In today’s briefing:
- US Equities: A Small Squeeze?
- Is It Time For Moderna To Boost Share Buyback And Start Paying Dividends?
- 2022: The Supercycle Year
- Stablecoin Part 2 – History of Stablecoins and the Best Stablecoin Yield Opportunities
- Peloton and the Kiss(es) of Death
- CLFD: Not so Clear Field, Initiating with Sell
- What to Expect of EM Rates When Expecting US Rates to Stay Volatile?
- The Nightcap from SPAC Track
- Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
- TPL: Rising Production, Raising Estimates
US Equities: A Small Squeeze?
- Both the S&P 500 and the Nasdaq 100 have hit decent supports
- This has come after the rise in yields has started to slow down
- At this stage it appears at least a short term bounce may be seen. It is too soon to determine anything more than that
Is It Time For Moderna To Boost Share Buyback And Start Paying Dividends?
- Shares of Moderna Inc (MRNA US) underperformed and fell ~32% YTD. Investors continued to cut exposure to stocks of COVID vaccine makers, including BioNTech, Novavax, CureVac, among others.
- In August 2021, Moderna announced the first share buyback plan. The company’s Board of Directors has authorized share repurchase for up to $1 billion with an expiry date in 2023.
- We estimate Moderna may end 2021 with a total of ~$18.5 billion in cash, cash eq., investments and expect the company may boost share buyback in the future.
2022: The Supercycle Year
- We share our thoughts on why 2022 may be a great year for digital assets.
During a bullish 2021 we saw Bitcoin increase in price 58% and Ether increase in price 400%.
- I expect this may actually turn out to be a positive year for the assets with the most growth, utility, and cashflows
Stablecoin Part 2 – History of Stablecoins and the Best Stablecoin Yield Opportunities
- We explore the notion that stablecoins existed even before crypto was invented and shows the difficulties of creating a monetary medium with zero volatility
- We show that the supply of stablecoins has grown 27x over the past 2 years and breakdown the history of stablecoins and their modern-day use cases
- We demonstrate a strategy to generate 20% returns on stablecoins using TerraUSD (UST CURNCY) and Anchor Protocol
Peloton and the Kiss(es) of Death
- As I perused the headlines yesterday, I came across a CNBC article that suggested Peloton would be hiring McKinsey to “review its cost structure and potentially eliminate some jobs”.
- Whilst Foley is not likely to be sleeping with fishes anytime soon, the CNBC report suggests that 12% of Peloton’s physical store count might be on the chopping board
- Whilst I still continue to believe Peloton will have success in their market over the longer term, this does not equate to attractive shareholder returns
CLFD: Not so Clear Field, Initiating with Sell
- CLFD has been the beneficiary of communication service providers investing in their broadband networks to meet an increase in data traffic.
- The events of the last two years, namely the COVID-19 pandemic causing work/learn from home and Huawei and ZTE equipment replacement, were the reason for the boom CLFD has experienced.
- CLFD’s community broadband customer was incentivized to replace Huawei and ZTE equipment with reimbursement checks from the FCC.
What to Expect of EM Rates When Expecting US Rates to Stay Volatile?
- The risk of US yields continuing to rise is high especially with inflation not having peaked yet, the Fed potentially reducing its balance sheet, and real rates still negative.
- The high volatility in US rates does not bode well for EM rates due to their high correlation even though EM local debt is overall cheap based on most metrics.
- Until the volatility in US rates subsides, it is best to focus on cross-country and curve trades in EM, with my preference for curve steepening trades in several countries.
The Nightcap from SPAC Track
- Power & Digital Infrastructure Acquisition Corp. (XPDI) shareholders approved its merger with Core Scientific
- Vistas Media Acquisition Company Inc. (VMAC) shareholders approved its merger with Anghami
- ACE Convergence Acquisition Corp. (ACEV) announces a $200M convertible note consisting of $175M in new financing from Oaktree and $25M from an ACE investment partner
Macro; Rating Changes; New Issues; Talking Heads; Top Gainers and Losers
US equity markets dropped again after with the S&P and Nasdaq down 1% and 1.2%. The latter is down 10% from its November 2021 high. Most sectors were in the red with Consumer Discretionary, Financials and IT down 1.4-1.8%. US 10Y Treasury yields eased 3bp to 1.85%. European markets closed higher with the DAX, CAC and FTSE up 0.2%, 0.6% and 0.4% respectively. Brazil’s Bovespa closed 1.3% higher. In the Middle East, UAE’s ADX and Saudi TASI were up 1.6% and 0.5%. Asian markets have opened broadly higher – HSI, STI and Nikkei were up 1.9%, 0.1% and 0.5% while Shanghai was down 0.2%. US IG CDS spreads were 0.6bp wider and HY CDS spreads were 3.5bp wider, EU Main CDS spreads were 0.1bp tighter and Crossover CDS spreads were 1.7bp tighter. Asia ex-Japan CDS spreads were 4.7bp tighter.
TPL: Rising Production, Raising Estimates
- TPL remains unhedged to the price of crude oil with Permian Basin output rising. Total output in the Permian Basin is projected to surpass 5 million barrels per day
- The increase in output would have an immediate benefit to TPL in the form of royalties and could generate incremental water and surface land easement revenue
- TPL’s stock has been selling off with the broader market in what we speculate could have to do with no action from TPL’s Board after the annual shareholder meeting
Before it’s here, it’s on Smartkarma
