The Hoot #11

Scatt's Seeds for Thought:

🌱 Silvergate > Watergate 😶‍🌫️

🌱 Bitcoin NFTs 🤨

🌱 Shell Homerun 💰

🌱 Highest-Paid CEOs of 2021 🤑

Meme of The Week

Year-to-date Market Performance:

• The S&P 500 is up 5.37%

• The Dow is up 0.74%

• The Nasdaq Comp. is up 11.68%

• Bitcoin is up 34.42%

• Ethereum is up 29.94%

• The Fortune Strategy Strategy is up 19.22% (up 14.89% since inception)

• S&P 500 stock buybacks are expected to hit $1 trillion this year. These are viewed as positive, healthy signs in that management thinks their stock is undervalued. If they're planning on buying it back, you already should have!

• US pending home sales surged more than 8.1% in January, boasting the largest gain in almost 3 years.  

• About 16% of Americans have 4 digit car bills. Yahoo Finance states that the % of borrowers that are at least 60 days late on their monthly bill is higher today than it was during the 08/09 crisis. Absolute insanity. If you're looking to get a new car, just be patient and watch the deals start to roll in.

• Earnings season for Scatt Capital is over. About 4 out of every 5 companies in our portfolio beat earnings expectations.

• PMI data (Producer Manufacturing Index) measuring the prevailing direction of economic trends in the manufacturing & service sectors. A reading over 50 = growth, and a reading under 50 = contraction. Latest reading for Manufacturing in Feb. came in at 47.7, and services was 55.10.

Silvergate > Watergate 😶‍🌫️

Silvergate is a US-based bank, and was widely known as the leader in the FinTech and crypto space. That was until recently... 🫤 Their stock became the most-shorted company on the market, and closed ~60% down on Thursday last week, after stating they wouldn’t be able to file its annual report by its original deadline, March 16th. Why, you ask? Because the crypto-incited damage last year hurt them so bad they’re not even sure the bank can continue to operate…. Oh no😗

To give you a bit of context, there are very few banks that went full on “crypto mode” with Silvergate leading the pack. They had some HUGE clients including the likes of Coinbase, Binance, and FTX, handling a total of $11b in assets. They were a big player, and an instrumental ‘bridge’ between fiat and crypto investors (facilitating approx. 80% of funds flowing into the digital asset markets). 

Silvergate right now...

In short: After the FTX collapse, investors withdrew $8bn+ from Silvergate. To cover the overwhelming amount of redemptions, the bank was forced into a ‘fire sale’ (sold off debt at a $720m loss). It then posted a $1bn loss for Q4, and an annual loss of $950m (compared to a $76m profit the prior year). They then were forced to repay the $4.3b loan from the FHLB (Federal Home Loan Bank). The DOJ is now also looking into their dealings with FTX & related parties... not a good day for Silvergate 🫢 

So going forward, huge institutional money has left the bank (as I said before) including massive exchanges such as Coinbase, Galaxy Digital, Gemini, Crypto.com, Paxos etc. So if it looks like a bank run, swims like a bank run, and quacks like one too, I'll take a wild guess and call it a bank run 🤷🏻‍♂️. The interesting thing to note is that this is the first time a crypto-catastrophe has filtered into the fiat world of finance, and so far the US Government is not a fan❗️ It's safe to say this scandal could be bigger than Nixon's Watergate...

Bitcoin NFTs 🤨

We've all heard of non-fungible tokens (AKA NFTs). Yes, those photos of the alien-like monkeys that sell for way more than what they appear to be worth. So, those NFTs are actually tokens. These are either digital representations of interest in an asset, or are used to facilitate transactions on a blockchain. Although tokens are tradeable and exchangeable, don't confuse them with cryptocurrencies. Crypto is the native asset of a blockchain, and tokens are built on a platform, upon an existing blockchain. 

Going back to NFTs - they have widely been known as Ethereum-based tokens but the latest buzz is about Bitcoin, or Ordinal NFTs. Ordinals is a new protocol which allows people to inscribe data (such as a photo, video, or words) onto the bitcoin blockchain - in other words allowing people to 'mint' (or create) NFTs. It's only been around for about a month or so, but there are already around 200,000 Ordinals NFTs in existence. 

There's always that one NFT guy at the party...

Why is this important though? Well as I previously said, NFTs have historically been known to run on the ethereum blockchain (and sometimes the Solana network too) - but this transition to bitcoin opens up a whole different avenue. The bitcoin network is largely known as the most-secure blockchain out there (with ZERO major hacks), however it has only really been used to facilitate peer-to-peer payments, at least until now. 

In short, this is GREAT for the industry. It promotes healthy competition within the NFT market, which is said to be worth NORTH of $27 billion 😯. The digital asset space (comprised of many moving parts) is arguable still in its 'wild west stages', so it's awesome to see some positive news 👊🏼.

Shell's Homerun 💰

Shell is a global group of energy and petrochemical companies. They have a focus on the exploration, production, refining and marketing of both natural gas and oil - and the manufacturing and marketing of other chemicals. But oil is quite a saturated and heavily-regulated industry, so do they even do well, and how good are they at that what they do? About $40 billion in annual profit kinda-good. Mind = blown 🤯. They posted their largest profit ever in 2022 ❗️

$40,000,000,000 (yes, billion) is A LOT of money. So much so, that someone on Twitter went ahead and calculated that if you had been paid $53,000 per day since Jesus was born (or about $20 million a year), you STILL wouldn't have made as much money as Shell did in 2022 🫠 .They say oil is a dying business... I say check your numbers. Sure, it might be slowing down, but man... the big players still seem to be cleaning it up 💵.

Highest-Paid CEOs of 2021 🤑

We always read about CEOs like Tim Cook (Apple), Elon Musk (Tesla), Jamie Dimon (JPM), Mark Zuckerberg (Meta) and how they are able to steer big companies in the right direction. But what is life like as a big corporate CEO? Stressful, I believe is the best answer. Any C-suite (CEO, CFO, CMO, CIO etc.) position carries with it a large amount of responsibility, and with great responsibility comes great reward. So how much do these business-celebrities actually make a year? On average, about $18.3 million. 

However, there are some staggering examples to take note of. Here is a quick breakdown of the highest-paid CEOs in 2021:

• Jeff Green (The Trade Desk) - $835 million

• Vladimir Tenev (Robinhood) - $796 million

• Peter Rawlinson (Lucid Group) - $565 million

• Robert Scaringe (Rivian) - $422 million

• Jason Kelly (Ginkgo Bioworks Holdings) - $380 million

Something to take note of though is that each compensation package is made up of many different components such as salary, stock options/awards, bonus, incentives etc. Stock options alone, however, make up around 99.5% of the above packages. Nonetheless, ABSOLUTELY WILD 😵‍💫 

And what's even scarier is that the government will take home anywhere between 25-40% of it at some point 🥲. However, what an incredibly nice problem to have. 

That wraps up #11, ladies & gents. 

I'll see you next week for another update. 🦉

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