Finance

A plunge may be looming for cryptocurrencies, housing and disruptive technology stocks tied to innovation.
According to Rich Bernstein, an Institutional Investor Hall of Famer, the nation’s expiring easy money policies and historic supply chain backlogs are posing serious risks for some of the market’s most popular investments.

“There’s a whole series of bubbles going on right now,” the Richard Bernstein Advisors CEO and CIO told CNBC’s “Trading Nation” on Wednesday. “There’s a bubble in long-duration assets. That’s a common theme.”
Bernstein’s cryptocurrency warning particularly applies to bitcoin. He said insatiable demand is a classic sign of a bubble.
He speculates a meltdown could resemble the tech bubble. It took 14 years for the Nasdaq 100 to break even if you invested in it on Dec. 31, 1999, he noted.
Housing is topping his watch list, too. In a tweet Tuesday, Bernstein warned rising home prices were starting to make the mid-2000s housing bubble seem rather mild.
“[Home prices are] now accelerating more than what you saw during the housing bubble,” the CNBC contributor said. “The rate of change now is higher than anything you saw during the housing bubble in 2005, 6, 7, 8.”

His other major risk is tied to chaos at the ports and its bullish effect on inflation. Bernstein sees it as a serious problem, and he warned on “Trading Nation” last April that investors were poorly prepared for it.
While he believes hyperinflation risks are very low, he believes inflation higher than consensus is extremely likely.
“They’re not going to stay this high. But where do they settle? Do they settle at the consensus 2 to 2.5% or do they settle at 3% or 3.5% or 4% or 4.5%? I think you treat it as an over/under bet right now,” he said.
And, Bernstein contends the supply chain backlogs will likely stick in investors’ psyches for years.
“It’s important to realize that the supply chain disruptions that we are seeing have lasted longer than the oil embargo in ’73-’74,” he said. “That was only a four-month supply disruption of oil, and it changed the way people thought about inflation for the next 10 years.”

‘There’s a world of opportunity out there’

In lieu of long-duration assets, Bernstein recommends owning pro-inflation assets. He finds they’re “woefully underinvested” in energy, materials and industrial stocks.
“People have been very, very myopic in terms of looking at disinflationary assets,” Bernstein said. “There is a world of opportunity out there right now. There is a world of opportunity out there right now outside of this small little bubble sector of tech innovation disruption, cryptos, that type of thing.”
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China imported about 3.7 million tons of thermal coal, the primary fuel for electricity production, from Russia in September, customs data showed. That’s up 28% from August and more than 230% higher than a year ago.
Despite China’s increased need for coal, reported imports of thermal coal from Australia remained zero, as they have been since an unofficial ban took place in late 2020.
This “illustrates the economic costs and dislocations that can be created when trade restrictions are used as a means to apply geopolitical pressure,” said Stephen Olson, senior research fellow at the Hinrich Foundation.

This photo taken on October 24, 2021 shows coal being loaded on a cargo ship in Jiujiang, in China’s central Jiangxi province.
STR | AFP | Getty Images

BEIJING — As China tries to resolve its power shortage, the country is also ramping up its coal imports — bringing in three times as much coal from Russia compared to last year, China customs data show.
Reports of power cuts at factories across China intensified in September as local governments struggled to balance rising demand for electricity with efforts to reduce carbon emissions. Initial trade data showed China’s imports of coal surged by 76% from a year ago in September to 32.9 million tons.

New customs data out late Tuesday showed that much of the coal came from Russia and Indonesia — not Australia. In 2019, the country had accounted for about 38% of China’s imports of thermal coal, the primary fuel for electricity production.

China’s thermal coal imports surge (2018-2021)

Source: Wind
China imported about 3.7 million tons of thermal coal from Russia in September, according to customs data accessed through Wind Information. That’s up 28% from August and more than 230% higher than a year ago.
The surge is not a one-off. China’s imports of thermal coal from Russia have either doubled or tripled from 2020 levels every month since May. The monthly figures this year also remain well above pre-pandemic levels in 2019.
“This demonstrates that China still needs the global trade system, despite its concerted efforts to reduce its dependence on trade,” said Stephen Olson, senior research fellow at the Hinrich Foundation, a nonprofit organization focused on trade issues.

