Referral program
Weekly Points – May 10th, 2024 – 5 Things to Know in Investing This Week – The That’s Not What I Said Issue

This week, we released the DKI report on AuthID in public and explain the use cases for biometric security. The stock has some near-term catalysts, and the full report is available on the DKI website. DKI Intern, Andrew Brown, brings up the complicated issue of whether the government should interfere in free markets to “help” future homebuyers. Ryan Sullivan, a thoughtful wealth advisor, contributes a guest “Thing” on the case for agricultural commodity investing. A new survey shows that people regret buy now, pay later spending. We’re shocked that they’re shocked that they then receive monthly bills for the debt that’s not being tracked. And I get attacked on Twitter/X by people arguing against things I never said and never did. Some complained that this week in the market was “boring”, but it was an eventful week at DKI. Ready?

This week, we’ll address the following topics:

  • DKI writes on AuthID $AUID and the case for biometric security.
  • How many single-family homes are Wall Street investors buying? Should Congress do something?
  • Do higher agricultural commodity prices mean paying more at the supermarket or are they an investment opportunity? Ryan Sullivan of Off The Beaten Path Financial provides a guest “Thing”.
  • A survey of buy now, pay later users reveals a high level of financial stress. Are you surprised?
  • Misunderstood posts and strawman arguments. My analysis doesn’t cause the world to change. It does help protect DKI subscribers from bad policy.

Ready for a new week of rejecting strawman arguments? Let’s dive in:

1) AuthID $AUID and the Case for Biometric Security:

Last week, I wrote about being permanently suspended on Twitter/X due to the actions of someone impersonating me. The X support team was responsive and effective in helping me regain control of my account within one day, but it took hours of my time to figure out what was happening and to manage the process. Had I been able to secure my account, name, and image with biometric security, we might have been able to avoid the issue entirely. Now, imagine that the person committing fraud was able to gain access to your work email, your bank account, or your brokerage account. Usernames, passwords, and two factor authentication involving email or text messages are no longer good enough. I believe the next step in securing your identity and accounts will be facial identification. AuthID has a best-in-class .7 second authentication process and a new CEO with a history of building successful sales teams in the industry. DKI’s full report is publicly available on our website.

authid-logo

Fast low-friction authentication is necessary when fraudsters get better every year.

DKI Takeaway: AuthID is a public venture capital company that won’t start to produce meaningful revenue until next year. We believe the company presents a skewed return distribution with huge upside in a growing market meaning you’re risking one dollar for the potential to make $10 – $15 in the next five to six years. Near-term expected catalysts include more clear financial reporting, a successful secondary financing, and more customer contract announcements. DKI’s report includes a lengthy section detailing the risks in the stock, and is available on our website. The short-sellers in the name list no risks to their thesis, but do like to make personal attacks. We suggest you read both sides, and decide for yourself who has the better case on the company.

2) Should Congress Stop Wall Street from Buying All the Homes?:

DKI Intern, Andrew Brown, notes that there is increasing concern about big Wall Street firms buying more single-family homes. Home ownership is a core part of the American Dream. While many people like the flexibility and capital preservation of renting, home ownership has created long-term personal and financial stability for millions of families. If big firms with unmatched access to capital buy up all the housing stock, can they turn us all into renters? Lawmakers in many States as well as the US Congress are considering bans on corporate purchase of single-family homes, forcing companies to sell their existing inventory, or imposing additional taxes on large corporations’ home ownership portfolios. Do you think the government should intervene?

Freddie Mac - Large Corporation Buyer Share

The issue isn’t as big as some have said. Chart from Freddie Mac.

DKI Takeaway: This is a heated issue with strong emotions attached. Looking at the chart from Freddie Mac, you can see that large corporate buyer home purchases are a much smaller share of the market than the 40%+ some have claimed. DKI thinks this issue has nuance. We’ve recently been shedding light on the struggles young people encounter when they try to buy a home. Wall Street purchase of housing inventory pushes up prices and causes those young people to stay renters for longer. No individual in their 20s or 30s is going to be able to outbid the big firms with near-unlimited access to capital. It’s easy to look at the situation and say the government should step in to protect the ability of young people to own instead of rent. But forcing companies to liquidate their assets could establish a risky precedent. In addition, we’re accustomed to thinking about this from the point of view of the buyer. Now, imagine you own a home and want to sell and pay off your mortgage. Should the government tell you that it’s illegal to sell to the highest bidder? Typically, when the government puts its thumb on the scale for “good reasons”, we get unpleasant unintended consequences. In general, DKI favors free markets over governmental interference, but this is a tough issue, and we don’t know the right answer. What do you think?

3) Agricultural Commodities Outperforming:

Ryan Sullivan of Off The Beaten Path Financial writes:  Do you get surprised at the checkout every time you go to the store? In 2024, agricultural commodity prices have been outpacing all other commodity indices. While many (including DKI) focused on gold breaking new highs, cocoa was up ~280% at its peak this year. Futures prices have fluctuated, but if you are a chocolate lover, then you still have some time to stock up. West Africa exports over 70% of the world’s cocoa and has been struggling with a combination of bad weather and disease. The impact of this will hit consumers later this year. This is just one example of a tight agriculture market that is still increasing food prices for all. While inflation is below the 2022 highs, food prices are still increasing (just at a slower rate).

