June 25, 2021 Sign Up

By Overheard on Wall Street

"Beating the competition is relatively easy. Beating yourself is a never-ending commitment."

Good morning! Yesterday President Biden unveiled a long awaited $1.2 trillion bipartisan infrastructure deal, which aims to improve the nation's transportation, water and internet infrastructure. The bill includes a $66 billion "pls fix" for passenger and freight rail, (Biden rode home on the Amtrak every night as a senator) the largest investment in the rail system's 50 year life.

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1. Story of the Day: Big Tech's Car Obsession

At first glance, the world of cars doesn't seem that glamorous to the likes of Google, Apple and Amazon. Besides the clunky factories and large amount of people needed to build cars, the world's top 10 carmakers have a meager operating margin of 5%, while the tech giants enjoy a 34% margin. Why then are tech giants drooling over autonomous vehicles? Well, it's to get the last drop of people's attention spans during their waking hours. 

Americans on average spend 308 hours behind the wheel (6 hours a week). That is a large amount of time someone could have spent on their tablet or phone, watching a mindless Netflix show or aimlessly scrolling on Instagram. By 2030, autonomous vehicles will be a $2 trillion industry and 58 million vehicles globally are expected to be driving themselves. Big tech has the means, from AI to huge data and engineering capabilities, to disrupt this industry.

Apple has brought back its plans for an Apple car after previously focusing only on the software. Google owns Waymo, which was the first to have an autonomous ride on the road and last year began testing self-driving trucks. Microsoft has partnered with Volkswagen on self-driving car software and Amazon is backing electric car maker, Rivian, and last year bought driverless startup Zoox. (driverless cars as part of Prime membership will be lit tho)

Short Squeez Takeaway: With the deep pockets the tech giants have, they can afford to put large amounts of money into this venture. One thing's for sure, whichever one of them is able to free up time behind the wheel in a meaningful way, will have a good chance of capturing the lion's share of the market, similar to what Apple did with the introduction of the iPhone (>50% share in the US). 

2. Markets Rundown

• Nasdaq and the S&P 500 closed at record highs as President Biden embraced a bipartisan infrastructure deal
• Bitcoin and Doge also continued their rebound as Bitcoin flirted with the $35k mark

Movers & Shakers

• (+) Trade Desk ($TTD) +16% after Google said it would delay its plans to phase out third-party cookies that track users across the web.
• (+) Eli Lilly ($LLY) +7% after announcing that its Alzheimer’s disease treatment received a “Breakthrough Therapy” designation from the FDA.
• (–) Rite Aid ($RAD) -14% as Wall Street digested mixed quarterly results and weaker earnings guidance.

3. Top Reads

4. Book of the Day: Mastering the Market Cycle: Getting the Odds on Your Side

From the title of the book, it may sound like the author (Howard Marks) is advocating stock market timing but that’s not the case. It’s about understanding where the stock market is in the market cycle and managing the risk.

If too many people have too much eagerness to invest, the price of assets goes too high, the prospective future return goes too low and the risk rises.

In his New York Times bestseller, the legendary investor Howard Marks, teaches the rhythms of market cycles not only diving into markets and economics but also human psychology and investing behaviors.

5. Daily Visual: The Global Wealth Pyramid

Source: Statista

6.  Daily Acumen: 4 Phases of Stock Market Cycles

Phase 1: Accumulation The primary characteristic of this phase is that the market has bottomed out and early adopters such as value investors like what their indicators are telling them (the market is cheap) and are now beginning to buy back in.

Phase 2: Mark-up In the mark-up phase, the market has experienced some stability and growth recently, primarily off the back of early investors from the accumulation phase. As a result, growth begins to speed up. In the later stages of this phase, greed starts to outweigh fear and your barber is excited to give you stock tips. The market outlook goes from bullish to downright euphoric.

Phase 3: Distribution In this phase, sellers of stocks begin to dominate. This is an unpredictable and emotional time to be an investor with frequent shifts between fear and greed. The length of this phase can vary wildly from market cycle to market cycle.

Phase 4: Mark-down This is one of the most painful times to be an investor as this is when the biggest portion of a price crash takes place. If you’re an active trader, you’re dealing with regrets about not selling your investments soon enough. Many investors will give up on their investment and eat the loss by selling their stocks. Even if you’re a passive investor, you’re still dealing with the stress of all the doom and gloom headlines in the news.

7. Memes of the Day

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