Train Wreck?
The Investor's Podcast Network
The Investor’s Podcast Network is a business podcast network. Our main show “We Study Billionaires” has 180M+ downloads.
By Weronika Pycek, Shawn O'Malley, and Matthew Gutierrez · June 20, 2023
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Almost no Wall Street?strategists?called this year’s stock rally. As you’ll see in our Chart of the Day, those “experts” predicted a down year for the first time since 1999. What came next? The best start to a year in 26 years.
Before this year, strategists hadn’t even predicted a single down year for stocks this century.???
The classic joke that weatherman is the “only job you can be wrong and still get paid,” might need to get updated.
Turns out, you can be well off the mark as a Wall Street strategist, too. It’s why many top business leaders and investors say they don’t pay attention to predictions about the economy or stock market.
—Shawn & Matthew
Here’s the rundown:
Today, we'll discuss the?three biggest stories in markets:
All this, and more, in just?5 minutes to read.
POP QUIZ
The S&P 500 is off to its best start to a year since 1997, up over 15%. In what year did the index post its best-ever start to a year (first 114 trading days)? Scroll to the end to find the answer!
CHART OF THE DAY
IN THE NEWS
???Wall Street Sours on America’s Downtowns?(WSJ)
Walk through most downtown areas in America, and the vibe just isn't the same. Whether it's big cities like New York, Philadelphia, and Chicago or mid-sized cities like Pittsburgh, Kansas City, and Omaha, it hasn't been smooth sailing for downtowns. The culprit: Offices in major metro areas have about?half as many workers?as before the pandemic.
That dynamic has hurt downtown coffee shops, restaurants, and other small businesses, which rely on downtown workers to pay the rent. It's a chain reaction: Fewer downtown workers means?less business?for downtown storefronts and?less tax revenue?for cities.
Train wreck??“You could see this as a slow-motion change or as the beginning of a slow-moving?train wreck,” said one analyst. “I hope it’s not a train wreck, but it could be.”
Why it matters:
Many city governments rely on tax collection on office buildings, wages earned within city limits, and fares from office workers' commutes. But each category is facing headwinds,?hampering city budgets.
“The?suburbs?are going to be one of the?big winners?in this, and the potential losers could be the large cities that have depended on people coming back and forth to work,” a real estate analyst noted.
Also important:?Office-building property taxes make up roughly?10% of revenue?in major cities. Green Street, a real-estate analytics firm, projects "a?dire picture?for future city budgets with high levels of remote work."
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领英推荐
???BlackRock Files for Bitcoin ETF?(Blockworks)
It’s an interesting time for one of?Wall Street’s biggest firms?— BlackRock — to embrace?Bitcoin.
Just months after?FTX’s collapse, the Securities and Exchange Commission (SEC) has turned its focus on other large digital asset exchanges like Coinbase and Binance,?suing?them for acting as unregistered securities exchanges (illegal marketplaces for crypto tokens which may legally be securities, requiring more regulatory oversight.)
Don’t Bitcoin ETFs already exist? Yes, and no. See, the SEC has only approved Bitcoin ETFs based on futures contracts. That is, funds that track future price expectations for Bitcoin and settle in cash.
A “spot” Bitcoin ETF changes that. It would accumulate Bitcoin as an underlying asset, giving investors?more direct exposure. And because ETFs trade as stocks do throughout the day, they’re very attractive investment vehicles, enabling millions of people to more easily and directly invest in Bitcoin in the same brokerage account they might use to buy Apple stock or an S&P 500 index fund.
Why it matters:
Enter BlackRock. The asset management giant oversees?trillions worth of assets?and maintains deep political connections. While other institutions’ spot Bitcoin ETF applications were rejected, perhaps BlackRock’s prestige is more likely to attract regulatory support.
Hence the speculation that BlackRock’s application will be the first true Bitcoin ETF approved, further?legitimizing?Bitcoin as a financial asset and enabling Americans to invest in Bitcoin with a more established, better-regulated financial institution such as BlackRock as a counterparty than, say, shady offshore crypto exchanges like FTX.
MORE HEADLINES
???President Biden to?meet?with A.I. experts in San Francisco.
???Rivian?joins?Ford and GM in turning to Tesla chargers.
???India breaks record for?largest purchase?of airplanes ever in deal with Airbus.
???Alibaba’s CEO Steps Down to Focus on Cloud Business (Bloomberg)
Daniel Zhang, CEO and chairman?of Alibaba, aka the?“Amazon of China,” will?step down?to prioritize the company's cloud division. This move aligns with Alibaba's ongoing?restructuring plan to split into six distinct businesses.
Alibaba confirmed that?Eddie Wu, the CEO of its subsidiaries Taobao and Tmall Group, will take over. Joseph Tsai will step in as Chairman of the?$240 billion company, effective Sept. 10.
The context: Alibaba is undergoing a significant reshuffle after facing?intense regulatory scrutiny?in the tech sector. In 2020, Jack Ma and Ant Group faced a crackdown, leading to allegations of?monopolistic behavior?against Alibaba and a substantial fine.
After the regulatory crackdowns, Alibaba has struggled to regain its rapid growth,?facing?competition?from new players like ByteDance (TikTok’s parent company) and PDD Holdings. Additionally, the company experienced challenges in the cloud sector,?losing market share?to state-backed competitors.
Why it matters:
As Alibaba breaks apart its conglomerate, investors have mixed feelings.?Three of its spin-off entities?will likely dilute existing investors considerably in upcoming fundraising efforts (namely, IPOs.)
Once a favorite among value investors, Alibaba’s stock has disappointed despite a growing underlying business. This prompted the legendary investor and Warren Buffett’s right-hand man, Charlie Munger, to call his investment in the company a “mistake.”
TRIVIA ANSWER
The S&P 500 soared?57.1%?through the first 114 trading days of?1933, a strong rebound out of the depths of the Great Depression. That year is followed by strong starts in 1975, 1987, 1943, and 1997.??
SEE YOU NEXT TIME!
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