Weekly Recap | October - W3
China's new taxe, Intuitive Surgery's quarter, Airbnb winter release, quaterly fair prices, crypto update, Apple's sales in China, more semis regulations & my (bearish) take on Europe.
Macro.
China New Taxes.
I talk so much about China because it certainly is the most interesting economic subjects at the moment, plus I am invested in Alibaba and could open more positions if their economic policies continue the right way. There are lots of opportunities in Chinese equities but they will yield returns only with great execution and proof that their market can be trusted. Hence my interest.
About the new policy: the CCP is introducing a 20% tax on profits realized outside of China. I do not see this as a punishment but as an incentive, an incentive to have a tax reductions if chinese invest locally. This will have two positive consequences.
Firstly, it will reduce the selling of the yuan. When Chinese fortunes invest overseas, they sell yuan to buy dollars or euros and this was acceptable while China needed a weak currency to favor exports and low labor costs. This isn’t the case anymore and strengthening the yuan would now make China richer.
Secondly, it will inject liquidity locally, helping resolve many of China’s current economic problems. Having Chinese fortunes invest locally will create more jobs and innovation while raising the buying power of Chinese citizens thanks to a stronger yuan and a stronger labor market.
Everything in this measure would help China realize its economic Herculean task of transitioning from its old economic model to a new one focused on local entrepreneurship & innovation.
The stock market reacted badly to this new because stocks do not care about economy; stocks care about liquidity, and taxes mean less liquidity. But in this specific case, it means more liquidity attributed to Chinese stocks and China at large, leading to more local consumption in the long term.
This is a pretty bullish measure in my opinion as long as we view it from a long-term economic framework. Chinese trade is still alive and strong and will continue to be very volatile.
Watched Stocks & Portfolio.
Intuitive Surgery Q3-24.
I did not do a full write-up for it because the company kept doing wonderfully, and it would have been a very short one with just some bullet points.
The number of procedures using their products grew 18% YoY while they installed 21.5% more surgical devices than last year for a total surgical system base of 9,539 systems, up 15% YoY.
Revenues grew 17% YoY and net income grew 35%, while gross margin stayed flat and net margins increased. Profitability also means positive free cash flow while the balance sheet remains immaculate.
Business is booming and the company is executing perfectly; this is what I personally expect for Transmedics as well since new and upgraded technologies in healthcare are necessary innovations for everyone. Sadly for us, the stock is still very expensive, impossible for me to start a position.
Airbnb Winter Release.
As usual, Airbnb released more upgrades to its application.
Starting with a “co-host” system allowing owners to find the best host around them to take care of their listings. Another way to improve the platform & service while rewarding excellent behavior & competences.
Owners without time will now be able to rely on quality hosts to manage their listings and upgrade what would have otherwise been only a “mediocre” home. Everyone wins.
This is the most interesting upgrade for this release but there are many more aimed at easing hosts' lives; better customization for messaging, a new display of income and listing statistics, or personalized details and filters for travelers based on their needs.
Fair Prices.
We had earnings from few companies this week and I’ll try to give my opinion on what their accumulation price would be for me if I were to buy them - although I don’t plan to buy everything I talk about. The idea is similar to when I presented it during my Investing - How & Why write-up.
Fair Price is the price above which I wouldn’t push my average price; Buy Price is the price at which I would buy next based on price action. Greens are stocks on my watchlist I would buy if they reached the proper price; orange are those I could be interested in but won’t prioritize over my watchlist.
Crypto Update.
I’ll do this one quickly for once.
Bitcoin broke its famous trendline and will apparently close the week around $68,000.
The buying pressure from the ETFs was the strongest in months with $2.13B of net inflows pushing total net inflows above $20B with Bitcoin over $60,000. This means buyers (big buyers) judge that Bitcoin above $60,000 is a good deal.
Heatmap and fundings didn’t change and point north over the medium term; having a retest around $64,000 or even less could shake most out of position but wouldn’t be a worry at all for me.