“It also illustrates the economic costs and dislocations that can be created when trade restrictions are used as a means to apply geopolitical pressure,” he said in an email.
Despite China’s increased need for coal, the customs agency’s data showed imports of thermal coal from Australia remained zero, as they have been since an unofficial ban took place in late 2020.
Australia was once China’s largest source of imported coal. But political tensions between the two countries escalated after Australia supported an investigation into how Beijing handled the coronavirus pandemic.
China imported 3 million tons of thermal coal from Indonesia last month, up 19% from August and a gain of 89% from September 2020, customs data showed.

Read more about China from CNBC Pro

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Stock futures edged higher in overnight trading on Wednesday after the S&P 500 and the Dow Jones Industrial Average slipped from their record highs.
Dow futures rose 45 points. S&P 500 futures and Nasdaq 100 futures both traded in mildly positive territory.

Shares of Twilio fell around 13% in after-hours trade, despite a beat on both earnings and revenue for the third quarter, after the cloud communications platform projected a fourth-quarter loss. Ebay also fell by about 5% on weak fourth-quarter revenue guidance. Ford, however, jumped almost 9% on strong earnings.

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Investors awaited the first estimate for third-quarter annualized gross domestic product growth from the Commerce Department. Economists polled by Dow Jones expected an increased of just 2.8% as products remained stranded at normally bustling ports, employers struggled to find workers and consumers battled with inflation.
On Wednesday, the S&P 500 slipped 0.5% for its first down day in three as the rally on a strong earnings season started to ease. The blue-chip Dow dipped more than 250 points, falling for the first time in four days.
Major averages have been marching higher on earnings momentum this month. The S&P 500 has gained 5.6% in October, on pace to post its best month since November 2020. The Dow is up 4.9% this month, while the tech-heavy Nasdaq Composite has rallied 5.5%.
Nearly 40% of S&P 500 companies have reported earnings and more than 80% of them beat Wall Street expectations, according to CNBC calculations. S&P 500 companies are expected to grow profit by about 37.6% in the third quarter.
“Earnings have helped and a reminder that US reporting so far has been better than the long-term average in terms of beats,” Jim Reid, head of thematic research at Deutsche Bank, said in a note. “It has still been healthier relative to some of the stagflationary gloom stories seen through September and early October which has perhaps helped the relief rally.”

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Ford Motor Company world headquarters, Dearborn, Michigan on January 19, 2021.
Aaron J. Thornton | Getty Images

Check out the companies making headlines in after-hours trading:
Ford Motor — Shares of the automaker jumped more than 5% after it nearly doubled analysts’ third-quarter earnings expectations and recorded a slight beat on Refinitiv revenue projections. Ford increased its annual guidance for the second time this year.

eBay — The e-commerce brand’s shares fell 5% after the company reported quarterly results. The company topped earnings expectations by 1 cent per share and beat revenue estimates, according to Refinitiv, but issued weak fourth-quarter revenue guidance.
Teladoc Health — The virtual healthcare company saw its stock fall more than 4% though the company reported a smaller-than-expected loss for the third quarter and also beat Refinitiv revenue estimates.
Twilio — Shares of the cloud communications platform tumbled more than 12% despite a beat on both earnings and revenue for the third quarter, according to Refinitiv. Twilio reported strong revenue guidance for the fourth quarter, but projected a fourth-quarter loss of 23 cents per share to 26 cents per share compared to an expected loss of 8 cents.

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Jack Dorsey creator, co-founder, and Chairman of Twitter and co-founder & CEO of Square speaks on stage at the Bitcoin 2021 Convention, a crypto-currency conference held at the Mana Convention Center in Wynwood on June 04, 2021 in Miami, Florida.
Joe Raedle | Getty Images

Check out the companies making headlines in midday trading.
Coca-Cola — Shares of Coca-Cola gained 1.9% after the beverage giant’s quarterly results beat on both top and bottom lines. Coca-Cola reported adjusted earnings of 65 cents per share, 7 cents higher than the Refinitiv consensus estimate. The company also hiked its full-year forecast.

