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18 March 2021
Video commentary for March 17th 2021
Happy St Patick’s Day!
Eoin Treacy’s view
A link to today’s video commentary is posted in the Subscriber’s Area.
Some of the topics discussed include: Fed stands pat, believing inflation is transitory. Risk assets rebound, bonds steady, gold steadies, oil eases, homebuilders and lumber conitnue to trend higher.
BlackRock, Lombard Say Faster Inflation Calls Are Premature
This article may be of interest to subscribers. Here is a section:
“As the dust settles in the wake of today’s FOMC, we will be focusing upon whether any additional back-up in yields is accompanied by a further widening of breakevens,” said Richard McGuire, the head of rates strategy at Rabobank. “If so then this argues that the move higher in rates is sustainable.”
But as long as U.S. yields don’t rise in a chaotic fashion, risk assets including emerging-market and high-yield corporate debt are expected to outperform, according to BlackRock’s Seth. “Rates can drift higher and still remain a positive backdrop for the risk assets, as long as the vulnerability is under control,” he said.
A Bloomberg Barclays index on global credit returns has gained 11% over the past year, compared with a loss of 2% for a gauge tracking Treasuries. BlackRock switched to a neutral duration position in February from underweight. The fund likes notes sold by Chinese real estate companies and the nation’s onshore bonds.
“The lack of correlation with the rest of the global developed markets also provides a diversification benefit,” Seth said of Chinese debt.
Eoin Treacy’s view
The Fed remains wedded to its view nascent inflationary pressures will not last long. There is a logical argument to support the view that the bounce back from the pandemic lows is exaggerated by the base effect and everything will settle down over the course of the next year or two. Since the Fed is willing to wait and see with inflation, it could be two full years before they are willing to draw firm conclusions.
Lennar Shares Spike on Plan to Spin Off Startup Investments
This article from Bloomberg may be of interest to subscribers. Here it is in full:
Lennar Corp. soared after the homebuilder said it will create a spinoff with at least $3 billion in assets.
The new company, which will have $3 to $5 billion in assets and no debt, will include Lennar’s technology investments, according to an earnings call Wednesday.
Lennar, which said it made about $470 million on its investment in Opendoor Technologies Inc., jumped as much as 9.5% to $97.09 in New York. The stock had gained 16% this year through Tuesday’s close.
Miami-based Lennar reported orders on Tuesday that beat estimates as it benefited from the pandemic housing market. It got also a boost from Opendoor, which began trading in December.
Lennar said two other “technology-driven” companies it has invested in also have announced agreements to go public through mergers with special purpose acquisition corporations, or SPACs.
Those companies are Doma, formerly known as States Title, and Hippo, the home-insurance startup that’s merging with a blank-check company led by Zynga Inc. founder Mark Pincus and LinkedIn co-founder Reid Hoffman
Eoin Treacy’s view
It is a clear sign of the times that a home builder, which is about as brick and mortar as it gets, has upwards of $5 billion in technology investments. It’s good news that the company has made wise decisions in what are now highly valued digital assets. However, that decision to prioritise risk in non-core businesses is also a symptom of the wider lack of building new homes that has been a feature of the recovery from the 2007-12 housing recession.
Tinuiti Acquires Amazon Specialist Ortega Group, Adds Kevin Mayer to Board
This article from the Wall Street Journal may be of interest to subscribers. Here is a section:
Ortega will likely be the first in a string of purchases by Tinuiti, which in December became part of private-equity giant New Mountain Capital and is hungry to broaden its capabilities. Tinuiti is in talks to acquire two other companies, said Zach Morrison, its chief executive.
“We set out at the end of last year to find a partner that could take this from a hundred-and-some-million-dollar company to a billion-dollar company,” he said.
Future deals will focus on resources related to working with the “triopoly,” he said, referring to Google, Facebook and Amazon, as well as marketing services around video, digital advertising and first-party data, he said. New board members, like Mr. Mayer, will also bring expertise in those areas, Mr. Morrison said.
Mr. Mayer recently joined sports-streaming company DAZN Group as chairman. He served briefly as chief executive of TikTok and in senior roles at Walt Disney Co. Tinuiti also added Anneka Gupta, president and head of products and platforms at data company LiveRamp, to its board.
Tinuiti, with about 750 staffers, had its strongest growth last year, as businesses sped up their investments in e-commerce and digital marketing to reach consumers in the Covid-19 pandemic, said Mr. Atkinson.
Eoin Treacy’s view
Tinuiti is one of the most successful ad agencies for ecommerce companies. They offer an end-to-end marketing and advertising service with a solid track record of boosting sales right across the Amazon/Shopify/Wal-Mart universe.
They generally require a minimum advertising spend of $25,000 a month to even consider taking on a new client. That suggests a revenue base of at least $1 million in turnover and solid margins to absorb the cost.
Eoin’s personal portfolio: from March 4th 2021
Eoin Treacy’s view
One of the most commonly asked questions by subscribers is how to find details of my open traders. In an effort to make it easier I will simply repost the latest summary daily until there is a change.
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