The SEC also authorized options on Bitcoin’s ETF which will boost speculation even more.
Still very bullish for Q4 and holding everything, including CLSK calls which are now up around 150% and my speculative PEPEBRC which stayed flat this week. I will update you either way when I sell and why; if I don’t say so assume that I am holding all positions.
Other Subjects.
Chips Export Regulation.
More potential regulations could affect U.S. chip makers as the Biden administration discusses more restrictions on selling these hardware to “certain Persian Gulf countries in the interest of national security”. This comes after banning their sales to China altogether last year.
These are always complex subjects that may never really happen and these countries will find ways to buy Nvidia’s or AMD’s chips regardless. From a strict market point of view reaction, well… Mr Market didn’t like it and ASML’s results didn’t help on Tuesday.
Seems to be a lot of noise in my opinion.
Apple New ATH.
Apple pushed just a little bit further and reached a new ATH this week due to apparently better-than-expected sales of their iPhones in China. The country has been uncertain after regulations from Chinese officials against the brand but the online journal Counterpoint seems to bring good news.
“Apple’s new iPhone 16 series saw a 20% sales increase in China during its first three weeks compared to 2023 models.”
Besides Apple, this could happen thanks to the different Chinese stimuli these last months. We said it would help companies like Tesla or Lululemon - which I own, and we already saw proof of this with record-high sales of EVs in the region; it surely will benefit Apple and others as well.
Europe is Doomed.
I do not put this in Macro because the truth is, no one cares about Europe anymore and this will be me maybe bitching a bit about the state of mind of the leaders of the countries I live in. I am not sure how interesting this can be for you so I kept it at the end.
Interest Rates.
First subject: The ECB reduced interest rates for the third consecutive time by 25 basis points. This is certainly good news somehow but I don’t think it really matters at all. Europeans will just get poorer at a slower rate than before but still faster than many other countries.
The problem in Europe is that any good news usually come with numerous bad news that reflect perfectly the mindset of our governments and the reasons why our countries are doomed.
France New Taxes.
Before starting: countries raising taxes usually indicates an unhealthy economy. There are no exceptions since taxes are typically the last resort governments use when nothing else is available anymore; this is explained in detail in my Bitcoin IC if you’re interested.
Many proposals have been proposed by the new French government; most won’t be accepted but again, this reflects rulers’ mentality. We’re talking about taxes based on nationality disregarding where you live r work, taxes on companies’ buybacks & dividends. They have already increased taxes on short-term rentals & are thinking about new ones while also raising taxes on inheritance.
Lastly but not least, an increase on the flat taxe applied to French citizens’ gains from investments from 30% to between 33% & 37% depending on yearly income.
This is for households but companies aren’t spared either; LVMH announced they’ll have to pay an exceptional tax of €1 billion this year. Total is already considering relocating its headquarters to the U.S.
How long before they all do?
Italy Taxes on Cryptos.
This will be shorter: Italy simply increased taxes on crypto asset gains from 27% to… 42%. So yes, if you are heavily invested and make, say, $100,000, you get to keep only $58,000 for yourself.
This was justified “because the phenomenom is spreading”.
El Salvador decided to join this movement and bought Bitcoins; Texas is doing the same with crypto miners while Italy decides to penalize those who made good decisions.
ECB & Bitcoin.
We’ve also had a beautiful paper published by the ECB explaining that Bitcoin was unfair contrary to what it claims, since those who bought earlier are now richer than those who didn’t (yes, they are paid to write these things..).
This is the entire concept of investing.
Conclusion.
We can see the contrast between China & Europe: one tries to keep liquidity locally, favorising local investments; While Europe continues taking from those who succeed not only from investments but also from any income.
Regardless of political views, Europe’s taxes will push capital away to countries with more favorable conditions - the UAE just exempted all crypto transactions from value-added tax, quite the timing. Do we really think those who invested well and made money will accept to pay 40%-ish of their gains in those countries? Or will they simply take their luggages and go away? What happens to a country when business owners, liquidities & those who succeed leave?
Food for thought.