Weekly Newsletter- Week of 9.5.2021
Hurricane Ida Devastates Business and Consumers
Nearly 16 years after Hurricane Katrina destroyed so many homes and businesses, another terrible storm landed to wreak havoc this week. Though not nearly as deadly as Katrina, Hurricane Ida has become another historically damaging storm that will take several weeks and months to repair. Categorized as a CAT4 hurricane, this storm is only one level below a CAT5, the highest storm grade possible.
Damaging Businesses
When storms like Ida hit, the damage can be widespread, and no person or business is safe. Hurricanes can damage homes as well as infrastructure and leave thousands, if not millions, without basic materials such as food, water, electricity, or gas.
Gas: Due to the devastation inflicted on their oil rigs, many oil companies are still trying to quantify the true impact of the storm. The immediate concern is any limitation on the availability of gas could cause a spike in gas prices. Though we expect some near-term volatility, we don’t predict any massive or prolonged price increases. For context, when Katrina hit, gas prices almost immediately jumped an average of 50 cents per gallon.
Insurance: Early predictions are estimating insured damages in the range of $20B for the city of New Orleans- this is compared to $65B during Katrina.
Electricity: The entire state city of New Orleans lost power during this devastating storm as major power lines and transformers were not immune to the storm’s rage. One of the main power sources of New Orleans predicts it could take several weeks before all its 3 million citizens fully gain back power. Additionally, the state of NY also suffered extreme damage due to the storm. As their subway system became flooded, the city will need to spend millions getting their core transit infrastructure running again. Hurricanes may only last a few days, but the damage caused by these storms can last much, much longer. As we look to rebuild and repair, we'll be watching to see what other businesses are affected and how that may impact the consumer.
The Zoom Fatigue is Real
This week, former pandemic winner Zoom reported earnings and share prices have dropped off a cliff- share are now trading nearly 15% lower than before reporting. At the height of the pandemic, Zoom was considered arguably the biggest benefactor from the stay-at-home economy. Overnight, Zoom and virtual meetups became essential to our everyday lives. From work to school, to just staying connected, Zoom was the glue that kept us together while staying apart during the pandemic. Now as we began to come out of the global pandemic, it's obvious the Zoom fatigue is real! The market is forward-looking, and investors have no interest in considering what another virtual economy would look like. Shares are currently trading around $280/share far below their pandemic high of $400/share. Despite the massive selloff, not all investors feel that Zoom has lost all value. Famed investor Cathy Woods added to her position this week, staking an additional $56 million worth of shares. She believes Zoom will continue to take more market share in all of the communications sector and not just in video conferencing.
PayPal Ready to Battle Robinhood
This week we heard a blockbuster announcement from PayPal, the growing fintech juggernaut. PayPal, and its top product Venmo, have been battling Square and their CashApp platform for years, as both continue to extend their banking services and their cryptocurrency investments. Robinhood has made major headways despite a user base of only 21 million. This compares to the over 400 million active users currently utilizing PayPal. PayPal management recently noted users who utilize their platform for cryptocurrency engagement are logging in twice often as those who don't. As PayPal continues to expand its financial services, it hopes to become a 'super application where all money management can be done in the same place. Thus, limiting the need for a user to ever leave the app. This should be very worrisome for Robinhood and its investors.