It’s gettin’ hot in here!
Quick Hits from Grit
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Happy Friday Everyone 👋
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*as of 4pm ET, 6/10/21
1. MACROIt’s gettin’ hot in here!
Inflation data came in hotter than expected on Thursday…which was sort of…expected?
Prices rose 0.6% in May, well above the 0.4% Wall Street was predicting. The YoY numbers were no better with prices surging 5.0%
I wonder what J-Pow will have to say about this. Hint: it rhymes with “lavatory.”
GRIT’S TAKE: Used cars and trucks remain a key factor in the inflation numbers with prices rising 7.3% last month, making them responsible for about a third of the index.
If you combine used auto with other re-opening categories (lodging, air travel, eating out, etc), they make for more than 50% of the driving force behind the price increases we’re seeing.
2. DEALS & IPOsMeet Dave he’s going to IPO
Dave is a fintech startup that’s taking on the big legacy banks - Dave vs. Goliath, get it?
Dave might be small, but he’s got some Goliath-sized backers, which include Maverick-owner and Shark, Mark Cuban, and Tiger Global Management.
Dave is valued at $4B (3x its most recent valuation) and expects to go public in the second half of 2021 via SPAC merger with VPC Impact Acquisition Holdings III.
GRIT’S TAKE: Back in March we took a deep dive into FinTech and examined how it’s EATING THE WORLD. Well, Dave here is just the latest example. What do they do exactly? They analyze spending patterns to predict checking shortfalls— and cover them for you!
Banks are always trying to CHARGE you extra fees, Dave is trying to take them away…PLUS they offer additional money-saving features that your grandpa’s bank doesn’t even know exist (like their sharing economy job board, Side Hustle)!
3. STOCK MARKETThe amount of margin debt out there is scary!
Margin is the money Chad borrows from Robinhood to purchase deep out of the money call options on meme stocks. This chart is showing us that Chad is borrowing a lot more than he ever has (or ever should).
FINRA also reports that stock market leverage has increased for 13 months in a row (since March 2020) and is now nearing $850B!
How does that compare to other peaks?
Dot.com margin debt: $300B
2008 Financial Crisis margin debt: $400B
GRIT’S TAKE: Investing on margin is NOT something Grit recommends! You might look like a genius while stocks are moving up, but the LAST thing you want is for your broker to hit you with a margin call (i.e., forcing you to either add money to your account or sell shares to meet requirements). DON’T DO IT!
4. CRYPTOEl Salvador becomes the first country to accept bitcoin as legal tender!
On Wednesday, the Salvadoran Congress approved a bill to accept bitcoin as legal tender, making it the first country in the world to do so!
We mentioned over the weekend that +70% of the country’s population doesn’t have a bank account. This fixes that. This also helps with the fact that nearly 30% of the country’s GDP comes from remittances (i.e., money being sent back home from abroad) which get hacked by fees.
Under the new law, conversions to other currencies will no longer be subject to capital gains tax, and businesses will be obligated to accept bitcoin as payment (unless they’re unable to, in which case they’d be exempt).
Could this be the start of a domino effect?
GRIT’S TAKE: Once the regulatory pressure is over and the cloud of negative headline dust settles, people might start REFOCUSING on the positives of bitcoin.
El Salvador’s historic decision will give us an actual look at the real-life economic impacts it could have. No more hypotheticals. This could serve as a massive catalyst for bitcoin over the next several years if other nations with emerging economies follow suit!
5. ENTERTAINMENTClover: the comeback kid
Last week, WallStreetBets’ target was AMC, and they beat the shorts BADLY.
This week, the horde of retail investors set their eyes on heavily shorted Clover Health, the Social Capital-backed health insurer, and came out swinging with a +32% Monday.
It was the 86% rally on Tuesday that really hurt the bears, though, who are now down over $500M after 2 trading sessions erased 5 months of losses for CLOV.
Do you know who wasn’t hurting after Tuesday? Chamath Palihapitiya! The retail-led rally turned his $16M original investment in Clover into $682M by day’s end. I wonder how long until he finds a way to take credit for the stock’s pop.
GRIT’S TAKE: Short sellers might be starting to smarten up, despite the breakouts from Reddit-fueled stocks we’ve been seeing.
The number of heavily shorted stocks in May was down to 18 from 43 in January (GameStop mania), and the amount of short interest has dropped to $5B from $25B at the same time.
What meme stock is Wallstreet Bets going after next? This week were back crawling Reddit with Swaggy Stocks to find out!
“SwaggyStocks, a website that tracks ticker mentions on r/WallStreetBets, assigns a sentiment grade from positive to negative based on the slang they use on the forum and the direction they want the stock to go. For example, someone saying ‘Please BB go to $30’ would be a positive reinforcement’, where’s as “Should I buy AMC puts?’ would be negative.” Check it out here!
UNDER THE RADAR...
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*SOURCES
1. Bloomberg, Wall Street Journal
2. CNBC
3. Wall Street Journal
4. FRED, FINRA
5. Reuters, Bloomberg
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