Recently, the FTC, led by progressive Big Tech critic Lina Khan, renewed its fight with Facebook, going after the company’s decision to acquire Instagram and WhatsApp. Drumming up fears of an antitrust breakup, this battle, like so many others brewing on The Hill is part of a larger war around the fundamentals of the platform-driven business model.
While the variety of charges and regulations cover plenty of ground, many question the legality of Big Tech’s size and scope, while going after the mergers and acquisitions that made it possible. They challenge their role as gatekeepers and go after their ability to compete with other businesses that sell similar products on their platforms.
Breaking up is hard to do and getting legislators on the same page during this period of polarization will create roadblocks for structural reform. With a conservative majority on the Supreme Court, major changes to antitrust law are also unlikely.
Despite Biden’s aggressive antitrust executive order signed in July, agencies will need new authorities and bigger budgets to go big before they go home, which companies and conservatives will effectively challenge.
Despite the hurdles, regulators still have a shot at some meaningful reforms and the Biden administration is in a strong position to shape the future of tech regulation.
Generally, it’s safe to assume there will be more scrutiny, oversight, and regulation as courts and legislators begin to wrap their heads around this nascent industry’s size and complexity. With so much capital and aspiration in the US equity markets tied up in Big Tech stocks, it’s also safe to assume investors will flinch, at least a little. Looking ahead, these are the most important questions to keep in mind.
How will Big Tech regulations and rulings affect a company’s core business?
Measures that address the fundamentals of the platform-driven business model like Amazon’s right to produce consumer goods or Google’s ability to organize Search
results around its own products could force meaningful shifts that limit new verticals for growth. In the short run, they might only chip away at profits, but in the long run, they could drastically limit the scope of new products and services.
What does it mean for the way monopolies are regulated more broadly?
Many progressives in government like FTC Chair Lina Khan believe in broadening the definition of a monopoly to account for the effects of market power that don’t directly impact consumer prices. This would allow regulators to go after company’s for their impact on competition and innovation, even if they offer free or affordable products like Amazon and Facebook.
Regardless of what it means for the company, what does it mean for tech investors?
Even in the case of a breakup, depending on when you got in, you might still come out ahead. Looking forward, the opportunity to diversify your investments across multiple companies with the same management and products as a traditional Big Tech stock could be more profitable.
How will outcomes shape expectations for other businesses?
In many ways, the success of Big Tech represents a ceiling of expectations for what investors believe a tech company can accomplish. If major changes occur, that ceiling will drop, which will have down-market effects on valuations and growth projections over time.
Ultimately, Big Tech stocks will always be a big opportunity, but some of the regulatory freedoms and opportunities for growth that fueled their sky-high valuations won’t last in the long run.
Despite its growing popularity, there’s a lot of confusion around ESG investing.
Whether you’re just getting started or you’re looking for a little perspective, this quick guide is designed to help you cut through the noise and make sense of what ESG investing is and what it isn’t.
ESG, short for environmental, social, and governance, is an umbrella term for the frameworks investors and companies use to measure and invest in the non-financial impacts of a business. Supporters of this approach still value financial returns, businesses and investors who focus on ESG use a broader set of metrics to judge a company’s value. Looking beyond a company’s shareholders, this form of stakeholder capitalism, as it’s sometimes called, works to think more proactively about a business’s role in society. While many believe ESG investments can help companies be more competitive, investors and businesses use it as a way to align their investment goals with their ethics and values.
At a basic level, ESG analysts and managers produce important data and analyses to help companies be more transparent about their impact on society. These reports and analytics can shed a revealing light on a company’s priorities and practices. Ultimately, this helps investors make more informed decisions while giving governments access to the information they need for effective oversight and policy.
Despite all of its promises, the field of ESG investing and its role in the economy still has a lot of room to grow.
For starters, measuring something intangible is actually very hard. While many ratings agencies, consultancies, and analytics firms are beginning to fill the gap, the field of quantifying things like employee welfare, sustainability, and good governance is still very young. With no methods for standardization and oversight, ESG reports create opportunities for marketing spin and financial fraud. Currently, US companies aren’t even required to report on ESG.
Blackrock’s former sustainable investing chief now thinks ESG is a ‘dangerous placebo’ – CNBC
CEOs are calling for more regulation—of ESG standards – Fortune
ESG Standards Could Converge Within the Next Two Years – Yahoo Finance
ESG can also be very subjective. While there are some things we can all agree on, the field of stakeholder capitalism touches on topics of politics and ethics, which have different meanings for different people. This does more damage to the standardization and scalability of ESG. Businesses are wary to adopt values that align with one group of consumers while alienating another.
Companies and investors also struggle to export ESG investment strategies to markets where laws and cultures are different from their own. Do American companies have a responsibility to promote American values when working in China, or should they adapt their approach to ESG in response to local demands? Principles of accounting and finance are generally the same across cultures. Politics and ethics are not.
