Author: Finance Staff

Coke pays $5.6 billion for control of BodyArmor

Business

Gibson McMonagle, Staff

PepsiCo Outpaces Coca-Cola 3-to-1 in Sports Drink | PYMNTS.com

PYMNTS

After Coke’s initial investment in the startup company BodyArmor, they decided to take full control with a $5.6 billion buyout. 

Prior to this week, the Coca-Cola Company owned 15 percent of BodyArmor. One of the leading rivals to Gatorade, BodyArmor was a startup company that began in 2011. The company promotes their drink to contain natural flavors and sweeteners with no colors from artificial sources. Their first big investor was Kobe Bryant in 2013. He paved the way for more athletes like James Harden and Mike Trout to help support the small company grow larger. Starting in 2018, the Coca-Cola Company became their second largest investor behind the creator of BodyArmor Mike Repole. 

On top of BodyArmor having their original sports drink, they also introduced BodyArmor Lyte. This drink is said to have the same nutrients of a regular bottle of BodyArmor but has only 20 calories and two grams of sugar per bottle. They also have released BodyArmor Sports water. This drink was said to be created for those who have an active lifestyle with a performance pH of 9+ and electrolytes for exercise. These two drinks plus the original BodyArmor sports drink allowed for high sales throughout the year. 

It is now being announced that the Coca-Cola Company is fully buying BodyArmor for $5.6 billion. This company went from a small startup to a multibillion-dollar company within 10 years. For context, Kobe Bryant initially invested $6 million back in 2013, and his investment today is worth over $400 million.  

Coke’s biggest rival, Pepsi, has been dominating the sports drink market due to Pepsi owning Gatorade. Gatorade in the past year had a 64 percent market share of U.S. sports drinks according to the Wall Street Journal. BodyArmor had 18 percent of sales, and Powerade had 13 percent. Coca-Cola now owns both Powerade and BodyArmor. 

Coke is always trying to increase their product line to compete with Pepsi. They are trying to challenge Gatorade with the purchase of BodyArmor. An editor of Beverage Digest, Duane Stanford, states, “Coke can try to sandwich Gatorade between BodyArmor, a more premium brand, and Powerade, which is more of a value brand.” 

The purchase of BodyArmor, in addition to their already owned brands like Powerade, Dasani water and Gold Peak tea brings a different strategy for Coke. They no longer have to be reliant on just the sodas they own like Fanta, Sprite and their very own Coca-Cola. They have branched off to other drinks, expanding their product line — this to compete with their largest competitor, PepsiCo.

Shiba Inu gets in top 10 cryptocurrencies, surpasses dogecoin

Business

Jason Ryan, Staff

Dogecoin struggles to keep pace with shiba inu's record-breaking surge even as Elon Musk boosts his favorite cryptocurrency | Currency News | Financial and Business News | Markets Insider

Market Insider

Digital cryptocurrency token Shiba Inu has jumped into the top 10 most valuable digital assets by market value, surpassing its inspiration, Dogecoin. 

The recent trading frenzy over a digital token called Shiba Inu — commonly promoted as a “meme” or joke coin in the crypto world — has jumped the canine-themed cryptocurrency into the top 10 most valuable digital assets by market value, hitting over $39 billion and surpassing its cousin and apparent inspiration, Dogecoin.

Since Wednesday, both Dogecoin and Shiba have frequently swapped places in the rankings, competing in what many would call a rivalry between the two. In fact, the Shiba Inu community actually refers to the crypto token as the “Dogecoin killer”.

As of Monday afternoon, Dogecoin, which was launched in 2013 as a joke, ranks No. 10 in cryptocurrencies with a market value of over $35 billion, according to CoinGecko.  Likewise, Shiba Inu, which launched in 2020 to poke fun at dogecoin, now ranks at No. 9 with a market value of over $39 billion. Shiba Inu hit an all-time high of $0.00008990 this past Monday.

Moreover, Shiba is up another 10 percent at midday this past Monday after its leap last week which had more than doubled in value. With this, most of that gain came in a flurry of trading last Wednesday, when it gained a whopping 66 percent. Besides, Shibu is in fact up about 900 percent in the past month.

