You Can't Bring Me Down

 

Financial markets never cease to amaze me. We’ve seen a company most of us heard of before a couple of weeks ago threatening to bring the whole system down. This comes on top of the CCP’s ability to put in new regulations like Steph Curry knocking down three pointers. I shared an article below about how China’s ban on crypto is different this time. I’m not exactly sure it is. The CCP had plans to dominate the world, but I’m not sure this is how they thought it would go. I thought of today’s title when I saw the strength of equity and crypto markets this week. All the news pointed to another lower week, but they seemed to fight it off and end the week higher. It’s also the title of a song in my pre-race routine. Here are some of the lyrics. I think it describes the crypto community quite well. Not sure if that ends good or bad.

Time out, let's get something clear
I speak more truth than you want to hear
Scapegoat to cover up your fear, you can't bring me...
You ain't never seen so much might
Fight for what I know is right
What up? You got yourself a fight, you can't bring me...
Stand up, we'll all sing along
Together ain't nothin' as strong
Won't quit, we ain't in the wrong, you can't bring me...

Here’s a good one for you from last week. According to an article on SeekingAlpha, ConocoPhillips is purchasing some assets from Shell that would make it the second largest Oil and Gas producer in the lower 48 States. They’d be second to ExxonMobil and would pass Chevron who is currently #2. Ok, what’s SO good about that? Well, all three of those companies were once part of Standard Oil. Below, I shared a podcast for you energy history buffs about the history of that company. It’s a truly unbelievable story of an average kid becoming the richest man in the world and controlling the largest company.

I was also happy to see Uncle Jay and his merry band of misfits decided to give us a light warning about the Fed’s tapering and rate hike expectations. Markets seemed to digest this well. Even with that, if inflation continues to run hot, they could change their plans. Refinitiv’s Interest Rate Probability app shows the expectations don’t really get to anything mildly serious until at least next year this time. 

This week I expect all the political rhetoric to be amped up around the debt ceiling. Basically, it’s the controlling party looking to up it and the minority looking to be debt fighting hawks. It’s so annoying on both sides. Names to keep an on eye though are those that gets the vast majority of their revenues from Uncle Sam. Other than that fiasco, I’m watching Recode’s Code Conference. They’ve got some of the biggest names in tech speaking.

Earnings Watch

Last Week

Last week I pointed to Stitch Fix as a name to watch. It came into its release with Predicted Surprise of 12% and it annihilated that. The company was expecting a loss and flipped to a decent profit and the stock responded well. It opened Tuesday up more than 12% and closed the week up more than 23%. On the downside, FedEx disappointed most last week. The company mentioned troubles with hiring and being able to deliver at capacity and the stock ended the week down more than 10%.

This Week

We’re still light in terms of the totals this week. On the individual name side, Micron (MU) is the largest name reporting. One names to pay some attention to is Jefferies (JEF), which has nearly a 15% Predicted Surprise on it’s EPS and the estimates there have some positive momentum. I’m looking to hear from some of the business services companies, Cintas and Paychex, as well as Carmax and Thor from the consumer side.

Equity Capital Markets (Via Refinitiv’s IFR)

Thirteen of the fourteen scheduled US IPOs priced this week with six coming in above range and three below. The trading was decent with only two trading down and averaging 17% through the end of the week. Bankers continue to look for a big finish to the year as Q3 ends this week. Toast hit a $30B valuation, which is up from it’s $5B pre-pandemic valuation. IFR shows the weekly total to be about $10.9B in the Equity Capital markets. Half of which was IPOs.

We’re looking at some slowness with only 3 IPOs scheduled as of now. Olaplex is the big dog looking to raise $1.1B. But they might see some competition in the news from the two direct listings from Amplitude and Warby Parker.

Best of the Week

This was a good episode. I like all of them but this one was worth sharing because of the topic. Jenny and Caleb are offering some views on the underlying investor. They talk about a ton of topics, but some of the insight shared by Caleb from the Investopedia data was incredibly insightful. You might know Jenny from her CNBC appearances, but she also runs a successful investment business. Some of her points around how RIAs are thinking about their client portfolios also tells a story. This one has two versions. A much more edited version for YouTube that runs much less time. The longer podcast version has some of the back and forth and a conversation around the NYC comeback.

