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01 April 2021
Video commentary for March 31st 2021
A link to today's video commentary is posted in the Subscriber's Area.
Some of the topics discussed include: stimulus plans spur risk-on move. Large caps rebound, bonds ease, gold rebounds, oil eases, renewable infrastructure benefits, Stock indices hitting new highs as they price in a boom.
Voltswagen Is the Perfect Example of German Humor
This article by Chris Bryant for Bloomberg may be of interest to subscribers. Here is a section:
This week Volkswagen AG provided a lesson in just how difficult it is to “be Elon.” VW’s U.S. arm claimed it was changing its corporate name to “Voltswagen,” denied it was an April Fools’ Day joke, then admitted that, um, it was in fact an April Fools’ Day joke gone wrong.
The German giant has been riding a wave of investor excitement about its electric-car strategy. Thanks in part to some clever social media and marketing, VW seemed to have cracked Musk’s knack for share-price boosting publicity. The more frequently traded VW preference shares are close to a six-year high.
News of the purported name change helped VW’s American depositary receipts — the ones favored by U.S. retail investors — to climb as much as 12.5% on Tuesday. Which is where this cringeworthy incident goes from being a disastrous attempt at humor to something potentially more serious.
I’m not suggesting VW’s gaffe was an attempt to manipulate the stock market and I doubt the U.S. Securities and Exchange Commission would view it like that. It’s a reminder, however, that we now live in the meme-stock age where even bad jokes can add or subtract billions of dollars in market value. It’s a minefield for corporate executives to navigate.
The market liked the Voltswagen idea. That’s going to give Volkswagen’s board something to think about. Tesla prospered because it gained a near monopoly on California’s carbon credits when Karma went bust. That allowed it fund loss making operations and meet payment deadlines while it was building its first battery factory. Many people wonder at Tesla’s business model. Is it a car company, a solar company or a battery company? The most accurate description is it is a regulatory arbitrage company. That’s a consideration every company board should be discussing.
Deliveroo Sinks 31% After IPO as Funds Shun Gig-Worker Model
This article by Swetha Gopinath for Bloomberg may be of interest to subscribers. Here is a section:
“It’s not a great endorsement of setting IPOs in the U.K.,” said Neil Campling, analyst at Mirabaud Securities. “You have the combination of poor timing, as many ‘at home’ stocks have been under pressure in recent weeks, and the well-publicized deal ‘strike’ by a number of A-list institutional investors.”
Investors are also souring on the fast-growing companies that benefited during the pandemic. DoorDash Inc. has slumped 23% this month, and European rivals Just Eat Takeaway.com NV and Delivery Hero SE have also fallen this year.
“The window for tech-driven IPOs just couldn’t be worse,” said Oliver Scharping, a portfolio manager Bantleon AG. “Deliveroo was trying to keep the window open with brute force.” Among the losers in the IPO will be retail investors, who were given the option to buy shares via Deliveroo’s app. Retail investors will only be able to trade the stock from April 7.
Food delivery is most prevalent in China. The price war between Alibaba’s Ele.me and Meituan Dianping is aggressive and keeps prices low. However, no one is under any illusion that it is profitable. Meanwhile both rely on an army of low paid migrant workers, willing to brave traffic and the elements, to make deliveries. This group have no rights. They also reside outside of the Hukou family registry system, so they are effectively anonymous.
Biden Plans $2.25 Trillion Spending, Corporate Tax Hikes
This article from Bloomberg may be of interest to subscribers. Here is a section:
A major undercurrent through the infrastructure plan is addressing inequality and expanding help for segments of society that the administration judges have been left out in the past. For example, in addition to fixing the “ten most economically significant bridges in the country in need of reconstruction,” there’s $20 billion for a new program that will “reconnect” neighborhoods that were cut off by past investments, such as the I-81 highway in Syracuse, New York. And all lead pipes will be replaced, to address water-quality issues.
$2.25 trillion is still a lot of money and if it passes it will represent a significant additional surge of liquidity through the economy. At a minimum that will help to spur commodity and building materials demand growth over the next decade.
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