From Anna's Desk: SPACs Lose Their Luster Bitcoin & Other Cryptocurrency Prices Fall Amid Volatility Fun Facts IN BRIEF
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J9833_Newsletter R3.qxp 6/25/21 1:07 PM Page 1
JULY/AUGUST 2021
A PUBLICATION FROM COMPREHENSIVE FINANCIAL SERVICES VOLUME XXXI • NUMBER 10
• From Anna’s Desk: SPACs Lose Their Luster
• Bitcoin & Other Cryptocurrency Prices
Fall Amid Volatility
• Fun Facts
• IN BRIEF:
Anna Luke, CFP®, PFP® California Insurance License #0D00106 www.cfsburbank.com
Registered Representative offers securities and advisory services through Independent Financial Group, LLC (IFG), a registered broker-dealer and investment advisor.
Member FINRA/SIPC. Comprehensive Financial Services and IFG are unaffiliated entities.
J9833_Newsletter R3.qxp 6/25/21 1:07 PM Page 2
FINANCIAL INSIGHTS PAGE 2 JULY/AUGUST 2021
From Anna’s Desk:
SPACs Lose Their Luster
Those related to SPACs have been
among the worst hit by the selloff and
have been battered by signals that
regulators are increasing scrutiny of
blank-check firms.
The swift change in momentum for
what was one of the winter’s hottest
investments shows how quickly volatile
assets from startups to crypto-
currencies can inflict pain on traders.
Early this year, nearly all SPACs were
rising, even when there was little
fundamental reason behind the gains.
Now, nearly all companies tied to the
sector are in a uniform free fall,
engulfing names backed by even the
most popular SPAC creators. SPACs
Shares of special-purpose acquisition are shell companies that list on an
Staff Contact Information
companies (“SPACs”) and firms they exchange with the sole purpose of
have taken public are tumbling, Anna Anna@cfsburbank.com
acquiring a private firm to take it
punishing individual investors who piled Phone: 818-846-8092, ext.3
public. The private company, often a
into the once-hot sector. You may startup, then gets the SPAC’s place in
remember that we covered the SPAC Lisa Lisa@cfsburbank.com
the stock market. Many individuals Phone: 818-846-8092, ext. 3
growth phenomenon in our last issue of view SPACs as a way to get in early
Financial Insights. Due to the with exciting companies of the future— Martha Martha@cfsburbank.com
volatility of such investments, we are and companies that go public through a Clients (A – G)
already in a position to address the SPAC are allowed to make rosy Phone: 818-846-8092, ext. 4
subsequent decline. projections that aren’t allowed in
Popular firms tied to the sector such traditional initial public offering. Kayleigh Kayleigh@cfsburbank.com
Clients (H – M)
as electric-car battery company
Phone: 818-846-8092, ext. 2
QuantumScape Corp. and space-
tourism firm Virgin Galactic Holdings
Ben Ben@cfsburbank.com
Inc. are down 50% or more during that Clients (N – Z)
span. SPACs listing splashy firms such Phone: 818-846-8092, ext. 8
as electric-car startup Lucid Motors
Inc. and personal-finance company Victor Victor@cfsburbank.com
Social Finance Inc. are also taking a Phone: 818-846-8092, ext. 5
beating.
Jackie Jackie@cfsburbank.com
The reversal shows the risks that Phone: 818-846-8092, ext. 7
come with popular speculative trades.
It is occurring as investors retreat from Ian Ian@cfsburbank.com
technology stocks amid fears that rising Phone: 818-846-8092, ext. 9
inflation will force the Federal Reserve
to end its easy-money policies more
quickly than anticipated. Those
concerns make wagers on rapidly
growing companies less appealing.
J9833_Newsletter R3.qxp 6/25/21 1:07 PM Page 3
FINANCIAL INSIGHTS PAGE 3 JULY/AUGUST 2021
Blank-check firms have raised a record $103 billion this Bitcoin & Other Cryptocurrency
year, according to data provider SPAC Research.
Prices Fall Amid Volatility
Several SPAC-related companies were among the most
heavily traded stocks on brokerages such as Robinhood
Markets Inc. earlier this year. The outsize trading activity
Bitcoin, the volatile digital currency that briefly became a
coincided with gains in shares of videogame company
trillion-dollar market, plunged in May as its monthlong slide
GameStop Corp. and other popular stocks but has now
morphed into a frenzied selloff.
turned into a rout for some investors who did not sell.
Cryptocurrencies have surged over the past year on a
The losses lend credence to the idea that SPAC mergers
wave of speculative excitement, spurred by famous backers
enrich insiders through unique incentives while often
as varied as Elon Musk, Paul Tudor Jones and Snoop Dogg.
sticking individual investors with losses if shares struggle,
That gave the small but growing crowd of bulls a feeling of
skeptics say. SPAC creators are typically protected by the
inevitability that cryptocurrencies would mature into a
right to buy a chunk of shares at a steep discount, while
significant asset class in their own right. Bitcoin, they
savvy professional investors often quickly sell their SPAC
wagered, might even fulfill its initial vision and become a
shares before deals are completed to minimize losses.
legitimate alternative currency.