Each Shiba coin costs just a tiny fraction of one cent; however, to put in simpler terms: if you were to have bought $1,000 worth of Shiba Inu in late September, your value of 20 million coins would now be worth around $9,000.

Both Shiba’s and Dogecoin’s growth can be largely credited to supporters hyping them up. It is the power of the people who are intensifying them that drives the performance of the coin a lot of the time, including celebrity supporters like billionaire Elon Musk, CEO of SpaceX and Tesla. Musk often tweets about different cryptocurrencies, and in doing so, has seemingly impacted their prices.

For example, a few times throughout 2021, Shiba has appeared to leap after Musk repeatedly posted images of his Shiba Inu puppy on Twitter; however, interestingly enough, on Oct. 24, Musk did clarify that he does not own any Shiba Inu tokens and that he only owns bitcoin, etherium and Dogecoin.

Overall, the current surge in Shiba Inu can be seen as very much community-driven, and it is clear to see any token or coin out there has the opportunity to run up like this if someone with a big microphone is amplifying it — case in point is Shiba Inu. Created in August 2020, it  has taken less than two years to become a contender for a top 10 cryptocurrency spot.    

U.S. set for highest Halloween spending in five years

Business

Jason Ryan, Staff

  Header Image: USA Today

Despite ongoing pandemic concerns, U.S. consumer spending on Halloween is set to be higher than ever within the past five years. 

An estimated two thirds or 65 percent of Americans intend to celebrate Halloween or participate in Halloween activities this year, up from 58 percent in 2020 and more comparable with 68 percent in 2019 before the COVID-19 pandemic. This trend demonstrates that Halloween is back on the schedule this year and plenty of Americans want trick-or-treaters, decorations and new costumes. 

According to research from the National Retail Federation, U.S. consumer seasonal spending this year is forecasted to be $10.14 billion, up from $8.05 billion last year in 2020, $8.78 billion in 2019, $8.97 billion in 2018 and $9.09 billion in 2017. The top ways consumers are planning to celebrate the holiday include handing out candy (66 percent), decorating their home or yard (52 percent), dressing in costumes (46 percent), carving a pumpkin (44 percent) and hosting or attending a party (25 percent). 

The association’s annual survey was carried out on its behalf by Prosper Insights and Analytics and analyzed celebration plans. Its findings presented 93 percent of millennial parents would be seeking to go all out for the holiday, particularly after last year in which many celebrations were restricted amid the pandemic; however, caution has been urged by health authorities, with the U.S. having the highest death toll from the pandemic in the world, with over 750,000 lost to Covid-19 since the start of the crisis that began early last year.

With more Americans celebrating Halloween this year, average spending is also up. For example, on average, consumers plan to spend $102.74 on costumes, candy, decorations and greeting cards – $10 more than what was planned last year. In addition, households with children are estimated to spend more than twice the amount than households without children ($149.69 compared with $73.57) this Halloween holiday. Likewise, the number of Americans planning to decorate for Halloween differentiates with last year’s spike in interest, with spending on decorations forecasted to climb to $3.17 billion, up from last year’s $2.59 billion. Total spending on costumes is the highest it has been since 2017 at $3.10 billion.

Of those planning to dress up for Halloween, nearly 69 percent of adults already know what their costume will be this year. More than 4.6 million adults plan to dress like a witch, more than 1.6 million as a vampire, more than 1.4 million as a ghost, more than 1.1 million as a cat and another 1.1 million as a pirate. Notably, more than 1.8 million children plan to dress as Spiderman, more than 1.6 million as their favorite princess, more than 1.2 million as Batman and more than 1.2 million will dress as one of their other favorite superheroes. All in all, it is very apparent that Halloween forecasts this year prove Americans want to spend way more on trick-or-treaters, decorations and new costumes.

