Market Talk, November 7th 2021
Each Sunday I will share:
• The greatest articles I have read during the week
• The best pieces of company-related insights I have consumed over the week
• One stellar podcast or interview
I appreciate the feedback thus far on the new formatting for the segment where I share my thoughts on my own position’s respective quarterly reports. I will stick with that going forward.
More so commentary, and now much easier to digest in 5-10 minutes 👍🏼. Part of the goal to eradicate verbosity.
In the coming weeks, I plan to share thoughts on Google, MatchGroup, Etsy, Square, IAC, Redfin, Pinterest, and Starbucks.
Once the bulk of earnings season comes to a close, I will have some creative freedom to write about non-earnings related matters, as well as continuing work on the next company spotlight, which is to be announced soon.
📈 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
💷 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 85 up from 72 last week.
The CBOE VIX stands at 16.48, up from 16.28 the week before.
Major Earnings for the Coming Week
Some of the major earnings for the upcoming week, compiled by Fincredible.
Articles of the Week
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.
1) Hayden Capital - Coinbase
Length: Dense Read
Source: (Hayden Capital)
The best report on Coinbase I have read thus far. In this report, Hayden Capital takes the reader through the historic and current position of the company, the base case for both bull and bear cases, an assessment of the competition, discussion on regulatory matters, risks, the perceived longevity of crypto as an asset class, and a whole lot more. Highly informative.
My attempts to explain the contents won’t do it justice, so I urge you to just read it if you are interested in the company, or crypto. Hayden paints the image of Coinbase’s unique position of being a brokerage and an exchange in the crypto industry well by remarking: “Imagine if Interactive Brokers also owned the exchanges like NASDAQ and CME, and had a direct plug into their inventory and liquidity”.
“We are long the crypto economy and believe Coinbase is in the best position to capture this growth. Trading at ~12.4x estimated 2021 EBITDA, we think the market is placing a discount on the business considering it’s explosive growth over past year (~12x year-on-year), and what we view as continued growth alongside the evolution of the crypto economy. This is also a highly cash generative business with 52% EBITDA margins off revenues of $2.2Bn in Q2’21 (we estimate ~$8.8Bn revenues for full-year 2021), and with a cash balance of ~$4.3Bn (as of Q2 2021).”
2) The Nothingness of Money
Length: Moderate Read
Source: (Lawrence Yeo)
Lawrence Yeo over at ‘More to That’ does a fantastic job of blending succinct writing with delightful and humorous imagery.
In this piece, he outlines the tragic realities of the relationship between our thoughts about money, the perceived importance of that thought, and the duration of our existence on this earth. Typically, it dwindles as we age.
“The Nothingness of Money is only possible through deep reflection, and this is largely enabled by viscerally facing your mortality. People with deathbed wisdom only have it because they were gifted time between a diagnosis and an end to processing it all.”
“That steep descent to zero is what I call The Nothingness of Money. It’s when the pointlessness of money is no longer theoretical; it’s truly understood. This delineation is important.
Everyone knows that your bank account doesn’t go with you upon death. But for most of life, that knowledge is theoretical, meaning that it’s not real enough to influence your day-to-day behavior. The mere awareness of your mortality isn’t enough to cease your pursuit of wealth.
It is only when the finiteness of life is glaringly obvious that things change.”
3) 1 Main Capital: Q3 Investor Letter
Length: Light Read
Source: (1 Main Capital)
Fairly short in length, but without scrimping on the insight. In this quarterly letter, Yaron decides to focus on the positions that 1 Main Capital liquidated during Q3, instead of conversing about the fund’s long positions.
The takeaways from those decisions are valuable indeed.
“Occasionally, I am reminded why we should always demand that our core positions be high-quality businesses run by smart and aligned management. In investments that have those attributes, a higher stock price doesn’t necessarily mean more risk.
In fact, I view many of our long-held core positions as less risky today than they were when we put them on at much lower prices, since their per share values have grown significantly and I know the businesses better today than I did back then. For opportunistic investments however, it is important to remember that they tend to lack many of the qualities we demand from our cores. As such as they appreciate from small positions (at cost) into larger ones (at market), they usually become riskier and become less attractive.”
4) The Reading Obsession
Length: Moderate Read
There are two commonly known perceptions of Mr Warren Buffett, the one where he is a cosy grandfatherly figure who spends his entire day reading, and the other which portrays him as a ruthless capitalist. Discussing his own distaste for the “fetishized” admiration of being someone who reads constantly, Neckar offers up some alternative perspectives as to how Buffett’s success came to the fore.
“Did a young Buffett read a lot? Yes, he certainly did. Did he spend all his time churning through annual reports, newspapers, books, and trade journals enough? No. Buffett understood how to balance his stack of reading materials with a solid travel schedule. He did not expect to solve the world’s investment puzzles solely from the comfort of his desk.
He built and maintained relationships that allowed him to source and discard ideas and evolve as an investor (not to mention enrich his life). Just think about the influence that Munger had on his pivot towards quality investing.”
Other Items I Read This Week
Note: ($) indicates there is a paywall on this content.
• Polen Capital: Q3 Letter
• Trading Engineered: 5 Keys To Master Trading Psychology
• MacroOps: Pareto's Law, 90/10
🕵️ Company Insight 🕵️
• The Verge (MVRS): Meta acquires Within
• The Science of Hitting (SPOT): Spotify: "Room To Run" ($)
• Cash App (SQ): Now Available to Everyone 13+
• The Verge (PINS): Pinterest TV Launch
• Ensemble Capital (BKNG): Booking: Ready for the travel rebound
• Paul Zbikowski (WINE): Naked Wines Deep Dive
Podcast of the Week
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.
How to Start a Hedgefund: Yaron Naymark and Thunderdome
This one is fantastic, whether you plan to launch a fund or not. Brandon is an excellent host, and both guests have a wealth of experience in the HF space, both taking alternate routes into the industry, making for a balanced and insightful discussion.
Yaron (of 1 Main Capital) bootstrapped his hedge fund, whilst Thunderdome (hugely insightful anonymous ladder attacker from Fintwit) shares his experiences launching at scale. From the nitty-gritty of running a fund to higher-level investment process-related matters, this conversational does a great job of educating the listener. Complete with a Q&A at the conclusion.
Host: Brandon Beylo
Thank you for reading Market Talk and have a great week,
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