Edition 21: Changing views on Bitcoin
Top of the news
Fed chairman Jay Powell acknowledged the potential for inflation this year but remained bearish on any intervention: “I would note that a transitory rise in inflation above 2% as seems likely to occur this year would not meet this standard (for raising rates)”.
Checks and bank deposits have landed for over 90 million Americans for the third $1400 stimulus check coming from the $1.9 trillion coronavirus relief package. BoA says it’s likely most people won’t spend it on GameStop stock, and instead spend it on necessities.
Tax filing day has been delayed to May 17, 2021.
The TSA has reported 5 consecutive days of a million or more passengers. American Airlines stock is 15% lower than prices in February last year; United is still down 22%. Southwest is the only domestic airline whose stock prices now exceed last year’s. WSJ has a fascinating visualization of travel changes between last year and this year.
Speaking of travel, overseas spectators will not be allowed to attend the Olympics this year. This means a refund of nearly 1 million tickets, as well as massive knock-on effects on other parts of the economy dependent on tourist travel.
Digital artist Mike Winkelmann aka “Beeple” sold his collage called “Everydays: The First 5000 Days” for $69 million at a Christie’s auction; the buyer was Singapore-based entrepreneur Vignesh Sundaresan. John Cleese listed his “Brooklyn Bridge” iPad drawing on OpenSea.
AstraZeneca is under scrutiny for alleged ill-effects from its vaccine. The European Medicines Agency has concluded that the “vaccine is not associated with an increase in the overall risk of thromboembolic events, or blood clots”, and researchers appear to have found a potential cause.
Is ARK Innovation worth the hype?
Cathie Wood, founder, CEO, and CIO of ARK Investment Management, has a bit of a cult following since her actively-managed ETF fund ARKK and ARKW have outperformed most funds; in fact, if you look at the top non-leveraged ETFs by return over the 5 years, all of ARK’s funds are in the top 10.
Unsurprisingly, 9 out of the 10 ARKK holdings are shared with ARKW; ARKW has shares in GBTC; conversely Ark Investments is the largest investor in GBTC (Note: GBTC is the largest institutional holder of Bitcoin). Recently, Cathie proclaimed she expected Tesla to hit $3000 within 4 years. My assessment: if you’re already interested in purchasing hot stocks like Tesla, Square, Spotify, you can’t probably go wrong paying someone like Cathie Wood 0.75% to pick the next hot one (Stripe, anyone?).
A little more bullish on Bitcoin
Long-time readers will know that I have traditionally been a huge skeptic of Bitcoin; it remains a highly volatile, highly speculative financial instrument with considerable risk and extremely worrisome environmental effects. In its most recent whitepaper entitled “Bitcoin’s Dirty Little Secrets”, Bank of America slammed Bitcoin as “impractical as a store of wealth or payments mechanism”; however, it did hint at one angle that has piqued my interest: demand may continue to outpace supply. Bitcoin’s protocol allows for a grand total of 21 million bitcoin to be mined and in circulation with just under 3 millions remaining to be mined (though it’s entirely possible that changes to protocol may occur between now and sometime in 2140, when supposedly the last “bitcoin” would be mined).
It still seems fair to say that Bitcoin is not widely understood or accepted yet. Long since associated with fraud and shady transactions, the practical applications of blockchain seem theoretical at best. However, the recent media explosion surrounding NFTs (crypto kitties, anyone?) and the fact that Christie’s largest digital arts auction, paid for entirely in ETH, sold for more than Piccasso prints, brings some semblance of real world relevance. While much of this remains just out of reach except for the most motivated and technologically savvy individual, perhaps, a sort of Robinhood moment for crypto is needed. Increasing institutional acceptance, easier and more secure purchasing and selling, and useful applications outside of pure speculation may prove to be useful for Bitcoin.
I’m fairly bullish on Coinbase being one such tool to make things a lot more approachable for the everyday user, though ironically its IPO -- scheduled for March -- did get delayed to April due to some shady employee activity.
All that being said, my purchase of Bitcoin is in full recognition it could collapse on itself at any moment.
ESG: the devils are in the details
Now with President Biden in the White House, clean energy is scheduled for quite the comeback, and I’m a firm believer that the way to win hearts and minds about clean energy starts with changes in day-to-day purchase decisions (in the US, this translates to cars). McKinsey estimates some 400 EVs will land in the market by 2023. The market is also paying attention.
There’s a lot of ETFs that profess to concentrate on ESGs (I talked about it previously here) -- companies that have a history of prioritizing Environmental, Social, and Governance factors. The funny thing is that many of these funds approach ESG by excluding companies that are related to alcohol, weapons, fossil fuels and gambling. Doing so tends to revert to the classic top-performers, aka tech. For example, Vanguard’s ESGV has Apple, Microsoft and Amazon as its top three holdings, as does ESGU, CRBN and SUSA; the short story is that if you’re buying ESG funds, just take a peek at their holdings, because their expense ratios may not really make them so diversified from other large-cap funds. I bought ICLN in November and it has performed relatively well. I’ve found ETHO(expense ratio 0.45%) to be fairly reasonable and is on my watchlist for the moment.
Lithium is another area of interest for me. There are a few companies and ETFs on my shortlist: Piedmont Lithium (Australian lithium mining, PLL, with a 100% analyst buy rating), Albemarle (the world's largest producer of lithium for electric vehicle batteries, ALB), Lithium Americas (LAC) and Global X Lithium and Battery Tech ETF (LIT). PLL in particular has been performing extremely well, and upcoming earnings on the 24th should tell us a bit more. Interestingly, both Piedmont Lithium and Albermale have operating hubs in North Carolina.
In other news
I’ve liquidated my AstraZeneca holdings, and I hold BTC. I remain bullish on both GLD and SLV.
Also, I’m starting something a bit new this week by highlighting another newsletter I’m subscribed to and hope you’ll enjoy. It’s called Wolf of Harcourt Street and the writer is based in Ireland. Things I like: he’s transparent about what he does and goes into depth into the companies he’s interested in. He writes things that I tend to dig into too, like how to interpret financial statements (it’s one of the first things I wrote about).
Next time, let’s take a look at HSAs as investment vehicles.
Rio
Rio Akasaka is not a registered investment, legal or tax advisor or a broker/dealer. Although best effort is made to ensure that all information is accurate and up to date, unintended errors may occur. Past performance is no guarantee of future returns. Always seek financial advice as needed.