       ryanj21@lasalle.edu

$1 Billion recovered in Ponzi scheme

Business

Nathan Kolb, Staff

Allen Stanford

Source: Business Insider

Robert Allen Stanford, a name that would rise to infamy, was born in Mexia, Texas on March 24, 1950. As a youth, Stanford once made $400 to clear an area of land for real estate developers and in exchange, he received cutdown trees that he could sell as firewood. After graduating from Baylor University, Stanford worked for Stanford Financial, a company that his grandfather founded as a salesman and bookkeeper. Stanford, with his talents in finding opportunities, transformed Stanford Financial into a multi-billion-dollar company owning $51 billion in investments. During the 1983 Texas oil bubble burst, Stanford traveled to Latin America and later set up shop in Antigua. Similar to all wealthy and successful people, Allen Stanford explored lobbying in the realm of politics; two lawmakers, Bob Ney and Tom DeLay, resigned as a result of his lobbying. It can be argued that his time in Antigua may have been the most successful years for him. Stanford led an extraordinary life which would eventually catch up with him.

After years of legitimacy, Allen Stanford went the unsavory route of scamming innocent people. Stanford’s plan was simple: tell investors that investing with him will lead to no risk and high returns and support it with a believable story. To hide his fraud, Stanford sent out fake financial reports. Stanford’s investors’ investments included securities such as certificates of deposits with interest rates double the average rate of the market. The average person would give Stanford their money because doing so appealed to their sense of financial security. 

As far as Ponzi schemes go, the most notable and infamous one is Bernie Madoff. He scammed his investors roughly $20 billion while telling his clients their investments were valued to be at $60 billion. Madoff pleaded guilty and received a 150-year sentence. The second largest Ponzi scheme in history is that of Allen Stanford. Stanford sold high yield certificate deposits to 18,000 people from 113 countries where he ran a $7.2 billion Ponzi scheme. Stanford was eventually caught in 2009 and assigned a 110-year sentence starting in 2012. In June 2016, Ralph Janvey, a court-appointed receiver, obtained $65 million in a settlement. Out of the $7 billion in Stanford’s bank, only $63 million was uncovered at the start of the receivership. In other words,only 0.95 percent of that $7 billion was found. Already, $443 million has been given out to Stanford’s victims while another $550 million will be distributed in quarter one of 2022. This $1 billion recovery also happens to be the second largest amount in history, with Bernie Madoff’s victims recovering $11 billion.

kolbn1@lasalle.edu

September FOMC meeting, Fed asset purchase tapering 

Business

Jason Ryan, Staff

Header Image: Market Realist

The Federal Reserve concluded its September meeting and announced plans that it may soon begin the process of slowing its asset purchases. 

This past Tuesday, Sept. 21, the Federal Open Market Committee (FOMC) held its sixth meeting of the year in Washington, D.C. that included some highly anticipated news. At the meeting, the Fed announced that the economy has made progress toward its goal of maximum employment and price stability, and that if development continues, the FOMC will soon taper their securities. The Fed has maintained its current strategy for now, but the statement of potentially looming asset tapering is a substantial change from past meetings.

Federal Reserve Chairman Jerome Powell noted in his press conference that he decided to put off the unpleasant business of announcing when the Fed will peel back its bond purchases — a process known as tapering — as too many economic uncertainties flourish. Such security purchases have been a key part of the economic recovery during the COVID-19 pandemic. At first, those policies helped stabilize the economy, and they have since been a crucial part of the Fed’s accommodating monetary policy stance.

However, Powell stated that “if progress continues broadly as expected, the committee judges that a moderation in the pace of asset purchases may soon be warranted,” adding together that if the economy remains on path, this situation could result in a gradual tapering process that wraps up by mid-2022. With this, the tapering of asset purchasing could begin soon, meaning the Fed’s long-promised signaling has arrived; nevertheless, Powell has still yet to commit to a specific timeline. 

Powell also indicated that growth made with inflation is still not a long-term concern, even as the Summary of Economic Projections (SEP) includes a higher median inflation forecast for 2021 than June’s SEP. Powell’s personal view halted that the assessment for significant progress to employment has been “all but met.”

The SEP announced this month reflects the Fed’s awareness of current economic conditions. The FOMC’s mean inflation expectations for 2021 grew from 3.4 percent in June to 4.2 percent in the latest forecast; however, Powell has insisted that the committee looks at inflation as transitory due to pandemic-related supply factors. For instance, he cited the automotive industry’s supply chain issues in particular during the September press conference.

