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SIX things you need to know this week in <5 minutes:
The housing market is softening
Down goes the “SPAC king”
Ford issues warning
Salesforce has entered the carbon credit race
Nasdaq jumps into crypto
This is what “hanger” looks like
1. MACRO
The housing market is softening
Elevated construction costs and hawkish policy from the Fed helped push US homebuilder sentiment down in September for the 9th consecutive month—that’s every month this year—for the worst streak on record.
While housing starts rose unexpectedly this month, applications for building permits—which gauge future construction—fell to the slowest pace since June 2020.
On the sales side, the market cooled for the 7th straight month in August with existing home sales dropping to their lowest rate since May 2020 (0.4%).
The 7-month slide in existing sales is the worst since October 2007 and brings year-over-year sales down to their 12th consecutive negative reading at -19.9%.
GRIT’S TAKE: On the bright side (for affordability), home values in August declined by the most since 2011, falling 0.3%, and suggest further softening ahead.
GRIT’S ACTION: We’re likely to see US home value continue to drop.
Under the Radar
PIONEERING A BETTER WAY. For years, the most “effective” pain management medications marketed by pharmaceuticals and prescribed by doctors have been opioids. Nirvana Life Sciences is reviving theories developed in the 60s and 70s with modern technologies to pioneer better, more practical solutions for addressing addiction*.
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2. DEALS
Down goes the “SPAC king”
Chamath Palihapitiya’s name became synonymous with special purpose acquisition companies (SPACs), or “blank check” companies, just as the momentum for high-growth, high-risk assets was hitting its stride.
Unfortunately for him, what goes up usually comes down and few areas in capital markets have suffered greater losses than the SPAC industry.
This week the “SPAC king” announced the shuttering of 2 of his blank check firms, including his largest ever (Hedosophia VI) which raised over $1.1 billion from investors.
Palihapitiya cited valuations and volatility as the two biggest obstacles in closing deals.
The De-Spac Index (which tracks companies that successfully merged with a target) is down 82% from its 2021 peak with roughly a quarter of its stocks trading under $2 a share.
GRIT’S TAKE: With over 550 SPACs holding almost $150 billion in cash that needs a home before deadlines hit, there’s no relief in sight for the blank check market.
GRIT’S ACTION: Not where I want to be in right now.
3. STOCK MARKET
Ford issues warning
At the beginning of July, General Motors warned that it had tens of thousands of manufactured vehicles waiting for components.
This week, Ford echoed those concerns warning investors of its own troubles related to inflation, persistent supply chain snarls, and supplier-related cost increases.
The automaker has around 40-45 thousand vehicles (mostly high-margin trucks and SUVs) it hasn’t been able to deliver to dealers due to missing parts.
The announcement—headlined by the additional $1 billion in supply chain costs the company may take on in Q3—sent the stock down more than 12% on the day.
GRIT’S TAKE: These supply chain issues have been hindering automakers since the pandemic began, but it has done little to soften demand.
GRIT’S ACTION: Dollar-cost averaging into S&P.
4. COMMODITIES
Salesforce has entered the carbon credit race
This week, business SaaS giant Salesforce () announced the launch of its own carbon credit marketplace.
Why is this a big deal?
McKinsey expects the voluntary carbon market to reach $50 billion by 2030.
To get there, it will have to overcome skepticism linked to a lack of transparency and clarity on pricing, as well as the quality and availability of projects.
Net Zero Marketplace—which will go online in the US in October with ~90 carbon-credit selling projects—plans to address these concerns by bringing together and partnering with some of the biggest environmental developers and rating agencies in the world.
GRIT’S TAKE: The voluntary credit market is still young and opaque, but ambitious climate goals are driving demand and creating opportunities.
GRIT’S ACTION: Subscribe to GRIT Carbon for your roadmap to finding them!
5. CRYPTO
Nasdaq jumps into crypto
Nasdaq () has already had its toes dipped into the crypto waters.
Crypto exchanges have been using the company’s matching engine technology while other firms in the crypto sphere outsource its surveillance and trading software.
Now, the world’s second-largest stock exchange is going head first by creating a new digital assets division that will act as a custodian of digital assets and initially offer Bitcoin and Ethereum to institutional investors.
As such, it will be competing with players like Coinbase and BitGo, while also bringing an entirely different (and refreshing?) air to the space.
Eventually, Nasdaq’s aim is to offer additional solutions like execution and liquidity services, and possibly even a crypto exchange.
“We believe this next wave of the revolution is going to be driven by mass institutional adoption. I can think of no better place to bring that trust and brand to the market than Nasdaq.”
GRIT’S TAKE: Wall Street establishment firms are no longer “wading” into crypto—they’ve taken the downturn as an opportunity to jump in.
GRIT’S ACTION: Long and strong Bitcoin and Ethereum.
6. ENTERTAINMENT
This is what “hanger” looks like
Beyond Meat COO Doug Ramsey was arrested over the weekend for “terroristic threatening and third-degree battery”.
This is just a fancy way of saying he (allegedly) got too drunk at a college football game, punched through the back of a Subaru, punched the Subaru owner in the head, threatened to kill him, and—the cherry on top—bit the Subaru man’s nose.
Ramsey was booked by police on Saturday and released on Sunday.
Beyond Meat shares (), for those wondering, are down over 90% from their 2021 peak.
They did not bounce on the news.
GRIT’S TAKE: This is what happens when you remove meat from your diet.
GRIT’S ACTION: Steak, medium-rare.
*SOURCES
1. Bloomberg, Zero Hedge, WSJ, CNBC
2. Bloomberg
3. CNBC
4. WSJ
5. Bloomberg
6. CNBC
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