Mo money, mo problems!

Quick Hits From Grit

Happy Friday Everyone 👋

A quick reminder that you’re truly awesome. I jump out of bed every morning feeling blessed that I get to share my stock & finance insights with you all. Please follow on Instagram to get GRITTY takes all day long.

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

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*as of 4pm ET, 7/22/21
1. MACRO

Mo money, mo problems!

On July 31, the suspension on the US debt ceiling expires, which means the Treasury Department needs to slash about 1/3 of its cash balance to meet required levels ($700M to $450M). This reduction in the Treasury General Account (TGA) boosts reserves in the banking system, which is already flush with cash.

It’s like the 2008 liquidity crunch, except the polar opposite: we’re swimming in cash like Scrooge McDuck.

The big banks are funneling this unwanted cash to the FED’s reverse purchase agreement facility (RRP), which saw nearly a trillion dollars flow in last month after increasing rates from zero to 0.05%

GRIT’S TAKE: Rising RRP rates are bad news for US Treasury Bills whose rates are currently pinned at historic lows.

GRIT’S ACTION: We do NOT own bonds. Even if our sweet 97-year-old grandmother wanted to gift us one for our birthday this year, we would politely tell her to get lost.

2. DEALS & IPOs

Please buy shares” - Vlad Tenev, probably

Robinhood will begin trading next Thursday under ticker $HOOD at $38-42 per share, which puts the valuation at a rough $35B (implies +$2k/user). They’re also throwing a curveball at the traditional IPO process by making pre-IPO shares available to its users. No word yet on whether or not users will be able to short shares. Typical Vlad, always putting his interest ahead of the users’…

A few numbers that caught my attention from the S-1:

  • Payment for order flow (PFOF) made up 81% of Q12021 revenues

  • Nearly 50% of PFOF revenues came from options

  • Total PFOF revenue grew 340% YoY, led by cryptocurrencies at almost 2000%

GRIT’S TAKE: There are many reasons to be cautious of this stock: regulatory issues (resulting in the largest FINRA fine ever), their dependence on PFOF, scalability, public trust issues, etc. It’s overvalued and overhyped…so who’s the marginal buyer of this stock?

GRIT’S ACTION: No, thank you.

3. STOCK MARKET

Earnings galore

If you were concerned that earnings had peaked last quarter, this week should provide some relief. Let’s take a look at highlights from some key beats so far:

  • American Airlines snapped 5 quarters of consecutive losses with net income of $19M

  • Southwest Airlines sales climbed 300% YoY to $4B

  • Verizon beat earnings and revenues, raised guidance, and increased FCF (Genevieve holds this stock!)

  • Johnson & Johnson sales increased 17.2% YoY, expects to sell $2.5B of its COVID-19 vaccine this year

Also, it looks like the partnership with Balenciega worked, because Crocs are officially the shoe of the summer:

  • EPS: $2.23 vs. $1.60 est

  • Revenue: $640.8M vs. $565.2M est

  • Guidance: last quarter they expected 40-45% sales growth for the year, now they’re raising that to 60-65%

GRIT’S TAKE: More than 85% of S&P reported has beat analysts’ predictions so far, and we’re just getting started!

GRIT’S ACTION: Diamond Hands on the stock market.

4. COMMODITIES

Coal is red hot

The world’s second-biggest source of energy is quietly up over 80% YTD and is currently sitting at all-time highs!

*Record scratch* Hold up, isn’t the point to get away from dirty energy?

Last week, China launched the world’s largest carbon emissions trading scheme (ETS). Think: a marketplace to buy and sell polluting permits. The ETS saw $32M in carbon dioxide emissions, or 4.1M tonnes, exchange hands on its debut.

China is easily the world’s biggest consumer of coal, and the ETS (which has been in the works for years) represents an effort to achieve its goal of becoming carbon neutral by 2060.

GRIT’S TAKE: This is just one example of the world moving away from fossil fuels. Another one? BHP, the world’s biggest miner, is thinking about quitting the oil game (which should earn them $2B this year) for good!

GRIT’S ACTION: A private carbon deal that I invested in 6 months ago is up +2x, they just raised +US$104M, and they’re going public in the US soon! If you want to find out which one, subscribe to my paid newsletter now!

5. ENTERTAINMENT

Bitcoin gets a bump from The B Word

After a brief dip below $30K, Bitcoin got a nice bounce after a meeting of the minds between Cathie Wood, Elon Musk, and Jack Dorsey. The 3 billionaires reinforced their bullish outlooks at a video conference organized by the Crypto Council for Innovation.

Cathie’s Take: “The convergence between blockchain technology and artificial intelligence [will] change the world in ways we can’t imagine right now.

Elon’s Take: I might pump, but I don’t dump.

Jack’s Take: A chance to replace the whole foundation [of traditional finance].”

GRIT’S TAKE: I’ve said it once, I’ve said thousand times, and I’ll say it again: it’s still too early for Bitcoin. But we’re getting there! Goldman Sachs reported this week that 45% of the family offices it does business with want to add cryptocurrencies to their portfolios.

GRIT’S ACTION: #HODLing Bitcoin


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Under the Radar…

NFT. New World wants to enhance the relationship between user and creator. That’s why they built the first ever augmented reality NFT platform where consumers can interact with their favorite artists, musicians, celebrities, and companies on a global scale. They were just acquired by publicly traded DeFi firm Graph Blockchain*!
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REVENUE. The bull case for Flora Growth just got a lot stronger. They signed a sales agreement with the largest Colombian distributor representing up to US$10MM in expected annual sales. PLUS, Flora expects to close the acquisition of Kock & Gsell which would add another +US$7.5MM to their top line. Keep your eye on this REVENUE MACHINE*!
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*SOURCES
1. BloombergTheDeepDive
2. SEC (S-1)Forbes
3. BloombergCNBCMarketWatchCNBCCNBC
4. FortuneReutersBloomberg
5. BloombergBitcoinist

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