The meeting concluded with no members of the FOMC predicting a change to the federal funds rate in 2021, but more of them now anticipate an increase in intensity in 2022 relative to June’s predictions. The 18 participants are equally split between anticipating a small boost to the federal funds rate in 2022 and expecting a rate change in 2023 or later.

ryanj21@lasalle.edu

El Salvador adopts bitcoin as national currency

Uncategorized
Women in Chiltiupan, El Salvador make a purchase at a store that accepts Bitcoin. Reuters via Jose Cabezas

As of September 7, Bitcoin is an official legal tender in the Central American country of El Salvador. President Nayib Bukele, 40, says that one of the main reasons for the new law is so residents can save money on remittances. Many Salvadorans send and receive money to and from family and friends abroad; transactions that can carry hefty fees. With bitcoin, a cryptocurrency, there are no transfer fees. According to Kenneth Suchoski, U.S. fintech and payments analyst at Autonomous Research, “For Western Union and some of the other remittance providers, keep in mind that most of the volume in the remittance industry is going from developed markets to emerging markets primarily to people — families and friends — that operate in cash.” El Salvador is one of these developing markets.

The GDP of El Salvador is significantly dependent upon these remittances, which make up nearly $6 billion or a fifth of their GDP, according to the World Bank. Globally, remittances total $500 billion each year. However, remittance providers like Western Union need not worry — at least for now. Suchoski says that these providers “…are still going to be relevant for years to come,” provided that Bitcoin does not gain widespread adoption and use. Currently, less than one percent of global cross-border remittances are in cryptocurrency, according to Autonomous Research.

MoneyGram, another remittance provider, has already made moves into the cryptocurrency markets. Earlier this year, MoneyGram announced that it would allow U.S. customers to buy and sell Bitcoin at 12,000 retail locations throughout the country. In a statement to Reuters, MoneyGram officials said that “We’ve built a bridge to connect bitcoin and other digital currencies to local fiat currency. As crypto and digital currencies rise in prominence, a core barrier to further growth is the on/off ramps to local fiat currencies.”

Western Union is apparently in agreement that there are multiple barriers to crypto growth. The company has dabbled in the use of cryptocurrencies, but has yet to come up with a sufficient “use case” to justify incorporating them into their business model.

Salvadorans have the option to receive payments in Bitcoin and may convert the funds to U.S. dollars. Economists predict that most Salvadorans will immediately convert Bitcoin to USD upon receipt. The Central Reserve Bank of El Salvador has been stocked with $150 million, a figure that some economists deem inadequate. If the price of cryptocurrency keeps rising, that means that El Salvador’s reserve of Bitcoin will pay off. However, there are a few concerns surrounding a national bank which is experiencing a “constant outflow of US dollars and constant inflow of bitcoin,” says economist Daniel Munevar to Yahoo! Finance. According to Munevar, a global debt specialist, Salvadoran president Bukele possesses a “disregard for public resources.”

El Salvador’s adoption of Bitcoin is likely to lead to an increase in volatility in the short term. This will likely make Salvadorans less inclined to hold onto the cryptocurrency. On the contrary, Edward Snowden tweeted on September 7 that El Salvador’s new law “massively incentivises early adoption and latecomers may regret hesitating.”

Moreover, Salvadoran financial markets were not in good shape to begin with; the country is in debt distress, leading the International Monetary Fund (IMF) to set indicative discal restructuring targets to grant a loan of $389 million. The IMF is traditionally very conservative, so if El Salvador is unable to repay its debts, it is highly unlikely that the IMF will want to help out with more loans.

What’s more, the laws and regulations regarding cryptocurrency are inchoate. Munevar states that the new law allows transactions that “skirt anti-money laundering regulations.” It is up to the Salvadoran government and president Bukele to manage this transition without relying on illegal activity, all while simultaneously encouraging the public to view Bitcoin as a legitimate currency.

Warren and Charlie meet in sunny California

Business

Michael D’Angelo, Staff

Vintage Value Investing

Pictured above is Berkshire Hathaway’s chairman and CEO Warren Buffet and Executive Vice Chairman Charlie Munger. Both men practice a value investing strategy and have created impressive returns for their shareholders.

