Author: Snippet.Finance

Macroeconomics

Spending Recovery

  • Latest internal JPM Chase data suggests gradual recovery in socially distanced discretionary spending is back after a pause.
  • This is defined as “card present” transactions that require people to go someplace and not buy from home (e.g. lodging, rental cars etc).
  • Taken from the latest and always excellent JPM Covid Research Compilation.
Stocks

Pinduoduo

  • A great presentation and separate post about a huge eCommerce business you probably haven’t heard of, founded only in 2015.
  • Its success is down to a team buying feature, social integration, gamification and live streaming.
  • These features have led to a daily active user (DAU) to monthly active user (MAU) ratio, a measure of engagement, of almost 50% – the highest, by some margin, among peers.
  • h/t Benedict Evans.
Misc

Emissions and Emerging Countries

  • It is well documented that the CO2 intensity (CO2 per unit of economic growth) of the world has improved.
  • However the level of emissions keeps going up, with recent increases mostly coming from emerging economies.
  • The reason? These countries have taken the burden of de-industrialisation by the developed world over the last 25 years.
  • As the chart shows – this has taken the form of a shift of carbon-intensive manufacturing of steel, cement, ammonia and plastics.
  • These goods are produced both for domestic needs but also for export to the developed world.
  • Sourced from the brilliant JPM Energy Outlook note.
Misc

History of Fraud and Short Selling

  • A fascinating post on the history of fraud and how short sellers and the media uncover it – with clear parallels to Wirecard today.
  • As Jim Chanos put it – “It is short sellers who are the real time financial detectives, whereas the regulators are often financial archaeologists.”
  • Interesting chart showing how speculative grade bonds dominated as the role of underwriters changed.
Misc

Sellside Economists

  • Funny, but often true, ten rules to being a sellside economist.
  • How to get attention: If you want to get famous for making big non-consensus calls, without the danger of looking like a muppet, you should adopt ‘the 40% rule’. Basically you can forecast whatever you want with a probability of 40%. Greece to quit the euro? Maybe! Trump to fire Powell and hire his daughter as the new Fed chair? Never say never! 40% means the odds will be greater than anyone else is saying, which is why your clients need to listen to your warning, but also that they shouldn’t be too surprised if, you know, the extreme event doesn’t actually happen.
  • Recession watch: … So the best approach is to emphasise the dangers of recession but claim this is at least 18 months away. If it happens sooner, you can say you correctly warned about the dangers. If there is no recession you can simply postpone your forecast and hope nobody remembers.
Tools

Hedge Fund Letters

  • Q2 letters from prominent hedge funds were out early August.
  • Three always worth reading:
  • Einhorn’s Greenlight Capital Q2 Letter – discussing his long inflation bet, Wirecard fraud and Tesla.
  • Loeb’s Third Point Capital Q2 Letter – where he discusses adjusting his process/strategy towards more quality compounders – with rationale for recent purchases (BABA, JD, AMZN etc) supporting this.
  • Klarman’s Baupost Group Q2 Letter – where he discusses his eight impacts of the pandemic on the future.
Misc

Ride Hailing Impact on Emissions

  • Is ride-hailing good for the green house gas emissions?
  • “The answer from several recent studies is straightforward: after accounting for people who would have taken public transport, biked or walked instead, and those who would not have traveled at all, there’s a substantial net increase in estimated vehicle miles traveled and emissions from ride-sharing, possibly as large as 60%-80% compared to a world with no ride-sharing at all”
  • Charts tell this story – (clockwise) a surge in ride-hailing in the US including NYC coupled with increased emissions per trip and miles travelled compared to the category they replace.
  • Sourced from this great note on Energy market outlook.
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