The Next Recession Will Be Caused by the Stock Market Shorter form - Watch time: 40 minutes

Investopedia Brown - Long form - Listen time: 96 minutes

Best of the Rest

IEX tries to be at the forefront of fairness in markets. The exchange is looking to put in some new features to, according to them, help the individual investor. The President and co-founder, Ronan Ryan, mentions that the retail market is the next segment of growth for their business. According to the article IEX is frequently mentioned on Reddit and Discord because the average investor sees the company as fighting on their behalf. This is more of a news story, but I thought it was worth including because it’s showing a power shift continuing in favor of the individual. Now, we just need a completely uneducated government to make some ridiculous rules that make no sense to know we’re fully there. 

‘Flash Boys’ exchange IEX ramps up effort to cater to Reddit retail crowd, forms broker committee to improve stock-market structure

I’ve been on China, well more like off China, for a while. This past week’s crypto ban created a problem for most currencies. First, we saw the CCP ban mining, which most say was to prevent the massive use of electricity. Now, they’re banning any use, and most say it’s to protect their own digital currency. The article notes that this has been happening since 2013 and is nothing new, but some point to the fact that citizens can still own crypto. The good news is that after the initial shock, I heard that every other China announcement has seen positive performance after. I didn’t find the need to research this, because each was somewhat different.

China’s Latest Crypto Ban Is Its Most Severe, Insiders Say

We touched on this last week and it was a big story being covered all over the place this week. This is a little bit of a different view on the topic from Hugh Hendry. Hugh thinks Evergrande is click bait and that it’s just another reason for the media to grab our attention.

Evergrande is this week's FinTwit Dopamine, less credit expansion and global gdp growth will be its legacy...

Rui Ma is the co-host of Tech Buzz China. She joined Bill to help us understand the current regulations environment in China. I loved the format of this conversation. Bill didn’t get her to predict and offer answers, but more was trying to understand how to think about what the CCP might be trying to do and how to analyze the competitive market.

Rui Ma - Talking China - Listening time: 91 minutes

Energy and Oil stocks have been down for quite some time, but oil has recently been on a bit of a run over the last month. Jesse Felder hit on a couple of points that I found informative. First, he mentioned insider bullishness, so I decided to check on the Starmine Insider scores by the TRBC Business Sector. The Refinitiv Business Sector is slightly more focused that GICS Industry Group, but less focused than their Industry classification. The second point was around how the producers or commercial accounts look to be positioning themselves for higher prices. He used the net positioning in futures for the commercial accounts as a percentage of the total open interest. I put that chart into a DataStream chart to track it further.

Is Oil About To Breakout Of Its Long-Term Downtrend?

This one is a longer one, but honestly I found it so dumbfounding how one company could be so large, impactful, and powerful even with a company like Amazon around today. In the podcast, the guys estimate Standard Oil’s revenue to be about 1% of the US GDP in the early 1900s. Today, this would be about $192B, which is around the 14th largest now, but the subsidiaries that are around today have revenues adding up to more than $400B. Rockefeller was just an animal as a businessman. He was ruthless in his quest for profits.

Standard Oil Part I - Listening time: 132 minutes

Brian Armstrong joined Pomp this week to discuss Coinbase, regulation, the SEC, bitcoin, Ethereum, smart contracts, NFTs, DAOs, company culture, remote work, and operating a publicly traded company. This is a good conversation for those of you looking to catch up on some of the new features in finance at a high level.

Building The Future of Crypto with Brian Armstrong - Listening time: 65 minutes

Individual investors are getting more active in Germany too. While nowhere near their American counterparts, they are owning more company shares. Even with this increase in interest, more than 40% of citizens still think stocks are a speculative object. Also,70% of shares listed on the DAX are still owned by foreigners. The chart below shows the average holding period moving more towards trading over investing, but it’s stalled a bit since the turn of the century.

New Record During Pandemic: Stock Trading Volume $59 Trillion US Higher Than In The Previous Year, Germans Particularly Fond Of ETFs

One for the Road

Ben highlights two of my favorite financial personalities from history. This is a nice short article that highlights what made each successful and how things changed forcing them to change. We’ve seen it happen a number of times throughout the history of markets. SOES bandits and things like ADR & Index arbitrage were once easy money, but are now mostly gone.
Benjamin Graham vs. Jesse Livermore

Thanks for reading. Have an amazing week.

Michael