• Why does Warren Buffett favor Japanese consortia?
• How are Wall Street investors responding to the potential ripple effect news?
• What are the key differences between sponsored and unsponsored ADRs?
MARKET MOVEMENTS
Dow Jones
S&P 500
Nasdaq
33,374.56 (-0.13%)
4,157.68 (-0.02%)
13,608.95 (+0.14%)
Opening price as of 05/18/2022 compared to last close
IN THE HEADLINES
Concerns on Wall Street Over Potential $1 Trillion Ripple Effect from Debt Agreement
President Biden is considering using the 14th Amendment to render the concept of a debt ceiling obsolete, which could face legal challenges but could also neutralize future debt crises. The uncertainty surrounding these potential solutions could lead to market volatility. Read more
A financial-sector update soothed investors
Western Alliance, a regional bank previously under scrutiny for stability concerns, announced increasing deposits this quarter, alleviating anxiety over the sector's future amidst recent banking tumult since mid-March. This announcement led to a 10% rise in Western Alliance's shares, echoed by a 7.3% increase in the KBW Nasdaq Regional Banking Index, the highest since 2021. Read more
TikTok is completely banned in Montana
Montana's Governor Greg Gianforte has signed a bill banning TikTok, starting January 1, 2024. This legislation, which demands app stores stop offering TikTok within the state, has been criticized for infringing on First Amendment rights and lacking national security evidence. The ban will be lifted if TikTok is sold to a company not from a foreign adversary nation. Read more
TradeUP TIDBITS
Warren Buffett recently visited Japan again (10 years after his last visit). He expressed a bullish outlook on the Japanese stock market and considered raising his stakes. In fact, in recent years, Mr. Buffett has been buying Japanese assets, including Japan's five largest trading companies and using Japan's low interest rates to issue large amounts of yen bonds. According to Berkshire Hathaway’s 13F filings, by 2022 Q4, the size of the position has exceeded $13 billion with a conservative estimated net gain of $4.5 billion.
When we do the math, the size of Berkshire's yen-denominated liabilities exceeded $7.8 billion in 2022 Q4. In Japan's extremely low interest rate environment, the average spread between the yen and the US dollar reached 2.5% in 2022. In the meantime, the yen depreciated by nearly 14% in 2022, so Berkshire was able to save $200 million in interest and make $1 billion in exchange rate profits just from those two factors alone. Read more on our blog
INVESTOR TIPS
American Depositary Receipts (ADRs) represent a claim to foreign securities while the actual underlying shares are held by U.S. Banks located overseas. ADRs trade in U.S. Markets, either on an exchange or over-the-counter. An ADR may be sponsored or unsponsored. For a sponsored ADR, the company whose stock underlies the ADR pays a depositary bank to issue ADR shares in the U.S. This sponsorship permits the company to raise capital in the U.S. and list the ADR on either the NYSE or Nasdaq. For an unsponsored ADR, the company does not pay for the cost associated with trading in the U.S. Unsponsored ADRs trade in the OTC market and are usually quoted on the OTC Link.
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