Even in the US, there’s plenty of competing views about the role of business and capital in society. Not everyone has the same vision of stakeholder capitalism. While some believe in expanding the charter of a corporation’s duties through ESG, many believe a company’s highest priority should always be shareholder profits. Both sides believe in some sort of balance between the two, but there’s a lot of disagreement over where to draw the line.
The political CEO – The Economist
Don’t believe the cynics: Done right, stakeholder capitalism is what America needs – Fortune
We Are Nowhere Near Stakeholder Capitalism – Harvard Business Review
That’s also in part because ESG investments don’t always produce clear financial benefits. While many studies have shown a strong correlation between ESG investments and financial returns, the lack of good ESG data means that many are still skeptical. Despite its growing popularity, the amount of American capital in ESG driven funds lags far behind Europe.
Why ESG Investors Are Happy to Settle for Lower Returns – Wharton Business School
Majority of ESG funds outperform wider market over 10 years – Financial Times
Two years after the Business Roundtable statement on stakeholder capitalism, has anything changed? – Fortune
Ultimately, ESG is about empowering investors with the information they need to make better decisions about the things they care about. It helps companies respond to
the needs of governments and investors by increasing transparency while generating real financial value out of their impact on society.
Even though so much of the industry’s future is up for debate, that debate and the industry’s development are two things investors can count on throughout the long term. Regardless of their own opinions, those who understand ESG’s value and its impact on markets will be in a better position to capture opportunities.
Pfizer and Moderna are now household names, thanks to the companies’ Covid-19 vaccines. But which pharma play belongs in your portfolio?
If you turn on the TV, flip on the radio, or scroll through social media, chances are you’ll see or hear the words Pfizer (PFE) and Moderna (MRNA) at least once a day. These two pharmaceutical companies are at the forefront of the vaccination efforts against Covid-19.
Both Pfizer and Moderna manufacture a new kind of vaccine. Called an mRNA (messenger ribonucleic acid) vaccine, it teaches the body’s cells how to make a protein that will trigger an immune response to a specific disease.
More traditional vaccines — like the COVID shot made by Johnson & Johnson (JNJ) — contain inactive disease-causing proteins. These directly trigger the immune response so it can fight the disease again more rapidly in the future.
MRNA vaccines are quicker and cheaper to make than traditional vaccines. So Pfizer and Moderna were the first drug-makers to win emergency use authorization from the Food and Drug Administration (FDA).
The competition between Pfizer and Moderna has been hot — and it will stay that way for a while. So let’s put these two pharma stocks head-to-head to see which one’s a better bet for your portfolio.
At a Glance: Pfizer vs. Moderna
The development and manufacture of multiple medicines and vaccines
The development and manufacture of mRNA vaccines
Market Cap (8/12/21)
New York, NY
Pfizer is a multinational pharmaceutical and biotechnology corporation that develops and manufactures medicines and vaccines to treat and prevent multiple conditions. It’s one of the 10 largest healthcare companies in the world.
When people mention “Big Pharma,” this is who they’re talking about.
Two German immigrants founded the company in the Williamsburg neighborhood of Brooklyn long before it was hip. In fact, Pfizer has been around for more than 170 years.
Today, Pfizer’s corporate headquarters are in Midtown Manhattan. But the company operates nearly 50 manufacturing plants all over the world.
Pfizer developed its Covid-19 mRNA vaccine in a partnership with Germany-based BioNTech (BNTX). The company invested $2 billion of its own funds on the project. It was the first working vaccine for the virus.
By comparison, Moderna is a much smaller and younger company than Pfizer. It was founded in 2010 and has its corporate headquarters in Massachusetts.
The company literally has mRNA in its name — Moderna’s original styling was ModeRNA Therapeutics. It was founded to commercialize the work of stem cell scientist Derrick Rossi, who co-discovered mRNA vaccine technology.
But Moderna is infamous for both its pompous CEO, Stephane Bancel, and its secretive reputation. Those factors have led to comparisons with Theranos, a notorious biotech startup that proved to be a fraud.
Still, investors are excited about Moderna and its potential.
So far, the Covid vaccine is Moderna’s only commercially available product. But it’s been enough to send shares of Moderna up by nearly 2,000% since before the pandemic. As a result, its market cap is more than half that of Pfizer’s based on just one drug.
Pfizer vs. Moderna: Products
Pfizer makes products you can find both behind and in front of the pharmacist’s counter. Chances are you have something made by the company in your medicine cabinet.
The company owns everyday remedy brands like Advil and Robitussin, as well as popular prescription drugs like Xanax and Celebrex.
And before the Covid-19 vaccine, Pfizer’s best-known product was the one-and-only “little blue pill,” aka Viagra.
All told, Pfizer currently manufactures more than 350 different pharmaceutical products. And its pipeline includes 95 more drugs, with dozens waiting in the wings for regulatory approval.
