GameStop and Other Reddit Picks, Dogecoin, Apple: Investments in the Spotlight

Reddit Mania

The wider world sure knows about r/WallStreetBets now.

A chaotic week of trading saw shares in the likes of video-game retailer GameStop Corp. and movie theatre chain AMC Entertainment Holdings Inc. driven up to dizzying heights by traders on the Reddit forum, humbling some of Wall Street’s most famous hedge funds in the process.

Then, retail brokerages including Robinhood stepped in to curb trading, and shares favored by the Reddit-inspired investors plunged. Robinhood is now facing backlash from angry customers and two leading U.S. House and Senate committees have pledged to hold hearings on the recent instability. Late Thursday, Robinhood said it would ease some restrictions — and prices rebounded. 

Things got weird beyond equities. Dogecoin, a digital coin that originally started as a joke,soared as much as 77% in Friday morning Asian trading after it was touted on social media. It’s one of the thousands of so-called alt coins which have sprung up as alternatives to Bitcoin.

Amid the frenzy, financial advisors arepleading for ordinary investors to take extreme care: “Focus on having patience rather than chasing the story of today,” James McManus, chief investment officer of Nutmeg, an online investment-management firm based in London. “That holds true in a down market as well as an up market.”

What’s Next? Judging by this week, almost anything could happen. While most analysts expect the mania around these specific stocks to eventually blow itself out, the episode has demonstrated just how much power the online trading army has to move markets. “This is something, I think, for a lot of people, that was a statement as much as an investment,” Alexis Ohanian, co-founder of Reddit who left the company’s board last year, told Bloomberg Television on Thursday. “I’d equate it to, like, folks voting with their dollars in order to get back at or make a statement towards big finance.”

Apple’s Caution

Back in the more conventional market world, it was a banner week for Apple Inc. in many ways. Its quarterly revenuetopped $100 billion for the first time and record iPhone shipments pushed it to theNo. 1 spot in the global smartphone market as rivals Samsung Electronics Co. and Huawei Technologies Co. lost ground.

Still, shares fell 3.5% Thursday as investors got jittery about a lack of official guidance from the company. Expectations for the company have been running red-hot on expectations of a new iPhone “super cycle,” where millions of existing users upgrade older hardware to new 5G models. 

While executives struck a positive note on high-end phone sales, they said sales growth would likely slow for AirPods and other wearables. 

What’s Next? Wall Street analysts are expecting big things from the company: Of the 45 surveyed by Bloomberg, 31 have a buy rating on the stock, 11 a hold and only three suggest selling. “With expectations elevated coming into the release, Apple delivered on all fronts,” RBC Capital Markets analyst Robert Muller wrote in a note. “We remain bullish on the multi-year 5G upgrade cycle, as 5G deployment remains slow in much of the world and we expect consumer adoption to grow as network buildouts continue.”

Housing Boom

Prices for lumber futures in Chicago hit a record high this week, having surged around 30% already this month. The upswing in what’s usually the winter quiet-period is one consequence of the U.S homebuilding spree.

The combination of ultra-low interest rates and a rush to move to less-populated areas has sent home construction starts in the U.S. soaring. Starts rose at the fastest pace since 2006 in December andbuilder backlogs suggest construction will remain firm for some months.

While that’s good news for the economy as house building generates jobs, the wood mills just haven’t been able to keep up — leaving buyers facing not just higher prices but also delivery delays.

What’s Next? In the medium term, as mills expand capacity, prices are expected to moderate. However, while prices have dipped slightly off their highs, there isn’t much relief in sight. “Everyone knows that current prices are stupid but the choice is either pay up or run out,” Vince Bulic, president of Canadian wholesaler Yaletown Lumber Industries Ltd., said in a Jan. 22 note. “Comfortable prices do not seem to be on the near-term horizon.”

Mall Drama

Conditions for commercial property in the U.K. just keep getting worse.

Empty space in malls and stores is rising at the fastest pace since at least 1999, when records began, according to quarterly report by the Royal Institution of Chartered Surveyors.

Office vacancies are also on the up, rising by the fastest pace since the financial crisis as companies question whether workers will ever return in the same volumes.

The one bright spot in the survey for landlords was for industrial and logistics space, with brokers anticipating rent rises as the shift to e-commerce continues at pace.

What’s Next? Outside industrials, there isn’t much optimism around even with the vaccine rollout underway. “Conditions remain challenging,” RICS economist Tarrant Parsons said in a statement. “The office and retail sectors continue to see occupier and investor demand diminish, with expectations for rents and capital values remaining deeply negative for the time being.”

— With assistance by Marcy Nicholson, and Mark Gurman

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