March 22, 2022

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TOGETHER WITH

Happy Tuesday. Can you guess by how much used-car prices rose in January of this vs. a year ago? a. 4.5%, b. 14.5%, c. 40.5%. Follow the wave 🌊 below for the answer.

Here's the gist on these finance topics for today 👇

Stock buybacks hit another record, but does that mean anything?
Has the NFT mania hit its peak?
How much more expensive are used and new cars this year?

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THE MARKETS

Stock Buybacks Hit Another Record. But Does That Mean Anything?

Investing is kind of like philosophy. Each individual investor has their own beliefs, and we’re all looking for meaning in a sea of unlimited metrics, hoping to find some meaning amidst the market chaos. Market participants from traders to institutions are data addicts. And they will turn every stone in search of a sound thesis, the holy grail that will lead them to the promised land.

So, who cares about stock buybacks? Investors, of course. The ability to exercise share buybacks is usually a sign of a mature and stable business that’s not lacking in the free cash flow department and probably providing a good return. And like it or not, buybacks just so happen to be at record levels again.

Didn’t this just happen recently?

Yep, good eye. Almost exactly three months ago, we reported that buybacks were reaching near record highs, and they’ve just kept going up ever since.

Goldman Sachs is bumping up its 2022 buyback projections toward a trillion. That’s a 12% increase from 2021, which was already an exceptional year for buybacks across the board, up 9.3% from the record $806.4 billion 2018 level.

Numerous companies (here’s a full list) have announced 2022 buyback plans for anywhere from $15 million to $25 billion. Some of the most notable in the pack have been big names like Alibaba ($25 billion), Cisco ($15 billion), Colgate-Palmolive ($5 billion), and Twitter ($4 billion). Even Amazon announced a $10 billion buyback plan in its recent stock split news.

What these signal to investors

Buybacks are amongst the controversial caveats of capitalism. Some would argue that companies would do better to spend buyback funds on research, employees, and capital expenditures to grow the business, rather than solely focus on prettier numbers in the short term. Regulators are becoming wary of the practice, too, with SEC Chair Gary Gensler vowing to put the brakes on it.

Then again, companies also may have amplified their buyback plans to steady the waters and reassure shareholders through what’s been a rough ride thus far in 2022. Not only can buybacks signal internal confidence, but they also increase earnings per share (EPS) by reducing the number of shares outstanding.

Bringing it all together

All-in-all, we find ourselves in a volatile market with extremes in either direction. If you try and decipher what it all means and where we’re headed, you may be locking yourself in your office contemplating for a long time.

Ultimately, you should evaluate these buyback reports on a case-by-case basis, based on your view of the relevant business, and whether you’re invested at all.

CRYPTO & NFTs

Has The NFT Mania Hit Its Peak?

For the most part, trends come and go in cycles, and investing has been no stranger to this reality over the last 18 months. Between outsized returns, crypto, meme stocks, and NFTs, we’ve seen our fair share of fads and hype cycles by now, but what remains when the dust settles?

NFTs are likely the most questionable in the group. To say the niche asset class they created forms a nascent, intriguing market would be an understatement. But they’re so weird that even crypto connoisseurs act circumspect towards them at times. So, does that mean they are in a bubble that's about to burst?

In a slump

Sales are down: 26,000 per day, that’s how many primary NFT sales there were at the beginning of 2022. Yet, by March, that number had dropped to nearly 3,000. The secondary market is down similarly, sliding from its January peak of 38k to just 8k by March.
Volume is down: One of the most popular NFT trading platforms, OpenSea, saw a daily volume peak of $248M in February, only for it to fall all the way down to $50M a few weeks later. Active accounts are also down, having gone from 380k in November to 194k most recently.

Average price is down: The average sale price of any given NFT was down to about $2k per most recent data, whereas just two months ago, that number was $6,800. That’s a 70% decline.
Overall value is down: Although a little harder to calculate, the NFT space does in fact have a rough market cap. That number used to exceed $23 billion, but now it’s down to around $10 billion. Besides, the market rout did not spare the value of some of the niche’s most popular collections. For example, the well-known Bored Apes played a substantial role in coloring the market’s candlesticks in red with a 44% drop in prices since the war in Ukraine started.

Bubble bursting, or just some acclimation?

These numbers don’t look good. But when we consider the bigger picture, neither have the traditional markets'. In light of the bad news, it’s also worth noting that the NFT market did explode beyond measure last year, lifting its total sales by 200x from $82.5M in 2020 to $17.7 billion. Doesn’t that make the recent dip seem smaller?

🖼️ Related lesson on this topic:

NFT Basics

Investing Basics

7 mins

CAR MARKET

How Much More Expensive Are Used and New Cars This Year?

Did you know I could sell my 2013 Honda Accord for about $16k right now, a car I paid $9k for in 2020? (It's your Gist writer, Austin, here.) Indeed, the market is insane for both new and used cars. We know, you know, who doesn’t? But how bad is it?

The last time we debriefed you on this was only 5 months ago, and it was already bad enough as is.

The situation in numbers

Used or new, both are bad. Year over year, new vehicles were roughly 12% more expensive this January compared to last year, and yet used ones were up 40.5% on their own, according to the Labor Department. Edmunds.com also reported that 82% of new car buyers paid over sticker price for their ride in January 2022.
Things may be easing a tiny bit. Wholesale auction company Manheim reported that the average price of used vehicles it sold at their auctions dropped 2.1% in February alone. Annualized, that would translate to a 22.5% decrease. Will prices continue falling at that rate? Highly unlikely, but it’s welcomed nonetheless.

Making the most of this. This vehicle market is similar to the white-hot housing market we’ve been in. Sure, you may have a lot of equity and selling sounds great, but you also have to replace what you sold in most cases. So, the best way to navigate this situation is to either hold on to what you own, have a good deal lined up, or simply downgrade and pocket the difference.

🚗 Related lesson on this topic:

Buy a New or Used Car?

Cars

5 mins

🔥 TODAY'S MOVERS & SHAKERS

Alibaba (+12.3%) will increase its share buyback program from $15 billion to $25 billion, likely the largest share repurchase program ever in China’s internet sector; BABA's stock price has fallen by 57% in the past year
Nike (+4.7%) beat profit and revenue estimates; sales growth for the quarter was driven by digital sales in North America
Tencent Music (+10.4%) reported better than expected profits and said it would pursue a secondary listing on the Hong Kong Stock Exchange
Bitcoin (BTC): +4% to $42,700
Ethereum (ETH): +4.1% to $3,013

This commentary is as of 8:30 am PDT.

🌊 BY THE WAY

Answer: Used-car prices rose 40.5% in January from a year ago, according to the Labor Department (USA Today)
🖼️ New planned ETF targets NFT-related stocks (Blockworks)
ICYMI. The implication of war on markets (Finny)
Finny lesson of the day: Many of us are in the thick of the US tax season, but do you know what tax-related items are outlined or deducted from your paycheck? If you're not so sure, it might be worth zooming in on it:

Understanding Your Paycheck

Benefits @ Work

9 mins

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About Finny

Finny is a financial education platform on a mission to make your money work for you. We offer a personalized learning platform through bite-size, jargon-free lessons, money trends & insights to teams & companies.

The Gist is Finny's twice a week (Tues & Thurs) newsletter covering personal finance & investing insights and money trends. Finny does not offer investment and stock advice or endorsements. The editorial team: Austin Payne, Othmane Zizi, Chihee Kim.

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