David Fuller and Eoin Treacy's
Comment of the Day
November - 182021
Eoin Treacy's view
Some of the topics discussed include: RBA delays raising rates, weights on banks, stay at home champions breaking out, virus spreading in Europe again, vaccine producers mixed, China growth moderating, crypto weak, gold steady, oil firms from $80.
Staples Center to become Crypto.com Arena in reported $700 million naming rights deal
This article from the ESPN may be of interest to subscribers. Here is a section:
Staples Center is getting a new name. Starting Christmas Day, it will be Crypto.com Arena.
The downtown Los Angeles home of the NBA's Lakers and Clippers, the NHL's Kings and the WNBA's Sparks will change its name after 22 years of operation, arena owner AEG announced Tuesday night.
Crypto.com is paying $700 million, according to multiple reports, over 20 years to rename the building. The parties aren't publicly announcing the financial terms of what's believed to be the richest naming rights deal in sports history.
The 20,000-seat arena has been Staples Center since it opened in October 1999, with the naming rights owned by the American office-supplies retail company under a 20-year agreement. The name will change when the Lakers host the Brooklyn Nets in the NBA's annual Christmas showcase.
Eoin Treacy's view
Staples was an enormous 1990s success story. The share opened at $0.89 in the 1989 IPO and peaked in 1999 at $23.95. It briefly regained that peak in 2006 and was taken private in 2017. Back in 1999 it must have felt like the world was the company’s oyster. Today it represents a diminishing position in the office supplies and services market.
Crypto.com is the self-purported fastest growing crypto exchange. To be honest, I’d never heard of it before yesterday. In an increasingly crowded market, it often takes a splashy gesture to make a name for oneself. Buying the naming rights to a stadium is certainly a way of doing that. So is having Matt Damon on the front page of the website. These ploys also speak to the aggressive growth multiples being pursued and how deleterious it is for share prices when they are not met.
Ultimately, the future of crypto exchanges is lower margins and more consolidation. Coinbase’s inability to keep pace with the price of bitcoin doubling suggests that is being priced in.
Bitcoin continues to test the lower side of the range following last week’s downside key day reversal and short-term failed upside break. It will need to continue to hold the $57000 level if a larger failed upside break is to be avoided.
Ethereum is also testing a psychological area of potential support near $4000. A clear upward dynamic will be required to confirm a return to demand dominance in this area.
I am also reminded of the fact that Sofi bought the rights to the new NFL stadium in Los Angeles a couple of years ago. I had never heard of that company before the event either.
The fintech sector has taken aim at the established payments companies by hoping technology will allow them to survive on lower fees and gain market share. This has taken two distinct paths; crypto and online payments.
The challenge is the big companies also have the wherewithal to spend on technology and have well established relationships and wide networks. Outside of crypto fintechs went after less creditworthy customers like young people and buy-now-pay-later business models.
The number of non-performing loans in this portion of the market and helps to explain the less than stellar performance of the fintech sector.
Amazon’s determination to squeeze Visa (NYSE:V) and other payments providers suggests thinner margins are likely across the sector.
Let's Buy the US Constitution
Thanks to a subscriber for this article from notboring.co which may be of interest. Here is a section:
DAOs are not a new idea. Vitalik Buterin, Ethereum’s co-founder and unwitting figurehead, contemplated Decentralized Autonomous Organizations in the original Ethereum Whitepaper in 2013. The DAO, a doomed decentralized venture fund, launched and folded in 2016. DAOs have been on fire this year within the web3 community; becoming a DAO is the de facto long-term fate of any sufficiently serious protocol.
In October, a16z led a $10 million round in the popular DAO Friends with Benefits. A couple weeks ago, PleasrDAO bought a 1/1 Wu-Tang album for $4 million. Last week, the Ethereum Name Service (ENS) became a DAO and airdropped $2 billion worth of ENS tokens on anyone who’d bought a .eth domain over the past few years. Many people received $10s of thousands just for being an early adopter.
But despite the early bright spots, most people have never heard of a DAO or bought into web3 yet -- it’s still very early. There’s still a struggle going on between web3’s fans and its skeptics, including many members of the US government. That’s not how it should be. America should be the home of web3, as @punk6529 eloquently laid out here:
Eoin Treacy's view
I’m sure those of us with a few grey hairs remember 2008 when securitization was a dirty word that was blamed for crashing the global financial system. The reason it created such a problem was it took groups of cashflows, treated them as a whole, they spliced them up into income streams with varying degrees of risk. Then smart people took that structure, leveraged it, and kept on leveraging it until it broke. Banks went bust all over the world and regulators swore it would never happen again. That’s why banks are less than eager to participate in these new ventures.
The creation of the limited company allowed risk to be shared and for value to be effectively securitized. Treasury strips allow individual cashflows to be traded independently from the principal. CLOs allowed groups of loans to be a securitized and that was also applied to mortgages, autos etch. The latest iteration of this trend is to securitise physical assets.
One of only a handful of physical copies of the US Constitution is a big splashy attention-grabbing example. Creating so much fervor around the sale ensures the guide price will be exceeded and possible by multiplies. It’s a good time to be both an auctioneer and the owner of collectibles.
Roblox is a leading beneficiary from the creation of NFTs on its game platform for example.