Over the weekend, Berkshire Hathaway held their annual shareholder meeting in Los Angeles, California. For the first time ever in the company’s long history, they held a shareholder meeting outside of Omaha, Nebraska. The meeting was headed by Berkshire’s executive staff, CEO and Chairman Warren Buffet and Executive Vice Chairman Charlie Munger. 

Both Buffett and Munger are hailed as some of the greatest investors of all time. They believe in a value investing strategy influenced by the principles of Benjamin Graham. Graham is most famous for developing the Margin of Safety principle and for writing the finance classic “The Intelligent Investor.” In addition, they are greatly influenced by the strategies of Phil Fisher, the author of “Common Stocks and Uncommon Profits” who famously believed the best time to sell a stock is never. Buffett and Munger emphasize a long-term investing strategy with an emphasis of finding “cheap” companies that appear to be trading below book value in the market. They own portions of great American corporations like Coca-Cola, Apple, Bank of America, Verizon and American Express.             

At the meeting, Buffett and Munger fielded and answered various questions. With their growing age, they confirmed their eventual successor: Greg Abel, a current Vice Chairman, will take over as CEO and direct operations. Buffet emphasized his belief around stock picking for the average investor. He stated, “I do not think the average person can pick stocks.” His suggestion, instead, was to diversify into American equities and purchase a fund which follows the performance of the S&P 500. Buffet has made this point plenty of times in the past. 

Both Buffett and Munger took jabs at the recent rise in SPACs and believe more people are turning to the market in a gambling-like sense. Buffet even went as far as calling SPACs an “exaggerated form of gambling.” A SPAC is a company that raises money through an initial public offering (IPO) with no commercial operations to acquire another existing company. They grew in popularity in 2020 as both a speculative investment and a way for companies to raise capital. 

To add to the sense of increased gambling in the markets, Buffett and Munger stated their opinions about online trading app Robinhood. They both said the app encourages gambling due to the easy access of speculative call and put options. Munger even called the app shameful. In the past, they criticized Robinhood’s selling of order flow data and commission free trades. An executive from Robinhood responded by saying “the people are tired of the Buffets and Mungers of the world acting like they are the only oracles of investing.” The most controversial statement of the weekend was when Munger took a strong jab at cryptocurrency. He went so far as to say Bitcoin’s success is disgusting and contrary to the interests of civilization. In the past he has called Bitcoin “worthless artificial gold.” 

The meeting concluded and many people took an opportunity to analyze both Buffet and Munger’s statements. Both men have led Berkshire for decades with expectational investment returns and their statements may prove important for investors looking for guidance. 

Currency of the future or tulip bulb of the past: will crypto continue to boom or will it bust?

Business

Michael D’Angelo, Staff

Gadgets 360

Pictured above is Tesla CEO, Elon Musk. In late March, Musk announced via Twitter that Tesla cars may be bought with bitcoin and any bitcoin Tesla receives as revenue will not be converted to fiat currency.

All the recent rage in the financial markets is related to cryptocurrency. It appears almost daily one can see a crypto-related news headline. Just two weeks ago a “meme” cryptocurrency known as dogecoin reached an all-time high, netting some traders thousands of dollars. In addition, just yesterday, Tesla announced they sold $272 million worth of bitcoin (BTC) during the first quarter. 

Cryptocurrency is defined as an unregulated digital currency that uses an online ledger to track ownership to buy and sell goods. An idea of unregulated digital currency drives the enthusiasm behind crypto and many investors view the currency as digital cash that cannot be traced. The most popular cryptocurrency is Bitcoin. Bitcoin utilizes complex blockchain technology to track ownership and manage trading. Some investors see Bitcoin as a store of value and an alternative to physical gold while others view it solely as currency to buy and sell goods. 

Bitcoin has grown tremendously since its inception in 2009 and has experienced widespread interest since last March when the pandemic and stay-at-home orders forced millions into lockdown. Much of Bitcoin’s rise is attributed to retail investors, but institutional investors are involved with the commodity. Big-name financial companies and fintech players like Square and MicroStrategy have used cash to purchase bitcoin. Even asset management fund Fidelity has jumped in and intends to release an ETF to track BTC benchmarks. Bitcoin’s market cap is currently valued at over $1 trillion. 

