The Big Picture in 5

Your 5-Minute Weekly Update on the World’s Biggest Trends and Opportunities

 

1. Suddenly, Money Matters

COVID-19 made for some wild times.

We had prolonged lockdowns. Stimulus checks. Tiger King. But even stranger, we had a massive run-up in stocks that don’t make any money:

Of course, this is hardly news by now.

High-flying tech stocks like Teladoc Health (NYSE: TDOC) or Peloton (Nasdaq: PTON) were one of the only bright spots during the pandemic. And due to the circumstances, their lack of profitability didn’t seem to bother anyone. After all, everyone was hurting during quarantine — even the big blue chips.

But now that rates are on the rise and inflation’s back in town, people want to see the money. Credit risk starts factoring back into the equation, especially for those companies not yet earning any cash.

While some of these tech stocks will eventually bounce back, it’s important to look at both sides of the chart above.

Because you’ll see how truly spectacular the last few years’ boom and bust have been. And how historically (at least going back to 2017), these nonprofitable stocks have been relatively nonprofitable investments.

Fortunately, there are profitable alternatives…

2. Then Who’s Making Money?

With so many sectors in the red, investors are left to wonder whether there were any real winners from the post-COVID recovery.

For better or worse, oil and gas have performed relatively well over the last year thanks to economic recovery and a major petrostate going to war. Back on April 5 of last year, Clint Lee recommended the SPDR S&P Oil & Gas Exploration & Production ETF (NYSE: XOP) as a solid play for recovery. Since then, shares have boomed 69%!

And with a cold winter ahead for Europe and American gas prices jumping to record highs, it looks like energy prices could continue to rise well into the future.

3. AirPods: Big as Iceland

There are successful products … and then, there are AirPods.

First released alongside the iPhone 7 back in 2016, these stylish and understated earbuds are dominating its marketplace in a way that few products can only ever dream of.

Based on AirPod sales alone, Apple (Nasdaq: AAPL) would easily be one of the biggest tech companies in the world:

The sheer scale of this is tough to quantify.

Just as a matter of perspective, consider that the entire country of Iceland had a gross domestic product of just under $22 billion for 2020. During that same year, AirPods sales were $23 billion.

Especially when you realize some of the hottest tech companies aren’t making any money at all (see above), that’s a very big deal. Apple has also been working to expand some of its most profitable segments while cutting costs across the board.

And yet, shares are down 20% so far this year. At the moment, shares are selling for less than their pre-pandemic valuation, at a price-to-earnings ratio of 23.8.

4. Russia vs. Ronald McDonald

McDonald’s (NYSE: MCD) has officially announced plans to sell its Russian restaurants.

According to The New York Times, the company is expecting to write off $1.2 to $1.4 billion and recognize “foreign currency translation losses” due to the circumstances.

Of course, McDonald’s 850 Russian locations have already been closed for several months — since the company suspended its operations soon after the country’s invasion of Ukraine. But unlike laying off employees and locking the doors, this plan to sell off the company’s real estate has a distressing air of finality.

It seems like McDonald’s (like most of the world) is no longer expecting the war in Ukraine to end any time soon.

5. The Market Is Making Massive Moves (Chart of the Week)

Friday before last was the 12-year anniversary of the infamous “flash crash” that saw markets dip 1,000 points in just 10 minutes.

Unprecedented at the time, these kinds of flash crashes are starting to become a disturbingly regular occurrence. In a special video on the subject, our resident quantitative analyst explained where these increasingly frequent flash crashes and waterfall declines come from.

And in recent weeks, the topic has only become more relevant:

Volatility is often a major factor during bear markets, but these daily moves have been especially pronounced. Especially over the last few weeks, these wild swings have been all over the chart.

Which brings us back to the very question that started today’s issue. Specifically, how can we even make money in a market like this?

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