The nightmare after Christmas
Not Pretty, Not Rich” is a newsletter about money, finance, and the economy. You can connect with me through my website, Twitter, LinkedIn, or send me an email at sammbecker@gmail.com. Also, if you enjoy this newsletter, I’d really appreciate it if you would share or forward it to others.
It’s Friday, December 18, 2020, and here’s the rundown:
In the news
Fancy words: “IPOs”
IPO fever: Airbnb and DoorDash go public
The nightmare after Christmas
Numbers and links
In the news
Vaccines. They’re here, and that should be the first step toward crawling out from under this pandemic.
Stimulus incoming? It’s been nine months since the last relief package was passed, which should piss everyone off. But it appears that we’re close to a new, $900 billion deal, that would include more stimulus checks.
Hacker’s delight: A massive cyberattack, apparently orchestrated by the Russians, compromised a number of government agencies, and we’re still not sure how extensive it was. It seems that this is probably a bigger deal than most people realize.
Fancy words and what they mean
This week: “IPOs”
We’re going to talk IPOs, but first, just so that everyone’s on the same page, let’s define what that means. “IPO” stands for “initial public offering,” and is the process a private company goes through in order to become a public company. Or, in other words, a publicly-traded company.
That means that you can buy its stock, or shares, on a stock exchange using Robinhood, Fidelity, or any other broker. So, when a company IPOs, its stock is available, for the first time, to any and all investors.
IPO fever, baby
DoorDash and Airbnb IPOs were the talk of the markets this past week.
It feels like a strange time for a company to go public, but hey, what the hell.
DoorDash and Airbnb are the latest buzzy companies to go public, and they both did so recently. Odds are, you’re familiar with these companies and may have used their services to order food or book a vacation — and it’s because most people are familiar with these companies that the ability to invest in them was pretty exciting to many investors.
And for both companies, their debuts were pretty explosive:
DoorDash shares rose 86% above its IPO price of $102 to close at $189.51.
Prices then fell back down:
Airbnb, likewise, saw its share price rocket up from $68 to $165, before closing its first day of trading at around $145.
Share prices then fell, but have since recovered:
Images: Google Finance
So, a lot of people made some serious money from these IPOs. Traders essentially made a bet that shares of these companies would increase in value after the markets opened, so they made purchases as soon as they were able, and sat back and watched the values of those shares rocket up.
This isn’t uncommon. It’s pretty typical for a popular or buzzworthy company’s stock to increase in value as soon as it goes public. The same thing happened with Beyond Meat last year.
But for the average person, IPOs like these don’t necessarily offer up the chance to make easy money. Sure, you could’ve bought some Airbnb shares on your Robinhood account last week and made some money, but there are significant risks — and I don’t know about all of you, but given the state of the world right now, I’m not willing to tie money up in an unprofitable food delivery company’s stock.
After Airbnb and DoorDash IPOd, their shares promptly lost value in the following days. So, if you were late to the party, you may have gotten burned and actually lost money. And some experts and analysts are also speaking out, saying that these types of explosive IPOs have some problems.
That’s all to say that, if you’re not a professional day trader, it may be best to sit back and let IPOs sort of…work themselves out. Both Airbnb and DoorDash are companies that, while you may have heard of or used their services, are still struggling in many respects.
Be skeptical, too. After Airbnb’s first trading day, it was actually valued more than the top three hotel chains in the world — Hilton Worldwide Holdings, Marriott International, and Intercontinental Hotels Group — COMBINED. Does that sound…right?
To conclude, before you smash “buy” in your WeBull account, know the risks of IPOs, and that, in many ways, the average investor may be at a disadvantage when trying to surf the enthusiasm wave to a short-term profit.
If you simply can’t find a prescription for IPO fever, though, stay tuned — the whole process is about to get the reality show treatment.
The nightmare after Christmas
Time is running out for millions of Americans.
The most recent weekly jobless numbers are sobering: 885,000 people filed for unemployment benefits for the first time during the week ending December 12, the most since September. Experts were estimating 808,000 — so, we blew that out of the park.
Clearly, things are getting worse. COVID cases are climbing, jobs are being lost, and even though vaccines are rolling out and there is reason for optimism, it does feel like we’re in for a rough few months.
That may become abundantly clear after Christmas. Approximately 12 million people could lose their unemployment benefits immediately after the holiday, and that’s because a couple of key provisions in the CARES Act expire that day. One is the Pandemic Unemployment Assistance program, providing benefits to unemployed freelance and gig workers. The other provision concerns Pandemic Emergency Unemployment Compensation (PEUC) benefits, which provides additional weeks of benefits for workers in some states.
Further, a federally-mandated moratorium on evictions ends at the end of December, putting 30 million people at risk of eviction.
This is all assuming that Congress can’t pass another relief bill of some type, of course. But given that it’s been nine months since the first bill was signed into law, and
So uh…yeah. Things are looking pretty bleak.
But as mentioned, it looks like there’s another stimulus deal in the works. The problem is that it likely won’t be enough — and that will stunt the economic recovery going forward. And, as this very newsletter has discussed, we’re going to get a lackluster stimulus package because some members of Congress have suddenly become very concerned about the national debt again, after a four-year break.
So here’s where we’re at: The situation for many households could deteriorate significantly after Christmas. Assuming another aid package is signed into law, things could be less bad. But still — pretty bad. I’d assume that the economy will start to recover as vaccines roll out and further stimulus measures are enacted.
But in the short-term? It could be rough.
Numbers and links
A profile of the guy who found Forrest Fenn’s treasure in Wyoming (Outside)
Hey look, an app where psychics pick stocks for you (Vice)
People move for a number of reasons. But do they move because taxes are too high? (CFA Institute)
Algorithms are keeping people poor (MIT Technology Review)
Borrowed: $79,000. Paid: $190,000. Now Owes? $236,000 — a student loan horror story (Matt Taibbi)
How much is your time worth? $19, apparently (NBER)
Experiments prove that tightwads (cheapskates) cheat in order to avoid paying for things (Journal of Economic Behavior & Organization)
25: The number of NYC penthouses a Hungarian artist was able to gain access to and photograph by posing as a billionaire (Curbed)
$228.2 million: The value of the supermax deal signed by basketball superstar Giannis Antetokounmpo — the biggest in NBA history. It’ll keep him in Milwaukee, a small-market, which is also cool (The Athletic)
Stay cold,
Sam