GILTI: The Ramifications On The Tax Burden Of Corporations
by ValueWalk - April 13th, 2021 11:39 am
By Gorilla Trades. Originally published at ValueWalk.
In his Daily Market Notes report to investors, while commenting on GILTI standards, Louis Navellier wrote:
Q1 2021 hedge fund letters, conferences and more
We are now essentially in “economic nirvana.” Examples: On Wednesday, the Atlanta Fed raised its first-quarter GDP estimate to a 6.2% annual pace, up from 6% previously estimated. The U.S. is still expected to boost the global GDP growth rate more than China in 2021, for the first time since 2005. Since the U.S. is a robust consumer-driven market, the U.S. has the potential to keep pace and exceed China’s overall GDP growth in 2021, since the U.S. economy is about one-third larger than China’s.
Uber posts the biggest bookings since the pandemic began This is Hard evidence about the snapback in travel demand, including a shortage of drivers while millions are still classified as unemployed.
The Biden Administration Wants To Change The GILTI Tax Standards
Hot topic: Biden Administration’s future tax policy is on how to generate more taxes from the revenues U.S. corporations produce outside of the United States.
The Trump Administration actually led this movement, as the Tax Cuts and Jobs Act (TCJA) introduced several new rules for taxing foreign profits of U.S. multinationals, including rules related to “Global Intangible Low Tax Income” (or GILTI) that result in a minimum tax of 10.5% on foreign profits.
The Biden Administration, led by Treasury Secretary Janet Yellen and many Democratic members of Congress, wants to make some material changes to the GILTI tax standards, and policymakers are busy figuring out what the ramifications will be on the tax burden of corporations.
The tax burden on GILTI was intended to fall on profits from intangible assets, such as patents that U.S. companies hold abroad.
Whatever the end game is for policymakers, taxes for corporations and for individuals are about to increase by varying degrees. To date, the stock market has paid little attention to this soon-to-be reality, instead opting to focus on Fed QE policies and Congressional stimulus. At some point, it would seem that this transformational change in tax policies will matter to the stock market – but then again, maybe not.
The Rise In The Producer Price Index
The latest inflation figures show a rapid escalation to a 1% (monthly)…
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Bill Gates Is Right About SPACs and QuantumScape
by ValueWalk - April 13th, 2021 11:20 am
By InvestorPlace. Originally published at ValueWalk.
Below $42, QS stock is a long-term home run for investors
Q1 2021 hedge fund letters, conferences and more
Bill Gates appeared on CNBC on Good Friday to discuss his climate-related work for the Economic Club of New York. The conversation veered off into the wild and wooly world of special purpose acquisition companies (SPACs). Gates, an early backer of QuantumScape Corp (NYSE:QS) and QS stock, suggested that people do what he’s doing and only get involved with quality SPACs.
The assumption here is that QuantumScape is such a company. Is he right? I’ll explore this subject further.
It Helps to Own QS Stock If You’re a Billionaire
If you bought 100 shares of QuantumScape stock on three occasions in 2021: Jan. 6 ($63.03), Feb. 17 ($66.52), and March 22 ($64.29), a back-of-the-napkin estimate suggests you’ve got a paper loss of $35,134, 26% less than the $19,384 you would have paid for 300 shares.
That’s not so great. Of course, if you bought 100 shares each time it fell back to earth, you’d be a very happy person. Maybe not Bill Gates-happy, but content, nonetheless.
Bloomberg Quint contributor Chris Bryant recently discussed how Gates is right to suggest private companies are going public way too quickly, in large part, because SPACs are raising gobs of money and issuing boatloads of shares to merge with these immature businesses.
Never mind that they’re doing so at ridiculously high financial projections. However, Bryant’s link to Yet Another Value Blog makes me think most of these SPAC IPOs aren’t worth the paper they’re written on.
I had been moving in that direction myself in February when I wrote that I was skeptical of Lucid Motor’s ability to garner 8% of the global electric vehicle (EV) market share. Here’s what I wrote on Feb. 25:
Companies like Tesla (NASDAQ:TSLA) have struggled for years before tasting success. So, I’m highly skeptical when someone implies it will be simple to go from zero production to 8% global market share of any product, let alone something as complicated as an electric vehicle. In that regard, this SPAC era reminds me of the dot-com…
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Investment Technology Has To Adapt To The Investment Journey
by ValueWalk - April 13th, 2021 10:29 am
By Jacob Wolinsky. Originally published at ValueWalk.
