The BSIC 2021 Oil Outlook

Download PDF The oil market has been one of the most interesting to follow since the outbreak of the SARS-CoV-2 pandemic. Due to the severe reduction in travel and factory activity, demand plummeted, dragging down the price of oil. Disagreements between Saudi Arabia and Russia on oil supply caused a supply shock to coincide with a demand shock, a rare event in history. On April 20, 2020, American crude WTI reached the historic low of Read more…

The cash conundrum: how companies manage their most liquid asset

Download PDF When lockdowns and travel restrictions started to threaten companies’ survival in March last year, all eyes turned to cash. What was before a mundane Treasury responsibility became a hot topic for discussion amongst C-suite executives. Mentions of cash, liquidity, and lines of credit multiplied in earnings calls. Cash management refers to “the collection, handling, control and investment of the organizational cash and cash equivalents, to ensure optimum utilization of the firm’s liquid resources”. Read more…

Stock Exchanges: who will be the next champion?

Download PDF Introduction Stock exchanges are sometimes considered simply as marketplaces where any investor with a brokerage account can participate in transactions with basic financial securities such as stocks or bonds, or more complex ones such as ETFs and derivatives. However, stock exchanges are also businesses that, like any other business, aim at making profit by providing their products and services to the customers that are willing to pay for them. Stock exchanges have multiple Read more…

The impact of NIRP on fixed income

Download PDF This article is part of our series that discusses the impact of low and negative interest rates on several asset classes. Here we will focus on the implications of NIRP on fixed income products. Introduction Today’s low or negative interest rates have already been experienced other times in history, for example in the US during the 40’s, or in Japan during the 90’s. However, the combination of low/negative interest rates and a flat Read more…

Why to buy when you can mine? An analysis of Bitcoin’s pricing models.

Download PDF Introduction Intrinsic value is a measure of what an asset is worth, and it is obtained by means of an objective calculation (to a certain extent), such as a DCF, where the cashflows of a company are discounted to the present in order to estimate the company’s true value. Ultimately, this leaves Bitcoin’s value controversial and debatable: this asset class does not produce any cashflows and the debate on whether or not Bitcoin Read more…

Market Recap 26/02/2021

Download PDF USA US indexes decreased sharply during the week, mainly due to a steep rise in longer-term Treasury yields and increasing inflation expectations. The S&P 500 posted its biggest weekly drop in a month, while the Nasdaq suffered its worst decline since October, as an increase in rates is a particular threat to big tech sky-high valuations because it would diminish the present value of their future cash flows, that are so distant in Read more…

Market Recap 19/02/2021

Download PDF USA United States’ major indexes evidence was mixed, but most of them ended lower in the holiday-shortened trading week (markets were closed on Monday in observance of Presidents’ Day). This was mainly due to an increase in treasury yields that climbed to the highest levels seen in a year, this weighted particularly on technology stocks. Symmetrically, the increase benefited bank shares by boosting lending margins and helped value shares outperform. These differences were Read more…

A Decade of Low-Interest Rates: A CF Point of View

Download PDF Introduction Everyone who took a macroeconomics class knows that the control of interest rates is a fundamental tool in economic policy. Monetary expansion or contraction has a real impact on inflation, GDP growth, and exchange rates and thus, central banks have tight control over the base rate in the economy. Theoretically, low-interest rates fuel economic expansion by incentivizing investment and borrowing. Since the 2008 financial crisis, central banks worldwide started buying up assets Read more…

Reading asset classes through the lens of NIRP

Download PDF At the beginning of 2020, BSIC members took a first glance at NIRP in the article “Negative interest rate policy – friend or foe?”. The piece discusses the impact of negative rates in the Euro area and the possible unintended consequences. This year we try to go through each asset class and find examples of negative rates’ impact. At the moment, there are four Central Banks that have their main policy rate in Read more…

Renesas buys Semiconductor company Dialog in €4.9bn deal

Download PDF Renesas Electronics [TSE: 6723] – market cap as of 19/02/2021: ¥2.14tn Dialog Semiconductor [FWB: DLG] – market cap as of 19/02/2021: €4.99bn Introduction Renesas Electronics has agreed to buy the Anglo-German Dialog for €4.9bn in an all-cash transaction. The offer priced Dialog at €67.50 per share, a 52% premium above the average company’s stock trading price registered in the previous three months. The transaction represents an important step for Renesas’ plan to expand Read more…

Big Tech: playing whack-a-mole with carbon?

Download PDF Introduction It takes over 70bn kilowatt hours per year to power the internet, which means the tech titans leave behind a massive carbon footprint. This article will focus on the largest technology companies, most notably Amazon, Alphabet, Apple, Facebook, and Microsoft, and their growing impact on the Earth’s climate. It will look at these companies’ energy consumption, relationships with oil & gas clients, and finally, their climate activism. Energy consumption Technology companies consume Read more…

The Draghi Effect

Download PDF Introduction  In his famous speech on July 26, 2012 at UKTI’s Global Investment Conference, Mario Draghi emphasized on the ‘irreversibility’ of the euro and ECB’s preparedness to do ‘whatever it takes’ to preserve it. The macroeconomic European atmosphere at the time was defined by uncertainty and financial troubles, especially for the southern countries of the EU like Greece, Italy, and Spain. Since assuming office and giving that speech, Mario Draghi managed to resume Read more…

Private Equity and The Music Industry: An Unlikely Love Story

Download PDF Introduction We are coming out of a decade in which interest rates have been at historic lows. All investors are looking into new directions to increase their returns. The rise of one asset class has caught a lot of market attention lately. With the advent of streaming, music royalties have a similar payoff structure to bonds. We chose to take a deeper dive into the music industry and explored the opportunities and risks Read more…

The Golden Trade – To Buy Barrick?

Download PDF Introduction One of the most enticing readings in finance starts with To the Shareholders of Berkshire Hathaway Inc. However, the investment reasoning of Warren Buffett is not only relevant in its current edition but also in the previous ones in which he has formed a long-lasting investment principle on an asset class that ends up being only strong enough of a conviction to be on or off his books for a certain time Read more…

Booms, surges, and battles. BSIC presents the latest trends in IPOs.

Download PDF Part 1 – A booming equity market The successful IPOs of Airbnb and DoorDash at the end of 2020 were in stark contrast with the high-profile debuts of big privately held companies, such as Uber and Lyft, which were not met with investor excitement in 2019. Not to talk about the float of WeWork which was pitched and then aborted due to intense public scrutiny about multibillion-dollar valuations for loss-making businesses. Overall, companies Read more…