In January, Saudi Arabia’s Finance Minister began discussions on behalf of the country to trade in currencies other than the US dollar.
He suggested the euro and Saudi riyal as alternatives.
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In the last week, the price of crude oil exported by Russia has hit a three month high.
And Russia isn’t the only country drifting away from the petrodollar.
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India is the third largest oil importer in the world.
Russia became the country’s leading provider of crude after Europe dramatically cut Russian oil imports in the wake of the Ukraine invasion.
India also happens to be Russia’s top oil customer.
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As long as the world needs dollars for oil, it guarantees demand for the dollar. That means the Fed can keep printing dollars to monetize the debt.
But if that demand were to suddenly disappear or even just shrink, it would create a big problem for the US economy.
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TL;DR: The US economy is powering ahead and remains more attractive, while the UK struggles to keep up.
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5. US vs. UK growth.
The US is funnel significant sums into tech and infrastructure.
The UK Is the only G7 economy that is smaller today than it was before the pandemic. It’s the only one expected to contract in 2023.
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4. Regulation matters.
SoftBank was turned off by the UK rule that listed companies must gain investor approval for all related party transactions.
In the US, companies only need to report these transactions without securing approval.
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3. The UK stock market has long underperformed that of the US.
The FTSE 100 is up less than 10% over the past five years, while the S&P 500 is up over 45%.
The FTSE 250 has even lost ground during that time frame.
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2. Valuations are a key factor.
$CRH could experience a “multiple re-rating” listing in the US.
CRH’s US peers trade at a P/E ratio of ~25x, but CRH was stuck at ~14x in the UK.
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London’s investment appeal is unraveling post-Brexit.
Some of Europe’s biggest companies are turning towards the US to list shares. It’s a massive blow to London’s stature as Europe’s financial center post-Brexit.
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FAANG is falling apart:
- Amazon and Meta have lost their trillion-dollar market-cap status
- Netflix is struggling with increased streaming competition
- Investors are bearish on Alphabet after its declining advertising revenue
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Zuck seems record-breaking in breaking records.
First, he secured a previously unfathomable fine from the FTC ($5B).
Then, in an apparent strategy to avoid more fines, he managed to lose his company 16,300% more than the original fine (or roughly $815B).
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Meta was worth as much as $1.078T last Sept, after becoming one of six US firms to ever hit the trillion-dollar mark.
But Meta’s time was short-lived. It then fell to $263B by its Q3 2022 earnings.
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Hours from its Q2 2019 earnings, Facebook was hit with a record-breaking $5B fine.
But the amount took attention away from the bigger punishment: $META had to “restructure its approach to privacy.”
There it is again: privacy. What Meta plans to charge users for.
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The most obvious reason social platforms would rather be thought of as tech companies is that the “tech” label introduces the potential for much higher valuations.
It can also help shield financial repercussions from regulators.
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Social media companies are looking for new sources of growth that are worth paying for.
Profits are no longer piling up as high in Silicon Valley for companies that built businesses on targeting users with ads.
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A Washington Post journalist being paid minimum wage by Jeff Bezos just compared Zuck to a mob boss for Meta’s latest “verification” test subscription.
But that completely underestimates the implications Zuck’s strategy has for Meta’s business model.
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As of 1/10/21, the 20 largest US banks had ~$2T of credit line commitments.
$1.5T still remain undrawn.
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In response to the Libor scandal, global regulators decided to phase it out LIBOR by the end of 2021.
Their solution? A more “reliable and transparent” benchmark rate.
Enter: SOFR
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Mispricing 800T of notional principle leads to some very large numbers.
Numbers large enough to trigger debate and get the Fed’s attention.
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Enter: Tom Hayes, the irrelevant British banker to become famous overnight after being convicted for his role in the LIBOR rate-fixing scandal.
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A rogue trader rendered banks’ benchmark useless, but $1T of risky US loans are still shackled to it.
Here’s what you need to know about the SOFR > LIBOR deadline 🧵
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24,703
In Warren Buffet's 1987 shareholder letter, he revealed his market strategy:
"In the short run, the market is a voting machine but in the long run, it is a weighing machine."
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206
Your grandpa's favorite investor just dropped his annual shareholder letter.
Here's everything you need to know about Mr. Market’s outlook on markets 👇
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14) The Dark index $DIX provides a way of dipping into dark exchanges. I
When the values of this indicator are higher than usual, it means that more buying occurred in dark pools than usual.
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12) More than 70% of all shares that changed hands in the stock market in 2021 did so in dark pools.
The percentage of shares traded in dark pools isn’t the only thing ramping up.
The number of shares traded in the market overall exploded.
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11) Dark pool prints are a leading indicator of upcoming market movements.
This is especially true for major indexes like $SPY.
A pattern of multiple large trades with bullish or bearish characteristics has predicted very large swings in that direction in the overall market.
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3) Last Friday's OpEx, over $1.8 trillion of options expired.
This increased activity can potentially lead to greater volatility in the underlying stocks as well.
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104
$1.8T of options expired last Friday. But the majority wasn’t on public exchanges.
Thanks to dark pools. Let’s dive in 🧵
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1,375
2023's economic data has prompted Wall Street banks to revise their expectations for upcoming Fed rate hikes.
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Reports since last Fed meeting include a blowout jobs report and hotter-than-expected CPI & PPI.
They challenge the disinflation narrative Powell has been pedaling since his post-meeting press conference.
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POV: You worked 80 hour weeks for a $10k bonus, just to hear Powell makes $190k base (🧵)
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1,092
Another thing JPMorgan has going for it is profitability.
Among the three biggest U.S. banks, JPM is the most profitable, easily trouncing Citigroup and slightly edging out Bank of America.
