Market Talk, August 8th 2021
August 8th, Edition 18
Market Talk is where I round up some of the data from public markets over the past week in a bitesize format.
Each Sunday I will share:
• The best pieces of company-related insights I have consumed over the week
• The greatest articles I have read during the week
• One stellar podcast or interview
If you wish to read this as a webpage, and not an email, then follow this link.
📈 Market Action 📉
Here are your quick updates from the past week for various asset classes.
The S&P 500
Sectoral ETFs for the US
🌎 Global Indices 🌎
Europe & UK
Africa & Middle-East
10Y Government Notes %
🛢️ Commodities 🛢️
💷 Major Currencies 💷
FX rates are correct as of the time of publishing.
🔇 US Market Sentiment 🔇
Fear & Greed Index
The CNN Greed and Fear Index measures market sentiment based on seven factors; momentum, price strength, price breadth, put/call ratios, junk bond demand, volatility, and safe-haven demand.
The current reading stands at 36, down from 24 last week.
The CBOE VIX stands at 16.15, down from 18.24 the week before.
Major Earnings for the Coming Week
Some of the major earnings for the upcoming week, compiled by Quartr.
🕵️ Company Insights 🕵️
Here, I will share a handful of interesting, company or industry-specific, pieces that I have read over the last week.
1) Square Acquire Afterpay in $29B Deal
Source: (Reuters, Hayden Capital, Square, John Street Capital)
On Sunday of last week, Square announced second-quarter results early, in tandem with an announcement of their acquisition of Afterpay for $29B in an all-stock deal.
Using expensive stock to acquire an expensive business. Much has been said about the relative value of Afterpay, and its snug fit into Square’s Seller and Cash App ecosystems, but the facts suggest, this was no cheap deal.
This deal will see Afterpay’s 16M active customers and 98K active merchants be swallowed by the Square ecosystem, in an attempt to integrate BNPL and offer the service to Square’s existing userbase, which houses 40M Cash App MAUs and a growing Seller base which is consistently migrating up-market to larger sized sellers.
I will save my own conclusions for when I share a full write-up here at Investment Talk, but until then you can catch the official Square slide overview here, as well as a fantastic thread from John Street Capital here.
For readers looking to get greater context into Afterpay, I highly recommend this Afterpay write-up dated November 2020 from Hayden Capital which might be a good primer.
For a quick overview of the deal, Reuters publish this piece earlier in the week which outlines how this deal was completed in just 11 weeks.
2) JD Deep Dive
Source: (The Global Investor)
For those of you who are actively seeking greater insights from the Asian and LatAm markets (shout out to John, an IT Subscriber), both @Invesquotes and @BuyandHoldd have recently partnered up to start the Global Investor newsletter.
Here, they will cover US, China, and Latam companies in the traditional ‘Deep Dive’ format.
The first project was a write-up on Chinese e-commerce giant JD.Com, which can be found here. This serves both as a shout out to two great young analysts working hard, and as a gateway for readers to discover writings on companies, not within their own neck of the woods. Happy reading.
3) PinTok, An Inflection Point for Pinterest
Source: (Investment Talk)
The Pinterest report, which digs into their declining Global MAUs, was by far the most interesting earnings report of the three, thus I decided to lift the paywall on this piece and make it available for everyone to read.
In this piece, I discuss the quarter, as well as shining some light on what this pivot into video may mean for the future of this business that attracts almost half a billion users to its platform each month.
4) Nintendo: Not a Typical Console Cycle
Source: (Ensemble Capital)
As an avid reader of the team at Ensemble Capital’s work, I found this piece (both in written and video format) interesting.
Previously considered too cyclical, and not investable, Ensemble thinks now is a great time to look at Nintendo. In this piece, they explain why.
“Skeptics argue that Nintendo’s latest hardware iteration, the Nintendo Switch, will follow the course of previous console cycles and start gathering dust in drawers until the next hardware generation is created. We disagree. For the first time in over 30 years, Nintendo is only producing one piece of hardware. Previously, it manufactured two pieces of hardware at the same time – one that’s handheld and another that hooks up to your television. Switch is the best of both worlds and allows Nintendo to focus all its resources – manufacturing, marketing, development, etc. – into one platform. Importantly, Switch has an operating system that can migrate to future hardware iterations, much like the Apple iOS stays with iPhone users as they upgrade every few years.”