OBP Financial - Commodity Comparison - May 10th, 2024

Commodity markets up this year. Agriculture up more.

DKI Takeaway: Ryan Sullivan continues:  Rising global population combined with conflicts and poor weather are leading to higher agriculture prices which leads to higher food prices. While the CPI is increasing at a slower rate for now, a tight labor market also increases food costs. With inflation starting to rise again, this is an area to watch closely as higher fuel prices can cause agricultural prices to quickly spiral. It’s always a good idea to have some food stocked up, especially if you like your chocolate! (DKI note:  I am a big fan of keeping a large supply of emergency food at home. Worst case is you have some extra tuna fish and chocolate next year.)

4) The “Shocking” Stress of Buy Now, Pay Later:

DKI has written about some of the concerning uses of buy now, pay later including people financing the purchase of fast food burgers and their monthly rent. A new poll reveals that 54% of buy now, pay later users spent more than they could afford. Significant percentages of users are falling behind on other lines of credit, have gone into significant debt, and report their spending is out of control. Somehow, 31% were surprised by how much they owe every month to pay off their BNPL loans. I’m not sure what’s more incredible; that people who borrow money are surprised they have monthly bills to pay back their debt, or that I’m surprised by this.

BNPL A

There are a lot of people using credit unwisely.

DKI Takeaway: We live in a consumer culture, and inflation has been tough on all of us. However, if you’re already employed, the only sustainable option is to reduce spending. Many people are already experiencing personal financial problems. From the point of view of someone who looks at a lot of macro data, there’s another problem. BNPL debt is often not reported as consumer debt. This means that when you see data showing higher credit usage by consumers, you’re not seeing all of it. Total credit card debt is at an all-time high and that’s not counting BNPL.

5) Misunderstood Posts and Strawman Arguments:

Last week, I was suspended from Twitter/X due to the actions of an imposter. This week, I got hate mail for things I never said. As Robb Fahrion joked in last week’s 5 Things video, I’m “micro-famous”. People took issue with my posts noting that work from home was a problem for the owners of office space and showing that government debt was increasing faster than GDP. I was accused of trying to force people back into the office, of donating to President Trump’s campaign, and of trying to get tax breaks for billionaires. Here are the facts: I work from all over the world, and never intend for DKI to have an office. I have never donated to a Presidential campaign. And billionaires have plenty of influence and lobbyists. They don’t need my help. So, what’s going on?

Debt vs GDP Growth

This graph seemed to upset a lot of people. Regardless of their feelings, it shows that government spending is destroying value.

DKI Takeaway: These insults are all strawman arguments and rely on arguing against things I never said. Observing an economic problem doesn’t mean that I’m in favor of the policies that caused that problem, or that my analysis caused it to happen. It is my job to figure out what can go wrong and come up with strategies to protect DKI subscribers from what’s coming, or even to make money from it. Massive government spending led to the inflation we’ve experienced the past few years. I recognized it early, and told DKI subscribers I was buying Bitcoin, gold, and energy (oil and uranium). They’ve all been hugely profitable investments. None of that means that I’m in favor of too much government spending, that I want to cut your favorite government program, or that I can change the practices of our government. Angry people can type angry things hidden at their keyboards. At DKI, we’re going to stay calm and cerebral, do a lot of original research, and try to make money for our clients and subscribers regardless of market conditions or governmental policies.

 

Here’s the video version: https://www.youtube.com/watch?v=WReKssMPEHM

 

Information contained in this report, and in each of its reports, is believed by Deep Knowledge Investing (“DKI”) to be accurate and/or derived from sources which it believes to be reliable; however, such information is presented without warranty of any kind, whether express or implied.  DKI makes no representation as to the completeness, timeliness, accuracy or soundness of the information and opinions contained therein or regarding any results that may be obtained from their use. The information and opinions contained in this report and in each of our reports and all other DKI Services shall not obligate DKI to provide updated or similar information in the future, except to the extent it is required by law to do so. 

The information we provide in this and in each of our reports, is publicly available. This report and each of our reports are neither an offer nor a solicitation to buy or sell securities. All expressions of opinion in this and in each of our reports are precisely that. Our opinions are subject to change, which DKI may not convey. DKI, affiliates of DKI or its principal or others associated with DKI may have, taken or sold, or may in the future take or sell positions in securities of companies about which we write, without disclosing any such transactions.

None of the information we provide or the opinions we express, including those in this report, or in any of our reports, are advice of any kind, including, without limitation, advice that investment in a company’s securities is prudent or suitable for any investor. In making any investment decision, each investor should consult with and rely on his or its own investigation, due diligence and the recommendations of investment professionals whom the investor has engaged for that purpose. 

In no event shall DKI be liable, based on this or any of its reports, or on any information or opinions DKI expresses or provides for any losses or damages of any kind or nature including, without limitation, costs, liabilities, trading losses, expenses (including, without limitation, attorneys’ fees), direct, indirect, punitive, incidental, special or consequential damages.

Leave a Comment

Recent Blogs

April CPI is 3.4%

This piece was originally published on May 15th, 2024 Overview: Today, we got the April Consumer Price Index (CPI) report which showed an overall increase of 3.4% unadjusted in...

Read More

Invite & Earn

X
Signup to start sharing your link
Signup
background banner image
loading gif

Available Coupon

X