What we’re reading (11/18)
“Pandemic Stocks Have Become Passé” (DealBook). “As the economy reopens and markets look forward to life without pandemic restrictions, many “stay at home” stocks are no longer paying off for investors. Peloton, the maker of connected exercise bikes, said yesterday that it would raise $1 billion in cash from selling stock, just weeks after it said it didn’t need more capital. The company’s stock is down more than 60 percent this year.”
“What Went Wrong With Zillow? A Real-Estate Algorithm Derailed Its Big Bet” (Wall Street Journal). “The first quarter delivered home-sale profits that were more than twice as high as anticipated, the company said. Zillow expected to make money primarily from transaction fees and from services such as title insurance—not from making a killing on the flip. The company’s algorithm, which was supposed to predict housing prices, didn’t seem to understand the market. Zillow was also behind on its target for home purchases. By the summer, it had the opposite problem, the company later acknowledged. It was paying too much money for homes, and buying too many of them, just when price increases were starting to slow.”
“In Praise of . . . Enron?” (Texas Monthly). “Twenty years later, however, Clemmons isn’t alone in waxing nostalgic about Enron. Interviews with nearly a dozen former employees paint a similarly rosy picture. Working there was “an amazing experience,” one said. “An awesome place to be a young person,” said another. Still, their memories contain contradictions. Enron was an invigorating, dynamic workplace (managed by unapologetic criminals). The company fearlessly pioneered several new markets and industries (while looting others).”
“Investors Know They Own Too Much Tech. This Analysis Shows That It’s Worse Than They Think.” (Institutional Investor). “Because pension funds and other big institutions have adopted index funds for at least part of their stock portfolios, many of them now face new risks. One of the criticisms of funds that track indices such the S&P 500, which is weighted by the market capitalization of its stocks, is that the benchmark has gotten concentrated in the most expensive constituents — think Alphabet, Apple, and Microsoft, for example. Investors, as a result, are less diversified than they think and more exposed to a potential decline in these stocks. “
“Don’t Mock The Metaverse” (The Economist). “Google Maps already offers a virtual space that contains the real world’s stations, shops and streets. The video-game industry—the only type of entertainment fully exposed to the compounding power of Moore’s law—has been selling virtual worlds for years. “EverQuest”, an online game launched in 1999, had half a million subscribers at its peak. (Players quickly co-opted it for socialising, and even weddings, as well as dragon-slaying.) “World of Warcraft”, which arrived five years later, hit 12m. These days 200m people a month hang out on “Roblox”, a video-game-cum-construction-set. Many spend their real money on virtual goods. It is hard to argue that an idea will never catch on when, for millions of people, it already has.”
