In the final full trading week of 2017, Tuesday will present investors with some notable corporate earnings, scant economic data, and bring markets one day closer to tax reform becoming law.
Shipping giant FedEx (FDX) will report earnings after the bell on Tuesday, with this report potentially giving markets some color on the holiday shopping season and its read on global economy.
On the economics side, the only major data expected Tuesday will be the November reading on housing starts and building permits. This data will follow Monday’s check on homebuilder sentiment, which showed America’s homebuilders feel as good as they have in 18 years, topping all confidence measures taken during the housing bubble.
Markets will also be tracking the progress of tax reform in Washington, D.C., with the Republican tax cut package set for a vote in the House on Tuesday, which could clear the way for President Donald Trump to sign the bill into law later this week.
This is what happens when people lose their minds.
The company billed itself as a fintech company that used artificial intelligence and machine learning to held finance international trade for small businesses. The stock went public at about $6 a share. Ho-hum.
And then on Friday, Longfin announced that it had acquired Ziddu.com, a “Blockchain-empowered solutions provider that offers Microfinance Lending against Collateralized Warehouse Receipts in the form of Ziddu Coins.” Which sort of sounds like a company that will offer loans to small businesses using Ziddu Coins instead of dollars. But the real story is what happened to the stock.
It went up.
After trading around the $5 a share mark on Thursday, by the close of business on Friday Longfin shares had gained about 300% and closed near $22 a share. Then on Monday, the stock went nuts, hitting $142 a share at one point, good for a 500% gain before settling at $72. So, just a tripling (and then some) of the stock price in a day. No big deal.
Over at Bloomberg View, Conor Sen argues that this kind of wild price action in the stock of a real company that at his point appears only tangentially related to bitcoin (BTC-USD) or blockchain is how the mania in bitcoin makes its way into the real economy.
Sen writes that the price moves in Longfin show that markets are willing to fund basically anything that appears to have ties to cryptocurrencies. As a result more companies will pivot this way.
“And these companies with newly bid-up valuations are unlikely to be good users of capital and other resources,” Sen writes. “They’re going to be hiring people, renting office space, purchasing equipment, and spending money on advertising to chase the crypto boom. That money is going to flow to real companies servicing those speculative crypto companies, increasing the exposure of the real economy to the crypto one. This means a temporary boost to economic growth, but of questionable quality.”
And we’re sympathetic to this view.
Bitcoin is a digital asset — one that the Federal Reserve has called “highly speculative” and about which some major banking executives have been less charitable — and the economic impact of bitcoin’s increasing value has been hard to discern outside of boosting financial market commentary and making a few early investors wealthy on paper.
What happens to markets and the economy when the price of bitcoin and other cryptocurrencies falls — if it does at all — is unclear. But the more that real companies, think of the rise in shares of Square (SQ) or Overstock.com (OSTK) this year based on crypto hype, see market values rise based on the exuberance of the investor class, the more we risk a real economic impact somewhere down the line.
Myles Udland is a writer at Yahoo Finance. Follow him on Twitter @MylesUdland
Read more from Myles here:
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- TOM LEE: Bitcoin is an important asset for investors to own