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Multipie Weekly #8: Curated reads for investors

In current edition of our weekly newsletter we share perspectives on global Inflation and interest rates with impact on asset allocation, give you the Q1 FY22 result tracker, share filtered insights from Crypto B word Summit, delve a bit more on Food delivery space and more. We hope you enjoy reading this as much as we enjoyed writing it. Check previous weekly here. If you want these directly in your mailbox, please subscribe here and share with your friends!
Let’s get started!

1. The Week, Month and Year Gone By 

Markets were flat over the week. Financials and Telecom saw correction, down 1.6% and 1.1% respectively. IT sector extended its gains supported by robust quarterly results.

For the last month, Real Estate has been the top performer with 12% returns. All sectors have been in green barring Power/ Utilities and Energy, which have corrected by 9.5% and 4.6% respectively.

2. We are entering a period of “Financial Repression”..

“Assess Macro; identify, invest micro” – the fine balance for investors.

Inflation has been a topic of hot debate amongst economists, macro experts and market participants alike. Professor Russell Napier, author of The Solid Ground and asset allocation strategist for institutions, recently shared some interesting and bold insights on the global macro-economy. We share key highlights:

The Global debt conundrum and artificially low interest rates:

Global debt currently exceeds $280 TN and is 350% of global GDP (highest ever levels). With no imminent solution in sight.

  • Russell’s view is that similar to the 40 year period around World War II (1929-1979), when the Global Debt to GDP spiked, governments will pursue a policy of financial repression. This means that the interest rate level will be deliberately kept below the inflation rate to get rid of the high levels of debt.
  • “…interest rates will not be allowed to reflect that rate of inflation”

Is the inflation transitory or persistent?

  • Near term: Current inflation is transitory, due to Covid induced supply side issues and will adjust temporarily. One risk to this thesis is China, where the deflationary trend is bound to change. Two key reasons:
    • Cost of labor in China is increasing significantly
    • Start of a Cold War with China, with economies looking to buy less from China, leading to the China plus one thesis
  • Structural view: Over the longer term, inflation will be driven by exceptionally high growth of money in circulation.
  • Enter M2 Money: M2 Money is the measure of total supply of money in circulation (you can read more here). And we have had an exceptionally high growth in broad money recently as we see below:
  • The US M2 Money spiked to 27% earlier this year, and is coming down recently (base effect). Russell believes that US and global money supply growth will settle over 10% for many years, significantly above average.
  • The consequence will be sustained global inflation above 4% (4-5.5%)

Why will M2 Money keep growing at over 10%?

  • To fund new debt – he expects more government guarantees, particularly for key political goals, such as boosting green energy investment and infrastructure and reducing inequality
  • Governments globally are now involved in the commercial banking system, via loan guarantees on private sector loans
  • If the private sector demand fails, the growth of the Banking balance sheet will be driven by the government’s management of the same
  • His bottom line view is that Central banks will have no say in the management of broad money growth, similar to the period after World War II

Select quotes:

  • “The most important part of my forecast is not the inflation rate per se. It’s that interest rates will not be allowed to reflect that rate of inflation.”
  • “Have we ever seen a country in history persistently running a broad money growth rate at 10% that didn’t have inflation at 4% or above?”
  • “It is a transfer of wealth from savers, forced to own fixed interest securities on low yields, to debtors who see their revenue rise with inflation while their interest payments remain low.”
  • “People have to understand that it’s not central banks that create most of the money, but commercial banks. So now governments, through their loan guarantees to commercial banks, can create as much money as they like. Out of thin air.”
  • It’s only when people begin to realize that the link between inflation and interest rates is broken, that the gold price will lift off
  • “…in the early stages of financial repression, equities and real estate are beneficiaries…The time to sell equities is when governments formally force savings institutions to buy more bonds.”

Read the full interview here and for anyone interested in more, listen to his ‘The End Game’ podcast with Grant Williams here.

3. Announcing: Multipie Q1 FY22 result tracker!


Moving from macro to micro – the result season for Q1FY22 is underway with over 200 results declared till now. We bring you all ongoing results in one single place!


Please show support for our work by sharing this!

4. The Word w/ Musk, Dorsey, and Cathie Wood

Jack Dorsey (Twitter), Cathie Woods (Ark Invest) and Elon Musk (Tesla, SpaceX)

The Crypto community saw a power packed event this week called “The B Word” conference with the keynote panel comprising Elon Musk, Jack Dorsey and Cathie Wood. We share select highlights:

Elon Musk (Technoking of Tesla):

  • At the base layer, Bitcoin (BTC) cannot become a monetary system. At a second layer, it is possible given how the second layer is developed.
  • Pros of BTC:
    • Money is stored in databases across banks and has issues  – the transaction and reconciliation speed is very slow and is unsecured
    • BTC improves the information and transaction flow of money by making it faster and less prone to fraud and other errors.
  • Cons of BTC as of now are:
    • Transaction volume is low
    • Cost of transaction is high
    • Minimal usability 
  • Energy view:  BTC mining is shifting towards renewable energy and hydro, geothermal and nuclear are the optimal energy sources for this
  • Not advisable to own crypto on exchanges/ wallets that don’t provide you with a private key

Jack Dorsey (Founder, CEO – Twitter)