Wealth managers need to adapt behavioural science techniques to boost client engagement and enhance client profiling to improve the investment journey, according to behavioural finance experts Oxford Risk.
Q1 2021 hedge fund letters, conferences and more
Blending Technology And Behavioural Science
It warns that advisers and wealth managers are not making full use of technology which could be harnessed to deliver a powerful approach to suitability and engagement while providing hyper-personalised and self-refining recommendations.
Blending technology and behavioural science enables a comprehensive approach to suitability that recognises the complexity of each client and their emotional needs over time.
Greg B Davies, PhD, Head of Behavioural Finance, Oxford Risk said: “Where it’s used in client engagement efforts at all, technology tends to focus on the administrative aspects of advisers learning about their clients, while treating those clients as robots.
Emotional Responses To The Investment Journey
“Selecting good investments is important but achieving good investment outcomes is more so. Emotional responses to the investment journey mean the calm person who sets the course is often different to the stressed one who will have to stick with the journey.”
Oxford Risk, which builds software to help wealth managers and other financial services companies assist their clients in making the best financial decisions in the face of complexity, uncertainty, and behavioural biases, has developed proprietary algorithms to target products, communications, and interventions for each individual client at a particular time.
Behavioural tools assess investors’ financial personality and preferences, as well as changes in financial situation, which, supplemented with other behavioural information and demographics builds a comprehensive profile. Oxford Risk’s financial personality assessment examines 15 distinct dimensions, each of which has specific implications of what to do differently depending on whether an investor is high or low on that aspect of personality. Based on that deep understanding individual investors can be matched to investment solutions tailored to their unique needs and personality.
The Journey Of Investing
Greg B Davies added: “Investment is a journey. Investment tech needs to come along for the whole ride.
“Our research has conclusively demonstrated that we can measure investors’ financial personality with simple but well-constructed questionnaires that are quick and easy to use, stable and empirically validated, and which add substantial depth to client profiles.”
The financial personality tests do…
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Tesla upgraded to Buy with new price target of $1,071
by ValueWalk - April 13th, 2021 10:21 am
By Michelle Jones. Originally published at ValueWalk.
Tesla Inc (NASDAQ:TSLA) has received an upgrade and price target increase for its exposure to the energy storage business. Canaccord Genuity analyst Jed Dorsheimer upgraded the stock to Buy and raised his price target to $1,071.
Q1 2021 hedge fund letters, conferences and more
Tesla Upgraded
The new price target is based on 62 times the firm’s 2024 EV/ EBITDA multiple, which is three times those of its competitors. Although Tesla‘s valuation is rich, Dorsheimer believes it has a lead of several years and noted that it is now expanding “aggressively” into energy storage.
He believes the automaker’s focus on “first-principle engineering” will dramatically change the battery market. Dorsheimer also believes it will enable Tesla to increase its lead in battery electric vehicles and expand into the solar and home energy market with its Powerwall line of storage products.
The analyst expects the constraints of battery supply to start abating in 2022 as the automaker’s new 4860 cell production starts at Giga Nevada and in Texas and Berlin. Tesla will also start partnering with Panasonic and LG for battery production.
When the automaker has enough batteries, it will be able to meet its “new aggressive Powerwall campaign” and bring its Powerpack and Megapack to full scale, often pairing them with solar installations. Dorsheimer expects accelerated growth in Tesla’s energy storage and generation business. He conservatively estimates $8 billion in revenue in 2025 with gross margins at parity or higher than its EV business at more than 25%.
Transition To Mass-Market Electric Vehicles
He also pointed out that the Model 3 and Model Y made up 99% of Tesla’s record first-quarter deliveries, which demonstrates a successful transition into the mass market. Dorsheimer expects auto gross margins to continue climbing to more than 25% as volumes of the Model 3 and Model Y rise from Giga Shanghai. Tesla is also expected to release entry-level models using LFP batteries, and he expects tailwinds from credit sales in China.
