August 27, 2023

Instacart and Klaviyo Files for IPO

📰 News Organizations

  • Powell Says Fed Will ‘Proceed Carefully’ on Further Rate Rises. Powell twice said the Fed would “proceed carefully” in any further move, signaling he saw little urgency to raise rates at the central bank’s next policy meeting in September.

  • Instacart Files To Go Public On Nasdaq. Instacart will list its shares on the Nasdaq under the ticker symbol “CART.” In its prospectus, the company said revenue in the latest quarter rose 15% to $716 million, and Instacart generated net income of $114 million.

  • Klaviyo Files for IPO Showing Profitability. The marketing automation company said that it plans to list on the New York Stock Exchange under the symbol “KVYO.” Klaviyo reported net income of $15.2 million for the first six months of the year. One of its biggest backers is Shopify.

  • Wells Fargo Fined $35 Million for Excessive Advisory Fees. Wells Fargo overcharged more than 10,900 investment advisory accounts by more than $26.8 million in advisory fees through the end of last year, the SEC said.

  • FTC Pauses Challenge to Amgen’s $27.8 Billion Deal for Horizon Therapeutics. The pause, effective until Sept. 18, allows the FTC to decide whether the agency should settle the case. Amgen has said the purchase would improve the availability of Horizon’s drugs for rare diseases.

  • AI Won’t Save Tech Stocks From Trouble, BofA’s Hartnett Says. They highlighted the correlation between central bank liquidity and tech stocks and indicated that the Nasdaq has been testing record highs while central bank balance sheets have fallen by around $3 trillion during the current rate-hiking cycle.

🐦 Twitter

  • The 3-Month Treasury Bill Yield has moved up to 5.58%, its highest level since January 2001. The market is now pricing in a 49% probability of another Fed rate hike (to 5.50-5.75%) at the November FOMC meeting. Source.

  • Interest expense on US Federal debt is now at a record 19.5% of US government revenue. This is well above the 16.9% seen in the 2011 debt ceiling crisis. As interest rates soar, interest is now one of the US government's biggest expenses. Source.

  • With new home sales soaring and rest of market mostly frozen, 30% of all single-family homes on market are now new, which is among highest share throughout history and well above average. Source.

  • There was nothing in Powell’s speech that we didn’t know before. What was notable this time, was that it was packaged slightly more hawkish than dovish. And that’s what people are picking up on. Source.

  • Energy & Cons Discr led market higher Friday while Comm Serv was in last place (but still higher); Energy back in first place MTD and is nearly flat YTD. Small caps underperformed large caps, with Russell 2000 Value in last place (and YTD. Source.

It is pretty simple. The more mortgage rates go up, the more housing demand goes down. I am not sure why reporters ask so often for the magic % where sales will fall off a cliff.

John Burns

📓 Online Publications

  • Affirm Shares Rocket 30% After Better-Than-Expected Results. Affirm also gave strong guidance for the fiscal first quarter, projecting $430 million to $455 million in revenue, versus analyst expectations of $430 million.

  • Pending Home Sales Climb To 2023 High Following Months Of Declines. Pending home sales rose 0.7% from June to July, reversing 7 months of declines. However, rising rates and home prices are poised to stifle sales growth into the fall, Redfin said on Friday.

  • Multifamily Delinquencies Have Tripled Year-over-year. Freddie Mac reports that multifamily delinquencies increased to 0.23% in July. The rate has increased recently as asking rents softened, vacancy rates increased, lending has tightened, and interest rates have increased sharply.

  • Mortgage Rates Surge to 7.23%. The 7.23% average mortgage rate for the 30-year fixed-rate loan, translates to an average monthly mortgage payment of $2,246 for a typical existing single-family home. This will hurt buyers’ opportunities to enter the market.

  • Another Nation State Just Revealed They Are Mining Bitcoin. The country of Oman has revealed a $1.1 billion plan to mine Bitcoin and use the digital currency as a key component of its digital transformation strategy.

🎧 Podcasts

  • Nvidia's Profit Margin Sustainability is Uncertain. David Sacks thinks that the rapid surge in demand for AI has led to a GPU shortage benefiting Nvidia's profit margins but the sustainability of these margins is uncertain, with the long-term demand for AI products remaining unpredictable. Source(17:54)

  • The IPO Market Needs a Catalyst. Chamath Palihapitiya highlights the dormant M&A market, shifting focus to the IPO sector, where catalysts on the level of a Starlink IPO are needed. Firms like Instacart lack allure and IPOs for Arm and Stripe will face challenges. Source(48:48)

  • Luxury Brands Ferrari and LVMH Resilient Amid Economic Challenges. Investing in luxury companies like Ferrari and LVMH offers potential benefits due to their strong brand equity, global appeal, and resilience during economic downturns, driven by the allure of exclusivity and status. Source(1:11:35)

  • The Fed Will Likely Continue to Cut Rates. Raoul Pal says the Fed cannot afford to pay the interest on the national debt. The Fed has about $13 trillion of debt to roll over plus new issuance, and they need to monetize the interest payments on that debt, essentially printing money to pay the interest on the debt. Source(5:25)