David Fuller and Eoin Treacy's Comment of the Day
Category - Technology

    WeWork agrees to $9 billion SPAC deal in new path to go public

    This article from Fortune may be of interest to subscribers. Here is a section:

    The company disclosed to prospective investors it had lost about $3.2 billion last year, the Financial Times reported earlier this week. The documents also show that occupancy rates fell to 47% at the end of 2020, down from 72% at the start of the year, before the pandemic hit, according to the newspaper.

    In the interview in January, Claure argued the pandemic was helping WeWork. He said the work-from-home situation benefits the company and would continue to do so as people return to the workplace. “This is where WeWork suddenly becomes an incredible value proposition,” he said. “New habits have been developed during this pandemic.”

    Mathrani will continue to lead the company after the deal. Vivek Ranadive of BowX and Insight Partners’s Deven Parekh will join the board.

    BowX Acquisition Corp. is managed by Ranadive and Murray Rode, both former executives at TIBCO Software and co-founders of venture firm Bow Capital.

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    Message Received, Loud & Clear

    This report from CIBC may be of interest to subscribers. Here is a section:

    The Bank of Canada is seeing enough progress in the economy that it feels it can begin reducing outdated programs, as well as slowly begin to remove some of the considerable stimulus in the system. There should not be too much impact from the cessation of select market functioning facilities directly. The bigger news today is the strongest signal yet that the Bank is ready to conduct a taper, and begin ‘right sizing’ the QE program. This is also the first time we have been shown what the future sequencing looks like, which is: i) taper to a net-zero purchase profile; ii) enter a reinvestment phase, and; iii) normalize rates. The best trades to take advantage of this are micro in nature, though also put ‘bigger’ macro trades like receiving 2yr-to-4yr forwards versus the U.S. at risk.

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    Taiwan Raises Red Alert Over Water, Cuts Chipmakers' Supply

    This article by Debby Wu and Cindy Wang for Bloomberg may be of interest to subscribers. Here is a section:

    Taiwan stepped up its fight against its worst drought in decades, further reducing water supplies to areas including a key hub of semiconductor manufacturing in the central part of the island in an effort to stop reserves from running dry.

    The government issued its first red alert on water supply in six years Wednesday, warning that reservoirs in several parts of central Taiwan are running dangerously low. Authorities will cut the water supply to companies in two major science parks in Taichung by 15%, economics minister Wang Mei-Hua said at a briefing in Taipei.

    Water will also be cut to non-industrial users across Taichung and Miaoli County two days a week, Wang said. The measures will come into effect from April 6.

    While Taiwan Semiconductor Manufacturing Co. and Micron Technology Inc. both have chip-making operations in Taichung, Wang said the restrictions would not affect their production. TSMC’s headquarters further north in Hsinchu has been spared further restrictions for now.

    TSMC says it plans to increase the amount of water it uses from tanker trucks but the new restrictions would not affect operations, according to an emailed statement. A Micron representative in Taiwan declined to comment, saying the company is now in a quiet period.

    The relative dry spell is putting pressure on the Hua said government to ensure continued supplies to water-intensive industries, such as its crucial semiconductor manufacturing, at a time when global companies are clamoring for computer chips. A shortage of semiconductors has slowed output at automakers worldwide, prompting TSMC and its peers to run their fabs at close to full capacity to try and keep up with demand.

    Taiwan’s usually ample supplies of water have plummeted after a significant drop in rainfall last year. The situation was further exacerbated by the fact that no typhoons made landfall in Taiwan in 2020.

    Wang said earlier this month that Taiwan has sufficient water reserves to keep its technology companies operating smoothly until late May, when seasonal rains usually replenish supplies depleted during the drier winter months.

    The meteorological situation adds to a new challenge to TSMC just as it’s grappling with competition from Samsung Electronics Co. and Intel Corp., which has unveiled a $20 billion plan to create a foundry business that will make chips for other companies.

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    Of Cigars, Contrarians, Nerds and Herds

    Thanks to Iain Little for this edition of his Global Thematic Diary series. Here is a section:

    Attitudes to risk have changed. In one month, investors have relegated Covid 19 and its mutant strains to the side[1]lines. They now obsess over inflation and a shaky bond market. Those who feared an equity bubble in February, spurred on by strident warnings from market opinion formers like Jeremy Grantham and Ray Dalio, have diminished in number and are keeping their heads down.

    Anyone following 10 year USD bond prices will not be surprised. The move from 0.5% in August to 1.60% in March, a near tripling, has spooked bond buyers, with a consequent hit to gold, highly priced technology shares and other interest rate sensitive assets. But a more subtle and longer term conclusion may be drawn.

    If sentiment is indeed registering such a confident attitude to growth and risk, it is reasonable to assume that investment positions are now largely in place to reflect that view. If so, the next concern of the market will be its nemesis: growth below expectations. Those investors who are now positioning investments excessively on the side of recovery, value or laggard stock sectors like banks may need to think twice before abandoning their long held commitment to healthcare, FMCG, e-commerce and technology. We are positioning client portfolios accordingly.

    As Mark Twain once said: “if you find yourself on the side of the majority, it is time to pause and reflect”.

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    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.

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    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.

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    Email of the on solar power, desertification, and profitability

    This video is very interesting. It is hard to comprehend the scale of this project.  It is part of China's ''ending poverty'' project.

    Whilst the US has been engaged in adventurism in the M-E and elsewhere (right up till today) resulting in heavy losses, both financial and human cost, China has been powering ahead in leaps and bounds, spreading their sphere of influence far and wide. Interesting times.

     

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    Big Market Delusion: Electric Vehicles

    This article by Rob Arnott for Research Affiliates may be of interest to subscribers. Here is a section: 

    From the beginning, the air travel business has been capital intensive and highly competitive. During good times, new airlines emerged and drove down profits. During bad times, many less well-capitalized companies folded. Over the course of the last century, virtually every company in the business either failed or merged into a larger airline, most of which also collapsed.

    The simple fact, as Warren Buffett so cleverly stated, is that technology does not translate into great fortunes for investors unless it is associated with barriers to entry that allow a company to earn returns significantly in excess of the cost of capital for an extended period. Of course, Apple, Google, and Facebook are well-known examples of such technological success, but they are the exception rather than the rule. For a host of complicated reasons, these companies have been able to build moats, or barriers to entry, around their businesses. They also benefit from the fact their products can be produced with limited capital investment.

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