Charts of the Month - April '21

The Future of Banks and FinTech

The team over at Stray Reflections believes that within the next several years the FinTech sector will overtake the traditional banking sector in terms of market cap (and relevance):

• “As FinTech’s reach critical mass, many have begun to embed more financial products to “rebundle” the bank. In March, Square received approval for a bank charter in a sign regulators are becoming more amenable to FinTech companies.
• Over the next several years, we believe Square, Shopify, and PayPal—collectively valued at $425 billion today—will be worth more than the ten largest US banks combined, sitting at a little over $1 trillion.
• Traveling forward in time, Tech Crunch contributor Nik Milanovic believes that basic financial services will become simple open-source protocols, lowering the barrier for any company to offer financial products to its customers. Financial services will be the next layer of the stack to build on top of internet, cloud, and mobile.
• Essentially, nearly every company, even those that have nothing to do with financial services, will qualify as a FinTech company. Today’s tech giants have a significant advantage as they consider how to leverage financial services to better serve their customers and build a moat around their business.”
• Check out the full article here.

12 years of Equity Inflows in 5 Months

Stimulus, ZIRP, YCC, retail boredom. Whatever the reason(s) for the growth in equity markets over the past few months, it’s something truly astonishing to look at. Whatever you believe, bubble or not, irresponsible central bankers or not, whatever. Just looking at this chart is incredible.

OPEC Spare Capacity

A classic Art Berman chart.

• Space Capacity is defined, roughly, as the amount of capacity that an oil producer can bring online in a reasonable amount of time (a couple of months). OPEC is currently sitting on an all-time high amount of this ‘back pocket’ capacity (8%ish of global daily demand), at a time when prices are, from a historical context, relatively low.
• This is partially the reason why Art believes the high in prices are likely in for the year. The market, he believes, will not be willing to pay for something like $80 oil, when OPEC has the ability to flood the market at any given time with all this spare capacity built up. Not that they have an incentive to do so, but a historical build-up is simply not the time to be overpaying for crude.
• Listen to the full interview here.

Wilshire to GDP | NASDAQ to Wilshire | Wilshire to Assets

If you haven’t read our latest Markets Update (shame on you), go check it out as these next three charts relate to that piece.

None of these charts are new to you, I’m sure. They float around FinTwit and research publications all the time, but for good reasons. They help contextualize the environment we are in vs. the historical backdrop.

But when we think about this new investing paradigm we propose in the latest piece, these three charts form a nice foundation of understanding for why we are thinking this way.

• Wilshire to GDP (Buffet Indicator): Does the ‘Buffet Indicator’ really carry as much weight as it used to back when investors preferred current profits, strong balance sheets, and clear paths to recurring and sustainable cash flows? Do hyper-growth technology companies with access to cheap capital coupled with ‘new age’ investors who apply less weight to the previously mentioned financial metrics need to turn a profit any time soon? Or is this simply ‘99 all over again?

• NASDAQ to Wilshire: Speaking of ’99, look at that NASDAQ run-up. That unequivocally was a bubble. The NASDAQ to the total market essentially doubled from ’98 to ’00, from 17% to 36%. Now, look at today. The NASDAQ is ~32% of the total market, but that run-up took almost 20 years from ’02 to today. Is this really a tech bubble? Or has the paradigm permanently shifted? Are the investors of old finally giving way to the investors of new?

• Wilshire to Assets: Context is critical. Are equities overpriced relative to CB balance sheet expansion? No, not really. Throw in some ZIRP on top of Everest-sized global balance sheets, and this all seems to make more sense than not. If this is what modern monetary policy looks like, then (praying we don’t get struck by lightning or a FinTwit mob), are things actually different this time?

Cropland per Capita

Terrible pun alert: this chart is just a little food for thought. Arable land per capita in the major growing regions around the world has been steadily declining for a long time, driven primarily by:

• Generalized population growth, especially as countries develop
• Generalized population growth, especially as countries develop

If you’re at all interested in #2, do your best to buy in-season crops, local, and organic (pesticide-free). Also, if you’re a meat-eater, look to alternative, more sustainable, sources of protein. One of my favorites is Wild Idea Buffalo.

They’re a Patagonia / Tin Shed Ventures portfolio company. The buffalo is legit tasty (100% grass-fed, free-range, hormone and antibiotics free, etc. etc.), but more importantly, their business model is focused on helping to naturally restore the grasslands across the Great Plains. You can check out a short film about their story here.

We have no affiliation with these guys. We just like and support their products.