My Top 6 Surprises This Week

This article is excerpted from Tom Yeung’s Moonshot Investor newsletter. To make sure you don’t miss any of Tom’s potential 100x picks, subscribe to his mailing list here.

Happy National Hugging Day

On Monday, we added a new section called What to Expect this Week.

As expected, many of the predictions came true. Banks from Morgan Stanley (NYSE:MS), Bank of America (NYSE:BAC) posted record earnings. And National Hugging Day is here, despite Centers for Disease Control and Prevention (CDC) guidance on social distancing.

Nevertheless, it took less than 24 hours for surprises to emerge. From crypto swings to a massive Metaverse acquisition, the market proves time and again that even the best predictions can fail to anticipate the wildness of human nature.

In today’s newsletter, we’re going to try something new. Fridays’ “Big Read” will move to Thursday, and I’ll start covering my top surprises of the week to cap things off.

Source: Catalyst Labs / Shutterstock.com

1. Microsoft Buys Activision.

The $68.7 billion deal immediately sent Sony (NYSE:SONY) executives to search engines asking “What videogame makers can I still buy?” (Hint: I’m sure Square Enix (OTCMKTS:SQNXF) fans would have something to say).

Meanwhile, news outlets spun their wheels trying to figure out the reason for the acquisition.

“IS THIS REALLY ABOUT THE METAVERSE?” AP News asked in all-caps. “Microsoft says so.”

Of course, that’s only part of the answer; if Microsoft only wanted a Metaverse play, they could easily have bought Unity (NYSE:U) or Epic Games for their graphics engines. Instead, MSFT went with the most expensive gaming company in America and its massive selection of titles that range from Call of Duty to World of Warcraft.

In other words, Microsoft isn’t satisfied with just creating a Metaverse platform. This time around, they’re looking to build the content as well.

2. Ethereum Loses NFT Market Share to Solana

On Wednesday, JPMorgan analyst Nikolaos Panigirtzoglou warned that Ethereum’s (CCC:ETH-USD) NFT market share had slipped from 95% to 80%.

“It looks like, similar to DeFi [decentralized finance] apps, congestion and high gas fees has been inducing NFT applications to use other blockchains.”

The biggest winner? Solana (CCC:SOL-USD). This upstart coin is both faster and cheaper than Ethereum, thanks to its advanced Proof of History (PoH) protocol.

Fees for buying an NFT on the Ethereum blockchain can range anywhere from $60 to several hundred dollars, making it impractical for smaller transactions. Unless the protocol can launch its Proof of Stake (PoS) “2.0” version soon, its market share losses will continue to snowball.

3. Vishal Garg Returns as CEO of Better.com

On Tuesday, mortgage lender Better.com announced Vishal Garg would be returning as CEO. Mr. Garg recently landed in hot water after unceremoniously firing 900 employees in a bizarre Zoom call, prompting a flurry of media speculation and internal investigations.

Apparently, calling workers “dumb dolphins” isn’t enough to get fired in this day and age.

“We are confident in Vishal and in the changes he is committed to making to provide the type of leadership, focus and vision that Better needs at this pivotal time,” the company announced in an email.

Many workers already loathe Zoom meetings. If you’re lucky, you’ll never have to attend one from Better.com.

4. Airbnb CEO Brian Chesky Plans to Live In Airbnbs for 2022

“Starting today, I’m living on Airbnb,” Airbnb (NASDAQ:ABNB) CEO Brian Chesky tweeted on Tuesday. “I’ll be staying in a different town or city every couple weeks.”

Mr. Chesky joins an entire industry of management consultants and #Vanlife aficionados in voluntarily living out of a suitcase for a year (though some consultants might contest the term “voluntary”).

The stunt tells us two things. First, Mr. Chesky clearly doesn’t have children. The prospect of repacking your kid’s mess every two weeks is already murderous… let alone planning for school.

But second (and more importantly), it’s a signal that Airbnb’s business model is here to stay. In 2020, I wrote that Airbnb’s IPO price of $68 was far too low. Even its pop higher to $120 left plenty of upside on the table.

Today, ABNB trades at $160, easily making it the most valuable hotel-based company. And if Mr. Chesky’s stunt tells us anything, it’s that Airbnb is only getting started.

5. Walmart Looks to Enter the Metaverse

In 2017, Walmart (NYSE:WMT) created a 2-minute video for SXSW, detailing a virtual reality version of in-store shopping.