Still, even SPAC insiders have seen their paper profits
But the same volatility that drove prices higher also sent
slashed in recent weeks. One reason for the volatility is that
them relentlessly lower.
many investors have used options and warrants to amplify
their SPAC wagers. Both options and warrants are much Bitcoin, which traded around $7,000 at the beginning of
more volatile than underlying shares, and frenzied trading 2020, peaked at $64,829 in mid-April. It then fell nearly fifty
in them can exacerbate stock moves in either direction. percent within a month.
The declines in shares tied to SPACs since February “Many people have been tempted to invest purely because
coincide with outflows from ETFs tied to the sector and a it has gone up in value and they have a fear of missing out,”
drop in stock-market and options-trading activity by said Rick Eling, investment director at wealth management
individual investors in March and April after such activity firm Quilter.
boomed to start the year, according to data compiled by JP
Morgan Chase & Co. “Bitcoin is a volatile asset, and as we have seen so often in
financial markets, boom is almost always followed by bust.”
(Wall Street Journal; Anna Luke)
The selloff extended to other digital currencies as well.
Since mid-May, value of the cryptocurrency market fell by
more than $470 billion to about $1.66 trillion. Those losses
are partially a result of how the market is structured.
Crypto markets trade 24 hours a day, seven days a week on
hundreds of exchanges around the world. Once momentum
accelerates in either direction there is no closing bell or
circuit breaker to slow trading.
Bitcoin bulls sitting on massive long-term gains might be
able to laugh off the most recent selloff in it and other
cryptocurrencies, but the episode exposes flaws in the
argument for Bitcoin as a true substitute for sovereign
currencies.
Fun Facts (Wall Street Journal; Anna Luke)
Crypto Ownership Now
•21.2m in the US, 14% of Americans
•Average Age: 38
•Average Annual Salary: $110k
•74% Male
Source: Markets Insider
J9833_Newsletter R3.qxp 6/25/21 1:07 PM Page 4
FINANCIAL INSIGHTS PAGE 4 JULY/AUGUST 2021
IN BRIEF
• Global coronavirus cases passed 164
million, and deaths topped 3.4
million. Meanwhile more than 1.5
billion vaccine doses have been
given.
• U.S. gasoline prices averaged above
$3 a gallon for the first time in more
than six years on May 12. The surge
following the May 7 shutdown of the
Colonial Pipeline, North America’s
biggest petroleum conduit, after a
cyberattack.
• The National Rifle Association had
its bankruptcy filing tossed out.
• Bankrupt car rental company Hertz
was sold to private equity buyers
Knighthead Capital Management
and Certares Management. The
deal gives each share of stock a
recovery value of about $8. It’s a
victory for shareholders, who only
recently faced the prospect of being
wiped out.
• Commodity prices are on a tear as
economies emerge from the depths
of the pandemic. Copper surged to a
high this month, surpassing $10k a
ton. For the first time in two
months, crude oil jumped above $70
per bbl. Iron ore has also hit a high,
reaching more than $200 a ton.
Source: Bloomberg Businessweek
J9833_Newsletter R3.qxp 6/25/21 1:07 PM Page 5
FINANCIAL INSIGHTS PAGE 5 JULY/AUGUST 2021
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HAPPY BIRTHDAY
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J9833_Newsletter R3.qxp 6/25/21 1:08 PM Page 6
FINANCIAL INSIGHTS PAGE 6 JULY/AUGUST 2021
Brain Teaser #118
Name Calling
Decipher the encoded words in the quip below The first person with the correct answer will receive an
using the numbers and letters on the phone pad. American Express gift card. Please email your answer to
Jackie@cfsburbank.com or call (818)-846-8092, ext. 7.
Remember that each number can stand for 3 or 4
possible letters.
Use your smartphone
to visit our website!
4-7-2-8-4-8-9
always wins
PRSRT STD
U.S. POSTAGE
PAID
Anna Luke, CFP®, PFP® PACIFIC RIM
Comprehensive Financial Services MAILERS
3811 W. Burbank Blvd.
Burbank, CA 91505-2116
818-846-8092
anna@cfsburbank.com
www.cfsburbank.com
In This Issue
䡵 From Anna’s Desk:SPACs Lose Their Luster
䡵 Bitcoin & Other Cryptocurrency Prices
Fall Amid Volatility
䡵 Fun Facts
䡵 IN BRIEF
䡵 Brain Teaser #118
Brain Teaser #117 (Answer)
He needs to cut 42 bread cubes. A bimonthly newsletter published by Comprehensive Financial Services
3811 W. Burbank Blvd. • Burbank, CA 91505 • Tel: 818.846.8092 •Fax: 818.845.2010
Thanks for all of you who submitted the www.cfsburbank.com
answers! The first person with the correct
answer was Emil Klimach. Comprehensive Financial Services is a diversified financial services and planning
company. The firm offers investment counseling, financial planning, money
Congratulations, Emil!
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