Barron’s Weekend Summary: The flurry of futures ETFs may be a turning point for Bitcoin and the broader crypto investment space
Cover Story:
-The flurry of futures ETFs may be a turning point for Bitcoin and the broader crypto investment space. Bitcoin came to life as a piece of libertarian digital agitprop—a decentralized money-transfer system aimed at swiping power from central bank fiat money and the broader financial establishment. That ethos still prevails in crypto, which remains both threatening and alluring to Wall Street.
Interview:
-Rajiv Jain, co-founder of GQG Partners, sees potential trouble ahead in shares of software companies. He’s also wary about the changes afoot in China, including a government crackdown on China’s biggest companies, debt troubles in its property sector, and an energy crisis as the economy slows. In a recent conversation with Barron’s, Jain discussed how these concerns are shaping his portfolio, why he is investing more in emerging markets, and the opportunity he sees in foreign banks. An edited version follows.
Tech Trader:
-Once primarily driven by its printer ink and toner business, it’s showing an impressive surge in innovation. On October 21, HP held its first analyst meeting in two years, and had surprisingly good news that drove the stock up 7%.HP now projects non-GAAP profits for fiscal 2022 of $4.07 to $4.27 a share, versus the previous Street consensus of $3.78. CFO Marie Myers made clear that most of the improvement would come from reduced share count, as HP keeps aggressively buying back stock. CEO Enrique Lores said that HP intends to continue returning at least 100% of its free cash flow to holders via buybacks and dividends.
The Trader:
- “China’s stock market is bouncing back after getting trounced for much of the year. Don’t be fooled into thinking it’s time to buy. While the declines in Chinese stocks reflect a lot of pessimism, analysts remain far too optimistic,” according to Cirrus Research’s Georgiana Fung. Indeed, “the rise in earnings expectations appear to be too buoyant,” Fung writes. “These cautionary readings signal lower expected returns to come.”
-After a nearly 2½-year hiatus, billionaires and the investors who follow their moves descended on Beverly Hills, Calif., to attend the Milken Institute Global Conference. The theme was “Charting a New Course,” but the discussions were often familiar—as was the ritzy setting. But Milken is an investor conference, and the current economic environment was still top of mind. Inflation concerns were discussed, if only to be dismissed.
-“The market is increasingly betting that the Fed will take action by raising rates to cool these inflationary pressures,” writes Joseph Kalish, chief global macro strategist at Ned Davis Research. Many of those pressures may have already been priced in. Some companies were forced to lower guidance because of rising costs, but for the most part, results have been solid. Through Wednesday, 99 companies had reported their results and just 10 missed analyst profit expectations, according to Bespoke Investment Group data, while 75% topped sales forecasts.
Features:
-As parents of children with special needs age, they should revisit the decisions they made —sometimes many years ago—regarding guardianship, beneficiaries, and other aspects of their child’s care. Forgetting to do so, experts say, can be costly from a benefits and estate-planning perspective and can have unintentional repercussions on your child’s care.
-The Roaring ’20s come to mind with the recent Federal Reserve report showing America’s richest 1% now own more wealth than the entire middle class. Economic inequality is at its highest since that decade—and some, including Jesse Colombo at the Real Investment Report, see a “common denominator” for the wealth disparity then and now: “A massive stock market bubble.” Is there a killer stalking us, too?
Europe:
-German chip maker Infineon Technologies should be benefiting from booming demand for its technology, as global economies bounce back from Covid-19 restrictions. The Munich-based semiconductor giant (IFX.Germany) designs, manufactures, tests, and sells the brains that control computers used in autos, industrial machines, and consumer electronics.
Emerging Markets:
-Debt-laden developer China Evergrande Group avoided a default on Friday, making a payment on its dollar bond coupon ahead of this weekend’s deadline, and Chinese stocks broadly have gotten a recent reprieve. But the reasons for investors to stay cautious on China-related investments are plentiful.
-Crypto use is expanding in two ways in emerging and frontier markets: from the bottom up through increasingly user-friendly exchanges like Paxful or Binance, and from the top down as governments roll out official digital currencies. An unlikely pioneer in this category is Cambodia, whose Bakong system has attracted six million users since launching a year ago, says Claire Wilson, a partner at Asia-based consultant Holland & Marie.
-Attacks like the one that initially cost Colonial Pipeline $4.4 million last spring aren’t carried out by the Russian government per se, which sticks to election meddling and traditional espionage. But the Kremlin sees an advantage in its criminal hackers, not to mention a likely cut of the proceeds for security officials.
“For Russia ransomware is a show of strength and source of intelligence,” says Josephine Wolff, who teaches cybersecurity policy at Tufts University’s Fletcher School. “They have the upper hand in this right now.”
Commodities:
-Drought conditions in the U.S. and elsewhere are behind the tight supplies and price gains for a range of commodities, including oats, wheat, soybeans, coffee, and even livestock.
That has contributed to food-price inflation. Food-at-home prices, referring to retail-store purchases, have climbed 2.1% this year compared with last year, according to the U.S. Department of Agriculture, with pork seeing the largest relative price increase at 5.4%. The USDA also expects food-at-home prices to climb 1.5% to 2.5% in 2022.
Streetwise:
-Editor Jack Hough thought he “had a decent asset allocation: a two-thirds weighting in overpriced stocks; most of the rest in fixed income, currently fixed to pay almost no income; and dutiful overseas exposure to both geriatric democracies and peppy police states. But it turns out I’m dangerously overloaded in reality. All of my investments relate to our physical existence as humans on Planet Earth, which, I don’t know if you’ve been following the headlines, but let’s just say I have a Hold rating on it.”