  • As per Dorsey, BTC is reminiscent of the early days of the internet 
  • Believe Bitcoin can become the “native currency of the internet”
  • BTC has the ability to “change everything”:
    • Can make monetary systems less costly and fast
    • Creates a vast scope for new business models
    • A standard currency across the world will dramatically reduce the difficulties of global transactions
  • Square and Twitter’s decentralization efforts:
    • Square: Building non-custodial wallets and keeping the development completely open sourced
    • Twitter: Focus is to embed BTC use case across features such Twitter Spaces, Tip Jar, etc
  • Focus needs to be on improving endpoint accessibility and entry for new participants into BTC by designing simplified wallets

Cathie Wood (CEO, Ark Invest)

  • Being a store of value is the main role being played by BTC currently 
  • As apps are built on top of BTC, the means of exchange function will become a reality 
  • Crypto is a hedge against confiscation of wealth through ways such as persistent inflation, that destroys purchasing power
  • BTC’s social benefit as part of ESG is by reducing remittance costs and creating more accessible payment gateways 
  • ARK Invest has been able to positively impact BTC through spreading investor education and making their own crypto research transparent 
  • Asymmetry in accounting standards’ treatment of BTC must be addressed
  • Hope for crypto: Becomes the best currency from an ESG point of view

5. Food Delivery war is taking over the country 

Alongside the Zomato listing, Swiggy closed its largest funding round ever!

Zomato, Zomaaato, Zomatoo..one kept hearing variations of this name all of last week. While the company saw a blockbuster listing, it’s key rival Swiggy didn’t miss the action. And the focus here seems to be on non-food delivery verticals.

Last week, Swiggy closed a $1.25 Bn funding round by SoftBank’s Vision Fund II. The funds will be used for expanding non-food verticals and M&A explorations.

Swiggy is going to remain private…Zomato’s listing doesn’t change our strategy in any way.

Sriharsha Majety (CEO)

Funding Details:

  • Raised US$ 1.25 Bn at valuation of US$ 5.5 Bn (Zomato closed at a market cap of US$ 13.4 Bn, making it the largest listed internet company in India)
  • New Investors:
    • Qatar Investment Authority, Falcon Edge Capital, Amansa Capital, Goldman Sachs

Non-Food Verticals:

  • Upto 25% of Swiggy’s revenues comes from non-food delivery businesses
    • Instamart: Hyperlocal grocery delivery service under an hour with presence in Bengaluru and Gurugram. Competes with Dunzo and Amazon Fresh. Instamart has better unit economics than what the food delivery business was achieving at that scale
    • Supr Daily: Subscription based morning essentials delivery service with presence in 5 major metros. Competes w. JioMart and BB Daily
  • SoftBank views Swiggy as a last mile convenience and logistics player and not a food delivery company

5.1 Aswath Damodaran Values Zomato at ₹ 41/share

Popularly known as the Dean of Valuation, Aswath Damodran released his analysis and valuation of Zomato and it left some scratching their heads. Why? Because, while Prof’s fair value comes at Rs 41/- (Zomato closed listing day at 126/-), he will not have any qualms investing in Zomato on a price drop. Here are just some of the key takeaways from his presentation which also helps one understand how to value new age businesses:

  • When compared to major economies such as EU, US, and China, India has the smallest food delivery market mainly due to three reasons:
    • Low per-capita income
    • Lesser broad based digital reach 
    • Conservative eating habits
  • Key Growth Assumptions (Fig: CY —> After 10 Years):
    • Market Size: Rs. 225 Bn —> Rs. 2 Tn
    • Zomato Market Share: 42% —> 40%
    • Revenue: Rs. 20 Bn —> Rs. 172 Bn
    • Op Margin: -24% —> 35%
    • Free Cash flow: Cash burn to sustain for only the next 4 years
    • Risk: 10% chance of business failure
  • If Zomato were to add services to its platform such as grocery delivery etc, it could add premium to valuation but still may not justify Rs. 70+/share
  • Significantly expensive compared to closest publicly listed peer, Doordash 
  • Investors must be cautious to not overvalue the company purely because of the large market availability 

6. In Other News

  • Amongst the series of historic Tech IPOs, one anticipated listing is Policybazaar, market leading Digital Insurance broker with expected IPO size of INR 6,500 Crores. We recorded a podcast and video with Founder, Group CEO Yashish Dahiya and will be sharing it this coming week. You can access it here and here once we upload 🙂
  • Earlier this week, India completed 30 years of landmark 1991 reforms, marked by liberalization of the economy. The “Epochal Budget” saw key reforms such as:
    • Industrial policy: Abolished License Raj; free markets
    • Trade policy: Cancelled import restrictions & licensing. This controlled Balance of Payments challenge.
    • Allowed FDI in India
    • Devalued Rupee by 20% to improve export competitiveness

Here is an interesting detailed read on the reforms of 1991 from Siddharth Misra

  • Our co-founder Mihir Patki hosted an interesting session on How good Nutrition and good investing are inter-connected today at 11 am. We will update on the availability of session recording!
  • The RBI is working towards a “phased implementation strategy” for a Central Bank Digital Currency (CBDC) in India, Dep. Governor T Rabi Sankar said earlier this week
  • The Supreme Court dismissed pleas by Airtel and Vodafone-Idea seeking correction of errors in AGR calculations by the DoT
  • KakaoBank, South Korea’s first listed neobank was oversubscribed 1700x, getting bids worth $2 Tn, which is more than the GDP of the country! 🙂

That’s all for this week. Please share with your peers if you found this helpful and subscribe at multipie.co to start receiving these as a weekly digest every weekend!

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