🔬 Bitcoin ETFs Endure Through The Waning Hype
Plus: Alphabet continues the trend of 'token' dividends; PCE inflation wasn't the disaster we expected; and much more
“In the business world, the rearview mirror is always clearer than the windshield.”
- Warren Buffett
“Never make forecasts, especially about the future.”
- Samuel Goldwyn
Bounce back week for the big US markets after last week’s disaster, as the S&P 500 and Nasdaq finished the week +2.7% and +4.2% respectively. The market shook off Thursday’s weak GDP and Stagflation fears pretty quickly, finishing Friday up +1.0% for the S&P and +2.0% for the Nasdaq.
All 11 sectors closed higher last week, led by Tech (+5.1%) and Consumer Discretionary (+3.5%). Materials and Energy were the weakest only up +0.7%.
Oil closed up +0.3% on Friday to bring the total to +2.0% on the week.
For better or worse, Tech had the biggest moves Friday: Alphabet (+10.2%) and Snapchat-parent Snap (+27.6%) rocked earnings, while Intel (-9.2%) did not.
Street Stories
Bitcoin ETFs
I read the other day (can’t remember where) about Bitcoin ETFs starting to experience outflows1 which I found kind of interesting, so I thought I’d take a look.
Turns out, they must have been full of s****.
1. Unlike a stock, where shares pass between individuals and the amount of shares in circulation doesn’t change unless through actions of the corporation (stock grants, share buybacks, stock dividends, etc.), when you sell an ETF the units no longer exist. New units count towards inflows, units sold count towards outflows.
The data shows that - despite the recent price volatility - the largest bitcoin ETFs (excluding Grayscale) have only had one day of net negative fund flows. Sure things have slowed down with the price rally cooling, but apparently interest in the King of Cryptos continues.
The net result is that the largest 8 Bitcoin ETFs (again, excluding Grayscale) currently hold AUM of $34.2 billion. To borrow from Charlie Munger, that’s a lot of rat poison!
PCE Inflation
The Fed’s preferred measure of inflation came out Friday, acting as something of a tailwind for markets. The +0.32% figure for March was slightly above the +0.3% Wall Street had hoped for but better than the worst case scenarios tossed around after GDP figures came out Thursday with the Q1 Core PCE component looking quite ugly (3.7% vs 3.4% consensus).
Additionally, while disinflation progress seems to have slowed, with respect to Core PCE at least it means moving downward as the year-over-year March print of +2.8% (vs. consensus for +2.7%) is the lowest since 2021.
Looking a bit deeper into the pieces that make up PCE, the price level for Goods is nearly unchanged over the last year, while it’s Services that remains elevated (+4.0%). Housing, which falls under Services, has represented one of the most persistent components to inflation, and at a 15% weight in the Index it is a strong contributor to overall inflation.
Dividends Are Dying
Google-parent Alphabet closed up 10.2% on Friday after posting a solid Q1, with beats on Revs and EPS. Additionally, part of that exuberance was the result of the company announcing a $70 billion share buyback program as well as its first ever dividend. Yippee?
Now, I’m mostly a growth investor so I think dividends are kinda lame unless you are already retired, but I do think the ‘token’ dividends a lot of companies pay is kinda ridiculous. Looking at the 10 largest companies in the S&P 500, only Broadcom and JP Morgan really pay proper dividends. So why the hell even bother?
While I’m sure there are a few investors who really appreciate Nvidia’s 0.02% divy, I believe the rationale for most companies is a bit more subtle.
For example, in a past life I worked at a mutual fund and part of the mandate for some of the Income funds was that we could only invest in stocks that paid dividends. It didn’t matter if it was at a 10% or 0.001% yield, if they paid a dividend we were allowed to hold the company in those funds. Many companies pay nominal dividends as a box checking exercise so that they hit certain quality scores or can be included to the massive pool of income-focused money.
Or in the case of Meta, this was a convenient way for Zuck to get cash out of the business without continuing to sell shares which dilutes his stake, and thus his voting control.
Something interesting though is that the dividend yield of the S&P 500 has been decreasing. Part of this can be attributed to the big Tech companies replacing the ole Blue Chip names as masters of the index. Cool companies don’t pay dividends. Or at least, not decent ones.
Joke Of The Day
Two men walk into a bar. You’d think at least one of them would have ducked.
I was addicted to the hokey pokey, but then I turned myself around.
Hot Headlines
Reuters / Investors brace for 5% Treasury yields as US inflation worries mount. The yield on the 10-Year Treasury Note is up 80 basis points this year to 4.7% and potentially closing in on October’s 5% level which was the highest since the Great Financial Crisis.
WSJ / Star scientist’s claim of ‘Reverse Aging’ draws hail of criticism. Harvard geneticist David Sinclair’s Academy for Health and Lifespan Research, a group of about 60 scientists that Sinclair co-founded and led, was hit with a cascade of resignations by members outraged by his claims. One scientist who quit referred to Sinclair on X as a “snake oil salesman.”