McDonald’s — McDonald’s shares ran up 2.7% after the fast-food chain beat earnings estimates. The company reported adjusted quarterly earnings of $2.76 per share, compared with the anticipated $2.46 per share. Higher prices and new menu items helped boost the company’s revenue.
Boeing — Shares of Boeing dipped 1.5% after a wider-than-expected quarterly loss. The aircraft maker posted an adjusted quarterly loss of 60 cents per share, compared with 20 cents per share expected. Revenue also missed expectations.
General Motors — GM shares fell 5.4% despite an earnings beat. The automaker posted profit of $1.52 per share on revenue of $26.78 billion, while Wall Street expected earnings of 96 cents per share on revenue of $26.51 billion.
Harley-Davidson — Shares of the motorcycle manufacturer jumped 3.6% after it reported its quarterly results. The company reported $1.18 per share in adjusted diluted earnings per share, compared to analysts’ estimate of 77 cents per share, according to FactSet. Harley also topped revenue forecasts.
Spotify — Spotify shares rose 8.3% after the audio streaming service posted a wider-than-expected quarterly loss, but revenue and user growth topped estimates. The company said its podcast segment boosted revenue.

Microsoft — Shares of the tech giant popped 4.2% following a stronger-than-expected quarterly report. Microsoft reported adjusted earnings of $2.27 per share for its fiscal first quarter, exceeding analysts’ estimates of $2.07 per share, according to Refinitiv. Total company revenue climbed almost 22% year over year, marking the fastest growth since 2018.
Alphabet — Shares of Alphabet gained 5% after the Google-parent company beat on earnings. Alphabet reported earnings of $27.99 per share, compared with $23.48 expected, according to Refinitiv. Management said Apple’s privacy features only had a “modest impact” on YouTube revenues.
Twitter — Shares of Twitter fell 10.8% despite the company’s third-quarter report, which met analysts’ expectations for revenue and user growth. Twitter also said Apple’s privacy changes had less of an impact than expected. However, the company said expenses, such as investing in head count growth, will bleed into 2022.
Robinhood — Shares of the brokerage slipped 10.4% after Robinhood reported a top and bottom line miss for its third-quarter earnings and delivered a bleak outlook for the current quarter. Revenue was dragged down by a slowdown in crypto trading and Robinhood warned that the headwinds in trading will persist into year-end. The stocks is now trading below its IPO price of $38 per share.
Visa — The payments giant saw shares fall 6.9% after it issued a conservative revenue outlook during as part of its quarterly earnings report. Visa brought in $1.62 per share, beating expectations by 8 cents. It also exceeded revenue expectations, thanks to an increase in online and travel spending.
Enphase Energy — Shares of the solar company surged 24.7% after Enphase reported record revenue during the third quarter. The microinverter maker posted sales of $351.5 million during the period, which was up 11% quarter over quarter. Enphase also issued upbeat guidance for the current quarter.
Six Flags — Shares of Six Flags dropped 8.4% after the company’s quarterly results bested expectations. Six Flags reported earnings of $1.80 per share on revenue of $638 million, while analysts surveyed by Refinitiv expected earnings of $1.55 per share on revenue of $587 million.
F5 Networks — F5 Networks shares added 5.9% after a solid earnings report. The company reported adjusted earnings of $3.01 per share on revenue of $682 million. Analysts surveyed by StreetAccount expected earnings of $2.75 on revenue of $672 million.
Fiserv — Fiserv shares sank 10% after the company beat earnings-per-share expectations by just 2 cents and revenue came in as expected, according to StreetAccount.
— CNBC’s Tanaya Macheel, Yun Li, Maggie Fitzgerald, Pippa Stevens contributed reporting

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ProShares debuted a bitcoin futures exchange-traded fund last week, another milestone for cryptocurrency enthusiasts.
The ETF carries a 0.95% annual expense ratio, which is high relative to other ETFs and mutual funds, according to financial advisors.
Long-term investors who want crypto exposure can likely do so more cheaply by buying directly. However, fund fees may not matter much to short-term investors, or those worried about security or access risk.

boonchai wedmakawand | Moment | Getty Images

Crypto enthusiasts had reason to cheer last week as digital currencies notched another milestone: the first U.S. bitcoin futures exchange-traded fund.
Investors rushed in. The ProShares Bitcoin Strategy ETF (BITO) had the second-biggest trading debut for any ETF on record when it launched Oct. 19. Its share price jumped 4%. A similar fund, the Valkyrie Bitcoin Strategy ETF (BTF), started Friday.

