Welcome back to our weekend reading.
There are no middling stories anymore – either everything is going up, or else everything must come down. This week was a litany of rallies, collapses, new records and slumping potential. Like a frustrated parent on a long car drive, we saw markets either accelerate rapidly or break to a halt, which at the very least has produced some interesting stories.
Let’s look back on the week.
Roblox: The game I thought nobody played
Don’t know if this is a sign that I’m falling out of touch with the ‘kids’, but I was under the impression that nobody played Roblox anymore – the part Virtual Reality life simulator, part Lego character dress-up game.
But the market has cunning ways to prove us all wrong, as Roblox surged 54% on its first day of trading after listing on the NYSE.
The next day it rallied a further 6% on market open after Cathie Wood’s ARK revealed an investment into the company. Despite the recent misfortune of ARKK after the broad tech sell-off, Cathie still seems to have sway over the performance of individual stocks and the ETF is now on the path to recovery.
Who remembers the time when Citi accidentally transferred $900 million to the wrong parties?
Well, Citi apparently.
Investors that kept money that Citigroup Inc. accidentally sent to Revlon Inc. lenders are finding that
the bank is freezing them out from more than just new debt, with the blocking extending to credit lines, trading activities and most other business ties. It seems Citi is quite salty about their counterparties not wanting to relinquish free money.
In the institutional bank equivalent of the silent treatment, Bloomberg reported that Citi has been blocking money managers who still hold the mistaken Revlon payment funds from any of their Collateralised Loan Obligations (CLOs), unless the borrower specifically requests that the money managers participate in their deal.
It’s not so much as you’re not invited to my birthday anymore as, you can only come if mum specifically says you have to. Welcome to Wall Street.
Coupang Inc, dubbed “Korea’s Amazon”, has recently made its founder Bom Kim a multi-billionaire after shares surged on its first trading day this week.
SoftBank Group is also an investor (35% stake) in the now $95 billion dollar e-commerce giant, who also won large from the 62% rally above the IPO offer price on Thursday. This represents around a $16 billion USD profit for the Japanese conglomerate, not bad for one trading day.
All That Glitters Is Not Copper…
This has to be one of the best stories of the week, a heist-movie-style switcheroo involving USD $36 million dollars of copper.
Mercuria Energy, a commodities trader out of Switzerland, signed a deal last year to buy the copper from a Turkish supplier. But once the ships arrived in the port at China and the cargo was unloaded, the only contents were tonnes of shiny painted rocks. And the pieces were just jagged pieces of broken paving stones, spray painted a vague bronze colour – for reference, raw copper ore is usually blue and refined copper is definitely not jagged…
… and Gold that Glitters Does Not Hedge
Gold may not have had its last day, but that doesn’t mean that managers across the world are still having their black suits dry cleaned in anticipation of the funeral.
BlackRock’s Russ Koesterich (PM for the Global Allocation Fund) came out this week to say that gold bullion is proving less and less an effective hedge against movements in other assets – most importantly against a stock market sell-off or positive inflation shock.
Full credit to him for not immediately leaping upon the podium to announce that Bitcoin is the only reasonable alternative, Ross’ justification is that “Gold’s ability to hedge against inflation has been somewhat exaggerated. While it is a reasonable store of value over the very long-term — think centuries — it is less reliable across most investment horizons.”
Due to the rate of mining gold itself has an approx. ~2% p.a. intrinsic inflation rate, so it makes sense that as the time horizon extends out, there is more viability in holding it. Unfortunately, outside of maybe Warren Buffet and Charlie Munger, most investors do not boast a 100-year long portfolio time horizon.
Have You Updated Your Antivirus Software?
China has been blamed for a recent attack on Microsoft’s widely used business email software – with a particularly aggressive cyber attack which used the tactic of infecting as many systems as possible before companies could secure the system rather than targeting a specific set of users.
According to Bloomberg the virus has hit at least 60,000 systems globally and began with a Chinese government-backed hacking group. The European Banking Authority became the latest victim this week, along with thousands of small-to-medium enterprises.
NFT $69 million
Christie’s auction house, boasting an impressive heritage back to 1766, now boasts the title of the first auction house to sell a completely digital artwork – yes we have moved on from collectible baseball cards and mid-tier rock bands, the world of high-art has moved into the Non-Fungible Token (NFT) arena.
The artwork titled ‘Everydays: the First 5,000 Days” sold for an eye-watering USD $69.3 million and was paid for in Ethereum. The artist, Beeple, is an illustrator from Wisconsin and his mosaic will be recorded in history as yet another signpost in the increasing acceptance of NFT’s as a means of distributing assets and goods of any value. The mosaic contains 5,000 pieces of digital art – one created everyday since 2013.
To give some context to this purchase price, major works by Van Gogh and Picasso sold in the last few months sold for $16 million and $15.6 million – if your kids are into making digital collages, maybe encourage them to work a little harder at it…
This also follows a cryptocurrency enthusiast/Blockchain CEO purchasing a $95,000 Banksy artwork, only to broadcast themselves setting it alight because they had transferred it into an NFT. I’m sure the street artist with a strong anti-capitalist theme loved seeing his art turned into an example of perfectly elastic demand.
China Censorship Stock Market
Chinese authorities reportedly censored search terms around ‘stock markets’ this week after the Shanghai index fell on concerns of overvaluation. Don’t worry CCP, I’m sure the NASDAQ has had dreams of doing something similar lately.
On the equivalent of Twitter, Weibo, searches for ‘stock market’, ‘shares’, ‘plunge’ and similar terms returned no results. Users could still post using the term, but for a large period of the day nothing could be seen as the market fell during the day.
In a period of two weeks the CSI 300 Index had fallen 14%, the equivalent of UDS $1.3 trillion in value.
Women in Trading Floors
In a recent study by Citi, it was found that on average women make up less than 20% of trading floors in Wall Street.
The reputation of trading floors being an aggressive environment may be less founded over the last decade, but still institutional banks have struggled to build up diversity across its trading staff.
The pandemic has a lasting impact on the female participation rate in the U.S and a recent note by Jesse regarding International Women’s Day covers some of the structural and economic reasons why, well worth a read if you want to hear the economics behind a primarily social discussion.
Our morning calls continue, next week we have the sage-like Jesse Imer covering in depth, the recent bond-market activity that he spoke about in recent notes – for those who need some demystification, tune in Tuesday.
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.