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Bridgewater Associates just released its Q4 13F filing, which showed Ray Dalio's company buying a significant amount of JPMorgan Chase & Co., $JPM, stock in the quarter.
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309
The world’s largest hedge fund don just invested big in Wall Street’s largest recession denier.
Here's what it reveals about each finance titan’s economic outlook (🧵)
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2,044
Powell's main variable is core services ex-shelter.
You have Medical Services to thank for why it printed at low levels.
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83
U.S. supplier prices rising means inflation pressures are still stubborn.
Trading after the latest CPI was a hint of what’s to come.
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The only thing banks care less about than decent bonuses are recent economic releases.
This morning’s PPI was no different. Let’s dive in 🧵
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1,364
Profanity usage was up from 2014 or 2015, but still down from earlier in the decade.
Whether it was a resurgence in swearing or just finally having the ability to track it, the public was beginning to take note of just how normalized swearing on earnings calls had gotten.
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127
By 2016, analysts and investors listening in to the latest round of earnings calls may have heard Kanye-esque rants.
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136
2022 was a record year for earnings call swearing. As tech’s earnings week ramps up, the sector continues to drag down the S&P.
What this means for its CEOs 🧵
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Think of the debt ceiling as child support and the US as children.
Yea, the Fed could help out. But they’re also their own independent person with their own individual needs (at least in Powell’s political scheming).
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1,523
Ackman called back to his Big Short infamy by using credit default swaps (“CDS”) to profit.
By buying credit default swaps, Ackman could limit his losses to about $1.56B in the worst case scenario.
Think of Ackman’s CDS as fire insurance and corporate bonds as a house.
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1,718
Ackman bet on credit spreads widening as a result of COVID damaging corporate creditworthiness.
In other words, he bet COVID would negatively affect corporate bonds.
He was right – in a big way. Credit spreads on the corporate bond index increased from 0.5% to 1.35%.
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1,720
In late February 2020, Ackman was growing increasingly worried about the COVID.
So, he did what all rational spenders would: bought instruments that would pay off if corporate bonds fell in value.
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1,961
From 2015 to 2018, Ackman was a shell of his Big Short glory. His fund had negative returns while S&P 500 returns were positive.
Investors were starting to withdraw their money.
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2,505
US debt just hit its ceiling. The last time a trader made billions on default bets, he turned $27M into $2.6B in 30 days.
It was none other than Bill Ackman (🧵)
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72,739
Goldman kicked off the next Wall Street earthquake.
Its layoffs are the most striking example of the deep cost-cutting measures being taken by big banks.
Morgan Stanley, Wells Fargo, Barclays, Credit Suisse and BlackRock have already laid off employees or announced job cuts.
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Solomon’s consumer play has lost $783M in 2020, $1.05B in 2021 and $1.21B in 2022 (through 9/30).
Everything Solomon has done in his tenure as CEO suggests he’s the banker-type from Margin Call who got to the meeting late and only heard the last option for how to get ahead.
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228
Goldman’s push into consumer banking was arguably CEO David Solomon’s biggest initiative.
The consumer unit, which houses Apple Card, GreenSky and some Marcus business, has hemorrhaged $4B in under three years.
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224
In London, affected $GS bankers left to local office pub.
Guess they spent the bonuses they didn’t receive on pints with ex-co-workers.
A quick search on the pub’s Instagram reveals it used the mass of bankers that day to market “Everyone loves a busy bar!”
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255
Goldman Sachs’ Q4 profit drop was 40% worse than Wall Street expected.
The firm posted a net earning of $1.33B on $10.59B in revenue for Q4. Its quarterly profit was only a third of what it was a year ago.
Earnings per share saw the largest miss in a decade.
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Goldman downgraded to Copperman.
Wall Street investors are punishing $GS for its identity crisis, posting the second-biggest loss in the S&P 500. Let’s discuss 🧵
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The #GaryGenslerResign trend can be summarized as:
Cool, some regulation would’ve been great a year ago. Thankfully you got to this before any customers got hurt.
Basically: Gary Gensler is writing tickets for drivers who run a stop sign that doesn't exist.
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Genesis’ ongoing woes stem from the fact that a significant portion of its funds (~$175M) have been locked in an FTX trading account.
So, all roads are still leading back to FTX.
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Barry Silbert wasn’t game to square off against the Winklevii, but Gary Gensler clearly found an intern to hold his beer.
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Bitcoin just crossed $20k for the first time since the downfall of FTX.
Just a day earlier, crypto was calling for SEC head Gary Gensler to resign.
Pick your fighter to fall first: The economy vs. Gensler [🧵]
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Your aunt’s favorite stock picker, Jim Cramer, reported that Pandit was forced out in disagreements.
That was a stark contrast with what the Citi board was trying to sell as clashes “centered on strategy and performance.”
In other words, they weren’t fans of Pandit’s direction.
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Citi Bike appeared to have paid off.
Its own brand tracking poll saw a 12-point increase for those in agreement that: “Citi is a socially responsible company.”
That’s a big jump in the age of “too big to fail” backlash, especially considering the probes into possible misconduct
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That culminated in a third bailout for Citi, when the US government agreed to convert $25 billion of preferred stock into common equity.
Citi’s tangible common equity had plummeted to just $29 billion at the time.
Its stock was trading at just $1.50.
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When Pandit became CEO, the world had just changed.
The previous environment of seemingly limitless liquidity pools had come to a sudden end.
Citi had to change too.
Pandit and his team immediately got to work. 9 months later, their problems were no longer Citi-specific:
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Pandit's tenure was bookended by extremes — he stepped in as the credit crisis was about to explode across the financial markets and the global economy.
He walked away just as it seemed the firm might be finding some stable ground.
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