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However, cost-conscious investors who want exposure to bitcoin and other cryptocurrencies in their portfolios may be better off buying them outright instead of via a futures ETF, according to some financial advisors.
That’s primarily the case for buy-and-hold investors, who’d save money over the long term, advisors said.
“They’re always better off buying bitcoin directly,” said Ivory Johnson, certified financial planner and founder of Delancey Wealth Management, based in Washington, D.C.

Long-term investors

The ProShares and Valkyrie ETFs, for example, each have a 0.95% expense ratio. That’s the asset manager’s fund fee; for every $10,000 someone invests, the managers keep $95 a year.

That might not sound like much, but costs can add up over decades of saving. The investor loses out on the fee, earnings on those fees and compound interest.
Here’s an example from the Securities and Exchange Commission: An investor who saves $100,000, earns 4% a year and pays a 0.25% annual fee would have $30,000 more after two decades than the same person who pays a 1% fee (which is about the cost of the bitcoin futures ETFs).  

“If it will be part of your portfolio for one, five, 10 years or longer, 1% is a big fee to pay for a mutual fund or an ETF,” said Charlie Fitzgerald III, CFP, principal and founding member of Moisand Fitzgerald Tamayo, based in Orlando, Florida.
Of course, buying bitcoin or other cryptocurrencies directly (not via an ETF) often isn’t free. Crypto platforms and exchanges like Coinbase typically charge a one-time fee (though not always) that varies by provider. But it’d generally be much less costly for buy-and-hold investors relative to the annual fund fee, Johnson said.
And fees aren’t the only consideration. Investors may feel safer getting crypto access through a professionally managed ETF if they’re worried about hackers or losing passwords or private keys needed to access the funds.

Short-term investors might also not mind a 0.95% fee if they plan to sell the ETF within days or weeks. (The fee amounts to 26 cents a day on a $10,000 investment.)
“The fee is inconsequential if you’re holding for two weeks then selling it,” Fitzgerald said.
In that case, a broker’s one-time trading fee is likely more consequential, he said.

Fee trends

Overall, there’s been a general trend toward lower investment fees. The average expense ratio of U.S. mutual funds and ETFs was 0.41% in 2020, less than half the 0.93% in 2000, according to Morningstar. (These costs are asset-weighted, meaning they account for relative fund popularity.)   
Another important distinction: The bitcoin futures ETFs don’t directly own bitcoin; they buy “futures” contracts, which are agreements to buy or sell the asset later for an agreed-upon price. Such funds will generally track bitcoin prices, Fitzgerald said.  
(It’s a similar concept to oil and gold futures, for example. Such investors don’t own the physical gold or barrels of oil.)
However, investors might be remiss paying a 0.95% fee for a fund that may or may not track the price of bitcoin, Johnson said.

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Shares of Robinhood are getting crushed in premarket trading on Wednesday following a worrisome earnings report from the newly public brokerage.
Robinhood shares are plummeting 10% in extended trading, dipping below the stock trading app’s IPO price of $38 per share.

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The decline after Robinhood missed on the top and bottom lines of its third quarter results. Revenue was dragged down by a slowdown in crypto trading and Robinhood warned that the headwinds in trading will persist into year-end.
The second quarter was “one of those idiosyncratic market events where there’s this massive interest specifically in Doge,” Robinhood CFO Jason Warnick told CNBC. “We love it when those moments happen. It’s a great way to bring a lot of new customers onto the platform but we’re really thinking about investing in crypto over the long term. It’s gonna be impossible for us to accurately predict…revenue on a quarter-to-quarter basis.”
For the third quarter, total net revenue came in at $365 million, missing a Refinitiv estimate of $431.5 million. This was well below the second quarter’s revenue of $565 million, which was bolstered by a massive surge in crypto trading.
Third-quarter transaction based revenue totaled $267 million, with only $51 million coming from cryptocurrency trading. Revenue from crypto trading totaled $233 million in the second quarter, helped by interest in meme-inspired dogecoin.
Robinhood CEO Vlad Tenev said Robinhood is going to wait for regulatory clarity on crypto before adding more digital coins to the platform. The brokerage currency offers seven coins.