LA Times / You’re gonna need a bigger number: Scientists consider a Category 6 for a mega-hurricane era. The scale was Category 1 (sustained winds of 74 to 95 mph) to Category 5 (winds of 157 mph or more). Category 6 would be 192 mph of more and of the 197 hurricanes classified as Category 5 from 1980 to 2021, five fit the description of a hypothetical Category 6 hurricane. Ya, we f***** the climate up.
WSJ / Even if the Fed cuts, the days of ultralow rates are over. Soaring budget deficits and investment needs mean the ‘neutral’ interest rate may be higher in the future.
Futurism / Catholic group defrocks AI Priest after it gave strange answers. ‘Father Justin’ apparently truly believed he was real, and in convo with Futurism claimed "from a young age, I felt a strong calling to the priesthood." Also claimed baptism in Gatorade was fine. Which does sound cool.
Trivia
Today’s trivia is on Bitcoin.
When was Bitcoin created?
A) 2005
B) 2008
C) 2010
D) 2009How many Bitcoins will ever be created?
A) 21 million
B) 21 million
C) 25 million
D) No limitWhat is a 'Satoshi', in the context of Bitcoin?
A) A software bug in Bitcoin code
B) A Bitcoin mining rig
C) The smallest unit of Bitcoin
D) A type of Bitcoin walletWhat is Bitcoin’s market cap (the total value of all Bitcoin in existence)?
A) $105 billion
B) $617 billion
C) $1.2 trillion
D) $3.2 trillion
(answers at bottom)
Market Movers
Winners!
Snap (SNAP) [+27.6%]: Q1 EPS, DAUs, and revenue exceeded expectations with Q2 guidance surpassing consensus. The results demonstrated broad-based acceleration globally, enhanced ad models delivering better returns, and growth in global views and content engagement, though flat in North America.
U.S. Silica Holdings (SLCA) [+21.7%]: Agreed to a $1.85B acquisition by APO, an 18.7% premium to the previous close, expected to finalize in Q3 of 2024.
ResMed (RMD) [+18.9%]: FQ results topped expectations in earnings, revenue, and margins with strong performance in Devices and Masks in the US, Canada, and LatAm, overcoming tough comps and concerns about GLP-1 impacts.
Newell Brands (NWL) [+12.3%]: Q1 earnings and revenue outperformed with significant sales in Home & Commercial and Learning & Development sectors. However, Outdoor and Recreation lagged; Q2 EPS guidance fell short, but FY24 outlook was maintained. The normalized operating margin nearly doubled from last year.
Skechers USA (SKX) [+11.2%]: Q1 sales, GM, and EPS all above forecasts. Despite a weaker Q2 outlook, FY guidance increased. Strength noted in US Wholesale, management's positive outlook, GM improvements, innovation, new categories, and market share gains.
Alphabet (GOOGL) [+10.2%]: Q1 earnings and revenue surpassed estimates with accelerated growth in Search, YouTube, and Cloud. Positive notes on AI advancements, cost reductions, and operational efficiency. Announced dividend and a new $70B buyback.
Losers!
Roku (ROKU) [-10.3%]: Q1 EBITDA and revenue surpassed forecasts; Q2 guidance for EBITDA and revenue ahead, though gross profit fell below expectations. Active accounts, streaming hours, and ARPU all slightly better than anticipated; analysts expressed concerns about ARPU growth limitations due to international mix shift, challenging ad environment, and rising operational expenses.
Dexcom (DXCM) [-9.9%]: Q1 EPS and revenue outperformed, with an upward adjustment to the lower end of FY24 revenue projections. Despite not meeting the whisper number for Q1 revenue and high pre-announcement expectations, analysts remain positive on growth prospects in the US and internationally, and the upcoming Stelo launch.
Atlassian (TEAM) [-9.6%]: Fiscal Q3 results exceeded key metrics, with server to data center migrations providing a boost. However, only in-line cloud growth and fiscal Q4 guidance were noted, alongside the departure of co-CEO Scott Farquhar, causing some disappointment.
Intel (INTC) [-9.2%]: Q1 earnings were above expectations, but revenue was lighter than anticipated. Management highlighted broad-based weaker demand, with product growth hindered by inventory issues at Mobileye and Altera. Q2 guidance was below market expectations, but growth is expected across all segments in H2.
Exxon Mobil (XOM) [-2.8%]: Q1 EPS fell short while revenue exceeded expectations, impacted by declining refining margins and lower natural gas prices. Fuel business earnings dropped 67% year-over-year, with Q1 Capex exceeding forecasts. However, the company maintained FY24 Capex guidance and plans to grow Upstream earnings by an additional 50% over the next four years.
Market Update
Trivia Answers
D) Bitcoin was created in 2009.
B) 21 million. Currently 19 million have been minted.
C) A Satoshi is the smallest unit of Bitcoin, equal to 0.00000001 bitcoin.
C) The market cap of Bitcoin is $1.2 trillion.
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RE: BTC ETFs not sure about the negative sentiment around these launches. By all measurements they were successful launches. See thread https://x.com/biancoresearch/status/1784678044411818241