Ladies and gentlemen, PEAK IPO: single-asset REITs

Quick Hits From GRIT

Happy Friday Everyone đź‘‹

FIVE things you need to know this week in 60 seconds.

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*as of 4pm ET, 7/15/21
1. MACRO

Feelin’ hot, hot, hot!

Consumer prices rose 5.4% over the last 12 months, the highest rate since 2008. Zooming in, prices increased 0.9% in June, well above estimates of 0.5%. So where did consumers feel the most pain?

Hopefully, you didn’t buy a used car or truck last month because if you did, you probably (definitely) overpaid! This category alone accounted for 1/3 of the overall CPI with prices climbing 10.5%.

The other major culprits were anything to do with reopening: hotels and motels, airfare, restaurants, etc.

GRIT’S TAKE: J-Pow was grilled on the Fed’s monetary policy by the House Financial Services Committee this week and the results were predictable: despite acknowledging that inflation is hotter than expected (uhh, ya think?) he still thinks it’s too soon to begin scaling back on the $120B Treasuries and mortgage-backed securities monthly allowance.

GRIT’S ACTION: Diamond Hands: commodity stocks.

2. DEALS & IPOs

A pair of crypto giants are going public

Last week, Peter Thiel-backed Bullish announced it was going public via SPAC merger in a $9B deal. The company has plans to launch a crypto exchange later this year.

*As an aside: I think Peter Thiel is not a human being. First, he takes Palantir (meme/software/defense) public, then Affirm (buy now/pay later), then Atai (let’s get psychedelic), and now this. The man never sleeps!

Not wanting to be left behind, Circle Internet Financial, one of the biggest crypto companies in the world, announced its plans to go public via its own SPAC merger deal valued at $4.5B.

The valuation might be half as big as Bullish’s, but there’s no reason to be bearish on Circle, which is growing fast. Right now, there’s over $25B in USD Coin (its stablecoin) in circulation. Compare that to only $1B just a year ago.

GRIT’S TAKE: Circle’s USD Coin has become the fastest growing, regulated, fully reserved dollar digital currency in the world. Their going public is a HUGE step towards the validation of cryptocurrencies!

GRIT’S ACTION: #HODLing Bitcoin and eyeing Ethereum for an entry point!

3. STOCK MARKET

Banks heading into earnings season like

The big banks came out swinging with their second quarter results this week. Let’s run back the tape:

  • JPMorgan: $3.78 a share vs. $3.21 est; $31.4B rev. vs. $29.9B est

    • Highlight: $3.4B investment banking rev. vs. $300M est

  • Morgan Stanley: $1.85 a share vs. $1.65 est; $14.8B rev. vs. $13.98B est

    • Highlight: $2.83B equities-trading revenue beat estimates by +$400M

  • Goldman Sachs: $15.02 a share vs. $10.24 est; $15.39B rev. vs. $12.17B est

    • Highlight: $3.61B investment banking revenue vs. $3B est

  • Wells Fargo: $1.38 a share vs. $0.97 est; $20.27B rev. vs. $17.77B est

    • Highlight: $6B net income compared to $3.8B loss in Q2 last year

  • Citigroup: $2.85 a share vs $1.96 est; $17.47B rev. vs. $17.2B est

    • Highlight: $1.1B equities-trading revenue vs $879 est

GRIT’S TAKE: Bank earnings were helped, in part, by the release of billions in reserves that had been set aside for loan losses (COVID). Another tiny driving factor? INVESTMENT BANKING. Global deal volume hit $1.42T last quarter alone!

GRIT’S ACTION: Diamond hands - JPMorgan, Morgan Stanley & RBC.

4. COMMODITIES

OPEC finally lets the UAE pump

A compromise was reached between OPEC and the United Arab Emirates (UAE) that will lift the baseline on how much oil the UAE can produce. You might remember that last week the group was bickering like a gaggle of drunk teenagers.

The UAE originally wanted to up production to 3.8M barrels per day from 3.17M, but Saudi Arabia agreed to 3.65M in the most passive-aggressive concession ever. Seriously, all this fuss over 150k barrels?

GRIT’S TAKE: Now that tempers have flared, the Cartel can focus on the actual matter at hand which is finalizing the plan to revive production. That plan will likely involve adding another 400k barrels a day (in monthly intervals) to help meet projected demand, which is expected to increase by 3.4% in 2022.

GRIT’S ACTION: Diamond hands - energy stocks

5. ENTERTAINMENT

Ladies and gentlemen, PEAK IPO: single-asset REITs

The folks over at ROX Financial LP in Oakley, California must have heard that IPOs have raised a record-breaking +$350B already this year because they want in on the action. So what does ROX Financial do, exactly?

Nothing. But they do have a plan to raise $84M as they form a real estate investment trust (REIT) to buy…….a single warehouse? It’s not just any warehouse, though, this is an Amazon warehouse!

If ROX Financial is successful, it would possibly be the first-ever real estate company to go public despite owning just one (1) single property.

GRIT’S TAKE: The company’s goal is to use the capital raised from the IPO to expand its portfolio with similar warehouses that it would then lease to Amazon. With e-commerce continuing to surge despite the pandemic subsiding, Amazon is not the worst online retailer to hitch your wagon to if this is your business model…

GRIT’S ACTION: Diamond hands - industrial REITs with e-commerce focus (up nicely on one of them!)

Want to find out which stocks Genevieve actually owns? Keep reading below!


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*SOURCES
1. Bloomberg
2. ReutersWSJ
3. WSJCNBC
4. WorldOilBloomberg
5. Business Insider

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