Robinhood reported a net loss of $1.32 billion, or $2.06 per share. Wall Street was expecting a loss of $1.37 per share, according to Refinitiv. 
The company also saw a slowdown in user growth. Monthly active users totaled 18.9 million, down from 21.3 million in the second quarter.
The brokerage also gave a bleak outlook for the rest of 2021. Robinhood said it expects fourth-quarter revenue no greater than $325 million. The company sees account growth in line with the 660,000 accounts opened in the third quarter of 2021.
“We wanted to be what we felt was appropriately conservative for our revenue guidance, particularly due to the fact that we are facing seasonal headwinds and lower year-over-year volatility,” Warnick said on the earnings call.
On the earnings call, Robinhood management described the quarter as one without a major market event, like GameStop trading in the first quarter and the rise of Dogecoin in the second quarter.
“We’ve decided as a company to be cautious about chasing growth with marketing dollars,” said Warnick. “You can always spend more to get more customers but what we’ve see is you tend to get lower-intent customers at worse economics.”
Robinhood is also entering the home stretch of its lock-up period, which will be over by December 1.
Starting Wednesday, half of tranche I convertible notes are coming unlocked as well as some employee shares, which totals about 62 million shares. On November 10, the other half of tranche I will be tradable and on December 1 all shares will be fully tradeable.
— with reporting from CNBC’s Kate Rooney.

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Check out the companies making headlines Wednesday before the bell:
Coca-Cola (KO) — Coca-Cola jumped 2.9% in the premarket following a profit and revenue beat for the beverage giant, which also raised its full-year forecast. Coca-Cola reported adjusted quarterly earnings of 65 cents per share, 7 cents above a Refinitiv estimate. Results were helped by reopening of theaters and restaurants.

McDonald’s (MCD) — McDonald’s climbed 3.1% after reporting adjusted quarterly earnings of $2.76 per share, 30 cents above estimates. Revenue and comparable restaurant sales exceeded analyst forecasts as well, helped by higher prices and new menu items.
Boeing (BA) — Boeing reported an adjusted quarterly loss of 60 cents per share, compared with an expected loss of 20 cents per share, while revenue fell short of forecasts as well. Boeing did report better than expected free cash flow, and the stock rose about 1% in premarket action.
General Motors (GM) — GM fell 1.2% in the premarket even after exceeding Wall Street forecasts on both the top and bottom lines. The automaker earned an adjusted $1.52 per share in the third quarter, well above the 96 cent consensus estimate. It also issued a strong full-year outlook.
Harley-Davidson (HOG) — The motorcycle maker reported quarterly earnings of $1.05 per share, beating the 70 cent consensus estimate, with revenue topping forecasts as well. Harley said it is working to mitigate the impact of supply chain challenges, and its stock gained 2.5%.
Spotify (SPOT) — The music streaming service reported a larger-than-expected quarterly loss, but revenue beat analyst estimates as did user growth. The stock gained 2.5% in the premarket. 

Microsoft (MSFT) — Microsoft beat estimates by 20 cents with adjusted quarterly earnings of $2.27 per share, with revenue above estimates as well. Microsoft benefitted from significant growth in its cloud computing business. The stock gained 1.5% in premarket action.
Alphabet (GOOGL) — Alphabet earned $27.99 per share for the third quarter, beating the Refinitiv estimate of $23.48 per share, with the Google parent’s revenue topping Wall Street forecasts as well. The quarter saw the biggest growth for Google ad sales in 14 years, but the stock slid 0.5%.
Twitter (TWTR) — Twitter reported an adjusted quarterly profit of 18 cents per share, topping a Refinitiv forecast by 3 cents per share. Revenue came in line with estimates. User growth was just below consensus. However, Twitter did not see a significant impact from the change in Apple’s privacy policies, in contrast to social media rivals Facebook (FB) and Snap (SNAP).  Twitter shares added 1.7% in premarket action.
Robinhood (HOOD) — Robinhood tumbled 8.5% in premarket trading, after the trading platform operator posted a larger-than-expected loss and quarterly revenue that missed estimates. Robinhood’s quarter was hurt by declining trading levels for cryptocurrencies, among other factors.
Visa (V) — Visa reported adjusted quarterly earnings of $1.62 per share, 8 cents above expectations, with revenue also beating forecasts on increased online and travel spending. However, Visa fell 2.5% in the premarket after issuing a revenue outlook that some analysts considered conservative.
Enphase Energy (ENPH) — Enphase surged 15.5% in premarket trading, after the solar company beat top and bottom line estimates in its latest quarter with revenue rising to record levels. 

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