Strip away the COVID vaccine, and Pfizer’s business is still massive.
On the other hand, Moderna’s portfolio is far smaller.
The company currently has only one commercially available product on the market, the Covid-19 vaccine.
That’s not to say there aren’t other Moderna treatments coming down the pipeline.
Currently, the company is exploring vaccines to prevent diseases such as the cytomegalovirus (CMV). This common virus is one of the leading causes of birth defects in the United States.
Moderna’s CMV vaccine is preparing for Phase 3 trials. If it’s approved, Moderna will own global commercial rights for the product, which CEO Stephane Bancel estimates will be worth as much as $2-5 billion in sales annually.
Moderna’s other potential products include vaccines for the flu, the Zika virus, and respiratory syncytial virus (RSV), as well as a vaccine to guard against HIV.
If these products ever come to market, there could be massive potential for Moderna and its investors. However, the operative word here is “if.” It’s possible none of these vaccines could get regulatory approval.
Hands down, Pfizer.
Moderna’s research pipeline is exciting and contains several potential blockbuster vaccines. But, again, it’s possible that none of these products could ever receive approval and become commercially available.
So for practical purposes, Moderna is still a one-trick pony.
Still, sometimes companies can succeed by being the very best at one thing. Unfortunately, however, Moderna’s Covid-19 vaccine isn’t the only one on the market.
Meanwhile, Pfizer has hundreds of products already on pharmacy shelves, with dozens more coming soon. So even if Pfizer were to scrap its pipeline, there would still be plenty of drugs to bring in revenue.
Pfizer vs. Moderna: Earnings and Profitability
For the most recent (second) quarter, Pfizer posted earnings that soundly beat Wall Street predictions.
Earnings per share (EPS) skyrocketed by nearly 73%, and revenue basically doubled year over year. Just under half of the quarter’s $19 billion in revenue came from vaccine sales. Specifically, the Covid-19 vaccine accounted for $7.8 billion in direct sales during the second quarter.
Take a look at how Covid has impacted Pfizer’s business on an annualized basis:
But it wasn’t just Pfizer’s “COVID business” that saw growth. Stripping out the mRNA vaccine, Pfizer saw 10% year-over-year operational revenue growth.
However, these results underwhelmed investors. Pfizer’s stock hasn’t shot up. Instead, it has underperformed the broader S&P 500 this year. Shareholders have seen growth of only 32%.
By comparison, Moderna’s stock is a moon rocket. Year to date, shares have surged by more than 250%.
Moderna’s second-quarter earnings matched Wall Street expectations. Revenue came in at $4.4 billion. That’s a giant leap from the $66.4 million posted for the same quarter last year.
Of course, that’s 100% due to Covid vaccine sales. The company estimates it will supply as many as 1 billion doses in fiscal 2021, with as many as 3 billion supplied in fiscal 2022.
Moderna. Over the past year, the company has gone from literally zero sales to billions.
Pfizer vs. Moderna: Which Is a Better Buy?
There’s plenty to like about both stocks. The decision of which one is right for you comes down to your investing style and risk tolerance.
If you’re looking for a company with fantastic potential — but don’t mind some risk and volatility — go with Moderna.
On the other hand, if you like to play it safe and would prefer a company with a proven track record — and a dividend payout, to boot — Pfizer is the better choice.
AMD and Nvidia are both poised to profit from the ongoing semiconductor shortage. But which chip stock is a better buy for your portfolio?
This year, a shortage of semiconductor chips has led to skyrocketing demand for the products that both American Micro Devices (AMD) and Nvidia (NVDA) make. In fact, since January 2020, the shares of both companies have risen by hundreds of percent.
Semiconductor chips are used in everything from cellphones and video game consoles to toothbrushes and automobiles. If it’s electronic, it needs a computer chip.
Chips are currently in short supply due to a myriad of reasons. For one thing, Covid restrictions caused an unprecedented demand for laptops and other personal electronics. Add to that an ongoing trade war with China, a factory fire, and weather-related disruptions.
Analysts are expecting the supply-and-demand imbalance to continue at least through the rest of the year. That should mean even more profits for AMD and Nvidia.
But if you had to choose one, which stock would be a better pick for your portfolio? Let’s dive in and compare AMD vs. Nvidia.
At a Glance: AMD vs. Nvidia
American Micro Devices Inc.(AMD)
Semiconductor chips, flash drives, graphics processors, and other consumer electronics components
Semiconductor chips, graphics processors, and application programming interfaces
Market Cap (8/12/21)
Santa Clara, CA
Santa Clara, CA
American Micro Devices, also known as AMD, has been making computer chips since before Neil Armstrong landed on the moon. The company was founded in May 1969 by former executives from Fairchild Semiconductor. Its history is linked with that of Silicon Valley, where the company has held its headquarters since the start.
