Welcome to Bespoke Brunch Reads — a linkfest of the favorite things we read over the past week. The links are mostly market related, but there are some other interesting subjects covered as well. We hope you enjoy the food for thought as a supplement to the research we provide you during the week.

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Cars

Standstill Traffic May Be the Only Thing Keeping Crash Deaths From Skyrocketing by Alissa Walker (Curbed)

Despite a pandemic-fueled collapse in the number of vehicle miles travelled, traffic deaths soared in 2020 as clear roads meant higher speeds and more death. [Link]

We Called 8 Dealerships Asking About EVs. Here’s What They Told Us by Adam Ismail (Jalopnik)

Whether or not dealerships embrace electric vehicles will be a key to how fast they roll out in the United States, and the early indication from this informal review of dealerships across the country. [Link]

Speculation

Young retail investors plan to spend almost half of their stimulus checks on stocks, Deutsche survey claims by Holly Ellyatt (CNBC)

A survey of retail investors suggest that the latest round of stimulus checks are in large part destined for the equity market, driven mostly by younger stock buyers. [Link]

The most frequently asked questions by Robinhood traders reveal ‘new type of uninformed equity-market participant’ by Andrew Keshner (MarketWatch)

During Robinhood platform outages, stocks that were widely owned by Robinhood traders became more liquid and less volatile, suggesting that high volume free to trade buyers and sellers on the platform are adding noise to market prices. [Link]

SPAC Pioneers Reap the Rewards After Waiting Nearly 30 Years by Amrith Ramkumar (WSJ)

Blank check companies were first introduced in 1993 but didn’t really catch on until the last few years; they’re now 70% of IPOs and have raised $75bn this year alone. [Link; paywall]

NFTs

The Whales of NBA Top Shot Made a Fortune Buying LeBron Highlights by Ben Cohen (WSJ)

Digital trading cards known as non-fungible tokens have proven to be a spectacular speculation, with unique clips (which are of course widely available on YouTube or other sites) trading for millions of dollars. [Link; paywall]

Why the NFT Craze Is a Bubble Waiting to Pop by James Surowiecki (Marker)

Unique digital assets are the latest mania fueled by blockchain technology and rabid speculator enthusiasm for the next big thing. [Link]

Tech

This Chip for AI Works Using Light, Not Electrons by Will Knight (Wired)

Instead of running electrons through transistors, a startup that got its beginnings at MIT is using light to build chips that have radically higher throughput potential…if they work. [Link; soft paywall]

Tesla Is Plugging a Secret Mega-Battery Into the Texas Grid by Dana Hull and Naureen Malik (Yahoo! Finance/Bloomberg)

A subsidiary of the electric vehicle company is developing a battery near Houston that can store 100 megawatts, enough to power 20,000 homes on a hot day in Texas. [Link]

POLITICO Playbook: Scoop: Biden taps another Big Tech trustbuster by Ryan Lizza, Tarra Palmeri, Eugene Daniels, and Rachael Bade (Politico)

The Biden Administration has made multiple appointments that suggest a tight focus on antitrust in the tech industry, with a White House economic advisor and a Federal Trade Commission member both falling inside that category. [Link]

Weird News

The bizarre tale of the world’s last lost tourist, who thought Maine was San Francisco by Andrew Chamings (SFGate)

Back in 1977, a German tourist got confused on a layover and mistook Bangor, Maine for San Francisco, sparking an international media frenzy over a very confused man who spoke no English. [Link]

Brood X cicadas are about to put on one of the wildest shows in nature. And D.C. is the main stage. by Darryl Fears (WaPo)

The Delaware Valley, central Midwest, Hamptons, and eastern Tennessee are all due to receive an unholy storm of cicadas this summer as Brood X emerges from its long slumber. [Link; soft paywall]

Tax Trouble

He Got $300,000 From Credit-Card Rewards. The IRS Said It Was Taxable Income. by Richard Rubin (WSJ)

A physicist who spent $6.4mm on gift cards which he rolled into money orders deposited to his bank. The transactions were so large and numerous that they were flagged by the Treasury Department, eventually leading to an IRS investigation. [Link; paywall]

