Off the Charts! The Coppleson v Grantham bubble-battle, a US$12 bn exodus from Asia, and a 'who-needs-Tesla' US$70 bn EV IPO

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Bubble, bubble - toil or take profits? This week we heard from bubble spruikers and deniers alike and both posed solid arguments for you to peruse here. Certainly, the US markets were looking a bit sickly ahead of their reporting season. But that didn't stop the rowdy Reddit investors from piling into meme stocks (again). AMC CEO seems to think if you can't beat 'em, join 'em. 

Closer to home, the ASX200 crept to a 100-day high, it feels like there's room to run again. If you still have the energy and the liquidity. 

And, the inescapable inflation-conversation has struck Asian markets. Some argue with Asia ahead of the recovery curve, inflation will hit there first. Investors are speaking with their hip pockets and outflows from Asia markets hit serious highs. 

Let's jump in... 

#1 Foreign investment, rain, both scarce across Asia

Asian equity markets have experienced outflows of $12.05 billion from foreign investors, matching levels last seen during the peak of COVID-19 in March 2020. According to Reuters, “a spike in COVID-19 cases in the region and … growing inflationary pressure tempered risk appetite”.

South Korea was hit the hardest, with over $7.97 billion exiting the country brought on by inflation concerns.

Taiwan also suffered heavily, with a typhoon-less 2020 leading to drought across the nation. Much of its water supplies are used to manufacture semiconductors, with the largest producer Taiwan Semiconductor Manufacturing Company (TSMC) requiring “156 million litres of water a day.” These chips are found in all your devices, from smartphones to televisions to electric vehicles. With supplies already strained on the back of COVID-19 induced production and transport restrictions, retailers are already warning of a potential tech crunch.  

#2 Rivian rising from Amazon's river of dreams

At the start of the 2020s, we asked ourselves what would define this decade. No one could have foreseen COVID-19 nor the unprecedented rise of meme stocks and crypto (ok, maybe crypto a touch). However electric vehicles would have been a safe bet and it hasn't disappointed so far. Tesla has captured the imagination of all on their mission to the moon. NIO and China Evergrade have risen to compete in the Chinese market, with the latter a conglomerate experiencing a 1000%+ share price climb on announcements it was expanding into EV without sold a single car yet. The latest name to sweep the headlines has been Rivian, best known for receiving an order from Amazon for 100,000 electrics vans in 2019, set to be delivered in 2022.

The Rivian R1T - its inaugural electric ute. 

They are looking to launch three vehicles: a pickup truck (ute), an SUV and the Amazon van, with its debut battery-electric ute 'R1T' on track to become available by July. While many of Tesla’s teething issues were around managing production supply chains, Rivian has already got a head start with assistance from two very handy investors: Amazon and Ford

“Rivian hasn’t publicly stated its production goals, but these people said the startup is building annual capacity for about 300,000 vehicles and aims to make as many as 40,000 in its first full year - or an average of almost 800 a week.” - Bloomberg (per "people familiar with the company’s strategy")

Tesla was founded in 2003 and didn’t pass 40,000 vehicles sales until 2015.

Recent reports from Bloomberg (again, by way of "people") suggest that Rivian is set to list on public markets later this year with advisers in JP Morgan, Morgan Stanley and Goldman Sachs. There is potential for it to reach a $70 billion valuation, definitely one for IPO Watch to keep a close eye on. 

#3 Harvey Norman has a Twitter Tantrum

It's been a tough week for Harvey Norman (ASX: HVN). After #BoycottHarveyNorman started to trend on Twitter the company tried to block as many critics as possible before doing everyone a favour and deleted its Twitter account.

Along with the hashtag came a wave of detractors and ex-employees detailing their poor experiences working for the company. One user tweeted that working for HVN “drove to suicide in 6 months”. The company's Twitter account replied with a facepalm and hand-waving emojis.

As the night went on the blockings racked up, including several politicians and the Australian Council of Trade Unions (ACTU). Ultimately the criticism seemed too much and eventually, the Harvey Norman AU Twitter account was shut down.

The campaign to boycott the retailer was started by the ACTU after Harvey Norman's founder Gerry Harvey refused to pay back $22 million in JobKeeper payments, despite the firm doubling its profits last year. 

The Chaser took the kind gesture of doing some pro-bono spruiking activities. Worth a watch. 

