Barron’s Weekend Summary: What should you know about bubbles in cryptos, meme stocks, and NFTs?
* Cover Story:
What should you know about bubbles in cryptos, meme stocks, and NFTs? This is the question that editor Jack Hough explores as he discusses the NYC.NFT conference. And his views are less than flattering: “What can compare with all of this? Not Dutch tulips selling for as much as houses in the 17th century. That was a cosmopolitan folly, not, as was misreported many years later, a ruinous mania, as University of Southern California historian Anne Goldgar has shown. The South Sea bubble comes a bit closer, but it featured a stock that gained tenfold in 1720 and set off a rush of dubious new offerings, which is nothing that the trend-chasers on Reddit haven’t seen.”
* Interview:
Slated for completion in 2026, Hobson College will occupy a prominent place on Princeton’s campus—and in history, as the school’s first residential college named after a Black woman, Mellody Hobson, the co-chief executive of Ariel Investments who manages some $17.3 billion worth of assets.Hobson, who along with her husband, Star Wars creator George Lucas, made the lead gift to fund the project. Indeed, Hobson has been tearing down figurative walls since she started her career at Ariel in 1991.“When I walked in the door, I knew I was going to work here forever,” says Hobson, who was recruited by Ariel’s founder, John Rogers, when she was a student at Princeton. Today, they share the role of chief executive officer for, with Hobson focused on running the business, and Rogers, on running the portfolios.
* Tech Trader:
Investors have abandoned the pandemic trade over the past few trading days, and I don’t think the process is quite finished. And the past week of tech earnings reflects this reality. Chegg which provides online tutoring, homework help, and other support services for high school and college students. Chegg shares dropped as much as 50% after the company warned that it’s losing students. Meanwhile, transportation and ‘mobility’ related companies like Lyft and Uber are noticing steady improvement. Lyft saw 73% revenue growth in the quarter, while Uber’s revenue jumped 72%.
* The Trader:
“Investors got a jolt Wednesday when American Eagle Outfitters announced the acquisition of Quiet Logistics, an operator of automated distribution centers near city centers, for $350 million. It wasn’t a small deal. The mall-based apparel retailer spent about 8% of its market cap on a distribution business. Quiet Logistics wasn’t even American Eagle’s first logistics buy: The retailer bought AirTerra, which focuses on middle-mile logistics, earlier in 2021.”
* Features:
-“A federal appeals court on Saturday temporarily blocked the Biden administration’s new rules that require many employers to ensure that their workers are vaccinated or tested weekly for Covid-19. A three-judge panel on the New Orleans-based Fifth U.S. Circuit Court of Appeals granted an emergency stay prohibiting enforcement of the rules for now, saying they raise “grave statutory and constitutional issues.”
- While some risks remain, Blade Air Mobility offers an interesting way to invest in the eVTOL future. The New York–based company has been likened to Uber Technologies (UBER). Like Uber, it doesn’t own vehicles, but instead has a network of 29 operators with many different aircraft transporting passengers and high-value cargo in cities around the world. It makes money by charging customers combinations of annual fees and per-ride ticket prices, and, like Uber, it takes a slice of sales.
-As a further sign that mobility is back, “shares of Expedia and Airbnb surged in premarket trading Friday as investors grew increasingly confident in the travel recovery following strong earnings reports. Both companies reported earnings late Thursday and provided further signs that the travel rebound is gathering pace. Airbnb stock was close to 6% up in premarket trading, while Expedia shares surged more than 14%.”
- The infrastructure bill passed in the House and commits $550 billion in new federal dollars to improve roads, bridges, highways, expand access to broadband internet, overhaul the electric grid, and other projects.
“The package allocates $39 billion for modernizing transit and $7.5 billion for building a network of electric-vehicle chargers. It also sets aside $89.9 billion for public transit spending over the next five years. These programs will be financed by $205 billion in economic relief that has been unspent during the Covid-19 pandemic, along with $53 billion worth of returned jobless benefits and leftover money from other programs.” Brian Vendig, president of wealth management firm MJP Wealth Advisors told Barrons on Saturday: “In the short-term, the economic effects of the infrastructure bill may be muted due to labor shortages, which can’t be solved overnight, and the time it will take for the government to allocate resources to the varying initiatives within the bill.”
* Europe:
-British Airways owner International Airlines Group pinned its recovery hopes on the reopening of the US-UK travel corridor as it warned of a €3 billion ($3.5B) operating loss in 2021. The trans-Atlantic travel corridor is set to open for Covid-19 vaccinated travelers from Monday, which IAG CEO Luis Gallego described as a “pivotal moment” for the industry. Long-haul bookings were recovering faster than short-haul heading into the holiday period, he said, adding that he expected the company to return to profitability in 2022.-In August 2020, as Vodafone Group shares tumbled, Barrons suggested that the drop was a buying opportunity. “Nine months after that, the telecom giant’s stock gained almost 20%, to 1.40 pounds sterling ($1.91), thanks to value created from asset disposals—such as the initial public offering of its mobile-tower business—and the easing of Covid-related travel restrictions. But just as the UK listed Vodafone shares hit their stride, CEO Nick Read unveiled some £500M a year for more investment in the network, advances in financial-services technology in Africa, and to pursue digital opportunities presented during the pandemic, such as heavy demand for cybersecurity.
* Emerging Markets:
“Mark Zuckerberg lately introduced Western financiers to the metaverse, an immersive online realm that may someday yield enormous profit. Chinese investors were all over it already. Young companies such as AVIT, which builds cool virtual-reality gear, and cutting-edge game designer Shenzhen Zhongqingbao Interaction Network have multiplied in value this year based on their metaverse promise. Chinese tech giants are catching the meta bug, too. Tencent Holding, TikTok parent ByteDance, and e-commerce champion Alibaba Group Holding are busy trademarking meta versions of existing ‘two-dimensional’ services and making nine-figure investments in meta start-ups.”
* Commodities:
Inflation and the surge of money printing activities by central banks in most advanced economies have encouraged investors to seek hedges. But it’s not gold they seek: “The perception that Bitcoin is a better inflation hedge has spurred a flow out of gold ETFs into cryptocurrencies, according to a recent report from J.P. Morgan global strategists, led by Nikolaos Panigirtzoglou. Gold’s failure to benefit from inflationary signs helped prompt the shift. Performance chasers no doubt also were following Bitcoin’s 111.9% gain this year or Ethereum’s 511.2% surge. But among the yellow metal’s few, proud believers is Trey Reik, managing member of Bristol Gold Group, a consultancy for institutional investors. Indeed, he says that gold equities shape up as the trade of the decade, at least for those willing to buck the consensus.”
* Streetwise:
“There is a bubble of bubbles across NFTs, meme stocks and crypto. How to dabble safely.” This week, Jack Hough’s column is available only in podcast form. But, the topic, NFT’s and cryptocurrency investments, is also discussed in the Cover section.