Tesla’s CEO, Elon Musk, has spoken countless times about cryptocurrency and his company’s offer to accept Bitcoin as payment for their cars. In February of 2021, Tesla bought $1.5 billion of Bitcoin. They stated in SEC filings that the purpose of the purchase was to gain a better return on their cash, but they did warn investors of the price volatility involved with the purchase. According to Tesla’s Q1 earnings report, total revenue grew year-over-year by 74 percent. Tesla’s GAAP net income reached $438 million while non-GAAP net income was over $1 billion. Also, Tesla reported more deliveries of their car products. Musk made the Bitcoin purchase to emphasize the liquidity involved with the coin. 

As cryptocurrency becomes more widespread, regulators and government officials are left scratching their heads. They must decide how to regulate the crypto market. India had a ban on cryptocurrency which has been reversed in March of this year. Turkey has banned cryptocurrency. Back home in the United States, Bitcoin faces some regulation by organizations like the SEC, the Fed and the CFTC. The IRS taxes Bitcoin and other cryptocurrencies as property. Janet Yellen, the current Treasury Secretary, believes Bitcoin is an “extremely inefficient” way to conduct monetary transactions. Overall, many regulators are going to have to find an agreement and decide how to regulate the coin. 

As Bitcoin grows in popularity and many people look to the future, we must be cautious of the recent rapid rise in its price and remember the history of financial booms and busts. Bitcoin and the cryptocurrency market have the potential to fully take over our lives. Bitcoin can be as useful as the American dollar in the next few decades or can be remembered like the tulip bulb of 1637.

CDC to re-evaluate Johnson & Johnson vaccine as halt due to cases of rare blood clots lingers on

Business

Elizabeth McLaughlin, Staff

AP Photo/David Zalubowski

The administration of the Johnson & Johnson COVID-19 vaccine was paused due to cases of rare blood clots associated with those who received the shot.

On April 20th, Johnson & Johnson announced that the European Medicines Agency’s Pharmacovigilance Risk Assessment Committee (PRAC) reviewed the company’s vaccine and confirmed that the overall benefit-risk profile remains positive. 

In recent months, Johnson & Johnson’s vaccine has been linked to a small number of cases of blood clots in combination with low platelet counts. These cases, though small in number, were enough to draw international concern. The EMA made it clear on Tuesday that there is some validity to these links between Johnson & Johnson’s vaccine and blood clots. Moreover, in a press release, the EMA stated “that a warning about unusual blood clots with low blood platelets should be added to the product information for COVID-19 Vaccine Janssen.”

The EMA relied on all available evidence, it said, which included eight U.S. reports of serious blood clot cases. As of April 7th, more than 7 million people had received the J&J vaccine in the United States.

The linkage between the vaccine and blood clots is not unique to Johnson & Johnson. In March, more than a dozen European countries halted the use of the AstraZeneca shot after some people who received the vaccine reported experiences of blood clots. 18 of these cases turned out to be fatal, compared to only one case of fatality linked to the Johnson & Johnson shot. The EMA stated that “unusual blood clots with low platelets” should be listed as “very rare side effects” for the AstraZeneca vaccine.

On Friday, April 23rd, vaccine advisers to the Centers for Disease Control and Prevention will meet to make recommendations regarding the use of the Johnson & Johnson vaccine. They will be meeting less than two weeks after the CDC and US Food and Drug Administration recommended a pause on the use of the Janssen vaccine. The pause gave experts time to work with doctors regarding the identification and treatment of these rare blood clots.

Moreover, ranking members at the CDC project said that “there will likely be more reports of blood clots connected to the vaccine” (Mascarenhas, CNN). Dr. William Schaffner, a non-voting member of the CDC’s Advisory Committee on Immunization Practices, stated that he and his colleagues need to understand the demographics of blood clot cases before they can move forward with a decision. Dr. Schaffner said that on Friday, the ACIP could give the all-clear for the vaccine, or it could recommend that the US stop using the vaccine entirely. Dr. Schaffner thinks it is likely that the ACIP will recommend the use continues with warnings about possible adverse side effects. Additionally, Dr. Schaffner says it is wise for high-risk people to avoid the vaccine altogether.

