The Market's Rollercoaster, How Paint Changes Air Conditioning and the Hottest IPO's of the Week
Updated: Nov 10, 2021
Welcome to "This Week In The Market" where I cover the biggest macro-stories, weirdest articles and the stocks that made moves. This week I cover how a Chinese company's debt could affect your portfolio, the whitest paint in history and the public debuts of Universal Music Group's and Toast.
We're Lucky It Wasn't Chinese Ever-Venti
The Headline: We were finally delivered the September we were promised. A historically bad month for the market, Monday saw the Dow drop as much as 900 points before recovering slightly at the end of the trading day. The S&P 500 dipped about 2.5% and the Nasdaq got crushed, dropping 3.3%. All indices made recovery plays throughout the rest of the week, highlighted by a 500+ point jump by the Dow on Thursday.
The BFD: The main takeaway from Monday's sudden sell-off is that sentiment can change quickly in the markets. Sunday night, news reached U.S markets that China's financial indices were on the decline due to the looming debt default of their largest real estate developer, Chinese Evergrande. As a quick background, most wealth in the United States is concentrated in public equities. Real estate makes up a considerable portion, but it's only about 7% of GDP. China on the other hand? Real estate makes up about 30% of GDP and is basically their only wealth creation game in town. So when their biggest developer threatens to default on $30 billion worth of debt, this is a problem for the world's second-biggest economy. The ripple effect of the news, combined with partisan saber-rattling on Capitol Hill over the debt ceiling and ever-increasing COVID cases worldwide, sent the markets tumbling.
Markets did recover, however, eventually turning positive for the week. Why? Shout-out to big Jay Powell at the Fed for that one. The Fed's release this week stated that they will maintain rates at near 0% and will continue their monetary stimulus, at least for the time being. The thing to watch out for in the next few months is the word "tapering," which indicates that the Fed will start to scale back, or taper, their bond-buying program, essentially letting the water out of the dam that is the stock market.
How Can This Make Me Rich?: Stay. Invested. I covered this in my piece earlier this week on stock market crashes, but time in the market is always more important than time in the market. If you had sold on Monday morning, you would have missed out on the huge rebound during the rest of the week that turned the markets positive. Stay invested.
How A Paint Could Save The World
It's not really my place as a financial blog to cover things like advancements in industrial's, but this story was so weird that I had to take a look. The whitest paint of all time has been developed. OK great, but what does that mean? Well, it could mean quite a bit for your wallet, and for the planet.
To go full Neil DeGrasse Tyson for a moment, color has quite a bit to do with the reflectivity of heat. The color black absorbs heat, while the color white reflects it. Well this new shade of white, developed by mechanical engineering professor Xiulin Ruan, is so white that it may eliminate the need for air conditioning units in new homes. The paint is designed, according to Architectural Digest, with barium sulfate particles of different sizes, an oddity for paints. This, coupled with the extremely high density of these particles in this particular paint, actually creates a shade of white that emits more heat than it absorbs. The upshot? It actually cools the air around it, essentially creating its own air conditioning unit without having to consume any electricity. This could usher in a new era of reduced electrical usage, lowering bills and the consumption of electricity and fossil fuels. In this case, watching paint dry is actually one hell of a good thing.
This week saw two big-time IPO's enter the market that saw immediate public market success. The first is Universal Music Group, hitting the European markets after being spun off from parent company Vivendi. The music recording giant debuted at a $39 billion valuation before spiking 35% and settling its first trading day close to a $52 billion valuation. A music company going public and being bought up to these kinds of valuations is notable, because it wasn't that long ago that the music industry was in decline. Illegal downloads had taken hold and revenue fell nearly 60%. UMG made a few key moves that really put it at the forefront of music, including key partnership agreements with Apple, Facebook, Tik Tok and Spotify. Locking up Taylor Swift after her departure from Big Machine also doesn't hurt your profitability.
The other big IPO this week is payment processor Toast. If you haven't heard of Toast, you've probably still used it. They are a payment processor specifically aimed at the restaurant industry, and they've made quite the impression. With over 48,000 locations and counting, they're the main competitor to Square in the industry, but also offer management services as a back-end solution for restaurants. All of this culminated in a $20 billion IPO valuation before jumping over 50% in their first trading day. All three of their founders also joined the "three comma club" on the first day of trading, becoming newly minted billionaires.
The success of Toast's IPO came as a shock to the 1,300 of the company's workforce that were laid off or furloughed as a result of last year's pandemic. As a company entirely reliant on the industry of dining-out, it's no coincidence that their IPO comes on the back of a quarter where restaurant demand has surged as a result of re-openings across the country. CNBC resident homeless man in a suit Jim Cramer weighed in on the stock's valuation, calling it "too expensive," which means it'll keep climbing.
That's it for this week's market update! Check back on Monday for the next edition of "Millionaire Lifestyle," and don't forget tomorrow's company deep dive where I check out Adobe!