Monthly Market Debrief

Market Snapshot

Well, the market seemed to calm down from its tariff tumble. The 90-day pause has investors believing whatever tariffs are placed will be much less than liberation day.

The pause launched the S&P 500 to a 9% one day gain and some serious insider trading allegations. Several hours before the announcement, Trump tweeted truthed:

Did he tweet truth this to provide an alibi to anyone who knew about the future tariff pause before it was announced? Did he tweet truth his initials? Or the stock ticker for his social media company? *which shot up 22% after the tariff pause

A lot of the claims surround this tweet truth as insider trading. The tweet truth is not the insider trading, the tweet truth is the cover for insider trading. 18 minutes before Trump’s pause announcement, 5,105 $SPY call options with 0 days to expiration (bets that the market will rise THAT DAY) were placed for $4.20 (blaze it). Following the 9% rise in the stock market, the same options increased to $42. The $2.14 million bet was now worth $21.44 million. If the stock market didn’t rise that day, the $2.14 million would have been worth $0 only 3.5 hours later. 

Is that just expert timing? Or did someone know it was going to happen? If this goes to court (which will never happen), they can point to Trump’s public tweet truth and say I based my bet on this publicly available information, not insider information.

Before the dust even settled on that insider trader allegation, Trump’s meme coin $Trump spiked +50% after its website announced that the top 220 holders will be invited to a gala with the president.

The top 25 coin holders will get an exclusive reception with Trump. Don’t worry though, Trump is also a guest at the dinner and not soliciting any funds…..

This prompted Senators Schiff and Warren to request an ethics investigation into this pay-to-play corruption. I honestly think the worst offense is the AI images on his meme coin’s website depicting Trump’s head on top of Gavin Newsom’s body.

What a time to be alive.

Company Highlight - The Metals Company

Full disclosure, I do own stock in this company. I gambled on a risky investment, and I was (and still am) okay if the value goes to $0 (RIP Barnes and Noble). This is NOT a recommendation to buy TMC. 

On a humid morning in September of 2022, I listened to Promise and Peril at the Bottom of the Sea by the New York Times. This podcast detailed the potential at the bottom of the Pacific Ocean and some less than moral means that The Metals Company (TMC) allegedly took to get it.

There are little potato shaped nodules filled with manganese, nickel, cobalt, and copper – all essential elements for batteries – littered across the ocean floor. As the demand for electric cars picks up, the demand for these elements is increasing. TMC estimates there are enough minerals on the floor to produce over 300 million electric cars.

The issue is trying to pick up these shiny potatoes without destroying the ocean floor. TMC is currently testing different options to find the least disruptive method. It won’t be perfect, but they argue disrupting the ocean floor is probably better than burning forests to create huge open pit mines with human labor. Environmental disruption aside, another issue is how TMC got the rights to certain areas of the ocean.

In the 1960s, wealthy nations started to explore the ocean floor for these nodules. By 1980, the United Nations was concerned that only wealthy nations would be able to exploit these difficult to get resources. It created the International Seabed Authority (ISA) to regulate and evenly distribute the rights to international waters for mining purposes to ensure developing nations have the same opportunity as first world countries.

All the data collected since the 1960s was combined by this agency giving it immense insight into which areas had the highest concentration of electric potatoes. The intent was for developing nations to partner with contractors, come to the UN agency, and receive the rights to mine certain areas.

The New York Times reporting alleges that TMC received access to this confidential information. Then, TMC found developing nations willing to partner with them to go to the UN agency to receive the rights to highly concentrated portions of the floor. Since TMC had secret insight into the value of the resources, they allegedly wrote deals with developing nations that were extremely lopsided.

Look, I am not saying this was the correct take away, but I immediately bought stock in TMC after listening to this podcast. I was not the only one as TMC’s stock went from $1.07 at open to $1.35 at its peak that day, a 26% increase, with trading volume exceeding 18 million shares when a normal day is around 1 million.

Following this 2022 podcast, TMC’s market cap has been relatively flat with a few short lived spikes on developments in their harvesting of spicy potatoes. That was until liberation day.

Following the announcement of 10% 20% 34% 104% 125% 145% ??% tariffs on China, China responded by placing export controls on rare earth minerals allowing it to restrict how much the US can import. Since China currently produces 90% of the world’s rare earth minerals, they have serious leverage.

In an effort to curb this leverage, Trump signed an executive order last Thursday to rapidly develop “domestic capabilities for exploration, characterization, collection, and processing of critical deep seabed minerals.”

TMC is at the forefront of this industry. Their stock has benefited nicely from this executive order. Last Thursday, their stock peaked at $3.80, a 233% YTD increase.

This is far from over though. The United Nations and dozens of other countries have protested this order saying it damages international efforts to regulate and ensure the safety of any deep-sea mining. The previously mentioned, 1980 UN agency, ISA, claims it will have formal rules in place by the end of 2025… 45 years after its founding.

TMC’s stock will likely continue to be a rollercoaster as inevitable lawsuits are filed. I have enjoyed the ride so far and will continue to ride this stock to the moon (or the bottom of the ocean floor).

Current Event - Capital One Acquires Discover

On April 18th, Capital One announced it received approval to acquire Discover in a $35.3 billion all-stock deal. This ends the long saga that started in February of 2024 when the deal was first announced. 

As a quick review from a previous letter, there are two major teams in the credit card world:

Issuers - the institutions that you pay back for your credit card charges

• Capital One

• Discover

• American Express

• Chase

Issuers make money when you pay an annual fee or interest on balances.

Of the issuers, Capital One has a modest 10% of purchaser volume. Chase has 21%; AMEX has 19%; Citi has 10%. Discover isn’t even in the top 5 for issuers.

Networks - the institutions that transmit data between the issuer and merchant 

• Discover

• American Express

• Visa 

• Mastercard

Networks make money every time you swipe through a fee charged to the merchant. This is why you see credit card surcharges. 

Discover and American Express have a competitive advantage as they both issue cards that utilize their networks. 

Of the four networks, Discover is by far the lowest with only 3.5% market share. Visa has 52%; Mastercard has 25%; AMEX has 19.5%. 

This merger is essentially Capital One looking at Discover thinking they should be as big as AMEX but are failing. By buying Discover, Capital One can start to compete directly with AMEX. Why do I say AMEX is their competition? Just compare their ads. 

Capital One is all in on airport lounges, travel rewards, and entertainment perks. This aims directly at the AMEX Platinum market share.

By owning the network, Capital One will receive a consistent cash flow allowing them to reinvest into better rewards.

As someone who strongly believes that cash back is king, I am not personally excited about this merger. I am always excited though to see how this increases or changes competition with AMEX.

Debrief on Deck

Next Week, we will talk CDs (certificate of deposits). Why do banks offer them? What do you mean the money in my account is actually lent out? Why does the bank only pay me a fraction of the interest they earn with MY MONEY?? Anyway, more on that next week.

As always, please reach out with any questions, comments, or opinions. You can reply directly to this email.

Until then, stay the course.