@jabdallah "Bourses in Britain and continental Europe, chock-full of troubled industries like carmaking, banking and energy, have lagged behind, and there are renewed jitters over the single currency (see article). In America investors have put even more faith in a tiny group of tech darlings—Alphabet, Amazon, Apple, Facebook and Microsoft—which now make up a fifth of the S&P 500 index. There is little euphoria, just a despairing reach for the handful of businesses judged to be all-weather survivors."
This is overly dramatic and I really hate this kind of thing because it's selling fear and gloom ("there is little euphoria to be found as the grey crowds settled in over the Nasdaq where the little Oliver Twist traders said, "please, sir can I have some Microsoft?" I mean give me a fucking break) rather than a thoughtful, balanced look at what is happening.
Simply, technology was already becoming a larger and larger part of daily life before this. What this has done in many cases is pull forward years of adoption and in some cases that adoption will replace aspects of other industries. Posted an article yesterday talking about Goldman discussing 3 million barrels less oil demand because some business travel will go away and be replaced by virtual meetings. Travel's loss is tech's gain, perhaps to some degree permanently. If there's more remote work being done, how much less miles will be driven? You can really sit and think about all the various things that will be to some degree effected by a rise in remote work. How much less office space will be needed?
When Booking Holdings (aka Priceline) did their pre-announcement in early April, it was a lot of fairly bleak stuff that included this sentence: "If the travel and restaurant industries are fundamentally changed by the COVID-19 outbreak in ways that are detrimental to our operating model, our business may continue to be adversely affected even as the broader global economy recovers." They have to include that probably but it's really something that might be absolutely the case, to some degree.
Telemedicine and virtual meetings have massive demand and anything that has to do with that - not only Zoom or Teladoc but things like Bandwidth and Twilio (up 40% yesterday) - are doing exceedingly well. Docusign (virtual signatures to go along with virtual meetings) doing well. There's plenty of others - RNG, etc.
I invested in Ocado last year with the view of online grocery being a
gradual growth theme over the next 5 years. Well, a lot of that next 5 years of adoption just got pulled forward by this and the stock is hitting new all time highs. You're seeing that across a number of things. Paypal on the call predicting that this is the tipping point for the beginning of the end of cash (and not surprisingly; given what's going on, businesses are not going to be eager to handle money during this - Nordstrom said the other day that when it reopens it will be cashless.) Microsoft: Microsoft saw 2 years of digital transformation happen in 2 months: Nadella (
https://www.business-standard.com/a...appen-in-2-months-nadella-120043000184_1.html)
You can say that some of these things are ahead of themselves -
I've even said it lately - but I really do think that what you're seeing in many cases is a significant pull forward of adoption of things like e-commerce, changes in healthcare (Teladoc, but Livongo's up nearly 100% YTD), virtual meetings, digital payments and more. There are clear winners during this and they're winning big; their are also clear losers during this and people have to consider things like whether some business travel is just going to be replaced by virtual meetings (ZM, DOCU) going forward. How this continues to play out in the short term for the companies involved is going to depend on how the situation plays out, but it is clear medium-to-long term that a lot of tech adoption and consumer change has been pulled forward and that there are clear
long-term winners and losers on the other side of this.
" chock-full of troubled industries like carmaking, banking and energy, have lagged behind"
Yeah, people aren't rushing to invest in Ford or GM, which they shouldn't be. Oil has not been a great choice during this and people should have focused on growth instead. Things that haven't delivered in years are getting left behind and if you really look around over what's done well and what hasn't - and despite the market's broad recent rise, if one actually looks underneath there are clear winners and losers - people are running to what they want to own for the years ahead and leaving behind in many cases what hasn't delivered and/or what they don't have confidence in navigating what might be a new normal. The things that benefit are being embraced to an impressive degree, the things that clearly aren't or that people don't have clarity on are being discarded.
"A second hazard to reckon with is fraud. Extended booms tend to encourage shifty behaviour, and the expansion before the covid crash was the longest on record. Years of cheap money and financial engineering mean that accounting shenanigans may now be laid bare. Already there have been two notable scandals in Asia in recent weeks, at Luckin Coffee, a Chinese Starbucks wannabe, and Hin Leong, a Singaporean energy trader that has been hiding giant losses (see article). A big fraud or corporate collapse in America could rock the markets’ confidence, much as the demise of Enron shredded investors’ nerves in 2001 and Lehman Brothers led the stockmarket down in 2008."
Luckin isn't the only one, there's been other discussions of fraud on Chinese stocks recently. Also, LK still halted nearly a month later, lol. There's always the possibility of a big corporate fraud. A big corporate collapse in this country would probably involve something that at this point people probably wouldn't be all that surprised about - there's plenty of dinosaurs, and a lot of things in slow decline that could have lasted for years (hi, department stores and specialty retail) have in some cases seen that decline be suddenly compressed into a much shorter time frame. It's the opposite of some industries seeing adoption being suddenly pulled forward.
"The most overlooked risk is of a political backlash. The slump will hurt smaller firms and leave the bigger corporate survivors in a stronger position, increasing the concentration of some industries that was already a problem before the pandemic. "
I think this is a concern for Target, Walmart, Amazon and maybe a couple of others. Retail in particular is going to be a case of the largest/strongest get bigger/stronger after this and possibly significantly so. A large portion of main street retail going away and leaving people with the option in many cases of going to Walmart or ordering on Amazon is probably not going to go over well.