Even though AMD is an OG in the computer chip industry, it’s long been considered an underdog. That’s especially been the case when compared to Intel (INTC), Silicon Valley’s largest chip maker.
However, AMD has been on an innovative streak during the last 10 years. For example, in 2016, it released the super-speedy Ryzen microprocessor. Many computer nerds consider this chip superior to Intel’s latest products.
AMD’s market share is growing, too. In 2020, the company saw a 70% increase in revenue. Intel’s revenue, on the other hand, grew only 8%.
Nvidia is another Silicon Valley chipmaker. It was founded in 1993. But it became a household name in 2001 when the first-generation Microsoft (MSFT) Xbox used its chips.
Today, gamers still favor Nvidia’s products. The company even has its own acclaimed HD gaming and streaming device, the Shield TV.
In the last 20 years, Nvidia has quickly become renowned for its high-end graphics processing units (GPUs). But it has also spent a lot of money on high-tech research and development (R&D). Last year, the company spent more than 20% of its sales on R&D.
Nvidia is particularly interested in artificial intelligence (AI) development. And the company has started designing and manufacturing microchips geared toward machine learning. In 2020, the company’s AI-related sales were more than $2.8 billion.
AMD vs. Nvidia: Products
AMD’s recent focus has been on affordable chips for laptops and PCs. Along with GPUs, it offers a range of central processing units (CPUs), as well as other personal computing and business chip solutions.
But AMD is looking to expand into more heavy-duty products. The company is currently acquiring Xilinx (XLNX), a firm that manufactures field programmable gate arrays, or FPGAs. These chips are used in industrial and aerospace equipment, as well as medical devices, cybersecurity systems, and consumer electronics.
Clearly, AMD wants to give Intel a run for its money
AMD is purchasing Xilinx for about $36 billion.
The company also manufactures hardware used in data centers, as well as cloud computing services. Earlier this summer, Alphabet (GOOGL) announced that it would offer Google Cloud services based on AMD chips.
AMD’s other customers include Microsoft, Hewlett Packard Enterprise (HPE), Dell (DELL), and Lenovo (LNVGY).
Nvidia is a go-to not only for gamers but also for data centers. Its powerful and fast GPUs can crunch a lot of data in a short amount of time.
The company is looking to expand further into this area with the intended purchase of Arm Holdings from SoftBank (SFTBY). The deal is worth $40 million but will give Nvidia a competitive edge against AMD and even Intel.
Arm designs CPUs and other chips, along with software development tools and system-on-a-chip (SoC) infrastructure and software. Nvidia plans to invest in an Arm-powered
AI supercomputer and nurture Arm’s partnerships in the healthcare, robotics, and AI vehicle industries.
Nvidia’s many customers include Alphabet, Apple (APPL), Microsoft, and Motorola (MSI).
Nvidia. AMD has built a strong portfolio of products during its 52-year history. The company has had to innovate to better compete with Intel, aka “Chipzilla.”
But Nvidia is positioning itself to become a leader in the future of technology. Its R&D into AI and its purchase of Arm are truly exciting developments.
Of course, it’s possible the Arm purchase (as well as AMD’s Xilinx deal) could crumble. Regulators haven’t approved either acquisition yet — although both companies are optimistic.
In the meantime, Nvidia’s current products are fan favorites. As a result, we’ll see its market share continue to expand, especially in the gaming industry.
AMD vs. Nvidia: Earnings and Profitability
During the second quarter of the current fiscal year, AMD nearly doubled its revenue on a year-over-year basis. And its adjusted earnings skyrocket 250%, to 63 cents.
This performance was crazy-good. And now the company has received its full-year revenue estimate from 37% to 60% growth.
Over the long run, analysts are calling for a 30%-plus annual growth rate. But that percentage could be higher for AMD.
On the other hand, Nvidia beat Wall Street expectations in the second quarter. The company announced record results, including $6.51 billion in revenue and adjusted earnings of $1.04 per share.
For the current (third) quarter, analysts expect Nvidia’s revenue to increase, to $6.8 billion.
Nvidia is another growth story. Its revenue skyrocketed 68% on an annualized basis during the second quarter. And its gaming segment grew 85%. This infographic tells the story:
Again, Nvidia. That 68% growth rate was pretty astounding.
But it’s a close call. AMD is also primed for continued revenue growth.
I think it comes down to the long-term potential here. Nvidia will stand to profit as it transforms from a gaming chip maker to an AI powerhouse. And it should take its investors along for the ride.
AMD vs. Nvidia: Which Is a Better Buy?
Both stocks are great. There’s little not to like about either company.
As I write (August 24), AMD’s stock is cheaper, below $108 per share. On the other hand, Nvidia is much more expensive, just below $220 per share.
It’s tempting to purchase both stocks. But Nvidia is a better investment for the long term for all of the above reasons. However, the smart money will wait for any dips in price before grabbing shares of Silicon Valley’s future king.
