Canada is crazy for carbon credits
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Happy Friday Everyone! 👋
Remember, how you behave when the stock market is most volatile will determine your lifetime returns.
SIX things you need to know this week in 60 seconds.
The Dollar smile
Elon and Twitter agree to deal
Hedgies see largest inflows in 7 years
Canada is crazy for carbon credits
Everyone’s mom after Fidelity opens 401(k)s to Bitcoin
Move over BAYC
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1. MACROThe Dollar smile
Expectations are that J-Pow & Co. will lift interest rates more aggressively than other central banks, with the futures market predicting the Fed will raise to 2.77% by the end of the year.
The resulting rising yields on US Treasuries have attracted foreign investors whose bets are pushing the US dollar to its best month since January 2015.
This week it surged to its highest level in 2 years and pushed the euro down to a 5-year low.
With persistent inflation, Russia’s invasion putting pressure on commodity prices, and China’s lockdowns disrupting supply chains—this remains a popular bet.
GRIT’S TAKE: A strong USD is deflationary which means lower commodities prices—will the dollar be our saving grace?
GRIT’S ACTION: Don’t chase commodities higher here.
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2. DEALSElon and Twitter agree to deal
Twitter accepted Elon Musk’s $44B offer on Monday, but other than that it’s been a typical week for the billionaire baddy.
On Tuesday a new filing showed that he was restricted from tweeting about the deal in any way that would “disparage the company or any of its representatives”.
Later that day he skirted that agreement by tweeting critically about the company’s questionable handling of a previous news story.
After that, he poked fun at the company with a photo of Truth Social (the Trump-tied social media platform) sitting atop it at #1 on the App Store.
He also vowed to reintroduce a certain narcotic into a certain beloved American soft drink, but stopped short of fixing McDonald’s forever broken ice cream machines.
You know, just your standard richest man in the world stuff.
GRIT’S TAKE: According to Audit Analytics, the Twitter deal would make Musk the most indebted CEO in America.
GRIT’S ACTION: I told the board on FOX Business to let the investors hit the bid. It’s the right call.
3. STOCK MARKETHedgies see largest inflows in 7 years
At the end of 2021, we noted that only 3 hedge funds (out of a group of notable funds) had managed to beat the S&P for the year.
By those standards, the hedgies are off to a fantastic start to 2022 after managers posted a 0.3% return for the first quarter. It doesn’t sound like much until you consider that S&P lost 5%.
The industry saw record inflows of $19.6B in Q1 as investors seek protection against a choppy market with volatility spikes driven by fears of inflation, rising interest rates, and oh by the way a tiny little geopolitical conflict driving up the price of commodities across the board.
Traders of said commodities helped macro strategy funds lead the competition with a 9.1% return.
GRIT’S TAKE: I repeat 📢 buy great companies and leave them alone.
GRIT’S ACTION: The bottom may be near.
4. COMMODITIESCanada is crazy for carbon credits
You know I love my carbon credits!
I first wrote to GRIT investors about this asset class back in June 2021. Since then, the demand for (and price of) offsets has done nothing but increase.
Now nearly a dozen startups are planning to list on Canadian exchanges to raise funds to finance carbon-credit purchases or invest in ventures that generate credits.
Innovations to reduce carbon emissions are necessarily bold so investments in these technologies are risky by nature—sometimes too risky for banks and mainstream investors.
Credits were designed to fund these risky projects.
GRIT’S TAKE: How these startups generate credits varies wildly, from smoke-reducing cookstoves to growing new forests for greenhouse gas storage to literally injecting carbon emissions straight into concrete!
GRIT’S ACTION: Grit is launching a GritCarbon newsletter soon, stay tuned!
5. CRYPTOEveryone’s mom after Fidelity opens 401(k)s to Bitcoin:
A decade ago, (now) Fidelity chairman and CEO Abigail Johnson began holding internal meetings every week to discuss digital assets and something called the blockchain.
In 2015 the company began mining Bitcoin.
In 2020 it opened its own crypto fund for wealthy customers.
This week it announced plans to become the first major retirement-plan provider to put Bitcoin on its 401(k) menu.
Starting later this year, plans will allow investors to place up to 20% of their accounts in Bitcoin (as well as up to 20% of each payroll contribution).
Could Fidelity’s move kickstart a domino effect across the industry?
GRIT’S TAKE: The US Labor Department, which regulates company-sponsored retirement plans, could pose a problem: just last month they were cautioning employers to exercise “extreme caution” before opening 401(k)s to cryptocurrencies.
GRIT’S ACTION: Bitcoin over bonds!
6. ENTERTAINMENTMove over BAYC
Bored Ape Yacht Club just got put on notice: there’s a new blue-chip NFT collection in town.
Moonbirds, a collection of 10,000 owl avatars, has become one of the fastest NFT projects to reach blue-chip status in terms of its floor price—which currently sits at 29.9 ETH (~$88k)—after notching over $360M in total sales volume over the first week after launch.
Over the weekend, Moonbird #2642 was sold to blockchain gaming firm The Sandbox for 350 ETH (~$1M).
Launched by former Google Ventures general partner Kevin Rose, Moonbirds offer a unique feature called “nesting” which lets holders stake NFTs to earn additional benefits like in-person meetups, events, and airdrops.
GRIT’S TAKE: NFT sales overall have been declining for months, but jumped 85% last week thanks to the collection’s debut.
GRIT’S ACTION: Long this entire sector.
How did WallStreetBets wake up feeling this morning?
*SOURCES
1. FT, FT
2. WSJ, CNBC
3. CNBC
4. WSJ
5. WSJ
6. The Block
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