Are you buying the dip?

Also in today’s edition: Omicron’s got no chill; Lockdown stocks are humbled; Restaurants stare at hard times; Big Tech ups its lobbying ante

Good Morning! The ants in China’s pants are scurrying to catch up with Jack Ma again, this time in the form of China Central Television. The state broadcaster has implicated the Alibaba and Ant Group honcho in a ‘you scratch my back, I’ll scratch yours’ deal involving a corrupt politician in Hangzhou. It’s the latest in a slew of woes for Ma, who’s awaited an open sesame moment ever since Beijing scuttled Ant Financial’s IPO in 2020.

In the latest episode of The Signal Daily, we break down the implications of the Sebi rule which is all set to roll out in April 2022. The episode also discusses Instagram’s move to try out the subscription model as a test in the US with some of its creators. The question is how many are willing to pay?

The Market Signal*

Stocks: Indian stocks continued their losing streak as investors took cues from a tech sell-off and anticipated rate hike in the US. Digital bellwethers Zomato and Paytm fell to their all-time lows. Key corporate earnings in India and a Fed meeting will likely dominate this week.

HODLing Their Purse Strings

What began as a tumble on January 20 has resulted in a $1 trillion-plus wipeout from the crypto market. While Bitcoin plunged to nearly $34,000—a 50% decrease from the November 2021 high of $68,700—altcoins such as Ether and Dogecoin also suffered a bear rampage. The decline comes in the wake of the US stock market’s worst week in two years, and a looming crypto ban in Russia. 

Between hawk and buzzard: In the past month alone, crypto faced regulatory crackdowns in Russia, Spain, Singapore, the UK, Kosovo, and Kazakhstan. The US’ upcoming policy on digital assets will be the latest in a slew of governments treating crypto as a risk asset. But HODLers, or crypto investors who ‘Hold On for Dear Life’, aren’t sweating the volatility. Take El Salvador president Nayib Bukele, who used the dip to buy 410 bitcoin.

Earth to crypto: Unlike Bukele, however, Indian investors aren’t buying the dip. And HODLers’ optimism about long-term gains will be tested as analysts foresee Bitcoin’s psychological level of $40,000 hovering around $30,000, for now.

TRACKING THE THIRD WAVE

Omicron Goes Pro?

Covid-19 cases are rising, so is the demand for test kits. The world is running out of it. This doesn’t spell good news for the industry as Omicron’s sub-variant, dubbed stealth Omicron (BA.2), is gaining ground. Spoiler alert: this sub-strain spreads quicker.

This sub-variant is now seen across 40 countries. The UK, Denmark, Sweden and yes, India have reported cases. There's also debate about it evading RT-PCR tests, hence the moniker. If yes, the Covid-19 test makers, and the world at large, have a new puzzle to solve. Until then, trust vaccines. 

Elsewhere: New Zealand PM Jacinda Ardern has set an example (once again) by postponing her wedding amidst a surge of cases in the country. Ireland is ready to put on its party hat and chug beer ahead of St. Patrick's Day, a first in two years.

Darlings No More

This is like the classic hare and tortoise parable. Value buyer Warren Buffet’s Berkshire Hathaway is about to catch up with Cathie Wood’s Ark Innovation ETF, the Financial Times reported. 

The rout: The Ark fund had given investors record returns on quick-draw Cathie’s 2020 bet on disruptive companies such as Tesla but is now bearing the brunt of a tech rout that is kindling memories of the dotcom bust and post-9/11 crash. The Nasdaq Composite fell more than 1% each session last week, finally plummeting more than 7.5% by the end of Friday. 

Wasteland: The pandemic gave a leg-up to several digital communication, entertainment and commerce companies such as Zoom and Peloton, whose stocks skyrocketed in 2020 and 2021 but have since crashed. Peloton nosedived and Netflix plunged on Friday. Lockdown’s favourite video calling app Zoom has lost 55% in six months. Pinduoduo is down 46%, PayPal 41% and DocuSign 50% in the same period. 

