The Hoot #9

My name is Matt Brimacombe. I'm a graduate student studying Finance, and an aspiring fund manager. The Hoot is a weekly newsletter that breaks down some of the biggest and most-relevant economic and business events; analyzes the financial markets; and touches on some sports news. Any feedback is greatly appreciated, and you can do so by responding to this email. Enjoy! 🦉

Meme of The Week

Just send them 1 edition of The Hoot - they'll be up-to-speed in no time 😏

Year-to-date Market Performance:

• The S&P 500 is up 6.24%

• The Dow is up 2.05%

• The Nasdaq Comp. is up 12.62%

• Bitcoin is up 48.83%

• Ethereum is up 41.65%%

• The Scatt Capital Strategy is up 26.10% (up 23.61% since inception)

• A WILD WEEK IN THE MARKET!

• CPI data came out on Valentine’s Day showing a 6.4% rise YoY, versus a 6.2% expectation. This shows slowing inflation, but stubbornly so.

• January’s retail sales SMASHED 💥 the 1.9% MoM estimates, coming in at 3% (the highest monthly gain in 2 years!)

• Jobless claims (the Fed will be watching this one following January’s HUGE report) came in at 194,000, tighter than the expected 200,000. Rate hikes incoming.

• PPI came in at 6.0% vs. expectations of 5.4% - showing a stubborn deflationary environment for wholesalers.

• Housing starts came in 4.5% BELOW the revised December estimates, 21.4% BELOW January 2022's rate. The property market is incredibly important in an economy, thus making the housing starts a LEADING ECONOMIC INDICATOR analysts observe.

• Coca Cola, Kraft Heinz, & Paramount reported earnings last week.

• 80% of Scatt Capital's portfolio companies have beaten earnings expectations.

The Shanghai Upgrade 🛠️

In the Hoot #7, we discussed Ethereum, what it is, how it works, and a little bit about the founder and his vision for the blockchain. 'ETH', or 'Ether' was built with the core concept of SCALABILITY in mind. Remember, Ether runs on a Proof-of-Stake (PoS) system (where users pledge their ETH coins to verify transactions, and as a result get paid in ETH for doing so). There are also a number of other blockchains that run on PoS systems such as Solana, Cardano, Polkadot, and Avalanche. Ethereum, however is the chain with the highest 'staking' market cap, meaning Ethereum is the most popular of all the PoS chains (with approximately 14% of the entire supply staked). The ETH network rewards its 'stakers' with around 5% annual yield (slightly above T-bills). However, due to the nature of the Ether system, staked ETH is NOT available to withdraw or trade until a certain update is released, known as the Shanghai Upgrade, which is scheduled to take place later this year 👀.

If you look like this right now... Don't worry, here's what you need to walk away with:

The Shanghai upgrade is coming to the Ethereum network around mid-March - one which allows stakers to withdraw and trade their rewards, meaning A LOT of liquidity 💧 is about to be unlocked (about $29 BILLION worth)! What this means for the price of ETH is anyone's guess BUT, $29 billion COULD represent A HUGE amount of selling pressure. I say could because the opposite might happen too. When people redeem their rewards (and sell their staked ETH), the annual yield would slowly RISE (making it more attractive to new stakers) which could then drive MORE people to stake 🤨. It's a very confusing concept... As usual with the financial markets, we all have an idea as to what CAN happen, but Mr. Market will make up his own mind in the end 🚶🏽‍♂️.

But don’t be scared off by just 1 of the many upgrades coming to the Ethereum network. Given the coin’s WIDE range of use, and the team behind it - I can assure you that Ethereum will be around for a while 🙌🏼. Dollar cost averaging 💵 can be your best friend with volatile assets like Ethereum and Bitcoin.

The AI War 🥊

Ladies & Gentlemen, please welcome our fighters! In this corner we have Microsoft weighing in with ChatGPT... And in the other corner we have Google weighing in with BARD!

We've all heard of ChatGPT, and how it can pass both the bar exam and Wharton-level business school exams (so much for that $200k MBA). But, *cue the dramatic music*... there's another one! Google recently announced their own version of a Chatbot called... 'BARD' 🤨. Talk about an anti-climactic name, right?

Google made this BIG announcement to the world about their new product, and how it would be integrated with their search engine. Well, they at least tried to. The bot ended up sharing inaccurate information during one of the promotional videos, and as a result Google lost $150 BILLION in 2 trading days ✌🏼 For reference, that is bigger than the ENTIRE market cap of HSBC, American Express, Goldman Sachs, Starbucks, Blackrock & Citibank... whoops 😗

There are, however, a few things to consider though. The FIRST thing that needs to be understood is that 58% of Google's revenue is derived from their search engine 😬, and SECOND... the market is likely overreacting due to the sensitivity of this, and it's potential impact on Google's overall performance. The AI industry, however, is expected to grow EXPONENTIALLY over the next 5-10 years, and these 2 behemoths are trying to knock each other out of the race 🥊.

The Cool Part: Both companies' are racing to get their AI programs integrated with ALL of their products, making our everyday lives cooler & easier. The Fun Part: Seeing who does it better & faster 👀. The race is on...

No Diamonds in the Sky 💎

Last weekend marked the end of the NFL season - and Rihanna was the halftime highlight 🎤. However, her voice didn't seem to be the focal point of the night - approximately 9 months after welcoming a baby boy, she announced that she is pregnant yet again 🤰🏽.

And while that is awesome news, what's even MORE interesting is that while Apple 🍏 is paying the NFL $250 million over 5 years to maintain sponsorship of the halftime show, Rihanna wasn't paid a single cent for her performance 😯. Joanna Hunter - a spokesperson for the NFL - said back in 2016 that they "only cover expenses and production costs"... wow, even after all that ad revenue as well ($672 million) 🫢. I suppose performing for the 100 million viewers is still good exposure...

Plus, with a net worth of about about $1.4 billion dollars (yes, 'B' as in Billion) - Rihanna likely isn't desperate for a few extra sticks 💵. She became America's youngest self-made billionaire in 2022, largely attributed to her extremely successful makeup brand, Fenty Beauty which she co-founded with luxury French brand LVMH (owned by Bernard Arnault - the wealthiest guy in the 🌏 right now).

XF What?! 🏈

There's the NFL, NBA, MLB, NHL, MLS, MLR... but what about the XFL? 🧐 From pro-wrestler turned actor, Dwayne 'The Rock' Johnson is starting to make a name for himself in the world of business. He has several enterprises which include Teremana Tequila (which grew to a $2bn company in 2 years 🤯), Seven Bucks Production, and now the XFL 🏈. Missing his chance to play in the NFL and going undrafted, The Rock decided to co-found the XFL given the popularity of American football.

Scatt LOVES Tequila... and The Rock 🤫

The idea behind the XFL is to give viewers a full 12 months of football, since the NFL doesn't run all year round. So given that the NFL season just ended, the first round of XFL games were played this past weekend.

Ordinarily I wouldn't be interested in something like this, but there's a curveball 💫(a big one for that matter 💪🏼): The Rock. Every business he's apart of seems to skyrocket (possibly thanks to his massive following), but nonetheless I'm interested to see if this takes off 🚀

The death toll in Türkiye & Syria continues to rise above 46,000 - my thoughts & prayers go out to all those affected ❤️

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.