November 2021

Clients and Friends,

November was a much a do about nothing month overall if you look at returns in stocks which were relatively flat. There was a continuation of a lot of the same themes we’ve seen with respect to rising inflation, port delays and concerns over valuations in most asset classes. A lot of the highly valued COVID themed companies like Docusign, Zoom and others saw declines followed by much steeper declines during December. Omicron continues to spread and we’re likely to see a surge of cases over the coming weeks and months here in the US.

One area I wanted to highligh and which is growing rapidly is buy now, pay later (BNPL). The premise is simple: buy a product for a fraction of its cost at checkout and pay the rest of it off over weeks or usually months. A recent stat I found said 1 in 5 Americans used one of these services in the past year, with US spending on BNPL increasing 230% since 2020. By 2025, global BNPL spending is expected to reach $680B. I recently got engaged over Thanksgiving and when buying a ring online, I was offered such a program for 0% interest.

BNPL is big business. Australian firm Afterpay was acquired by Square in August for $29B. Affirm, a BNPL firm in the US is currently valued at $31B at the time of my writing this. Swedish BNPL firm Klarna is expecting to fetch $50B at IPO in the near future.

And check out these juicy fees!

But one question remains; is BNPL debt? The answer all depends on who you ask. Companies and merchants are touting these as convenient payment options but regulators and some consumers view them as loans and believe they should carry the same protections as credit cards or other forms of consumer debt. Right now, BNPL is not regulated in the way that credit cards are. That means there are no standards for disclosures on fees, amounts owed, credit reporting and payments. Even the due date of a “buy now, pay later” payment is not as clear as a credit card with a consistent payment date.

There’s no disputing the momentum behind BNPL. The next phase of this trend is we likely brands themselves like Target, Macy’s and other push their own BNPL programs.

Market Charts

As I said a few months ago and for fear of showing the same charts, I’ll leave you with one. This chart shows the inflow to stocks on a rolling 12 month period. The inflow to stocks for the past 12 months ($1.1 trillion) exceeds the combined inflow over the past 19 years.

Let that sink in for a moment.

Just as working out without a spotter can be dangerous, investing without an “investment spotter” can be equally detrimental. I’m available if you need a spot.

I hope you found this month’s update helpful and informative.

Best Regards,

Jared Toren
CEO & Founder

Most Used Sources: Edges & Odds, WSJ Daily Shot, 361 Capital, Steve Blumenthal’s On My Radar

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