The NorthView Compass
There’s certainly a lot to celebrate and reflect on from a wild February 2021: Tom Brady wins his 7th (!) Super Bowl; GameStop rocks the markets and the news; Hall of Famer and former Negro Leagues player Hammerin’ Hank Aaron passes away; Texas spends a week battling frigid temperatures colder than Alaska, and many other shocking and amazing events round out the shortest month of the year. Oh and lest we forget, Happy belated National Pizza Day (February 9) and Margarita Day (February 22).
Thank you all for the wonderful feedback from our first edition last month. We’re so glad you decided to stick around and we hope to continue providing valuable content to companies and their advisors in our network.
About NorthView Advisors
NorthView Advisors is a full-service, lower-middle market focused, investment bank that prides itself in establishing and maintaining meaningful, personal relationships with its clients and investors.
Celebrating Black History
In the wise words of Morgan Freeman, “Black History is American history,” and it ought to be taught and celebrated in every classroom, boardroom, office, and home around the country. Thank you to those brave men and women, present and past, who continue to encourage and inspire future generations to embrace equality and fair treatment of all people, regardless of the color of one’s skin.
According to McKinsey:
The share of minority-owned businesses is highest in the industries most affected by COVID, and yet those same minority-owned businesses have committed to supporting their communities and employees almost twice as much.
This Month’s Financial Concept
2021, the Year of the Taper Tantrum 2.0?
What's a Taper Tantrum?
The term was coined in 2013 after the surge in US Treasury yields was a result of the Federal Reserve’s (the “Fed”) announcement of future tapering of its policy of quantitative easing – slowing the pace of Treasury Bond purchases, which reduced the amount of money feeding the economy. The ensuing rise in bond yields led to a media hyped “tantrum” stemming from fears that the stock market would crumble as a result. Coincidentally, they did not in 2013; however, money outflows, particularly from emerging markets, were substantial.
Is 2021 another Taper Tantrum?
Potential deja vu as we go in to March 2021 where the 10-year US Treasury rates have increased from 0.9 to 1.4% (a 55% increase YTD), so the answer is…Maybe. Or maybe it’s not a short-lived “tantrum” at all and is something much longer-term.
Why might this matter to you?
If you’re a borrower and this Taper Tantrum actually occurs, it probably doesn’t matter to you, that is of course so long as it corrects quickly like it did in 2013.
If this becomes a more long-term trend and thus the yields on Treasuries continue to rise, coupled with inflationary pressures from a low interest rate environment over the last decade+, investors would then have a reduced incentive to lend at lower rates and/or invest in riskier assets such as equity. Therefore, the interest rate, and margin spread you may be paying on your debt now, is likely to go up in kind to adjust for higher risk compared to US Treasury yield.
We’re not suggesting that there will even be a tapering event or a tantrum, or even a long-term reset. The goal was to simply introduce the concept.
What's a Quality of Earnings and Why Should I Care?
A dedicated resource of curated content for CFOs
Cliches are often overlooked as common sense, but they can also serve as good reminders to keep us from overlooking our common sense. As the saying goes, “better to get money when you can, not when you have to” reminds us to take the opportunity when it’s available. Liquidity’s the lifeblood of any business, right now there’s both ample opportunity and methods available to secure it.
A dedicated resource for M&A news, announcements, and insights
Like every other aspect of work, COVID has changed the way M&A transactions are being executed. To be successful in this environment dealmakers are adapting their tools and perspectives, and embracing a more unconventional approach.
Data indicates M&A activity is rising and is expected to continue doing so throughout the year. As we near the end of Q1 in ’21, here are some overarching trends and how they’re influencing transactions.
Other Recommended Reads
The Four Greatest Words in Sports
Baseball is back with Pitchers and Catchers reporting to Spring Training as early as February 17 with First Full Squad workouts starting February 22.
While it pains us to post a Dodgers pic, they certainly deserve every bit of credit for what they did in 2020. Hopefully, this season will bring back fans in seats, the DH to the National League, and a full 162 game schedule.
Our favorite to win the 2021 World Series? Well, our last prediction saw the Chiefs lose to a 42 year old, although he is the GOAT…so in that case, yes, we’ll go with the Trevor Bauer sweepstakes winner, the Los Angeles Dodgers. Here’s to hoping that the back-to-back jinx is on.