Innovation "Bubble", DAO vs TradFi, Global ETF Record Year Inflows.
Lithium up +450% YTD, DAO Disruption in Wealth Mgt, Santa Rally
1. MACRO-Are Innovation Stocks in A Bubble?
After innovation stocks in corrective territory for nearly 11 months, we are seeing some innovation stocks entering discount territory where their valuations are a fraction of peak levels. However, we still believe that the pandemic has accelerated the ‘stay connected’ transforming the hybrid workforce globally.
During Fed meeting last week, the Fed announced it will aggressively dial back of its bond-buying by $30Bn, a.k.a quantitative easing or QE per month, double the previously announced $15 Billion per month.
So what does the Fed talks about tapering mean? QE helps the economy by reducing long-term interest rates making business and mortgage borrowing cheaper. And Fed buying back its bonds in the broader market reduces the supply of these bonds but at the same time lowering yield.
J-Pow issued a statement reassuring that an increase in rates won’t happen until after tapering has been completed, which at the new pace now means March.
Singular’s Take: Inflation is here to stay no matter what the Fed says. According to Tom Lee from Fundstrat “I think the band-aid is getting pulled off. The market’s been waiting for this. It was selling off on the rumor and it’s time to buy the event.”
Looking Ahead : We have seen the stock markets rebounded and soared from 2020 into 2021. Tech was selling off hard this year and most tech look very attractive at those prices where the boarder market is looking to re-risk.
2. DAO vs. Traditional Asset Managers
Every industry (at every level) is going to be disrupted over the next 10, 20, 50 years. History contains proof of that.
The pace of technological advancements is accelerating the frequency of these disruptions.
NFTs. Last week, a crypto Decentralized Autonomous Organization (DAO) is trying to buy an NBA team, now they’re trying to put Vanguard out of business.
Index Coop DAO is a digital asset manager that builds and manages crypto indexes where members calibrate the composition of the index by casting votes using $INDEX tokens funded by leading VCs like Sequoia, Index Coop started Oct 2020 is now managing nearly $500Mn.
The DAO now has about 6 products and basket of cryptocurrencies, think about low-risk index funds but for cryptos. Most like Index Coop, Indexed Finance, PieDAO, and BasketDAo are run by DAOs governed by smart contracts and user communities.
Yes, to-the-moon swings are fun, but that’s not a retirement strategy.
Singular’s Takeway: Index Coop has proven that there is a deep need and market led by the DeFi renaissance where they identified a clear paint point for users to acquire DeFi tokens on Ethereum.
Looking Ahead: SingularDAO coming soon – we might replace Vanguard in a Decentralized Way ; )
3. ETFs Record Global Inflows of $1T
Finance is littered with acronyms, but one that doesn’t get enough credit is the ETF. While IPOs, SPACs, SPARCs, NFTs, DAOs, and WTFs get all the headlines, inflows into global ETFs have quietly crossed $1T for the first time ever this year.
Most of this money went into low-cost index funds (>75% of which are run by Vanguard, BlackRock, and State Street), but about 10% went into active funds that seek to outperform rather than simply track an index.
In fact, of the record 380 ETFs launched in 2021 (you can find one for pretty much every theme imaginable at this point), more than half are actively managed.
Singular’s Takeaway: The bull market has propped up many ETFs, but according to FactSet, about a third of active ETFs are marked as having a medium or high risk of closure.
Looking Ahead: Most new investors are better off owning a passive S&P ETF. Buffett agrees.
4. EVs has Boosted Lithium +450% YTD!
The demand for electric vehicles (EVs) has been increasing rapidly as more automobile manufacturers are looking to fund their R&D in EV technologies. For instance, Rivian is now valued at $101Bn with zero sales. As the number of EVs being produced increases, the key component lithium is getting in short supply as supply-chain bottlenecks and potential long-term shortages has driven Lithium prices to $235,500
The world’s top lithium producers including Albermarle (ALB.N) and SQM (SQMA.SN) account for nearly about 50% of global lithium sales.
Under the Radar: Lithium Americas (NYSE: LAC), a startup that has produced zero lithium with notable projects in Argentina and the US currently has a market cap of $3.6B thanks to bets on continued scarcity!
Looking Ahead : Carbon credits.
5. FTC opens Antitrust probe into Meta Platforms Acquisition of VR apps
The FTC has recently taken note and has extended probe of Meta Platform’s acquisition of a list of VR app companies like Supernatural, a VR fitness app for $400 Mn. in late October.
Meta Platforms-formally known as Facebook has acquired about six VR startups related to its Oculus VR headsets.
Singular’s Take: We don’t know how much the acquisition cost Meta Platform with the five remaining startups but the latest move to acquire Supernatural has heightened regulatory pressures for Big Tech.
Looking Ahead: VR’s close cousin Augmented Reality (AR) will have a strong impact on the way we communicate, game, and interact with the physical world, Singular will continue to watch this space as the ‘metaverse’ develops.