Dorsheimer believes that the automaker’s successful transition into the mass market and sizable investments in battery manufacturing and production capacity will enable it to “conquer another trillion-dollar market in energy generation and storage.” He added that Tesla is “rapidly creating…
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Still A Bullish Fever In Stocks?
by ValueWalk - April 13th, 2021 10:04 am
By Monica Kingsley. Originally published at ValueWalk.
S&P 500 went nowhere yesterday – just like the prior Monday, heavy buying into Friday‘s close met no follow-up the day after. After almost touching 16 to close the week, VIX peeked higher yesterday only to reverse back down. Nice try but if you look at the put/call ratio turning down simulatenously, the alarm bells are far from ringing.
Q1 2021 hedge fund letters, conferences and more
The S&P 500 rise of late isn‘t without its good share of non-confirmations though. The ones seen in Russell 2000 and emerging markets got a fresh company in the corporate credit markets. No denying that the stock market is in a strong uptrend, but it got a bit too stretched vs. its 50-day moving average – a consolidation in short order would be a healthy move, but the CPI readings above expectations don‘t favor one today.
If you look at the put/call ratio again, its lows throughout Mar and Apr haven‘t been reaching the really exuberant levels of prior months, hinting at a less steep path of S&P 500 gains. And what about the volume print as stocks went about making new highs? Not encouraging either, and it‘s not that rising yields would be causing trouble:
(…) The retreat in rising yields is running into headwinds, much sooner than the 10-year one could reach the low 1.50% figure at least. Value stocks and cyclicals such as financials appear calling it out, and both rose on Friday.
And financials had a good day yesterday too. Technology welcomed the reprieve, and the heavyweights joined in increasingly more. Again though, more than a little stretched, these $NYFANG generals are rising while the troops (broader tech) are hesitating, which makes a down day / consolidation quite likely, especially should the TLT retreat again. As I wrote yesterday:
(…) The rotation simply isn‘t much there, and the TINA trade isn‘t letting much air to come out of the S&P 500 sectors that would be expected to sell off in a more relaxed monetary policy.
And that‘s probably what gold is sensing as it grew weak yesterday. The rising yields aren‘t yet at levels causing issue for the S&P…
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Coronavirus stimulus checks: IRS may inform by letter why you got less than expected
by ValueWalk - April 13th, 2021 9:23 am
By Aman Jain. Originally published at ValueWalk.
The IRS is likely in the last phase of sending out the third round of stimulus checks, but there are many who are still not convinced they received the correct amount with their first and second stimulus payments. Some people believe they got less than what they were eligible for, while some got no payment at all. Now these people have an opportunity to clear up their doubts by filing the Recovery Rebate Credit. If the IRS doesn’t agree with their calculation, it will issue them a letter validating the coronavirus stimulus check amount they got.
Q1 2021 hedge fund letters, conferences and more
Coronavirus stimulus check: when will IRS send you a letter
Congress approved $1,200 and $600 in stimulus payments in the first and second round last year, respectively. However, many people say their stimulus check amount was much less than what they were eligible for, or they got no payment at all.
Such people can claim their due payment of the first two rounds by filing the Recovery Rebate Credit. They need to complete line 30 of Forms 1040 or 1040-SR, which has been added to this year’s tax return forms.
In this form, the taxpayer needs to mention the amount of stimulus money they already received. Also, they need to show any more stimulus amount due to them. People can show the workings in the worksheet provided with the tax form.
Once the IRS gets your tax return, as well as the form for the Recovery Rebate Credit, it will analyze your form. This means, filing for the credit is no guarantee that you will get the due amount you think you are eligible for.
In case of a discrepancy, i.e. where the IRS believes your calculation of the amount due is wrong, the agency will send you a letter to clear up the confusion about the amount due.
Reasons for discrepancy
Some of the reasons for a discrepancy could be if you did not provide a valid Social Security number, or if you were claimed as a dependent by someone else on their 2020 tax return.
