September 23, 2022
Notable:
- Chamath Palihapitiya closes two SPACs and gives back $1.6B.
- Truss cuts taxes. The British pound falls as low as $1.0960, a drop of 3%. Bond yields rise. (Meaning that Gilts, a cool name for UK bonds, drop.)
- Oil prices fall more than 5% to below $80/barrel, the lowest levels since January.
Aren’t we getting used to bad news yet?
Chamapapa (I’m just afraid I’ll pronounce it wrong) has been known as the SPAC king because he’s the blind date connection for a bunch of successfully married SPACs as well as desperately seeking SPACs. You may recall that SPACs are ways that regular folks can get in on IPOs. To be more specific, some rich guys list an empty company on the market as a sort of placeholder saying, “this company is going to buy another company you’ve never heard about which will be The Next Big Thing and make you a millionaire. Who wants to buy in?” Then all the mindful, well-informed investors methodically purchase shares [jump over the cliff like lemmings] because they know that rich guys care about them. Thankfully, the newly created SPAC [idiotmobile] does have a deadline, though. Two years or else everyone gets their money back.
If you’ve ever tried to buy an IPO on the market on the day it goes live, you’ll understand why this sounds so great. The little guy almost never gets the IPO price. The rich guys do because they buy in beforehand, but the little guy FOMOs in right after the price skyrockets. Since buying the SPAC locks you in at around $10 (the usual price for a SPAC stock), when it finds the next Apple, you’ll be one of the pre-IPO rich guys laughing all the way to the bank…right?
Interesting thing — those rich guys who set up the SPAC? They get 20% of the new company. So in Cham-man’s case, that 20% of $1.6B. Clearly, his incentive is to help the little guy by carefully finding the absolute best pre-IPO gems [quickly buying a couple losers for a $320M payday], right?
Now, I’m not saying the Cham-meister is out to rip you off. He’s just an easy target because he’s been the face of SPACs for the past two years. He could actually be very sincere. Digging into whether he held onto most of his shares after his SPACs had mergers will give you the answer, but you should always look twice when something seems too good to be true (cynicism!).
Truss cuts taxes. The new Prime Minister of the UK who happens to not have a moustache (as mentioned here) signed off on some major tax breaks. The market expressed its absolute confidence in the decision to take on mountains of new government debt by crashing the British pound (quick — where’s Soros?) and selling UK bonds. Remember, in the case of bonds the value goes down because people are selling (because you think Putin can’t pay), so yields go up. I know — why do they say, “yields went up” instead of “bonds went down?” After careful consideration, my conclusion is that rich people just want to confuse you and make you do the opposite of what they’re doing so they can cash in while ripping you off. (Ask Jesse Livermore.) I promise that someday when I’m a rich person, I’ll totally not rip you off. Totally.
Oil prices drop a lot. I was going to talk about this more, but this update is already pretty long so we’ll discuss the riveting world of the petrodollar another day. I know, I know, you want it now, but this awesome marshmallow study shows why delayed gratification is of critical importance for higher SAT scores and being popular, which are clearly always linked because I was a nerd and absolutely, ridiculously, mind-blowingly popular. Really. Er.
A last word on the Cham-a-chu-chu. I actually first heard about him because of an interview he did during the pandemic…which I thought was pretty awesome. No joke. He was a total stud in the interview. Gives you a differing perspective on Wall Street/government bailouts (which is indirectly connected to corporate buybacks which I know you’re peeing your pants to hear about). It’s always good to see other sides of an argument. (cynicism!)
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