The most realistic part? No Walmart store associates anywhere to help me find the Pop-tarts aisle.

Fast forward five years and America’s largest in-person retailer is finally ready to add the finishing touches. On Sunday, news emerged that the big-box retailer had filed several trademarks for Metaverse-themed products and cryptocurrencies:

  • IC 035: Online retail store services featuring virtual merchandise
  • IC 036: Financial services, namely providing a digital currency and a digital token of value for use by members
  • IC 0009: Downloadable software for use in managing portfolios of digital currency, virtual currency, cryptocurrency

Walmart has made big moves before. In 1983, the company preempted Costco (NASDAQ:COST) and BJ’s Wholesale by creating Sam’s Club. WMT has also become the second-largest ecommerce company in the U.S, shipping more than eBay (NASDAQ:EBAY), Wayfair (NYSE:W) and Chewy (NYSE:CHWY) combined.

With its planned entry into blockchain, it’s going to be a company to watch.

6. Coinbase Hitches Up with Mastercard

And finally, Coinbase (NASDAQ:COIN) announced this week that it’s teaming up with Mastercard (NYSE:MA) to allow users to buy NFTs with real-world dollars.

This marks an enormous change in the way NFTs work.

Currently, NFT investors need dedicated crypto wallets to buy and sell the digital assets. And though these wallets are relatively simple to set up, that extra step created a minor hurdle that prevented many ordinary investors from joining in.

No more. If COIN and MA have their way, people will soon be able to buy digital artwork with their credit or debit cards, just as they might order something on Amazon (NASDAQ:AMZN).

The experiment could end in disaster. Credit card companies routinely lock out sites like OnlyFans for high chargebacks (apparently, many OnlyFans users have second thoughts about subscribing to explicit content). And who knows what a 30-day return policy will look like for jpeg images of smiling apes.

But if the venture succeeds, Coinbase could open up an entire world of tokenization to ordinary investors. Perhaps a streaming service for NFTs will be next?

Inflation, Inflation, Inflation…

By now, you’re probably sick of me writing about inflation.

Yes, we know it’s bad… can we talk about something else now?

But indulge me one last time before we move onto other topics next week.

The International Inflation Problem

Inflation has moved far beyond America’s borders. Since the start of the year, countries from Germany to South Korea have released uncomfortably high numbers. Not since the 1970s has the developed world seen such widespread price rises.

And that’s scary.

Inflation in the 1970s started very much the same way as it did today. American stimulus spending in the late 1960s — coupled with the first oil shock of 1973 — would set the stage for runaway prices over the next two decades. Many economists now see the Covid-19 stimulus checks as the catalyst for our present surge (though others would strongly disagree).

Fortunately, governments today have a far better understanding of how to combat inflation. Gone are the days of Ford-era “Whip Inflation Now” policies (namely, price controls and personal savings). We now know that central banks and interest rates are far more effective at stemming the inflationary tide.

That means stock movements today are far more predictable than they were in the 1970s. Rising rates will help financials (particularly banks and insurers) that rely on net interest income for profits. High-quality industrials and consumer goods companies will also outperform, as regular Moonshot readers will note from my stock picks this week.

Meanwhile, speculative firms priced on future profits are the ones to suffer, particularly if they have high debt (looking at you, AMC (NYSE:AMC)). These firms will find it increasingly difficult to raise cheap capital and fulfill their meme promise.

Moonshot investing is inherently risky — a fact I will never sugarcoat. But a little bit of macro knowledge is a lot like counting cards at a blackjack table. By tilting the odds slightly further in your favor, you can walk away from the casino far wealthier than you started.

P.S. Do you want to hear more about cryptocurrencies? Penny stocks? Options? Leave me a note at moonshots@investorplace.com or connect with me on LinkedIn and let me know what you’d like to see.

FREE REPORT: 17 Reddit Penny Stocks to Buy Now

Thomas Yeung is an expert when it comes to finding fast-paced growth opportunities on Reddit. He recommended Dogecoin before it skyrocketed over 8,000%, Ripple before it flew up more than 480% and Cardano before it soared 460%. Now, in a new report, he’s naming 17 of his favorite Reddit penny stocks. Claim your FREE COPY here!

On the date of publication, Tom Yeung did not have (either directly or indirectly) any positions in the securities mentioned in this article.

Tom Yeung, CFA, is a registered investment advisor on a mission to bring simplicity to the world of investing.

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