Also, as per the terms of the first two rounds, a dependent age 17 or more…
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Letter In Support Of An Ambitious U.S. 2030 Climate Goal
by ValueWalk - April 13th, 2021 6:00 am
By Jacob Wolinsky. Originally published at ValueWalk.
A letter coordinated by the We Mean Business coalition and Ceres (and supported by an impressive group of NGOs focused on business and climate), the signatories indicate their strong support for the Biden administration’s commitment to federal climate action and policy, and call for a highly ambitious U.S. 2030 climate goal (aka, an National Determined Contribution or NDC that is pursuant to the Paris Agreement) of reducing emissions by at least 50% (below 2005 levels).
Q1 2021 hedge fund letters, conferences and more
Signatories include businesses ranging from SMEs to multinational corporations like Apple, LafargeHolcim, Microsoft, Walmart, Verizon and Unilever, to name a few. What unites them is 1) they have business operations in the U.S. and 2) a common desire for the U.S. to at least halve emissions this decade in pursuit of the U.S. reaching net-zero emissions by 2050. These signatories know that ambitious U.S. climate policy is good for business, the economy, people and planet.
The Biden administration is expected to announce the US NDC in the lead up to the Leaders Summit on Climate, which takes place April 22 and 23.
Business/Investor Letter in Support of an Ambitious U.S. 2030 Climate Goal (i.e., National Determined Contribution – NDC)
Dear President Biden,
We, the undersigned businesses and investors with a major presence in the U.S., applaud your administration’s demonstrated commitment to address climate change head-on, and we stand in support of your efforts.
Millions of Americans are already feeling the impacts of climate change. From recent extreme weather to deadly wildfires and record-breaking hurricanes, the human and economic losses of the past 12 months alone are profound. Tragically, these devastating climate impacts also disproportionately hit marginalized and low-income communities who are least able to withstand them. We must act now to slow and turn the tide.
As business leaders, we care deeply about the future of the U.S. and the health of its people and economy. Collectively, our businesses employ 6 million American workers across all 50 states, representing over $3 trillion in annual revenue, and those of us who are investor represent more than $1 trillion in assets under management. We join the majority of Americans in thanking you for re-entering the U.S…
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A Quick Guide On How To Start A Profitable Business
by ValueWalk - April 13th, 2021 1:18 am
By Luke Fitzpatrick. Originally published at ValueWalk.
Are you thinking about starting a small business? The thought of investing a significant amount of money into a potential business venture can be daunting. Here are some of the best tips on how to start a profitable business that will give your new enterprise the best chance at success.
1. Provide a solution to an existing problem
It’s easier to establish a loyal customer base when you focus on solving an existing problem. Instead of thinking about what to sell, think about how you can help make their lives easier. Your business should fill the gap in the industry of your choosing.
It’s also important to be passionate about solving the said problem so you won’t quickly grow tired of running your business. For instance, if you’re passionate about software and notice that many people struggle with finding the best restaurants in their area, you could create an easy-to-use app that connects customers to restaurants.
Zero in on why you want to open your own business. Evaluate your motives so you can create a brand that resonates well with your audience. More importantly, know the problems your potential customers face and figure out how to solve them.
2. Create a simple business plan
Once you have a business idea you want to try, the next thing you need to do is to create a simple business plan. This can seem overwhelming, especially to those who are new in the business. But your business plan doesn’t have to be overly complex in the first stages of planning.
Even though we’re only creating a simple business plan, you still need to do your research. Here are some of the things you can include in your business plan:
- Define the problem.
- Highlight the solution.
- Outline your business model.
- Write down your products or services, prices, and costs.
- Describe your target market.
- Define your competitive advantage.
- Outline your financial summary.
- Indicate funding required.
A business plan also gives direction as to where your business is headed. Once you have this in place, it’ll be easier for you to update and augment your processes and plans as your business grows. You can eventually…
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How Insurance Is Modernizing On-Demand Generation
by ValueWalk - April 13th, 2021 12:59 am
By Luke Fitzpatrick. Originally published at ValueWalk.
Over the past ten years, the world has become increasingly on-demand in order to cater to the preferences of Gen-Zs and millennials. The on-demand generation refers to being able to order things easily and quickly as the need for them arises. Examples of on-demand services that are currently dominating the world including Uber (rides), Airbnb (housing), and Instacart (groceries).