Robert Kiyosaki, the author of “Rich Dad Poor Dad” has warned against a potential crash this year in a recent Tweet.
“Always remember…Las Vegas was NOT built on winners…Neither was Wall Street.”
Robert Kiyosaki (Rich Dad Poor Dad)
Why This Matters
Previously, Kiyosaki advised purchasing gold, silver and Bitcoin to his Twitter audience while they still could to hedge against a potential crash.
“The best time to prepare for a crash is before the crash. The biggest crash in world history is coming. The good news is the best time to get rich is during a crash. Bad news is the next crash will be a long one. Get more gold, silver, and Bitcoin while you can. Take care.“
Kiyosaki purchased Bitcoin in December 2020 when it was trading as low as $18,000 with another Tweet mentioning how he was glad to buy the cryptocurrency and that it would eventually hit $50k, which it did in February of 2021.
Will the COVID Vaccine Save The Economy?
“Bitcoin is taking off. Gold and silver are next. Don’t miss the biggest opportunity of 2020. Buy Gold, silver, and Bitcoin. Take care.”
Kiyosaki is no stranger to controversy, primarily for being ‘anti-education’ and encouraging people to sometimes avoid higher education, his criticism of the COVID vaccine and other controversies.
One thing is for sure, he knows exactly how to get attention. Although he may have been right previously about Bitcoin, time will tell if his prediction about a 2021 crash turns out to be true.
It’s always a good idea to research investment opinions from multiple experts before making any financial decisions. Although some may steer clear of Kiyosaki’s advice entirely, many other investors seem to enjoy his anti-establishment views.
On Friday, August 20, a proposed merger between Mudrick Capital Acquisition Company II and Topps was terminated.
Mudrick, a SPAC, sought to merge Topps—perhaps the most well-known trading card company in the United States—with another company, but the deal fell through due to the failure to renew a contract between Topps and Major League Baseball (MLB). Topps will still continue producing MLB trading cards through 2025.
Topps and MLB had a working partnership dating back to 1952, allowing MLB to enjoy trading card royalties and Topps to enjoy the benefits of being the “Official Trading Card” partner of the 30-team league.
MLB Breaks It Off
On Thursday, however, MLB decided to go in a different direction and officially announced its decision to not renew the long-standing relationship. In response, Mudrick decided to kill the SPAC merger, which had originally been proposed in April.
Prior to the end of the company’s relationship with MLB, Topps was valued at about $1.3 billion. The company still has licensing deals with the National Hockey League (NHL), as well a deal with the still-expanding Major League Soccer (MLS).
Don’t Give Up On Topps Just Yet
Despite the disappointing termination, the company leadership remains optimistic. “Topps expects to be able to produce substantially all its current licensed baseball products through 2025, pursuant to its existing agreements, and will build on the exceptional performance in the second quarter of 2021 in its Sports & Entertainment segment, and its Confections segment”, the company claimed in a recent statement.
Topps used to be publicly traded but decided to privatize in 2007. Current chairman, Michael Eisner, stated early this year that a SPAC was the best option for the company to once again go public.
More SPAC Deals Than Ever
As of August 4, there have already been 389 SPACs in 2021, totaling more than $100 billion and significantly outranking any prior year. The SPAC—or special purpose acquisition company—has been a defining force throughout 2021, causing many investors and companies to reevaluate the process of going public.
The collapse of the Topps SPAC serves as a reminder that most of these deals are highly contingent and are by no means guaranteed. SPACs are often referred to as “blank check” companies because they are created prior to acquiring the target investment.
Currently, Topps is owned by Madison Dearborn Partners and the Tornante Company. The company has not yet commented whether it will seek to regenerate a similar deal, even without its highly valued partnership with MLB.
Market trends within the stock market tend to fluctuate in cycles. What comes up must come down is a universal law and an expression that is applicable not only to nature, but also to market forces in the stock market.
The common known cycles within the stock market are two: that of the bear and that of the bull. When the market is bullish, it is high. But as the universal law of nature implies, what is high cannot stay high forever, and so it follows that bullish markets eventually cycle back to bearish. The bearish cycles to bull eventually, and so the cycle continues. The movements are probably a bit more nuanced than this for a financial expert looking closely at the movements within the market, the bull/bear trend generally applies.
Current market trend
The current state of the stock market is great!
On the surface, this is great news for all investors. However, it is worthwhile to think about this trend a little more in depth. Why is it as great as it is right now? Since market trends are interdependent on what is happening around the world, negative news is often accompanied with downward movements in the market. Given the Coronavirus pandemic, the current news is not so great, so why is the market still doing so well?
