Buyers make or break companies with their voting or buying or betting. Somedays it’s all that matters.
Stocks quotes in this article:
Old versus new? Variants that kill versus variants that are meaningless?
Sometimes this market divides itself into categories that are just mind-blowing. Today is one of the most mind-blowing I have seen.
Let me rip down the way the day has shaped up.
First, for weeks on end we have seen the oils run. They haven’t gone up as much as the price of crude, in part because they aren’t drilling as much as they used to as they are trying to husband cash. That makes sense. They have pledged to be prudent, which is a big deal given they haven’t been. They have pledged to be better citizens which actually means drilling less and being more considerate of the environment. That can only get them so far, but when the climate insurgents won a proxy fight against the most storied oil company of all time, Exxon Mobil (XOM) , the group got religion. Ever since it has been the industrial leader.
But with oil down a dollar, the buyers have cashiered their general and it that meant you would get the kind of drop that can explain half of what’s occurred.
Then there’s the Boeing (BA) saga. It seems that whatever programs they might have are under assault by the FAA. I was all excited about the possibility for the big United (UAL) order and, instead, I discover that the 777 has issues. The 777? I thought that one was okay. The company is adamant not to worry about the timeline. All is good. However, it’s more about the tenor: the FAA must really despise these guys.
The industrials need Boeing. It’s too important to the group. Now there are two strikes against them: another project in trouble and no China orders in sight. Will strike three be a gigantic equity offering now that the CFO whom we trusted when he said there wouldn’t be a deal leaves this week? I think you need tons of dry powder if you want to be in this one.
Finally we have the variants to consider. Do you really want to travel until you find out if your vaccine works against everything new that this constantly mutating virus creates? Who in heck thought of this dasdardly thing? Can it really just be bats and pigs? I am starting to believe it was invented and that the Chinese are giving us a version where pigs do fly.
Anyway, the airlines and cruise ships are all down, not helped by a $500 million equity offering from Carnival (CCL) . Heaven knows after all of these deals whether the companies have any earnings power left for shareholders.
Marriott (MAR) down five on this. That’s a ton of points to shed on a variant.
That said, how can you not like American Express (AXP) here down more than four points. There’s a lot more to the company than just travel.
How about the infrastructure bill. Wasn’t that good for a host of heavy industrials? Yes, if it can still be passed. The weekend programs made it sound like the President may have killed it with his own gaffe about the need to have his whole agenda passed. I think things will work out. But the steel and big machinery companies can’t withstand this kind of hiccup and their stocks gave up some of last week’s sweet gains.
Now just contrast this with the new, the Nasdaq. We start out with Intellia Therapeutics (NTLA) which accomplished what would have thought to be impossible: successful gene editing to help combat a disease than impacts more than 50,000 people. The pin action here is incredible. Regeneron (REGN) is a partner of Intellia. Crispr (CRSP) and Editas Medicine (EDIT) have similar experiments. And all are huge holdings of the ubiquitous Cathie Wood (ARKK) who, like with Tesla (TSLA) , believed early and often in gene editing.
Her stocks had been laid to waste not that long ago but ever since the CPI ran too hot and buyers made up their minds that the that the Fed would have to destroy the economy to save it with a series of rate hikes, her stocks have been on the move. Now they are turbocharged. Remember how this market works: if it is exciting it goes higher even if it is out of synch with the current valuation. The secret of Wood’s investing: she seeks to find the most out-of-synch companies with absurd valuations, until they aren’t. Now maybe one of these companies hits a home run or gets bought say, by a Pfizer (PFE) , which is making tons of money on its COVID vaccine, gets a bid. These companies may have something very special.
Speaking of special, how about the possibility that Nvidia (NVDA) gets Arm Holdings. The big money has been betting from the beginning that this deal, which would make Nvidia among the biggest players in cellphones and personal computers, would be blocked as anti-competitive. The semiconductor industry has not been a fan of the deal. But this weekend we learned that Marvell Tech (MRVL) , Broadcom (AVGO) and Mediatek, a gigantic Taiwanese chipmaker, have no problems with it. The idea that it is anti-competitive does seem like poppy cock to me. I was worried that Arm would lose engineers to California. I mean couldn’t they just close the London-based company? But Jensen Huang, the genius behind Nvdia, has assured the opposite. I expect Nvidia to go on a hiring binge in the U.K. That leaves China to perhaps block it. Many thought that China would block the Nvidia-Mellanox deal. Nope. Didn’t happen. I think that Nvidia will close on this deal. Others agree. The stock’s up 30.
How about PayPal (PYPL) soon giving the go-ahead for every-day users to sell things on their personal Venmo accounts for a fee. Heretofore they had been banned from doing so. Remember when Venmo was supposed to be a loser for these guys because it wasn’t being monetized? Now it’s fabulous. So PayPal goes up nicely even as Visa (V) and Mastercard (MA) get hit, a tenuous connection but one made nonetheless.
When Tesla has a big recall in China, I mean 285,000 cars, something Wedbush called a “moment of truth,” you had to figure that the stock would be crushed. But this is Tesla. The stock rallies. I have to repeat that, the stock rallies! It’s new!
Finally there’s Etsy (ETSY) , which bought a Brazil-based marketplace for unique, handmade items for $217 million. No big deal? Elo7 has 1.9 million active buyers and 56,000 active sellers with 8 million items for sale. This is a market that could be huge given how fractured it is. You have to believe it can be an innovative bonanza.
I know it seems too simplistic. How can the new companies have such a halo while the old ones such Pig-Pen like cloud over them? I think it has to do with the buyers. They like excitement. Maybe they like cool per share? and they hate uncool per share?
No matter. They make or break companies with their voting or buying or betting.
And somedays it’s all that matters.
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