Big Trouble in Not So Little China

 

Last week was a weird one for me. Coming off vacation then quickly into a holiday weekend, I think my brain has hit full summer mode when it comes to markets. I’m only half paying attention to the details. There are a couple of things that were hard not to pay attention to though. OPEC+ and oil, which hit a near term high of 77 in early AM trading on Tuesday, but then traded off about 10% during the week. Saudi Arabia and UAE are battling over production and it’s putting OPEC+ at risk. I don’t think it’s a large risk, because it benefits all those involved. However, there’s the story of the scorpion and the frog. The other things on the list to watch for me is China. First, they changed the rules on Crypto and now they’re pressuring foreign listed companies. DiDi got crushed after their $14 IPO. It was down about 20%. This follows the whole Any Financial and Jack Ma situation. The iShares China large cap ETF (FXI) is down 9% over the last two weeks. I think this continues, but then if everyone thinks this, is this a possible buying opportunity?

This week is a light week on the Economic side, but we’ll get CPI & PPI numbers from a bunch of G10 countries. We also will hear from Uncle Jerome this week in his semi-annual report to Congress. Angela Merkel will visit the White House for what is likely the final time.

Earnings Watch

There was one name of note last week, at least for me. WD-40 reported excellent numbers and upped guidance last week, but no one cared. How does no one pay attention to this name? It’s literally one of the most important products a homeowner has in their toolbox.

This week we start the Q2 reports with the Banks+ and a few other large cap names. It’s not that large in number of names with only about 40 names reporting in North America. However, the size of the Banks and other mega-caps reporting has nearly 7% of the S&P 500 market cap reporting. I’m watching all the Banks, but Goldman's underlying numbers are showing some trends. The quarter's EPS estimate rose 5% last week and 11% over the month. It shows a 3.7% Predicted Surprise. One non-bank name to be aware of is KSU. It's ATM options saw a decent jump on Thursday and the 30ATM Implied Vol is trading up in the 79% percentile.

Equity Capital Markets

Looking at the IFR ECM calendar there are nine IPOs this week. Most are on the smaller side, but one is a little large. Stevanato, an Italian drug container company, is looking to raise close to $1B. A couple of stats I saw this week. According to IFR, 50 foreign companies have raised $29B in US listed IPOs, which includes cross-listings. As mentioned in the open, China’s instability is causing some angst, and because they have been about 15% of the 2021 US IPO Market according to Renaissance Capital. I'm wondering if China developments slow down the Capital Markets a little. As of right now, it doesn't look like it, as in the last two weeks, there has been more than 30 IPO filings in the US alone.

In the secondary markets, the big IPO lockup expiry this week is Playtika Holdings (PLTK). The offering raised $2.1B on about 80M shares. There are only 84M shares in free float and 400M outstanding overall. Another lockup name is Affirm Holdings. It’s not as big as PLTK, but 28M shares unlock of 143M in free float and 265M overall. It also has a large holding among hedge funds.

Best of the Week

For those of you that didn’t know Denise Shull is the inspiration for Wendy Rhoades, played by Maggie Siff on Billions. Actually, Denise talks about her current legal case on that matter towards the end of the interview. That’s not the only reason to share this episode though. Denise goes through a lot of things that made her the inspiration for that character. She gets into the role of emotions in trading and investing. Many people underestimate the impact your emotions have on your work. It’s not just trading.

Denise Shull — Making Intuition Work For You - Listening time: 71 minutes

Best of the Rest

I recently finished the book, Black Edge, which is essentially about Steve Cohen and insider trading. It’s such a crazy story that I wouldn’t believe it to be true if I didn’t grow up in the industry. This video essentially tells most of the important stories in the book, but also includes some of the more recent Meme fiasco. It’s a great summary, but if you find this one interesting, I highly recommend reading Black Edge.

Steve Cohen - America's Most Profitable Day Trader - Watch time: 20 minutes

One of Refinitiv’s sister companies under the LSEG umbrella had a rather important event last week. Wise Plc was the first technology company to do a direct listing on the LSE. This listing proves that the UK is a possibility for fintech companies.

LSE Has First Direct Listing of Tech Company

Patrick Stanley is the founder and CEO of CityCoins, a new product that allows you to support your favorite cities while earning yield in Bitcoin. In this conversation, Pomp and Patrick discuss CityCoins, how they work, municipal equity vs debt, government’s role, how citizens benefit, why this benefits bitcoin, and why Miami was the first city. This is one of the tangential cases for the uses of Bitcoin and crypto. This left me thinking, can things like this replace some aspects of the $4T muni bond market?

Patrick Stanley On Creating Equity For Cities - Listening time: 45 minutes

This Tweet by Mohamed El-Erian alerted me to this WSJ article about High Yield yields falling below the CPI. It’s a perfect storm here with low yields all around and investors searching for them in any form. Then on top of that we have some freakishly low basis to come off to produce huge CPI numbers.

Junk-Bond Rally Pulls Yields Below Inflation

I’m a pretty big Tony Robbins fan. I may have enjoyed this interview a little more than a normal person. Tony talks about his childhood and other life impacting experiences he’s had. Every time I hear Tony speak I get fired up to do something awesome.

Tony Robbins Points to the Keys to Fulfillment - Listening time: 51 minutes

One for the Road

Keep an eye on ticker CARV. Carver Bancorp, a nano-cap $91M stock, shares ripped as the next focus of the Reddit community. The stock has about 3.5M shares outstanding, but only about 1M of those are free float, which means the shares not closely held traded 95 and 64 times in each of the last two trading days.

Carver Bancorp Triples in Apparent Meme Stock Boost

Thanks for reading. Have a most excellent week.
Michael