Weekend Update #198
Thank you for your continued support and engagement. Each week, we're sharing what companies we're researching and the what, the who and the how that we think makes the companies interesting and unique. This roundup is brought to you weekly by a group of interns, creative minds, artists and investors who believe that through best in class investing along with the democratization of financial education we can do great things together. Enjoy, Explore and Share.
The S&P 500 continued its upward march this week, hitting new all-time highs on Thursday. With the FOMC’s shift to rate cuts, the market is keenly aware of risks to the labor market but continues to be reassured by measures of consistent economic growth. Precious metals continued a rally as interest rates start to fall. Silver hit a new high since 2015 at $32.71 per ounce and gold rose to new all-time highs at $2,685.58 per ounce. The positivity comes despite Category 4 Hurricane Helene making landfall and Israel stepping up attacks on Hezbollah this week.
In economic data this week, Consumer Confidence on Tuesday led to some momentary panic as the index fell the most since August 2021 and surveyed measures of opinions on current business conditions plunged. However, that data was quickly overlooked by the market, and the University of Michigan’s Consumer Sentiment report on Friday actually showed a rebound in confidence throughout the month. Broadly, consumers report negative sentiment around the labor market and income measures but the expectations of a lower rate environment are helping to buoy feelings toward buying conditions. Overall, both surveys show consumers maintain positive year-ahead economic outlooks.
Annualized quarter-over-quarter GDP growth was 3.0% in Q2 2024 with the Atlanta Fed’s GDPNow estimate showing a 3.1% estimate for Q3 2024. While the Fed has been able to bring down inflation with its restrictive monetary policy stance, so far measures of economic growth continue to point to stability. Inflation-adjusted consumer spending rose 0.1% month-over-month in August while 3-month annualized PCE rose 2.1% year-over-year in August. Overall, these data show that consumers are becoming more frugal with spending and the economy continues to cool — good news for the Federal Reserve as they are expected to continue their rate cutting cycle.
Internationally, the People’s Bank of China announced sweeping monetary stimulus to reignite confidence in China’s growth, cutting interest rates and reducing bank reserve requirements — the first announcement of both on the same day since 2015. Government officials pledged to stabilize the real estate market by reducing borrowing costs. It was announced that 800 billion yuan ($113 billion USD) would be injected as liquidity support to Chinese equities while the creation of a market stabilization fund is in talks. The Chinese government is set to issue 2 trillion yuan ($284 billion USD) in sovereign bonds this year. The combination of stimulus measures led to a 13.0% 5-day surge in the Hang Seng index, pushing year-to-date returns to 21.0% — surpassing even the S&P 500’s 20.4% YTD gain.
Friday’s Close (Weekly Performance)
S&P 500 5,738.17 (+0.62%)
Nasdaq 18,119.59 (+0.95%)
Dow Jones 42,313.00 (+0.59%)
Thank you Blue Room Analyst JARED FENLEY
This week’s economic news remained positive following the significant Federal Reserve rate cut last week, helping the S&P 500 reach a new all-time high. Although the index dipped slightly on Friday, it still ended the week higher, as did Fund One. The Fed's preferred measure of US inflation showed a slight increase in August, alongside a rise in inflation-adjusted consumer spending, confirming investors' views on the economy's health. Consumer sentiment data released Friday echoed this optimism and Treasury yields fell as data reinforced expectations for additional Fed interest-rate cut. Trading this week also benefited from stimulus announcements in China which resulted in its primary index experiencing its best week since 2008.
Our positions in Mobileye, Coinbase, and Snapchat were key contributors to our performance this week. Mobileye continued its upward momentum following Intel's announcement to maintain its majority stake in the autonomous driving technology firm. Coinbase saw a boost as investor sentiment improved around a potential favorable outcome in its SEC lawsuit. Snapchat gained traction with news of its partnership with Google AI, which aims to enhance user engagement and reduce costs, further boosting investor confidence.