The chair of the ACIP, Dr. Jose Romero, who is also Arkansas’ secretary of health, says that the committee has reviewed enough data at this point to make a responsible decision. Although more data will be presented on Friday, Dr. Romero believes that the committee will likely affirm the vaccine’s legitimacy after estimating the risk-benefit analysis. However, there are currently so few cases of blood clots that it is hard to assess the entire picture of risk. For example, all but one case were in females; some members of the ACIP are concerned that cases among men or older people might arise in the near future. The ACIP would benefit from more data in the form of blood clot cases, but those looking to receive the vaccine might not benefit.

Dr. Romero stated, “I really hope that the American public will look at this pause and look at what we have done during this pause as an indication of how safe the vaccine system and the vaccine pipeline is in this country.”

mclaughline7@lasalle.edu

Hottest new craze to hit markets: bubble investing

Foolegian

Bill O’Brien, Editor

Lombardiletter

The 2000 market crash often referred to as the “dot com bubble” was great for investors exposing their portfolio to the tech industry, realizing very high returns for a time. What happened after is irrelevant.

With financial markets experiencing depressed fixed income yields and spreads, investors have had to get creative when it comes to portfolio strategy and turning a buck during the pandemic. Luckily, some investors have hopped on a new wave that is surely keeping them hype and, at least emotionally, invested in the market. Bubble investing has been around since the inception of supply and demand markets, but never have investors been jumping through hoops for insanely overvalued investments like they have been today.

David Portnoy, Chief Market Strategist at Barstool Sports, or “Stool Presidente,” as his analysts call him, is the pioneer of the portfolio strategy. “Say it you cowards. Stocks only go up. Stocks only go up. Say the words Ron. I am your King,” Portnoy iterates time and time again in his annual research report to clients via Twitter. Sophisticated retail investors were quick to adopt Portnoy’s market strategies, flooding securities with, virtually, no cash flow, like Gamestop (NYSE: GME) and AMC Theatres (NYSE: AMC), realizing massive returns in the process (if one bought early enough, but that part’s irrelevant).

Even Fed Chair Jerome Powell has had a lot to say about asset valuations in markets to reporters after the Fed’s latest Federal Open Market Committee Hearing. “The market’s hot, baby, the market’s RED HOT. Fed’s getting in on this for sure, Gamestop to the moon, diamond hands my friends, DIAMOND HANDS.” Since the hearing, the Federal Reserve’s balance sheet is valued at approximately $7.72 trillion. Sources at the Fed confirm Powell has been pressuring analysts at the Reserve’s New York trading desks to “get their diamond hands on GME pronto.” 

The Fed’s aggressive buying sprees have prompted some backlash among junior analysts working at the Central Bank. One analyst spoke to Collegian reporters on the condition of anonymity, “I sit at a desk and buy as many junk bonds as I can until the early morning. I can’t eat, I can’t sleep… At this point, I would rather be worked to an early grave by DJ D-Sol at Goldman.”

Cnbc

Powell responded to analysts’ claims of overwork with personal attacks. “Kids these days got no gumption, no spirit. Back in my day, we fueled financial crises 18 hours a day. We didn’t get Peloton bikes as participation awards either. Buncha pansies if you ask me.”

Anyways, what was I writing about again? Oh right, the 2020-21 bubble investing trend (craze). Bubble investing has been a mixed bag depending on who you are. If you’re an ambitious investor with a lot to lose and not a lot of know-how, then chances are this trend is perfect for you. Plus, you’ll be able to tell your friends you’re “in the market” at least for as long as your positions last. The future of investing is looking bright as of April 2021. Whether that bright light is a beautiful sunrise on the horizon or a nuclear bomb exploding in the distance, coming to vaporize all of our highly leveraged market positions, well, I guess that’s up to you to decide. Until next time, as the once-great Ben Affleck said in a famous coming-of-age movie, Good Will Hunting, “the business we have, here-to-for, you can speak to my aforementioned attorney. Good day, gentlemen, and until that day comes, keep your ear to the grindstone.” This is investing.