The Signal

An imminent rate revision by the US Federal Reserve has set the cat among the pigeons. Although the Fed has let it be known that it would raise rates at least twice in 2022, runaway inflation and better-than-expected economic recovery are fuelling speculation on the magnitude and frequency of the rate hikes. Bond markets are already pricing in a steeper rise than earlier thought. Jittery investors and traders now believe the Fed could perhaps act four times this year. Prospects of less liquidity and expensive capital have scythed through valuations across asset classes. 

Restaurants Cry $O$

The restaurant industry is stuck in an infinite loop. Just when they were setting up the table, Omicron flipped it. Night curfew orders, restrictions came marching again. 

Reservations were once again postponed or cancelled owing to fresh hesitance. Even liquor store owners urged governments to rethink their plans. Ushers and managers took up gigs as delivery executives for meal tickets. Restaurants shut down; chefs took Zoom classes.

Food for thought: Restaurants are bearing the brunt of the pandemic. The NRAI report states that one in four restaurants shut their doors since March 2020.

Flicker of hope: While Covid-19 trampled the industry's profit and resolve, the QSR format accelerated. Orders surged and discount coupons disappeared from the checkout section.

Kabir Suri, president, NRAI, believes financial aid could help the industry stage a comeback. But who’s listening?

Big Tech Flexes Its Money Muscles

2021 was a defining year for large technology companies, particularly with the regulatory storm that was brewing in Washington DC. There were lawsuits—both at the federal and state levels, appointments of personnel, and rare bipartisanship among legislators on issues surrounding these companies. Which meant that they had to lobby hard to shore up their defences and make their case.

And they did.

Show me the money: While Google increased its lobbying spend by 28% to $9.6 million in 2021, Meta’s spend rose a marginal 2% to $20.1 million in the same year. Amazon too hiked its spend by 8.2% to $19.3 million, while Apple’s $6.5 million was roughly the same as the previous year. Microsoft spent $10.2 million, an increase of 8.4% from 2020.

Chinese go really big: ByteDance and Huawei went big, increasing their respective lobbying budgets to $4.7 million (up 83%) and $3.6 million (up 664%). This shouldn’t be surprising, given the backdrop of a US-China trade war, and concerns over TikTok’s impact on younger users.

FYI 

Security blanket: CEO Parag Agrawal has reshuffled Twitter’s security team. Meanwhile, the social media platform is reportedly working on a trusted friends feature called Flock.

Future tense: The Future-Amazon standoff continues even as the latter reiterated its intention of infusing capital in debt-ridden Future Retail Ltd.

Rights on cue: Employees of the beleaguered, Microsoft-acquired Activision Blizzard have formed the first of its kind Game Workers’ Alliance Union.

Game on: Amidst slowing subscriber growth, Netflix is betting on game IPs and expanding its mobile gaming scope to consoles and PCs.

Chip up: Intel is investing up to $100 billion to build what could be the world’s biggest semiconductor complex in Ohio, US.

Fab listing: Lifestyle retail brand FabIndia has commenced its IPO journey with a claimed valuation of over ₹20,000 crore.

Jiminy cricket: The 15th season of the IPL will kick off in March 2022, just five months after the conclusion of IPL 2021.

FWIW

M&M & makeover: The marketing team behind candymaker Mars’ M&M believe they can change the world. And yet, M&M mascots have gone woke to align with the times. The green candy has swapped high-heeled boots for sneakers; the brown M&M (formerly Ms. Brown) is happy with kitten heels instead of stilettos. Well, the guys at Fox News still managed to slut-shame them. 

No uterus, no opinion: Trust crypto bros to propose solutions to problems they have no clue about. Elon Musk thought aloud about population collapse. Vitalik Buterin, co-founder of Ethereum, chipped in saying synthetic wombs could be the answer to population collapse and wage gaps. It drew reactions. Remember folks: Not everything needs to be a stream of consciousness on Twitter.

Time to shine: The demand for diamonds is on a high. To keep up, the supply of tiny, previously overlooked diamonds has increased in the US despite the times we live in. And that's because one of the world's biggest mines closed down, raising the prices of low-tier diamonds as well. 

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