That is because the govern-

ment uses different time

frames and methods for gath-

ering data for the separate re-

ports. The Labor Department

releases a national compilation

of unemployment-insurance

claims for the prior week every

Thursday, giving a fairly quick

read on fast-moving changes to

the U.S. labor market.

The monthly unemployment

report, a separate undertaking,

offers a more comprehensive

view of the labor market, but the

timing of the surveys for that

data preceded the coronavirus’s

impact on the economy.

A survey of households that

determines the unemployment

rate asked Americans if they

reported to work during the

week of March 8-14. Many cor-

onavirus-related shutdowns oc-

curred the following week.

Similarly, a survey of em-

ployers, which determines pay-

roll figures, asks for the head

count during the pay period in-

cluding March 12. If a worker

was paid for any portion of that

period, they were on a payroll.

Economists surveyed by The

Wall Street Journal through

Monday forecast employers cut

10,000 workers from payrolls

and the unemployment rate for

March ticked up to 3.7% from

3.5%. Those benign numbers

miss mass layoffs because they

occurred in the second half of

March, after the survey period.

—Eric Morath