2021 Market musings and predictions

Whew, 2020 what a year. I’m glad that it is behind us. What does the future hold for 2021?

TLDR:

2021 most likely a strong bull market – think roaring 20’s.
Violent inflation overshoot is the most visible risk, however, black swans are a key risk and nobody can predict them.
I’m a reluctant bull – willing to invest in pre-tax accounts, but staying out of the markets in taxable accounts. Wheel option strategy to enhance cash on cash returns.

Let us take a deeper dive. What is going to make markets melt-up in 2021?

Monetary musings – 2020 year in review

As we enter the last few weeks of 2020, I want to take stock of how this blogging experiment has been faring.

I started this year with a simple objective, write consistently week after week. Looking back at the metrics, this consistency habit has paid off in spades. The post count for 2020 was 40 posts (almost one every week!) which is almost double the 22 posts written in 2019. In terms of page views this has been a stellar year, dare I say hockey stick growth! The page views for 2020 came in at ~12.5K YTD growing 3X over 2019 (4.1K views). Visitors also grew 2.7X to 7.1K visitors in 2020.

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One interface to rule them all | The next frontier in fintech? Part 2

In the last post, we explored what drives an economy (spending) and the levers that a government can use to restart the economy after a crisis (monetary and fiscal). Since 2008 monetary policy has paid the dominant role, but in 2020 fiscal policy is finally making a comeback. Fiscal policy has a direct impact on consumers’ lives as the main objective is to get cash into consumers’ hands so that spending continues unabated.

How to get cash to citizens?

It is logistically impossible for a government entity to show up at every citizen’s doorstep with a truckload of physical cash. Besides the obvious problem of logistics, there are also problems with confirming identities and physical record-keeping. Especially when governments are handing out money, they want to be very particular that only their citizens are getting the cash and there are no cases of freeloading (via fraud, etc). Direct transfers are a politically charged issue – there are always allegations of a slippery slope, nanny state, and communism that get thrown around! You have to get this part right.

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Sovereign digital currencies | The next frontier in fintech? Part 1

Does a sovereign backed digital currency matter?

It’s a question I’ve been brooding about ever since the European central bank announced its digital euro project. But first, let’s take a walk through memory lane and establish some concepts and abstractions to build upon.

Humans at our core are consumers and consumption is central in our economic model. Consumption drives everything. We have needs and wants and we want them fulfilled. Businesses are the organizational unit that builds the goods to satisfy these needs and wants. They produce the goods that customers want. Money is the grease that makes this machine work, it’s the unit of exchange. At steady-state consumers need to have a source of money which is either from some form of employment (trading time for money) or via borrowing (trading collateral for money i.e credit). Consumers can either save, invest, or spend the money that they have. Savings and investment are just steps on the way to spend. The end state is always to spend down the cash and exchange it for goods and services.

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Neither a borrower nor a lender be | A tour through Upstart’s S1

Upstart Holdings, an online lender recently filed their S1. This is the first blog post that I have collaborated on. It was too good to pass up collaborating with another Rohit :). Y’all are in for a treat, it’s a 2-Rohit’s-for-the-price of one analysis!

What is Upstart?

Upstart is an online consumer lender and a lending technology provider. Their core differentiation is that they use Artificial Intelligence for lending decisions. Upstart claims that this results in automated disbursals, higher approval rates, better risk-adjusted performance, and reduced fraud. Their main customer interface is via its website http://www.upstart.com and through bank partners. Currently, their cloud lending platform is available only in the US. Software is eating the world, but in a financial services business, the product is always money. Upstart is an online lender first. They have operated a lending platform for years and now pivoting to providing a SaaS (ish) platform for banks.

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End of the Line | Lessons from the fall of AT&T

Book review time! Some lessons learned from reading the End of the Line: The Rise and Fall of AT&T by Leslie Cauley . How I got to this book is an interesting story in itself. I’m a huge Twitter consumer (I read a lot, but barely tweet) and Post_M is one of my favorite accounts on Twitter. She tweeted a video of a talk with Liberty Media’s CEO John Malone, which I watched and started going through the rabbit hole of more John Malone talks on Youtube and one of the videos recommended this book. The cable industry was never on my list of things that cared about, but thanks to Twitter and Youtube and a book recommendation – I learned a lot! The internet is truly a wonderful place.

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Jedi or Empire | Buy Now Pay Later competitive dynamics

We’ve been taking a journey through the BNPL space, we looked at the history, the product, and the go-to-market. I’d like to close the series with a view on the competition and where I think the industry is headed. Warning speculative discussions and opinions ahead.

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To market to market | How do BNPL players go-to-market?

Continuing the deep dive on the BNPL players, the next thing I wanted to look at is their go-to-market strategies. How do they get their customers? Links to Part 1 and Part 2. A word of caution, all the research and numbers are from an outside in perspective and based on publicly available information. There is a possibility that I’m completely wrong in my analysis!

My simple mental model for go to market is,

Who is the target customer? Are there many target customers?
What is the narrow sub-segment of target customers?
What is the value proposition and positioning for this customer?
What are the channels that are used to reach out to this customer? Is there a low-cost acquisition channel in the mix?

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Go Vote | A tour through the real economy

We take a break from our regular programming to remind everybody to go vote. This election is important, y’all know that. Just vote if you haven’t already. I don’t care who you vote for, just vote.

Another question that I have been pondering is – We know the stock market is up and to the right, but it’s not the real economy. How is the real economy doing? How bad is it – Is there another shoe to drop? As I dug into some indicators, color me pleasantly surprised.

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What’s in a name – A deep dive into the BNPL product offering

Part two of the deep dive into the Buy now pay later (BNPL) market. In part one we dug deeper into the core product and its history. In this post, I dig deeper into the value proposition of the product.

A common misconception about this market is that it exists only to serve only the needs of the consumer. It exists only to make consumption easy. This is wrong. This a two-sided platform product. This product exists to help both sides of the transaction – merchants, who sell items and the consumers who purchase them. The fundamental axiom in use here is that extending credit greases consumption. Consumption for consumers is revenue for merchants. By offering various credit constructs and financing options to your customers you are enabling them to buy more of your products. This increases your revenues as a merchant. There is immense value in this product as a conversion tool.

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