Beginning at the end of February and into March of 2020, for example, there was a substantial dip in the market. Though the virus Coronavirus arrived in the US around January of 2020 (possibly a little before), the first news of the Coronavirus pandemic did not start circulating throughout all major news outlets until after the first week of March 2020. With the fear that the pandemic could have a deleterious impact on the world economy and everyday life, investors got incredibly nervous and began a slew of sales, which ultimately drove the market down. March 11, 2020 marked the end of what some investors claimed as the longest bull market in history, with a dip of about 6%.
However, the market quickly recovered. After the plunge in March of 2020, the market as measured by the S&P regained 15% by the end of 2020. Today, about a year later after that infamous downward dip, the stock market valuation remains high, which is, on the surface, great news for investors. The dip amidst the publicization of the Coronavirus pandemic did not last long, and it’s probably safe to conclude, much shorter than many other bear markets in history.
Prior to this downturn, the market has been going especially strong for two years in a steady, positive trend, since the 2008 economic crash. In 2019, for example, the stock market, as measured by S&P gained 28% and MSCI developed world index gained
Minus the market downturn in the advent of Coronavirus, the stock market has been bullish for about a decade. Some investors see this period as the longest bull market in history. But when will it all end?
The concerning thing about the stock market recovery after the plunge in March 2020 is that the recovery has been propped up by the federal government. While bullish markets usually occur in tandem with strong economic growth, the economy since the advent of Covid has been anything but good. So why is the stock market still so high?
The almost-instant stock market recovery after the March 2020 dip has been a result of the federal government pumping liquid assets into the market. In the wake of the Covid crisis, the federal government has attempted to pass various measures to help individuals, small and big businesses, and this included stipulations to help prop up the stock market by pumping liquid assets into it. So basically, since the Covid crisis, the federal reserve has been pumping liquidity into the financial system, just as it has in the wake of the 2008 economic crisis. In other words, it is because of the help of the federal government that stock valuation has remained high.
This is good news not only for the wealthy. It is also good news for the average, middle class American, who has their retirement savings invested in 401k plans whose growth over time is reliant on the stock market performing well. However, if the stock market is performing well not on its own but because of government intervention, the growth seems overly superficial. Will there be any consequences as a result?
There are concerns that federal debt, partly from spending such as this, will balloon out of control and leave the country in permanent economic hardship. So what will happen?
When will the market revert into the opposite direction?
Since the market has remained bullish for so long, the downturn is bound to come at any moment. This expectation may be the reason for why gold and cryptocurrency are becoming all the more popular-there is already panic setting in about a stock market crash.
The outcome of the Coronavirus epidemic in the remainder of 2021 will be key in how the stock market performs in the near future. If businesses and individuals continue to make an economic recovery, perhaps the market will remain on a strong upward trend.
If not, then the market will see a downturn unless the federal government once again steps in to the rescue.
How to Invest in Artificial Intelligence Like a Pro
“When things get complicated, it’s easy to lose sight of the fundamentals.”
Artificial intelligence is the new oil of our tech-driven economy, with a market size expected to grow20% or more every year by 2026. While you don’t need supercomputer intelligence to start investing in AI, there are a few things you need to know that will help you cut through the noise and avoid rookie mistakes.
There’s no industry standard definition for artificial intelligence
Before you invest in AI, make sure it’s actually AI! The market is awash with snake oil because its complexity makes AI difficult to define and measure. While the official definition of artificial intelligence describes a machine that can think like a human, different companies and industries have different ideas and standards for what AI should be able to do. Eager companies like to use this to their advantage, putting the cart before the horse to raise capital.
“It’s becoming clear that if you have a website, you are now AI,” said Anand Sanwal, CEO at the data research firm CB during the 2017 AI bubble.
You don’t need to learn to code but having a grasp of AI’s basic principles as well as the difference between machine and deep learning will help you navigate the hype as you begin to invest in AI. These resources can help you get started.
Investopedia’s definition of AI – Article
Crash Course: Artificial Intelligence – Video Series
Towards Data Science: AI VS Machine Learning VS Deep Learning – Article • “Evil Robots, Killer Computers, and Other Myths: The Truth About AI and the Future of Humanity” by Steven Schwartz – Book
Engineers don’t have all the answers
With the average person less informed and no clear standards, there’s often more smoke than fire. Sometimes, however, AI companies focus too much on the tech and lose sight of the product as a whole. That’s because engineers don’t always think like their users. Most users – individuals and enterprises – don’t care as much about how advanced the software is. They care about its usability and the tangible impact it has on their lives.
Artificial intelligence is designed to solve problems but sometimes, the complexity of a product and a poor UX can create just as many problems as it solves. Watch out for complexity dressing itself up as innovation. The customer is always right.
Diversify your AI investment strategy
Pundits have a hard time agreeing on pure-play AI stocks because many of the most notable ones like Amazon and Facebook do a lot more than just artificial intelligence. While Amazon uses AI in everything from its supply chains to its recommendation algorithms, we don’t usually think of ourselves as buying artificial intelligence from them. Instead, we focus on the products their AI supports like a Prime subscription or Amazon Web Services.
