Wednesday, September 29, 2021

Rockin' In The Free Markets

Investors have been looking for alternative investments and will be able to invest in a guitar from an alternative metal band. Gibson is using Rally to sell ownership of collectible guitars. The company recently sold 13,000 pieces of a guitar owned by Guns N' Roses guitarist Slash for $5 each. Of course, the company did not cut up the guitar, but sold a fractional share. Other guitars by Tony Iommi of Black Sabbath and Adam Jones of Tool are scheduled for sale. Of course, as with any collectible market, it appears that guitars that are not especially rare are having prices plucked up with the prices of rare guitars. The real question is will investors fret over the investment in the future or will it turn into real Money?

Hamsters Spinning Wheels

Early critics of the efficient market hypothesis claimed incorrectly that market efficiency meant that a monkey throwing darts at a list of stocks was just as good an investment strategy as any other. Now we have hamsters spinning wheels. Mr Goxx, a hamster, makes cryptocurrency investments by spinning a wheel. Two men in Germany have created a cage in which Mr. Goxx spins a hamster wheel. Where the wheel stops selects the cryptocurrency for investment. Then, Mr. Goxx enters one of two tunnels for a buy or sell order. Switches on the wheel and tunnels automatically execute the order. Since Mr. Goxx has begun investing in September 2020, his return is above all major stock market indices. Are you ready for a hamster investment advisor? We hope not!

Monday, September 20, 2021

Bonds May Save Reefs

Belize is well-known for its coral reefs and scuba diving, including the Great Blue Hole, which Jacques Cousteau called one the five best dive sites in the world. Now, Belize may help save its coral reefs through bonds. Belize has a "superbond" outstanding, which is a combination of previous bond restructurings. The par value of $572 billion is part of Belize's 133 percent debt-to-GDP ratio, which the International Monetary Fund has stated is unsustainable. Belize is engaged in talks with bondholders to exchange $550 for every $1,000 in par value. Under the terms of the agreement, Belize will invest a significant amount in support of marine conservation aimed at protecting its reefs. Currently, 50 percent of bondholders have agreed to the terms, although 75 percent of bondholder support is necessary for the proposal to pass.

Friday, September 17, 2021

SPAC Issuance Slows

Early in the year, SPACs were all the rage as a way to sidestep the IPO process. In January, 97 SPACs went public compared to 27 IPOs.  In July, there were only 32 SPACs compared to 57 IPOs. In fact, many SPAC investors are selling their shares or redeeming shares when a deal is announced. Reasons for the slowdown in SPACs are increased SEC scrutiny and the fact that 438 SPACs that had raised over $130 billion combined have yet to find a merger partner. Additionally, as Jay Ritter from the University of Florida notes, 94 of 131 SPACs that have announced mergers since October 2020 are trading below the initial $10 price.

Tuesday, September 14, 2021

Buyback Excise Tax Proposed

In the textbook, we discussed how buybacks have a tax advantage over dividends because it results in a lower effective tax rate for shareholders. A new law being proposed in the Senate would levy a 2 percent excise tax on all funds used for share buybacks. Although the statement released by the Senator Ron Wyden, who is proposing the buyback tax, essentially argues that buybacks are ill-advised, the evidence is not quite as clear.

Thursday, August 26, 2021

Munis Go Green

The issuance of green muni bonds is a small part of the overall muni bond market, but the segment is growing. In 2012, $2 billion of green munis were issued, but that grew to $234 billion in 2020 and a projected $375 billion in 2021. Although green corporate bonds can be used for a variety of investments, green muni bonds are often used to fund clean power, water, and sewage systems. Green muni performance compared to regular muni bond is not clear as green bonds outperformed prior to 2019, but underperformed by a large margin in 2020. As with any muni bond, green muni bonds are a source of tax-free income.  

Wednesday, August 25, 2021

Fidelity Goes Behavioral

Fidelity Investments recently hired Gilbert Haddad to head the company's decision science area. The data gathered from the new initiative is "..really like applying behavioral finance and behavioral science to understand” what the portfolio managers and analysts are good at or not. The data will also be used to "help them understand their own biases" in the investments made by the manager to help them avoid bad behavioral decisions.