Welcome back to our weekend reading,
To quote Arnold in Terminator 3, “I’m back”.
It’s been quite a week for stories – and given that a new Federal Reserve Chair is expected to be nominated next week, November may be a particularly readable month of news at this rate.
Full disclosure: after Jesse’s palette cleanser last week, we must return to speaking about the world of crypto for what is probably the most interesting story of this quarter. Sorry, TradFi.
Let’s look back on the week.
Cost of Doing (Dirty) Business
Around a decade ago, the cost of capital (the minimum return necessary to undertake the project) was around the same for oil and gas projects as it was for renewables, somewhere in the band of 5-10%.
Today, the chart tells a very different story.
The annual projected return needed to justify the development of a new oil project is now at 20% p.a., doubling over the same period that renewables have halved down to ~3-5%.
This is a sign of things to come that capital may be increasingly directed towards renewable projects, both from pure-play developers to the oil and gas incumbents looking to diversify their business and capital base away from dirty industry.
2021 Winners and Losers (YTD)
A particularly interesting table from Bank of America this week on the winners and losers across asset classes – though that Natural Gas number might be a bit on the nose if you bought anytime in the last month or so…
|High Yield Bonds||+10.2%|
|US 30-Year Treasuries||-7.1%|
Source: BofA Securities
Buying the Constitution
If there’s one thing that you might not expect from crypto/web3 enthusiasts, it’s to try and buy a document that’s more than two centuries old.
ConstitutionDAO, a Decentralised Autonomous Organisation, is a decentralsed investing protocol that has allowed thousands to come together in an attempt to bid for one of the last remaining copies of the US Constitution.
One of the founding organisers of ConstitutionDAO happened upon an upcoming Sotheby’s auction, which was selling one of the last copies (1 out of 11) left of the Constitution from a private collector.
In just a few days, a core team of organisers established communication lines with Sotheby’s, museums and of course the wider crypto community – in 36 hours, over 2,600 people followed the new Twitter account, and over $10 million USD in soft commitments was gathered.
Although they raised more than $40 million USD in a week, an unnamed bidder just beat them out to take home the copy for $43.2 million USD.
If you read about the endeavour there’s a lot of focus on the patriotism of it all, but what I find more interesting as an outsider to both the US and the world of DAO’s is the potential and efficiency this structure makes for syndicated investments.
*All numbers in USD from BofA Securities
Equities: $13.2bn into equities
Bonds: $6.2bn into bonds
Precious Metals: $71mn out of gold
Cash: $7.8bn into cash
Flows to Know
$1.0 trillion into equities in 2021
A 200-year history of US real interest rates
Equity Inflows Decelerating
US profits dropping from 48.8% to 7.4%
If It Is Broke, YOU Fix IT
Apple have announced it will begin making parts and repair tools available for customers to fix their own devices, changing a longstanding narrative around approved repairers – though I can’t help but wonder what kind of markup those parts and tools will have slapped on them.
“Self Service Repair” will be rolled out initially in the US but will expand globally throughout 2022. Initially, this will only be for iPhone 12 and 13, will later extending to Mac computers which feature M1 chips.
If I Were a Rich Man
Well, I’ve already gone and got that song stuck in my head now.
Over the last 20 years, global wealth has tripled, driven largely by China’s rapid expansion, according to a report of McKinsey & Co.
Net worth globally rose from $156 trillion USD in 2000 to $514 trillion USD at the end of 2020; China increased its wealth from $7 trillion USD in 2000 to a whopping $120 trillion in 2020, taking out the top spot for wealth in the world.
Most global wealth is locked up in land and property, a trend that has remained consistent over the period of the report.
In both the US and China, more than 60% of the wealth is held by the top 10% of households, a share that has been increasing over the past two decades.
Our morning calls continue, please do tune in for a daily dose of market insights and access to some leading experts in the funds management field.
Tune in from 9:30-10:00 am AEST, Tuesdays and Thursdays.
Have a safe and enjoyable weekend.
Max and the Mason Stevens team.
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The views expressed in this article are the views of the stated author as at the date published and are subject to change based on markets and other conditions. Past performance is not a reliable indicator of future performance. Mason Stevens is only providing general advice in providing this information. You should consider this information, along with all your other investments and strategies when assessing the appropriateness of the information to your individual circumstances. Mason Stevens and its associates and their respective directors and other staff each declare that they may hold interests in securities and/or earn fees or other benefits from transactions arising as a result of information contained in this article.