Food & Drink

Union officials: Tate’s Bake Shop workers threatened with deportation if they unionize (Long Island News 12)

Undocumented workers for Long Island bakery Tate’s are being threatened with deportation in response to a unionization drive. Tate’s is owned by Mondelez. [Link; auto-playing video]

The True Cost of a Cocktail by John Debary (Punch)

Ever wonder why a drink at a cocktail bar hits your wallet so hard? A breakdown of the costs that a cocktail typically embeds in its high menu price. [Link]

Furniture

Booming furniture sales mean ‘unprecedented’ delays for sofas and desks by Abha Bhattarai (WaPo)

Huge demand for furniture to upgrade homes that Americans are spending far more time in than usual is driving an unprecedented disruption to supply chains. [Link; soft paywall]

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Have a great weekend!

Last night the Federal Reserve updated its quarterly Flow of Funds (Z.1) report for Q4. The quarterly report measures income, savings, assets, and liabilities of various macroeconomic sectors. Looking at households specifically, we can measure aggregate exposure to stocks by looking at their holdings of equity investments relative to other assets. We note that this does not include mutual fund shares but it does include ETFs, closed-end funds, and REITs.

As shown below, the value of equity market assets held by households is up to 16.8/% of total assets, the highest since Q3 of 1969 and surpassing the 16.7% peak from the tech bubble. Looking at financial assets only, equity exposure is the highest since the 24.2% peak from 2000, but is nonetheless extremely elevated. We should note that while this signal is certainly a contrarian indicator, it doesn’t necessarily mean that equity markets must decline in value; there’s no reason that markets can’t continue to climb and raise the share of equity ownership further.

Things look different when we include household holdings of mutual funds and other exposure to equities. In the chart below we account for indirect allocations to equities. By this measure, Q4 equity market exposure rose to 38.0% of financial assets (versus the Q1 2000 peak of 38.3%). Equity exposure as a percentage of all financial assets hit a record, surpassing the old peak of 26.4% with a 27.0% reading in Q4. In short, households are very aggressively exposed to equity markets.  This blog post is adapted from an analysis included in our nightly Closer report.  Click here to start a free trial of Bespoke Institutional to get immediate access.

As equities have rebounded in the past week with the S&P 500 and Dow returning to all-time highs today, sentiment has gotten a boost.  After falling in back-to-back weeks, bullish sentiment as measured by the AAII’s weekly survey snapped back rising 9.1 percentage points to 49.4%.  That was the biggest one-week increase since the week of November 12th when it rose 17.88 percentage points, and it is also the highest level of bullish sentiment since then.

The declines in bullish sentiment of the prior two weeks saw neutral rather than bearish sentiment pick up the difference. This week again bearish sentiment went less changed than bullish or neutral.  Bearish sentiment was only slightly lower falling 1.8 percentage points to 23.5%.  That is the lowest level of bearish sentiment since the second to last week of 2020 when it bottomed out at 21.99%.

That means the gains in bullish sentiment took from the big decline in the percentage of respondents reporting as neutral.  Only 27.1% of respondents reported as neutral this week, down 7.3 percentage points from the prior week.  That was the largest single-week decline since the end of 2020 as sentiment is back to the same level as the start of February.

These changes in sentiment have meant that the bull-bear spread took a sharp move higher rising to 25.9.  That is the highest level in the spread since the first week of December when it was slightly higher at 26.41. Prior to that, the only recent reading that was as high was November 12th which was the highest level in over two years.

While the AAII’s survey has reflected the bounce in equities over the past week, another sentiment survey is not yet reflecting this week’s price action.  The Investors Intelligence survey of equity newsletter writers showed bullish sentiment fell 2.9 percentage points to 51%.  That is the lowest level since the end of last May when it was 50.5%. Meanwhile, bearish sentiment rose 2 percentage points to 20.6%; the highest since early November.  This survey also queries respondents on whether or not they are looking for a correction.  With the Nasdaq having met the technical definition of a correction earlier this week (a 10% decline from a high), it’s not surprising that the highest share of respondents, 28.4%, reported that they are looking for a correction since late September.  Click here to view Bespoke’s premium membership options for our best research available.