On the downside, our short positions in Intel and Tesla, along with some weakness in our biotechnology holdings, negatively impacted performance. Intel continues to rise on speculation of potential bids, while Tesla is benefitting from the positive stimulus news in China, where it generates about a third of its sales. We remain disappointed with the performance of several biotechnology stocks; however, we find some comfort in the fact that this trend is not company-specific but rather reflects a broader lack of investor interest in the sector. If our fundamental thesis on these names holds true, we anticipate that investors will eventually recognize their value and seize the opportunity to buy these undervalued stocks.
Thank you Blue Room Investing President JOHN FENLEY
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Peering Into the
Bizarre Frontier
of the Metaverse:
VR, AR, Wearables & AI
by JARED FENLEY
BLUE ROOM ANALYST
Stepping into the metaverse in 2024
is an otherworldly experience,
teetering between awe-inspiring and utterly bizarre.
Meta AI-generated image
For a total cost of $0 and no lost time traveling, I was able to “attend” one of tech’s biggest events of the year — The Meta Connect 2024 Conference — in full virtual reality (VR) with the Meta Quest 3. While the true in-person event was completely separate from the virtual event I experienced, Meta clearly put in a lot of effort to make the virtual event a key part of the conference.
After logging into Horizon Worlds and completing an efficient yet amusing tutorial on how to control my virtual avatar, I stepped into a portal that teleported me to the Meta Connect 2024 virtual event. This VR world boasted virtual booths to learn more about Meta’s Horizon capabilities, activities and games to learn more about a VR headset’s capabilities in the metaverse, and nudges to interact socially with the other virtual attendees. All of these characteristics you’d expect to find at an in-person event as well.
Screenshot from my field of view during the Horizon Worlds Meta Connect event
Much like the real-life event, there was an auditorium space for people to crowd around what appeared to be a 50-foot-sized live video feed of CEO Mark Zuckerberg presenting his keynote speech. Throughout the event, you could hear how other attendees remarked and reacted to the announcements through gasps, cheers, and claps. Above all, it didn’t feel like I was watching a video through a computer screen — I felt like I was a part of this event, experiencing something tangible along with other attendees, even if it was in avatar form.
What anyone who hasn’t experienced the metaverse in VR needs to know is this:
It feels very close to reality
but like a parallel universe
where everything is just a little off.
Meta AI-generated image
“Utterly bizarre.”
Although the above constituted one of the metaverse’s many mindblowing experiences, with all honesty, experiences in the metaverse are just as much characterized as utterly bizarre.
As far as I could tell, the virtual Connect event attendees were made up of Meta employees, developers, and investors like myself. While a somewhat diverse group, it felt more like everyone was an observer of this metaverse experience rather than a participant. No one felt quite comfortable with it yet.
One man was walking around the space prior to the live keynote, livestreaming his perspective for a social media platform of some kind. From my perspective, I observed a man talking to himself non-stop in a stream-of-consciousness fashion with no other indication that he could be recording or communicating with an outside audience. Maybe you could argue that vloggers are more and more commonly found walking around cities and everyday landmarks, but this was not a “normal” social experience by any means.
Noticing from my peripheral vision other virtual attendees looking over at me in my avatar form sparked the same psychological reactions in my brain as being observed by other people — an experience that goes completely against the anonymous, individualized experiences we have grown accustomed to on the current form of the internet.
Although body tracking in VR is good enough to tell when someone is observing you or what they are focusing on, there are also plenty of avatars running around with their arms straight in front of them (like zombies) which is an odd sight. This occurs because although the metaverse is built to mimic real life, in reality, many of us attendees were sitting at desks with our arms on a flat surface.
While we were all experiencing something novel and foreign together, there was very little communication between people — unlike a normal result of real-life experiences shared by people. It felt too fake and virtual to feel like we should act as people normally do in public events or spaces, yet it felt too real to feel comfortable with being just a disconnected observer. All of our classic social cues contrasted starkly with the habits we’ve formed by using the internet in such siloed, individual experiences.
This brings me to a key point: Experiences in the metaverse force humans to adapt socially in completely new ways.
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