Sunday Ghospel

Happy Sunday

August has drawn to a close. A one day recession. Gold surging so high, I have already booked appointments with my dentist to see if I have any gold crowns I did not know about. J Pow performing a dovish power pivot. Oasis getting back together. What a month. With that much happening, it seems only right the US has kicked back with a long labour day weekend to recover. Fuelled by curiosity to see which English rock band might reunite in September, I share this week’s ghospel.

Cheers
Philip

The week in review

Taking the temperature

• Mixed bag - S&P closed the week fractionally higher. The NASDAQ even traded down. On account of a spectacular but still not spectacular enough double earnings beat by NVIDIA sending the AI starlet’s shares down (7)% in aftermarket pricing - post-earnings call.

• The FEDs favourite inflation meter - the PCE - came in @ 2.6%. Slightly below the 2.7% expected

• Inflation across the 20 countries that use the euro currency fell to the lowest level in about three years - eyeing the September 12 ECB meeting, further rate cuts may be expected

• Big week in earnings not just for AI but also for consumer staples. Dollar General. Ulta Beauty. Both missed earnings expectations. Dollar General notes consumers being financially constrained. I wonder if this should not be the time when people are more driven to go for Dollar General - Ulta in comparison reports that consumers are conscious to only spend on necessities rather than more discretionary / non-staple goods. Add to that that the revenue did increase for DG and that particularly margins decreased it feels like there is more to the story - perhaps competitive pressure and density of substitute supply in consumer staples that erodes their business. With consumer confidence beginning to improve in the US, rates expected to come down and PCE inflation not as strong as expected I wonder if they will see improved foot traffic in the coming quarter.

Venture tabs

• VC returns are outsized in early-stage investments. Later-stage strategies are feeling the constraints in exit markets particularly. Timing and illiquid markets are not on their side. Classic exits via IPO and M&A are dry - alternative routes are being explored. VC and the Alternative Investment space in general has seen a surge in Secondaries and NAV debt to recapitalise positions. Some continuation vehicle strategies are also entering the market. have heard of more LPA renegotiations in private credit and PE.

• OpenAI was reported this week to be in talks to raise a new round of funding. The valuation: A cool 100bn (+14bn compared to the valuation they marked in September during a secondary sale). Investors have already been earmarked to get onto OpenAI’s coveted cap table - even at this valuation. The deal is led by Thrive Capital, which is looking to invest 1bn alongside participating investors Microsoft, Nvidia, and Apple.

• Carta was accused of using cap table data to support its secondary trading business in January. Every news channel covered it. Investors were upset. Carta shut down secondary trading. All is not lost, however. Carta has now agreed to sell the business unit to Public.

• Lidl - get your groceries. Store your data. The grocery chain and owner Schwarz Group is copying what Amazon had done with AWS some 20 years ago. Lidl is spinning off its internal IT unit - Schwar Digits. The standalone BU will compete regionally with the likes of hyperscalers AWS, Google and MSFT - according to the FT analysis the competition at least regionally is credible. Schwarz Digits generated 1.9bn top line in 2023 and clients include SAP and Bayern Munich. As data regulations in Europe and the cloud infrastructure of the future for Europe is set out in Gaia-X it will be interesting to see how this plays out.

• Sunswap - London based developer of decarbonization solutions for cold-chain logistics - raised 20m led by BGF. Investor consortium includes Shell Ventures, Move Energy, Barclays and the Clean Growth Fund. I have worked with the Shell Ventures team during my time at UBS including on the raise for Skeleton Tech. - could be a good touchpoint to reach out. The venture developed a combined solar and battery technology. This is installed on the transporters of chilled consumer goods and offers a carbon reducing alternative to traditional diesel-powered refrigeration units

The week ahead

Economic Events

• ISM Manufacturing PMI

  • August reading scheduled for Tuesday

  • Consensus Estimate: 47.5 (vs. 46.8 for July)

  • Additional context for the curious: The composition of the index: New Orders --30% Production --25% Employment --20% Supplier Deliveries --15% and Inventories -- 10%

• ISM Non-Manufacturing PMI (also known as Service PMI)

  • August reading scheduled for Thursday

  • Consensus Estimate: 50.9 (vs. 51.4 for July)

• August US Unemployment Rate

  • The Friday reading is expected to come in @ 4.2% (10bps lower than the previous month)

Earnings I will be watching

• Dollar Tree - on the back of Dollar General, will be interesting to see if the sentiment on consumer confidence is shared

• Lots of cloud and software earnings:

  • Samsara

  • Asanna

  • UiPath

  • Smartsheet

  • HPE

  • Broadcom

  • GitLab

• Copart