The on-demand trend has become incredibly popular because it is incredibly convenient. Now, this trend is spreading into the world of insurance.
The old way of insurance
In the past, insurance used to involve signing long-term contracts that were very complicated and very difficult to get out of. Oftentimes, the process of buying them involved hiring an insurance broker who would shop around for many different plans on your behalf.
It could take weeks to find a good plan and then people could get locked into them for an extended amount of time without the possibility of getting out of them.
The new way
Thanks to developments in Insurtech (insurance technology) it is now possible for people who need insurance to be able to find solutions and place orders for them quickly. Users can find a wide variety of insurance products on the platform including hiking insurance, biking insurance, running insurance, pet insurance, ‘kidsurance,’ critical illness insurance, and travel care.
Hiking insurance, biking insurance, and running insurance all provide coverage for losses that can be incurred while a person participates in these activities. These insurance products can cover the equipment itself such as the bike, or medical expenses related to injuries performing these activities.
Pet insurance provides insurance coverage for expenses related to your pet developing a disease or disability. Kidsurance provides coverage for expenses related to your child developing an illness or disability.
These types of expenses can be extremely expensive and parents who have ill or disabled children often have to take time off of work, which compounds the issue. Kidsurance is a great supplement to traditional health insurance that can help you and your family to weather the storm if your child falls ill or becomes disabled.
Innovative Insurtech companies
Here is a list of some of the most innovative Insurtech companies on the market right now that are creating high-quality insurance solutions for the on-demand generation.
Lemonade
Lemonade is an Insurtech company that has built a reputation…
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Logica Capital March 2021 Commentary: The Extended Deterioration In Implied Volatility
by ValueWalk - April 12th, 2021 5:30 pm
By Jacob Wolinsky. Originally published at ValueWalk.
Logica Capital commentary for the month ended March 31, 2021.
Q1 2021 hedge fund letters, conferences and more
Logica Absolute Return (LAR) – Upside/Downside Convexity – No Correlation
- Tactical/dynamic balanced Put/Call allocation – Symmetric Straddle
Logica Tail Risk (LTR) – Max Downside Convexity – Strong Negative Correlation
- Tactical/dynamic downside tilted Put/Call allocation – Ratio Straddle
March 2021 Performance*
Logica Absolute Return -0.1%
Logica Tail Risk -1.4%
VIX -8.55 pts
Naive Straddle -3.6%**
S&P 500 +4.2%
YTD Performance*
Logica Absolute Return -1.3%
Logica Tail Risk -2.8%
Naive Straddle -9.8%**
S&P 500 +5.9%
2020 Performance*
Logica Absolute Return +14.9%
Logica Tail Risk +15.1%
S&P 500 +17.4%
Summary: Month over month broad market/index performance disguised turbulence under the surface that is typical of elevated implied volatility (IV) regimes. At the same time, March saw a meaningful decline in S&P 500 near term at-the-money (ATM) IV, causing a significant headwind for long volatility strategies like ours – fortunately, this means we are approaching a more favorable environment.
* Returns are Gross of fees to illustrate strategy performance. Logica Absolute Return Fund returned -0.16% (net) for March 2021
** Naïve Straddle Return: a 1.5 month out, S&P 500 at-the-money put and call bought on the final trading day of prior month and sold on the final trading day of current month. This return on premium is then divided by a factor of 6 to be comparable to Logica’s typical AUM-to-premium ratio
Return Attribution & Portfolio Commentary
“I don’t run away from a challenge because I am afraid. Instead, I run toward it because the only way to escape fear is to trample it beneath your feet.”
-Nadia Comaneci, 5-time Olympic Gold Medalist
The overarching backdrop for the market’s continued upward surge, alongside volatility’s continued decline, is that sooner or later, something’s gotta give. The good news is that this elusive something is ever closer; with the CBOE Volatility Index (VIX) closing the month at 19.4, it is now well within a single standard deviation of its historical level of ~16-18, and concurrently, the S&P 500 is at all-time highs. This bodes well for either a continued market rally without as much volatility decline, or else some market downside with substantively more room for…
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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...
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