Charts of the Week
Weekly KnowHow
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Happy 4th July to all our readers!
The aim of this product is to highlight some interesting charts that support our current views, challenge the consensual view or are simply just interesting to share. As always, if you ever have any questions then feel free to reach out.
1. Sustainability of Robinhood revenues by cohort: We have all seen the charts from the Robinhood filing yesterday but one that we thought didn’t get quite as much attention as others is the below. For us, a key focus for the investment case will be for investors to be comfortable with the sustained deposit growth from existing accounts, especially the more mature account. As you can see from the below, through 2020 this has clearly been the case but going forward when markets aren’t as accommodative, it will be very important to track these data points.
2. Hedge funds' vital role in responsible investment: While this chart will come as no surprise to anyone reading this, we have highlighted it because of the corresponding report by Merrill Sepehrnia, Head of Total Return Sustainability at Pictet Asset Management, explaining why hedge funds are well placed to uncover ESG issues and help drive the ESG agenda forward.
3. What happens when you lose 1% a day then gain 1% back the next day? Credit to @LighthouseCap23 on twitter for this.It is relatively self-explanatory but highlights a very important point for us. We have said for a while now there are normally 3 drivers for a stock’s share price and in many cases, without a catalyst to change the narrative, slippage on your investments can be a consistent source of pain for your portfolio.
4. Chaos in the European power and gas markets: This Bloomberg chart below shows that Spanish day-ahead wholesale electricity prices have hit a near 20-year high today and are trading at their 2nd highest level ever (behind the very short spike we saw back in 2001). Even with the approval of a Royal Decree Law to reduce taxes applied to power supply, and thus electricity price for consumers, the inflationary pressures are still a real pain point for the economy.
5. US corporate equity issuance off the charts (well nearly): The charts in Dr Edward Yardeni’s latest piece published last Sunday highlight just how crazy the equity issuance has been in 2020 and 2021 vs historical standards. Chart 2 is actually off the charts…
6. We are going out, but not to the cinema yet… This will disappoint many AMC investors but the charts from IHS Market Economists Ben Herzon and Joel Prakken show just how quickly restaurant diners have come back. Averaged over last week, the count of seated diners on the OpenTable platform has been about 4.9% below the comparable period in 2019. Meanwhile, box office revenues last week were 77.9% below the comparable week in 2019, despite the strength of Fast & Furious 9, a sharp decline from the prior three weeks, when revenues were down roughly 60%.
7. Lumber suffers worst month on record back to 1978: This was a chart many of those pushing the inflation debate back in May highlighted as a growing fear that inflation is overshooting and not transitory given usage for lumber in the building industry. It is interesting therefore to see these inflationary pressures have given all the gains seen in April and May and now lumber prices are actually down YTD.
8. How have UK household spending expectations changed since last year? With Robinhood fever re-igniting the debate among investors about retail investment in markets, we thought we would highlight a chart that was published in the middle of June from the NMG Household survey is interesting. The chart suggests that while plans to invest in financial products has increased slightly, it still represents a small proportion of total spending. It would be interesting to see a similar chart for the US if anyone has seen something?
9. Stablecoins Could Pose New Short-Term Credit Market Risks: This recent report from Fitch is well worth a read, even if it is not necessarily a new debate. They suggest that the rapid growth of stablecoin issuance could, in time, have implications for the functioning of short-term credit markets. Potential asset contagion risks linked to the liquidation of stablecoin reserve holdings could increase pressure for tighter regulation of the nascent sector. Fitch do suggest that there are fewer risks posed by coins that are fully backed by safe, highly liquid assets, although authorities may still be concerned if the footprint is potentially global or systemic. For example, USD Coin, the second-largest US dollar-linked stablecoin, is backed by US dollars on a 1:1 basis held in custody accounts.
10. FDA Accelerated Approval Program being used at an increasing rate: We have spoken a number of times about the implications of the FDA Biogen approval (most recently this week on why we like the Biotech space and think it is ripe for M&A). With this in mid, it is interesting to see that there were 41 approvals for cancer through the accelerated program last year, the most by far since the program was initiated. Still, how well they work remains unclear with about half that number not yet reporting on their confirmatory trials.
