Bulls, Bitcoin, & Beyond

Market Moves Yesterday

S&P 500 @ 4,839.81 ( ⬆️ 1.23%)

Nasdaq Composite @ 15,310.97 ( ⬆️ 1.70%)

Bitcoin @ $40,863.26 ( ⬇️ 1.94%)

Hey Scoopers,

Its Monday! Brace yourself for a thrilling newsletter. Here’s the scoop 👇

👉 Meta bets big on AI

👉 Holiday shopping gets a boost

👉 Bitcoin ETF trading volumes gain pace

Meta Gains 200% Since 2023

After an awful year in 2022, shares of social media giant Meta Platforms have more than tripled in market value since the start of 2023. Valued at $985 million by market cap, Meta is among the largest companies in the world.

Investors were pleased after Meta announced a slew of initiatives to lower its cost base after the stock plunged 64% in 2022, trading at a level previously witnessed in 2016.

Meta repurchased billions of dollars in stock in the last year and is forecast to end 2023 with earnings of $14.37 per share in 2023, up from less than $9 per share in 2022.

The tech heavyweight is also investing heavily in artificial intelligence. For instance, the company will purchase 350,000 Nvidia H100 graphics cards by the end of 2024 for almost $10 billion.

Analysts expect Meta’s earnings to surge to $39 per share by the end of 2028. If the stock is valued at 20x forward earnings, it should more than double from current levels.

Holiday Shopping Tops $964 Billion

Holiday sales in 2023 in the U.S. rose by 3.8% year over year to $964.4 billion, according to the NRF or National Retail Federation. It shows that consumers continued to spend on gifts and celebrations despite inflation.

On average, sales grew by 3.6% in the holiday season between 2010 and 2019. These numbers increased during the COVID-19 pandemic as holiday sales were up 9.3% in 2020 and 13.5% in 2021.

NRF projected sales in the 2023 holiday season to range between $957.3 billion and $966.6 billion.

Here’s what drove consumer spending 👇

👉 Electronics and appliance stores grew sales by 9.3%

👉 Health and personal stores grew sales by 9%

👉 Online sales surged by 8.2%

Despite robust consumer spending in Q4, it will be interesting to see if these trends continue in 2024.

Several factors might impact spending in 2024, including cooling inflation, the possibility of interest rate cuts, and a divisive presidential election.

The profit margins of retailers might also move lower in the near term as they navigate supply chain disruptions in the Red Sea, resulting in higher shipping costs.

Spot Bitcoin ETFs Attract Investments

Spot Bitcoin ETFs (exchange-traded funds) were launched ten days back, and in this period:

• Total trading volume of 11 spot Bitcoin ETFs surpassed $10 billion

• Grayscale, BlackRock, and Fidelity accounted for 90% of the trading volume

• Trading volumes have been more than $1 billion each day since the ETFs were launched

Despite an inflow in spot Bitcoin ETFs, BTC prices slumped almost 20% since touching two-year highs recently.

Headlines You Can’t Miss!

How shoppers are dealing with holiday debt

Moody’s has a negative outlook for Asia’s creditworthiness in 2024

Two economic indicators will drive Fed policy this month

Mortgage interest rates to drop in 2024

AI might be a massive use case for blockchain

Chart of The Day

You might want to hold your, uh, dancing horses here. IPOs can be a thrilling ride, no doubt about it. They’re often young, buzzy companies at the start of their growth spurt. And, there’s a commonly held idea that getting in on an IPO is like snagging a front-row seat to the next big thing.

But here’s the thing: excitement doesn’t always mean a smart investment. Despite those first-day trading spikes, research by “Mr. IPO” Jay Ritter suggests that IPOs tend to have a poor long-term track record for investors.

From 1980 through 2022, the majority of IPOs lost money over the three- and five-year periods that followed their debut, with 37% losing more than half their value over three years.

He found that the average IPO stock bought at the publicly available closing price on the first trading day returned about 6% annualized over three years.

Meanwhile, an index of all U.S.-listed stocks returned about 11% annualized over the same period. Put more simply, you’d have been better off simply buying the index.

And, look, there are a couple of reasons why IPOs don’t live up to the hype. For starters, most retail investors can’t buy in at the offer price. These shares are typically reserved for big institutional players and maybe some select retail investors who are sitting on piles of cash and have the right connections.

For the average Joe or Jane, getting in at this stage just isn’t possible. And, usually, by the time these stocks make their grand entrance on the open market, their prices have already spiked.

So, if you’re a regular retail investor, you’re probably buying in at a price that’s way less juicy. And that can have a huge effect on your returns: Ritter found that jumping in at the first day’s closing price, rather than the initial offer price, can slash your three-year returns by nearly half.

Another reason is the existence of lock-up risk: bigwigs like founders, employees, and early bird investors are usually handcuffed from selling their shares for a few months post-IPO.

Once that lock-up period ends, there’s often a mad dash to sell, flooding the market with shares and – you guessed it – driving the price down. And don’t forget about the tug-of-war in interests, with venture capitalists, underwriters, and early investors itching to cash out big at the IPO.

Last, new kids on the stock block often come with limited info and trading history, meaning their early prices are more easily driven by sentiment rather than fundamentals. That makes it more of a popularity contest than anything else.

After all, many investors forget that for every Tesla, there is at least one WeWork (the company lost 99% since its 2021 debut and recently filed for bankruptcy).

There’s a reason why legendary investor Warren Buffett has called investing in IPOs “a stupid game.”

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DISCLAIMER: None of this is financial advice. This newsletter is strictly educational and is not investment advice or a solicitation to buy or sell assets or make financial decisions. Please be careful and do your own research.