What to do with all that cash?
Quick Hits From Grit
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What to do with all that cash?
Corporate balance sheets around the world are holding an all-time high $6.84T in cash and short-term investments. That’s 45% higher than the 5-year (pre-pandemic) average. Forecasts estimate that US firms will spend around $2.8T on capital expenditures, mergers, and other investments by the end of the year. They’ve also bought back more stock through July than in any year since 2000 (except 2018) at more than $680B.
Some expect spending will decline this quarter, like JPMorgan, who predicts a 5.8% drop despite companies generating more cash than expected (earnings surprises). Other investors are betting that companies will go brrrrrrr in the form of share buybacks, debt reduction, acquisitions, and dividends.
GRIT’S TAKE: What companies will do with their cash is going to come down to what kind of business they’re in. Restaurants, airlines, and cruises, for example, are likely to keep liquidity high on Delta fears. Others like Tyson Foods, Newell (consumer products), Morgan Stanley, and Constellation (alcohol) have already pledged to boost spending.
GRIT’S ACTION: Stay invested.
2. DEALS & IPOs
IPO: Green Bitcoin mining
One of the biggest knocks on crypto is the amount of energy it consumes. We saw how Elon reacted when he “found out” about the increasing use of fossil fuels for Bitcoin mining, for example. Then China took extreme measures with severe crackdowns that led to the “great mining migration.”
Iris Energy is a Sydney-based Bitcoin miner that uses renewable energy exclusively to produce the OG crypto. Iris’ plan is to establish its computer firepower in energy markets where there is a surplus of energy (and prices are low), then switch off operations and glide as prices peak.
The company had previously explored going the SPAC route, but decided not to (probably dodged a bullet there). This week, they filed for a direct listing on the NASDAQ and expect to debut sometime in the 4th quarter.
GRIT’S TAKE: This space is still very young, but it’s growing fast. The 3 largest publicly traded miners combine for nearly $7B in market cap: Marathon Digital Holdings (US), Riot Blockchain (US), and HIVE Blockchain (Canada).
GRIT’S ACTION: Long Bitcoin (and carbon credits) and looking for an entry point on Ethereum.
3. STOCK MARKET
The unstoppable force meets the immovable object
On Monday, regulatory filings showed that Michael Burry’s (think The Big Short) Scion Management had a roughly $30M bet against Wall Street Queen Cathie Wood’s ARK Innovation ETF.
Wood responded by politely calling Burry a Boomer:
“I do not believe that he understands the fundamentals that are creating explosive growth and investment opportunities in the innovation space.”
While everyone else is zigging with concerns about rising prices, “Cathie BAE” is zagging, expecting deflation (especially in commodities and materials) to catapult innovation trends. Her timeframe remains a mystery.
So does Burry’s, for that matter — we don’t know if he is up or down on his position, or if he’s still holding the contracts at all.
GRIT’S TAKE: But we know that he wasn’t the only one betting that innovation stocks are overvalued. Scion reported 235.5k put contracts on ARK, but there are 4 hedge funds with bigger positions totalling nearly 4 million contracts.
GRIT’S ACTION: Long Cathie. Short the Big Shorter.
Carbon is the new oil
KraneShares Global Carbon ETF (KRBN) is just over a year old and has grown over 70% since its inception thanks to a boom in carbon credits. Credits are tradeable permits that allow companies to emit carbon dioxide. Businesses can trade permits to meet emissions requirements.
Over time as credits are swapped, prices will increase, forcing businesses to invest in reducing emissions over purchasing credits. At least that’s the goal, which seems to be working thus far. KRBN has $579MM in assets and holds the most traded futures contracts on major markets in the US and Europe.
GRIT’S TAKE: GRIT subscribers know how I feel about carbon: it’s the future.
GRIT’S ACTION: I am up 15x on one of my private carbon deals that just went public, and I’ve just invested in a new one. Subscribe for the inside info!
If you haven’t launched an NFT yet, are you even trying?
The NFT market has been red hot throughout August — on Monday, OpenSea, the largest NFT marketplace, surpassed $1B in trading volume for the month. And it’s not just sales volume that's rising, the number of unique buyers is climbing which means more investors are willing to dip their toes into the niche market of non-fungible penguins and rocks!
We’re also seeing tons of athletes, celebrities, and companies flooding the market to get a piece of the action: Wayne Gretzky, Tom Brady, Steve Aoki, Logan Paul, Coca Cola, Pringles, Dunkaroos, Charmin — the list goes on.
GRIT’S ACTION: The “floor price” concept is interesting here — it refers to the lowest-priced NFT available within a collection. It may be artificial (i.e. there’s no guarantee that the value won’t drop below that price), but it creates a mental floor for buyers. Plus, we’re talking about multi-million dollar JPEGs here, so throw traditional/rational thinking out the window!
GRIT’S TAKE: Our iconic GRIT NFT recently sold to a collector with +$370k worth of MOONCATS ;)
Under the Radar…
Blockchain is like the Internet in the 90’s. It will change the way we do everything. The sector is expected to grow at a CAGR of 53% this year to $1.62B. How to get exposure? TAAL is a vertically integrated blockchain infrastructure and service provider for enterprises. It’s publicly traded and recently raised $40MM*!
The world’s first and largest augmented reality NFT platform is making moves! New World is doing its best New York Yankees impression by snatching up all the top talent, like Italian designer, Gianpiero D’Alessandro, and Toronto musician, Karl Wolf! Check out parent DeFi company, publicly traded Graph Blockchain now*!
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This clinical stage biotech is making a splash on the NASDAQ. Shares of Cardiol Therapeutics are up over 20% since listing earlier this month. What’s Cardiol’s edge? They’ve developed an ultra-high concentration CBD treatment to fight heart disease.
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