IceCap Capital Management latest letter to investors
Our view on global investment markets:
For many, the Super Bowl football game is a rather odd event.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
To begin with, Americans claim the winner of the big game to be the world champion – despite never defeating the best from Europe, Asia, or Africa.
Next, most of the Super Bowl games are duds. Aside from the crowd pleasing 5 victories by the San Francisco 49ers, and the crowd pleasing 5 losses by the New England Patriots – most games are forgettable.
Now, this lack of competitiveness, isn’t necessarily a bad thing. After all, for most people the game is secondary to the entertainment including the commercials and the Halftime Show.
The first ever Halftime Show in 1967 featured dogs leaping through hula hoops and catching Frisbees. Everyone agreed it was pretty cool.
In 1974, the Halftime Show scored a huge win when Miss Texas, Judy Mallett, played the fiddle to the 74,000 stomping fans in Houston. THAT was a good time.
Over the years, the Halftime Show developed into something bigger than the game itself, with the more memorable ones featuring wardrobe malfunctions and the ability of the Americans to actually make it rain while legendary rock star Prince sang about rain.
And with the possibility of reuniting the Gallagher brothers and Oasis for next year’s final gig – the Halftime Show will cement itself forever as being the greatest show on turf.
As the Halftime Show literally occurs smack dab in the middle of the game – it should signal the mid-point of the big event.
Yet, in reality the 2nd half breezes by fairly quickly with the outcome usually well decided and well accepted by everyone glued to their screen.
The irony of course, is that this year as millions prepare to enjoy the big show, millions of investors are simultaneously wondering if financial markets have also reached their very own Halftime Show.
Naturally, with stock markets hitting all time highs, and Bond yields hitting all time lows – very good arguments are made supporting a significant change in direction for each market.
And as life imitates art, it is reasonable to believe that the 2nd half of financial markets will zoom by just as fast as the 2nd half of the Super Bowl.
So, to be safe. Buckle up. Strap on your helmet and pads. And get ready for the 2nd half of global financial markets.
It’s a show you won’t want to miss.
The Multiplier Effect
US Tax Cuts
One word – ENORMOUS.
Yes, despite all the growlings and howlings from both political rivals, and sovereign economic rivals – the recently announced American tax cuts are tremendously good for the US economy.
This is good.
And yes, just as proclaimed by many, these very same tax cuts will add significantly to the American debt pile.
This is bad.
Yes it sounds confusing, so let’s take a minute to clarify the good and the bad. Remember – here at IceCap we are not American voters, and we shed our emotions and pause our personal belief systems when assessing geopolitics (something EVERY investment manager should be doing by the way).
First the good. From the most simplest perspective – the more money you have in your pocket the better.
We have yet to meet anyone on this planet who would not accept more money in their pay cheque due to lower taxes.
More money means more spending, more savings or faster debt pay downs.
When this is multiplied across all of America, the aggregate amount is very, very large and significant.
And, when you next consider the tax savings at the corporate level multiplied across all of America, the aggregate amount is bigger still.
The two amounts together create a powerful wave of economic stimulus not only for America, but for the world.
Some argue that the rich people are getting richer, and the wealthy companies are getting wealthier.
This is irrelevant.
If you are against the tax cuts and disagree, you are always welcome to pay more to the IRS than what is required. Yes, there’s no law saying you can not make extra contributions to the US Treasury.
Regardless if the tax savings are spent buying Budweiser, pinot noir, stock buybacks, or yachts – money begins to flow through the system creating a multiplier effect which leads to even more spending and savings.
Not convinced? Consider recent comments from the world’s largest investment manager Blackrock Inc.
Money has no feelings
Also consider that Blackrock is controlled, and managed by Larry Fink who squarely supports the American Democratic Party, and is certainly no fan of President Trump.
Above is captioned from Blackrock’s February 2018 Market Outlook.
In other words – if one of the biggest non-supporters of the US President can check his personal political perspective at the door, then maybe your manager should do so too.
As well, there are countless other company specific data points all supporting the same effect – people everywhere are receiving back more money due to the Trump Tax Cuts.
Now, it’s also rather important to understand the significance of these tax cuts from a global perspective.
Understand that America is a pretty big butterfly – and now that it’s flapping its enormous economic wings, the effect will absolutely be felt around the world.
For starters, and to really gauge the effect of the US tax cuts, simply listen to the response from America’s economic competitors and you’ll find never ending cries of unfairness.
Article by IceCap Capital Management
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