If you invest in Big Tech, you already invest in AI and for many investors, this is their preferred AI investment strategy. Right now, judging the value of these stocks requires you to look beyond AI to everything it helps companies create. Over time, however, investments from Big Tech into artificial intelligence could produce new, AI-driven products that become a larger part of their valuation.
That corner of the AI market is occupied by companies like Nvidia, C3.ai, and Palantir, where artificial intelligence lies closer to their core business. Nvidia is often considered a pure-play AI stock for its computer graphic chips, while C3.ai, Palantir, and others
offer enterprise-level tech and services, designed to scale personalized AI solutions for all sorts of business challenges. In both cases, a better understanding of AI can help you know their business better and improve your AI investment strategy.
Check out Forbes’ Top 50 AI companies to watch in 2021
Looking across industries, AI faces different headwinds to growth. For companies in industries like health care and autonomous vehicles, regulation and public trust are important pieces of the profit puzzle. They can create barriers to growth for even the best of companies, while others in entertainment, finance, or insurance face fewer regulatory roadblocks. Sometimes, the most complex and regulated industries are set for the most disruption and growth, in contrast to lower risk opportunities for more modest growth.
Don’t forget the bigger picture
One day, artificial intelligence will become a part of almost everything we do, and now is your chance to get in on the ground floor of the revolution. Regardless of the approach you take, take the time to educate yourself. You’ll be glad you did.
Workhorse is challenging Tesla’s title of top electric vehicle company. But which stock is a better buy for your investment portfolio?
At the time of its founding nearly 20 years ago, Tesla (TSLA) seemed like a company straight out of science fiction. Fully electric cars that can drive themselves… it was stuff you’d expect from a TV show like Knight Rider.
Today, electric vehicles (EVs) are a reality. Chances are you or one of your friends might even own one. And as more EVs come onto the market, more EV manufacturers enter the investing arena.
One competitor generating a lot of buzz is Workhorse (WKHS). Headquartered in Ohio, rather than Silicon Valley, Workhorse is trying to corner the market for electric trucks.
Let’s pit Tesla vs. Workhorse and see which stock is a better buy for your investment portfolio.
At a Glance: Tesla vs. Workhorse
Workhorse Group Inc.
Electric vehicles and energy generation and storage systems
Electric trucks and drone systems
Market Cap (8/12/21)
Palo Alto, CA
Named after legendary inventor Nikola Tesla, this EV company was the brainchild of two California entrepreneurs, Martin Eberhard and Marc Tarpenning. However, since 2008, Tesla’s CEO has been Elon Musk, an eccentric billionaire who’s just as good at stirring up controversy as he is leading a company.
Tesla currently produces electric vehicles, batteries and energy storage systems, solar panels, and solar roof tiles. The company’s subsidiary Tesla Energy develops and installs solar-power generation systems.
Workhorse has been around a few years longer than Tesla, but its original focus was on producing stepvan and motorhome chassis and selling diesel engines. Workhorse shifted to EVs in 2015.
As Workhorse’s name implies, this company’s focus is on electric vehicles driven for business rather than pleasure. The goal is to create cost-effective EVs for “last mile delivery” — the leg of the shipping process from transportation hub to destination. Think UPS (UPS) or Amazon (AMZN) delivery trucks.
Workhorse is also developing a delivery drone that can move packages from truck to doorstep.
Tesla vs. Workhorse: Products
Tesla brought out its first car, the Roadster, in 2009. In 2012, the company debuted the Model S sedan, followed by the Model X SUV in 2015, the Model 3 sedan in 2017, and the Model Y crossover in 2020. Currently, the Model 3 is the world’s top-selling plug-in electric car, with more than 800,000 vehicles on the road as of December 2020.
In 2020, Tesla rolled out its 1 millionth electric car.
In the future, Tesla plans to introduce another generation Roadster, as well as the Semi (an all-electric semi-truck) and the Cybertruck pickup. All vehicles are currently slated for production in 2022.
But of course, Tesla’s products aren’t limited to just EVs. Tesla Energy develops, builds, sells, and installs solar energy generation systems such as the Tesla Solar Roof and Solar Inverter. The subsidiary also makes storage systems like the Powerwall home energy storage device and the Powerpack and Megapack large-scale clean energy storage systems.
Workhorse’s two EV products are delivery trucks, one with 650 cubic feet of cargo volume, and the other with 1,000 cubic feet. But ironically, in its most recent fiscal quarter, the company managed to deliver only 14 vehicles.
Workhorse has also licensed its EV technology to Lordstown Motors, which is working on a fleet of electric pickup trucks.
