Insights

Fool Me Twice, Impeach on You

We have so far seen three days of an impeachment trial for Donald Trump, largely based around the January riots, which saw an armed group storm the Capitol Building during a vote to validate the results of now President Biden.

Democrats have based their argument for impeachment on the notion that Trump encouraged/directed rioters to storm the capital, and that his inflammatory rhetoric and undermining of the election results was directly responsible for the events of January 6.

For purposes of this note, we won’t go into the merits of either side’s arguments or why they chose to begin a second impeachment proceeding. Politics, like poker, often has agendas which are kept unclear from the observer – as Warren Buffet is fond of saying,

“In poker, if you’ve been playing the game for 30 minutes and you don’t know who the patsy is, you’re the patsy.”

What we know at the end of Day 3 is that the Democrats have wrapped their case, with a response from Trump’s attorneys to be delivered some time this evening. A conviction requires two-thirds majority of the Senate – 67 votes – which will need at least 17 of 50 Republican senators to vote against their former President.

It’s unclear how a conviction would move markets if it was to occur – it’s unlikely that the S&P 500 has a 2024 Trump Presidency priced in at the moment, but we’ve been proven wrong by the market before and chances are we may all be proven wrong again.

Cathie’s Ark

Cathie Wood’s $6.8 million play on 1833.HKL (Ping An Healthcare & Technology) drew the attention of hordes of copycat investors on Thursday, lifting the company’s market value by a record $3.3 billion.

It was the latest example of Wood’s extraordinary power to move markets. Ark’s trades have become a focal point for many retail investors, since the ARK ETF outperformed its benchmark significantly over the last year.

Once details emerged of Ark Fintech Innovation ETF purchasing 497,800 shares of 1833.HK emerged, liquidity flooded the security and the resulting 21% move drove Ark’s holdings to around $6.8 million at the close. Well played Cathie.

Have you had your shots?

The global vaccine rollout has well and truly begun, with over 159 million doses administered across 76 countries (according to Bloomberg). This represents just shy of 6 million doses per day.

Unsurprisingly North America and Europe are amongst the top countries in receiving dosages, the U.S currently has 10.9% of its population with at least 1 shot and 3.6% fully vaccinated.

These sound like big numbers – and it’s definitely good to see progress being made – but keep in mind that at a rate of 6 million doses per day, it will take around 5.4 years to cover three quarters of the population with the proper two-dose vaccine.

Currently, Israel is leading the pack with 68 doses per 100 people.

The Double Bubble

What do you get when you mix one of the most bubble-like stocks, with one of the most bubble-like asset classes?

Massive gains, apparently.

Earlier in the week, Tesla announced a $1.5 billion USD purchase into Bitcoin, and made a suggestion to the market that the company intended to start accepting BTC as a form of payment for its products. The validity of this is yet to be fully explored, and this could just as likely be a very clever play by Magnificent Mr Musk to generate positive sentiment around his new investment.

“We expect to begin accepting Bitcoin as a form of payment for our products in the near future, subject to applicable laws and initially on a limited basis.”

Tesla, securities filing.

Regardless of the true intentions, BTC surged up over 19% on the back of this vote of confidence from the world’s wealthiest spaceman.

The recent price action in BTC has been largely driven by large public boosts to sentiment, with Mastercard announcing last night that it would be building the infrastructure in its service to accept Bitcoin as a form of payment, and BNY Mellon announcing that they will accept Bitcoin as a custodial holding.

(SPA)re us some (C)ash?

Special Purpose Acquisition Companies, or “SPACs”, are truly picking up steam in the last few months. Whilst historically these ‘cash boxes’ raised a few billion each month, depending on the manager and what kind of enticing deals they promised, across the board these vehicles are now bringing in well over USD $10 billion per month.

I’ll be touching on this topic further next Thursday in one of our morning notes, because the sheer volume of funds entering these SPACs is a macroeconomic indicator in itself.

The latest news is former Credit Suisse CEO, Tidjane Thiam, has partnered with PIMCO to cut a ‘blank check’ for a SPAC seeking to raise $250 million. Freedom Acquisition Corporation plans to offer 25 million units at a price of $10 USD in its upcoming IPO, 9.9% of which PIMCO has cornerstoned.

The stated aim of this new SPAC is to “hunt for deals in the financial services industry in both developed and emerging markets, with a focus on technology-enabled businesses”. In other words, get ready to see some chunks of flows go into payment platforms in the months to come.

London Has Fallen

London’s supremacy as Europe’s largest trading centre has been one of the victim’s of Brexit, with Amsterdam overtaking the London Stock Exchange in January as the highest volume trading floor on the continent.

An average 9.2 billion euros of shares a day were traded on various Dutch venues in January, increasing by over 400% from December. That compares to average daily volumes in London of 8.6 billion euros in the same period.

Flows*

*All numbers are in USD. Numbers and charts below are from BofA Securities

Equities: Largest week of equity inflows ever ($58.1bn)

Bonds: $13.1bn into bonds

Precious Metals: $0.8bn out of gold

Flows to Know

Record week of tech inflows ($5.4bn)
2^nd large inflows ever into US large caps ($25.1bn)
3^rd largest inflows into US small caps ($5.6bn)
1^st outflow from gold in 2 months

Microcap stocks leading gains in US equity prices since Jan 2020

Largest Weekly Tech Inflows Ever

Raising the Steaks

A fun one to end the note.

An Israeli company has announced the first 3D-printing rib-eye steak on Tuesday, created from a culture of animal tissue.

This is the steak. I promise this is the only time I’ll be compelled to add a photo of raw meat to a note.

Aleph Farms, the company behind the steak you see here, uses living animal cells as opposed to plant-based alternatives, allowing for premium whole-muscle cuts of meat and corner a consumer base that is not currently served by plant-based products.

Lab-grown meat is a growing industry, forgive the pun, as both an alternative to the rising cost of agriculture and tackling climate change. We are currently keeping an eye on Asia-focused meat alternatives, given that China alone eats over 75 million tonnes of pork, beef and poultry.

Next Week’s Speakers

Our morning calls are back up and running, thank you to everybody dialling in presently – for those who aren’t, we do encourage you to listen in for some unique content from some very capable speakers.

If you haven’t registered, I encourage you to do so, even to access the replays after the call.

Have a safe and enjoyable weekend.

To our friends in Melbourne, our thoughts are with you, please stay safe and remember that this too shall pass – you’ve done it once and you’ll get through it again

– Max and the Mason Stevens team