After reading this, I sent out a tweet asking for great research pieces on Nintendo and decided to link them all together in a thread (see here).
This sent me down a Nintendo-shaped rabbit hole, and I may choose Nintendo as a future monthly write-up target after Lululemon.
I particularly enjoyed this piece by Matthew Ball.
📰 Brain Food 📰
Here is a shortlist of a few interesting pieces that I have read over the course of the week, to feed your mind.
Note, these articles are not numerically listed in order of perceived value.
To access the suggested article, click the purple link after the source subheading.
Length: Moderate Read
The term ‘Metaverse’ has been thrown around a lot lately, and who better than Ben Thompson to walk us through what that actually means, as well as some historic build-up to that idea.
“From this perspective Facebook’s grand metaverse mission sounds an awful lot like VR re-branded. And honestly, that’s perfectly fine! I’ve long been skeptical about Facebook’s investments in VR, but over the last year in particular, as Apple’s iOS changes have highlighted Facebook’s platform risk, I’ve come around to Zuckerberg’s point of view. There are far worse things for a massively profitable company to invest in than what could very well be a key platform of the future. And, naturally, whatever Facebook builds for VR will be accessible elsewhere, whether that be AR, mobile, or your computer; Facebook’s goal isn’t the Internet, it’s bigger than that”
Length: Dense Read
Source: (Andy Johns)
This week, I was reading about Flywheels thanks to an unnamed source who passed this article onto me as prescripted reading.
In this piece, the author lays out the context of what a flywheel actually is, an “unstoppable momentum of organic growth, driven by users”, as well well as outlining some of the core ingredients which are vital to creating those environments.
Not particularly investment-related, but ultra-relevant to the study of early-stage businesses. This one will tickle your neurons.
“Let’s take Reddit as an example. The stockpile of registered users is Reddit’s version of potential energy. When those users create content and the content is discovered in Google, shared via social media, or distributed online through other means, then the “arrow has been shot” so-to-speak. In this analogy, the user-generated content is kinetic energy. When new content is created it fetches new traffic and users into the platform, increasing the size of the flywheel and accelerating its rotational energy. It becomes self-propagating. And once that kicks in, good luck stopping it.”
3) Too Smart
Length: Light Read
Source: (The Collaborative Fund)
This one is a short and sweet reminder that intelligence is often relative, and that the easiest person to fool, is yourself. Takes 2 minutes to read, and will make you smarter.
“The ability to create complex stories makes it easy to fool people, including yourself.”
4) The Rise of Bernard Arnault
Length: Moderate Read
Source: (Neckar’s Notes)
An interesting take on the history of Bernard Arnault, one of the world’s richest men, and know for his leadership of the acquisitive French luxury conglomerate, LVHM.
The author has composed a beautifully eloquent summary of the titan’s rise to the top, capturing the journey well.
“Chevalier could only watch as Arnault was gaining more control. Guinness, his old friend and ally, had been neutered. When Guinness tried to acquire more shares independently, Arnault informed them they could only do so through their joint company —– which was under Arnault’s control.
A bitter power struggle developed between Racamier and Arnault which the press called it the “young wolf versus the old lion.” Racamier proposed a separation of the company and a buyout of Vuitton. “Some people say I'm a wolf,” Arnault mused. “That's not at all true. Wolves break up companies into pieces. It was Racamier who wanted to cut the company into pieces. I was the only one who did not want to dismantle it.”
🍬 Ear Candy 🍬
There is a huge range of Podcasts to listen to, and the choice can feel quite saturated at times. Here, I will share one podcast I listened to during the week, that I feel is worth your time.
Linda Lebrun — The Substack Economy
I figured this one would be a great one to share for readers, considering how you are each part of the Substack economy, as readers or creators.
In this interview, Jim OShaughnessy discusses the Substack business from behind the scenes with Linda Leburn, who is a member of the Substack team involved specifically with investment and finance writers.
Linda is a fantastic and energetic person whom I have had the pleasure of talking too on numerous occasions, and I feel you will enjoy this one.
Host: Jim OShaughnessy
Guest: Linda Leburn
Thank you for reading Market Talk and have a great week,
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Lead Analyst at Occasio Capital Ltd
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