It also helps to highlight how we are likely to see this market evolve. By the time it eventually crescendos everything will be up for securitization. That’s particularly powerful for big landmark buildings which lack fractional secondary markets. This article from Bloomberg detailing how collectors avoid CGT by splitting ownership of art works is a less developed version of the NFT market.
As a measure of how popular these ideas are, I met someone a few weeks ago who was looking to launch an NFT for a group of historic memorabilia from the Battle of Little Big Horn. The group’s aim is to use the proceeds to build a museum. I don’t think of myself as special. Rather, my conclusion is if I end up having a conversation with someone it is a reflection of what is happening in the wider market environment.
DAO’s (Decentralized autonomous organizations) run in the background but are ruled by majority vote, so more than 50% of the owners would need to make a decision before anything changes. They are being hailed as the true democratic structure but if Switzerland’s practices of having referenda on everything is any guide it is a recipe for incumbent bias.
Alibaba Outlook Disappoints After China Slowdown Hurt Sales
This article from Bloomberg may be of interest to subscribers. Here is a section:
Revenue growth at a plethora of divisions including its Cainiao logistics arm and local on-demand services underperformed expectations, while bread-and-butter customer management revenue from platforms like Taobao and Tmall grew just 3% -- the slowest in at least five quarters.
Competition is intensifying just as China grapples with the widest Covid-19 outbreak since the virus first emerged in Wuhan. Rivals like JD.com Inc (NASDAQ:JD). and Pinduoduo Inc (NASDAQ:PDD). are stepping up investments to win over Alibaba’s users, just as a resurgence in coronavirus cases dents consumer spending. Gross domestic product expanded 4.9% in the September quarter, cooling from the 7.9% growth in the previous period, partly because of lockdown measures across many cities.
“Looking ahead, we will continue to invest heavily into three growth engines of domestic consumption, globalization, cloud computing and data intelligence,” Zhang told analysts on the call.
Eoin Treacy's view
China’s growth has slowed meaningfully as the housing market shock therapy imposed in response to Evergrande’s overleverage has weighed on sentiment. As more credit is made available to property developers, speculative interest should begin to recovery over coming quarters.
The big question, and something that needs to be monitored via the shares of the consumer facing stocks, is the extent to which the average Chinese citizen is willing to play along with the Maoist connotations of Xi Jinping thought.
Since he came to power, many people have been discussing how he sees Mao rather than Deng as his political inspiration. That’s represents a significant departure from the Zhang Zemin administration which focused on making money rather than political idealism.
The “lying flat” movement started in China and represents a rebellion against the frenetic pace of life and particularly the “heads I wind, tails you lose” economic model that only seems to benefit politically connected individuals. It remains to be seen whether that has any effect on retail sales over the medium term.
Alibaba pulled back violently today but continue to hold the low near $140.
JD.com continues to firm from the region of the trend mean.
Pinduoduo’s farm to table initiative may be weighing on the potential for profitability. The share has been trending lower since the February peak and is back testing the lows.
Eoin's personal portfolio: leveraged profits taken September 7th
Eoin Treacy's view
One of the most commonly asked questions by subscribers is how to find details of my open traders. To make it easier I will simply repost the latest summary daily until there is a change.
I bought back into both bitcoin and ethereum last on August 6th. I took the profit in both positions today at $47,935 and $3,477 against my purchases at $42,427 and $2,866 respectively. I’ve been happy to buy back on weakness but remain of the view that the risk in the sector is substantially higher since the peak in March. Therefore, my policy was to sell on the first sign of trouble. That was delivered today with large downward dynamics.
I increased my platinum long on August 27th paying $1002 for another position. My existing platinum longs were purchased at $1072 and $885. I remain of the view that precious metals are still cheap and are to be bought on significant dips.
I also continue to hold my silver trading position, initiated at $23.7. I will buy more if the current reaction deepens.
I have been saying for months that I have purchase orders below the market in gold and silver. The first of these was triggered on August 9th. I was filled at $1702.3 including spread-bet dealing costs. My original positions were opened in Q4 2020 at $1879.2 and $1818.6. That reduces by average purchase price to $1800.
I still have additional bids in the market below prevailing prices in gold and silver and will leave them in place to take advantage of any possible additional volatility. These are leveraged trading positions rather than medium to long-term investments.
With baby steps trading one has to have high conviction prices will recover and the patience to buy on weakness before eventually being proved right; hopefully.
Among my investments, my original position in the VanEck Vectors Gold Miners ETF was purchased on March 25th at $20.12. I bought another unit at $35.79 on December 1st. I continue to shop for opportunities in the gold sector.
My two investment positions in Rolls Royce were purchased at 154.75 and 105p respectively. I also took up the rights issue which has resulted in an average purchase price of 54.63p. Rolls Royce has not participated in the stock market rebound of late and continues to form a first step above the Type-2 base formation.
The Chart Seminar 2022
Eoin Treacy's view
With global vaccination rates rising, the prospect of anti-COVID pills on the horizon and the promise of travel restrictions being dropped, it is time to start thinking about venues for The Chart Seminar in 2022. Please drop sarah@fullertreacymoney.com a line if you would be interested in attending an event next year, as well as your preferred location. At present the two locations with greatest demand are London and Dubai.