#4 REACTIONS TO GRANTHAM’S PREDICTIONS OF DOOM

Nothing gets investors talking more than predictions of bubbles and bear markets. The last week has been no exception. Just over a week ago, we released an exclusive interview with GMO co-founder, Jeremy Grantham (available in both written and podcast form), where he had made bold predictions of a major market crash in the coming months. Not everyone was on board his bear thesis though. Richard “Coppo” Coppleson is not convinced, pointing out in a recent note:

“Grantham has been predicting this “bubble crash” for many years. And if you had listened to him in that time, you would have missed out on one of the great bull markets.”

Meanwhile, over on LinkedIn, Donald Amstad, Head of Investment Specialists – APAC at Aberdeen Standard Investments, and star of the most popular video in Livewire history, was firmly in the bear camp:

“The most telling remarks are on the career risks faced by any asset management or financial markets professional, who calls out a bubble - and the risk of getting out too early and of underperforming vs peers for months and possibly years. Recall former Citi CEO Chuck Prince’s July 2007 FT interview “we’re still dancing” comment? Today the dance floor looks even more crowded and the exits even smaller.”

No doubt more fund managers and investors will weigh in on this, given the coverage Grantham’s views have since received in other financial press. But only time will tell which party is correct.

#5 AMC is back "to the moon"
....and this might affect your portfolio

Think meme stonks won't affect you? Well, according to Wall Street Journal, the AMC (and GameStop) rally has pushed these stocks into the Russell 2000 - so some ETF investors might actually own shares in these stocks without realising. Fun. 

Investors have said AMC rose 100% overnight on Wednesday off the back of "no news". Clearly, these investors aren't on Reddit or TikTok (for good reason). The "no news" is a re-ignition of meme stonk fervour.

One of my personal favourites, TikTok Investors, a parody account that's beyond a joke posted this gem. For the unwary investors... this is nonsense. It's dipping a toe in the shallow end of the devil's pool that is meme-investors.

The Sydney Morning Herald wrote this week:

"Broking analysts are almost unanimous (only had a “buy” recommendation at $US16 a share that has been overtaken by events) that AMC is grossly overvalued and may yet become bankrupt."

But the AMC CEO is relishing the limelight - offering free popcorn to shareholders. (Actual popcorn, not the figurative popcorn we're eating while watching this unfold.)

"AMC brought in another $587 million of new equity today. A total of $1.246 billion of equity raised in May and June. This strengthens AMC. It improves our balance sheet and provides flexibility both to address possible challenges and to capitalize on attractive opportunities," CEO Adam Aron wrote on Twitter this morning.

Top articles from the Livewire contributors this week

#1 Why sell great businesses for the mediocre? asks Bob Desmond this week. He gives us a list of nine “obvious” events that never came to be.

#2 Vale David Swensen - Lessons from a pioneer of Endowment investing is a tribute from Alastair MacLeod about an investing legend and what lessons we should remember him by. 

#3 Coppelson: My rebuttal to Jeremy Grantham’s bubble thesis. There's nothing Livewire readers love more than a debate. After Patrick Poke's exclusive with Jeremy Grantham, Richard Coppleson comes back with his thoughts on the bubble. 

#4 Like it or not, it's 11 o'clock in mining. In this article Hedley Widdup asks if we're at the peak of the new mining boom already. 

#5 RBA sets up July to move to open-ended QE, likely exceeding $100 billion, where Christopher Joye breaks down two key monetary policy decisions expected for July.  

Coming up next week... 

  • The Great Charity Calcutta Challenge: Each year, the Australian Fund Manager Foundation holds a charity stock-picking contest, featuring market legends like Philip King and Kerr Neilson. Next week, James Marlay will be revealing who is leading the pack and how stocks are performing as a group.  
  • Top-Rated Funds Series: Our coverages of some of Australia's best performing fund managers continues next week. The series launched on 1 June and you can check it out here. 
  • Last week, Lonsec's Peter Green told us the mid-cap sector will be one to watch. So, we'll be putting that to the test with the next episode of Buy Hold Sell, featuring Catherine Allfrey and Bruce Williams. 

What did we miss?

Did you catch a story this week that you thought was Off the Charts? Let us know in the comment section below! Or email content@livewiremarkets.com.

Also, if you're enjoying Off the Charts or have any suggestions for the series let us know!

- Nicholas Plessas, Angus Kennedy, Mia Kwok and Patrick Poke.


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