Barron’s Weekend Summary: Bitcoin and other cryptocurrencies have lost $1.6T of value since the market peaked last November.
Cover Story:
Bitcoin and other cryptocurrencies have lost $1.6T of value since the market peaked last November. Tighter monetary policy and fears of a recession are weighing not only on stocks but also, in the case of crypto, on an asset whose hype has long exceeded its real-world uses. The recent collapse of a major “stablecoin,” which wiped out $40B in a few weeks, isn’t instilling confidence in the crypto ecosystem, either. Still, Bitcoin is up fivefold from its pre-pandemic days, and the industry has expanded to legions of other blockchains, tokens, and apps.
Interview:
No interview feature this week
Tech Trader:
-Many tech stocks have tumbled, but a small cloud stock has become more attractive. Snowflake is a cloud-based data warehousing company. It provides software on top of the giant data piles stored in public clouds—Amazon Web Services, Microsoft Azure, and Google Cloud—to help customers manage, analyze, and act on information about customers and their own businesses. Snowflake serves companies in many markets, including financial services, healthcare, retailing, media, and technology, helping to generate insights about their businesses and to provide customers with content and experiences.
The Trader:
-The stock market ended it’s a weeks-long losing streak. But it does not mean this stock market is any good.
Still, it was quite the relief when the market finally managed to string together a few good days, enough for the DJIA to gain 6.2% for the week, ending an eight-week losing streak. After seven long weeks of declines, the S&P 500 rose 6.6%, and the NASDAQ gained 6.9%. And that was reason enough for optimism.
-Pet food retailer Chewy is set to report earnings this coming Wednesday. It’s expected to report a loss of $0.10/share on sales of $2.41B, and a profit on adjusted earnings before interest, taxes, amortization, and depreciation—or EBITDA—of $6M. That could be optimistic. Raymond James analyst Aaron Kessler estimates that total revenue could come in at $2.42B, while adjusted Ebitda could come in at a loss of $22.7M.
-Bank stocks had a great week, and they can thank JPMorgan Chase. Not every bank is JPMorgan, however, and investors should be selective in choosing which ones to buy. JPMorgan held its investor day on Monday, and it was well celebrated by investors. Perhaps it was the fact that the company maintained its target for a 17% return on tangible equity, or maybe it was because CEO Jamie Dimon talked up the strength of the US economy and the US consumer.
Features:
-Like many well-intentioned movements, the environmental, social and governance movement—ESG—has spawned unintended consequences. ESG has become a dominant force in recent years, attracting more than $40T in assets, driving profound impact on capital markets and through them the entire US economy. Emerging critiques of ESG are strongly grounded in the economic consequences of investors’ narrow focus on ESG priorities. For example, the cost of capital for activities frowned upon by ESG—like fossil fuel production—has significantly increased, contributing to inflation and undermining US energy security. Yet the concept of stakeholder capitalism is proving more durable. Sometimes conflated with ESG, stakeholder capitalism is the idea that businesses have responsibilities to more than just their shareholders. Despite the valid economic critiques of the consequences of ESG investing, no serious intellectual challenge to stakeholder capitalism has emerged.
-Some of the big tech stocks such as Alphabet, Meta (Facebook), and four more others might be bargains and investors might want to consider buying now. When the stock market gets pounded, bargains abound—or so it seems. But in a bear market, the key to investing success is separating the thoughtlessly discarded from the overpriced junk. With about 2/3 of the stocks in the S&P 500SPX +2.47% down more than 20% from their all-time highs and the index itself down 15%, many stocks are on sale. Investors have their pick of nearly every sector, from tech and communication services to consumer staples and discretionary.
European Trader:
European supermajors BP and Shell attract headlineses of three smaller companies— TotalEnergies, Repsol, and Equinor—are up sharply against a backdrop of falling stock markets. Whether they are worth holding now depends on whether investors prize them at current prices because of the solid outlook for dividends. On top of that, oil companies are under pressure as investors prioritize environmental, social, and governance-friendly firms. ESG investors are now realizing that oil companies have money to invest in, and much to gain from, the transition to a low-carbon future.
Emerging Markets:
Tether is making a push into emerging markets as competition grows with rival stablecoin issuer Circle.
The largest cryptocurrency after Bitcoin and Ether, Tether’s USDT has long been the leading stablecoin—a type of digital token pegged to a real asset, such as the dollar. But USDT’s dominance has recently come under pressure. Rival USD Coin (USDC), issued by BlackRock and Fidelity-backed Circle, is increasingly taking market share amid unanswered questions about Tether’s collateralization.
Commodities:
Relief is at hand for coffee lovers who have been blighted by soaring prices for the past year or so. For that, they can thank favorable weather in South America and lower-than-expected demand growth. “In the absence of a weather event, prices are likely to trend down,” says Carlos Mera, the head of agricultural commodities market research at Rabobank in London.
-Tariffs he imposed on some 8,000 Chinese imports cost US customers $8B last year, according to the Peterson Institute for International Economics. They show scant evidence of either spurring domestic substitution or wringing concessions out of Beijing. Yet President Joe Biden has only tightened them, cutting off ad hoc exclusions that importers could petition for under Trump.
Streetwise:
-Jack Hough examines the small-cap rebound and says that “Stocks have never divided perfectly into growth and value buckets, because most companies are meant to grow, and value is subjective. Rule of thumb: If you’re embarrassed to name the company but are proud of the price you paid, it might be a value stock. The opposite goes for growth.”