Workhorse is also developing a custom-built truck-mounted drone called the HorseFly, which will be able to deliver packages from a truck to your doorstep. In August 2021, Workhorse entered into a drone pilot program with the United States Department of Agriculture (USDA).Workhorse had pinned its hopes on a juicy contract with the United States Postal Service (USPS) to manufacture a fleet of electric mail trucks. However, in a surprise twist, the USPS awarded the contract to Oshkosh (OSK) instead. That caused Workhorse’s shares to plummet in the spring.
Tesla is a clear winner here. With more than 1 million vehicles on the road, a bet on Tesla is a bet on fact, not rumor.
By contrast, Workhorse still faces hurdles in getting its products on the road. For example, the HorseFly must still pass the Federal Aviation Administration (FAA) certification process.
Workhorse has also shown that it’s unable to scale its business, failing to meet production targets. If Workhorse isn’t capable of producing vehicles, how can it grab lucrative large-scale contracts?
Tesla vs. Workhorse: Earnings and Profitability
For its second fiscal quarter of the year, Tesla recorded record profits of $1.1 billion on revenue of roughly $12 billion. Wall Street analysts had been expecting only $11.4 billion in revenue.
For several years, Tesla reported a profit thanks only to the clean emissions tax credits that it receives from governments and then sells to less environmentally friendly competitors.
But this quarter, Tesla’s profits came from strong sales and lower operating costs.
Workhorse released its 2021 second-quarter results on Monday, August 9. And they weren’t good.
The company posted revenue of $1.2 million for the quarter, which completely missed Wall Street’s expectations of $5.2 million. The company also reported a loss of $43.6 million.
To be honest, this was an improvement over last year’s second-quarter results. But Workhorse isn’t delivering the figures that investors and analysts want to see.
Again, Tesla. The company has finally proven that its business can be profitable. And with governments around the globe pushing for more zero-emission EVs, there’s plenty of room for Tesla’s profits to grow.
Tesla vs. Workhorse: Which Is a Better Buy?
As Tesla continues to grow in strength, Workhorse flounders. Tesla is selling products left and right, while Workhorse has failed to scale.
Even if Workhorse were to snap up some profitable contracts, it has a long way to go before it can catch up with Tesla, the EV industry leader. Workhorse’s stock is too risky for most investment portfolios.
That said, with a market cap north of $700 billion, I’d wager that Tesla is overvalued. The smart money will wait for a better (lower) entry point before grabbing shares of the world’s most famous electric car maker.
What does this say about the future of the US economy?
Despite a meaningful drop in July’s unemployment rate from 5.9% to 5.4%, economists are struggling to understand why there’s a labor shortage with 8.6 million workers unemployed and nearly 10 million job openings.
As of July, the US economy still had about 7 million fewer jobs than it did before the first lockdowns in 2020.
While some of the workforce shortage could be explained by the pandemic and unemployment benefits, there’s a bigger story beneath the data that says more about where the post-pandemic economy is headed.
Currently, unemployed workers get 38% of their salaries replaced, on average, plus an additional $300 per week through unemployment benefits, which conservative governors are scrapping, hoping to boost workforce participation.
Are unemployment benefits the cause?
While most economists agree the benefits create some disincentive to work by decreasing the financial costs of being unemployed, the size of that effect is unknown.
So far, the overall picture from the data suggests that unemployment benefits aren’t the leading cause of the labor shortage, though studies have shown they can explain part of it.
Despite having enough open jobs to return to their pre-pandemic payrolls, some of the hardest-hit industries like services, leisure and hospitality, and retail are seeing the largest worker shortages.
Some of this can be explained by the almost historic levels of job switching. It’s creating gaps between the jobs people want and the ones they used to have, which is driving up wages and negotiating power for some traditionally low-skilled workers in these lagging industries.
Contributing factors to unemployment
The cost and personal demands of child care are also keeping workers at home – women especially. While some of this is expected to change as schools open in the fall, the pandemic’s uncertainty and the demand surplus in the labor market have many mothers taking a wait-and-see approach. Others could be settling into a new lifestyle where they spend more time at home, forcing businesses to increase wages and benefits as incentives.
Part of the gap can also be explained by trends that predated the pandemic like automation and an aging workforce.
With baby boomers coming of age for retirement, economists expected the labor force to shrink, adding to the workforce shortage. By decreasing workforce opportunities and increasing home values, the pandemic accelerated this trend dramatically.
Forcing companies to do more with less and cut down on person-to-person interactions, the pandemic also increased the pace of automation. This means there are going to be a larger number of high skilled jobs in industries like technology and manufacturing at the expense of low-skilled labor, even sooner than expected.
The pandemic pressured workers to rethink everything and despite positive jobs data, many of them aren’t ready to get back to work. In this buyer’s market, people are using their negotiating power to weigh their options, reassess their priorities, and try something new. Their choices and the response of business, amidst rising pressures to automate and a shrinking workforce will have a lasting impact on the future of the American economy.