Watching FX tells you a lot of things

The action is in the currencies;
overbought readings in the ‘risk’ currencies,
which marries up with the Nasdaq and Copper,
and no one likes the USD.

December 14, 2020
by Rob Zdravevski
rob@karriasset.com.au

It’s just hot air

If all of the world’s cattle could form a nation, they would be the third largest emitter of emissions behind China and the U.S.

Listen to what is not being said

This year, IPO’s on U.S. exchanges have raised a record $140 billion, exceeding the $107 billion raised in the height of the 1999 dot-com boom.

It has also been a week when we have seen;

✔️ Tesla announce its 3rd (secondary) equity sale this year.
The timing of the previous offerings uncannily occurred at interim market highs;

✔️ the most ridiculous IPO in DoorDash;
(stock doubles on its first day, market cap is $60bn vs. $16bn in early 2020)

✔️ and Airbnb premiered on the bourse with an IPO of its own.

The process of pricing of Airbnb’s IPO began between the $44-$50 per share range which was revised to $56-$60 while the final price struck was at $68.

Unlike Facebook’s IPO pricing debacle in 2012, I think Airbnb’s pricing was spot-on.

The after-market demand saw the stock close at $145 on its first day of trading. With $602 million shares outstanding, it now has a market cap of $87 billion.

But on a fully diluted basis (including employee stock, options and restricted units) Airbnb has 700m shares, so its Market Cap is $101 billion.

and DoorDash has 385m shares, which adjusts its Market Cap to $71.5 billion, which is a little bit too much when you are losing $150 million and trading on 30 times revenue.

December 11, 2020
by Rob Zdravevski
rob@karriasset.com.au

Why buy bonds at -0.01%?

Do you remember during the European debt crisis, which peaked around 2012, when the PIGS (Portugal, Italy, Greece & Spain) were being bailed out by the European Central Bank?

In the chart below, you can see the Portuguese 10 year Government Bond was yielding 14% at that time.

I didn’t have the inclination, acumen or guts to buy those bonds then and nor since.

But today, that bond has traded at a negative yield of 0.01%.

How times have changed.

Some investors have felt that such a yield is so ravishing that they decided to buy the heck out of those bonds to the point where they will happily receive a zero yielding return.

I can’t figure this out and nor do I have answer.
It’s simply an astonishing occurrence.

December 9, 2020
by Rob Zdravevski
rob@karriasset.com.au

Equities to pause – Newsletter

It’s time for equity markets to take a pause.

My latest newsletter discusses some reasoning.

https://mailchi.mp/karriasset/its-time-for-a-pause

Airbnb’s IPO and the ‘hidden’ shares

This year, IPO’s on U.S. exchanges have raised a record $140 billion, exceeding the $107 billion raised in the height of the 1999 dot-com boom.

It has also been a week when we have seen;

✔️ Tesla announce its 3rd (secondary) equity sale this year.
The timing of the previous offerings uncannily occurred at interim market highs;

✔️ the most ridiculous IPO in DoorDash;
(stock doubles on its first day, market cap is $60bn vs. $16bn private valuation)

✔️ and Airbnb premiered on the bourse with an IPO of its own.

The process of pricing of Airbnb’s IPO began between the $44-$50 per share range which was revised to $56-$60 while the final price struck was at $68.

Unlike Facebook’s IPO pricing debacle in 2012, I think Airbnb’s pricing was spot-on.

The after-market demand saw the stock close at $145 on its first day of trading. With $602 million shares outstanding, it now has a market cap of $87 billion.

But on a fully diluted basis (including employee stock, options and restricted units) Airbnb has 700m shares, so its Market Cap is $101 billion.

and DoorDash has 385m shares, which adjusts its Market Cap to $71.5 billion, which is a little bit too much when you are losing $150 million and trading on 30 times revenue.

December 11, 2020
by Rob Zdravevski
rob@karriasset.com.au

Borrow and Sell when you least need to

’tis the season to focus on the new extremes being exhibited in selected stocks.

Today, I want to discuss Australian listed mining and related services company called Mineral Resources (MIN.AX).

MinRes is a high quality enterprise and managed very well with an extremely competent team. It has a solid (conservative) balance sheet, attractive margins and exhibited ravishing growth.

Currently its price action (I’ll discuss valuations another time) is trading at extremes. The charts below show that MinRes is trading at a stretch above its 200 day moving average (on a Weekly basis) and at 2 standard deviations above its Monthly mean. This doesn’t happen too often.

Previous visits to these levels have married up with oversold readings and peaks in its trending strength.

It’s at this point that investment bankers should be circling and pitch that MinRes either;
a) raise money by offering shares in the secondary market,
b) use its ‘inflated’ stock as currency to make acquisition or
c) borrow cheap debt

December 9, 2020
by Rob Zdravevski
rob@karriasset.com.au

Using your position of strength

Tesla continues to add chapters to the investment banking playbook. Using the inflated currency of the company’s common stock, it will sell $5 billion worth of shares to fund its spending plans.

And why not…..The stock price has risen 670% this year. It “only” has net debt of $1 billion which is not a stretch against its $4 billion of EBITDA. Its market cap is $616 billion. The secondary offering is barely 1% of its market cap and it’s not dilutive at all.

Valuations on the company aside, they are classically raising money when (figuratively speaking) they don’t need it and it is far better to sell stock, or borrow money, from a position of strength.

Throw in a recent stock split and an upcoming inclusion into the S&P 500 Index, Tesla will be able to sell another $5 billion worth of shares in the next few months again and even re-finance its debt at lower rates than the 5.3% coupon its paying bondholders for its 2025 maturity.

Incidentally, their timing isn’t too bad either.

Circles in the chart below denote when Tesla’s previous secondary offerings were announced. A $5bn raise on September 1, 2020 and a $2bn share sale on February 13, 2020.

December 9, 2020
by Rob Zdravevski
rob@karriasset.com.au

The Platinum call is looking good

Within 3 weeks since this original post below, Platinum has risen 17% while Gold has declined 3% 😊

https://robzdravevski.com/2020/11/17/investment-thesis-long-platinum/

Why is the ‘Western’ way considered superior?

“Westerners” make up somewhere between 11% – 15% of the world’s population (depending if we include Latin America and Eastern Europe)……

but ‘the west’ seems to dictate the principles of how business is done…..

and ‘the west’ actively publish books on the topics of ‘how to do business’ in other parts of the world, aiming to teach readers how to adapt and what to look for and do, when dealing with other cultures.

Do you think Africans, Asians, Arabs (and Persians), Latinos or Eskimos produce guides on how to do business with westerners?

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