Investors usually want to know what the most important story of the day is, the thing responsible for driving stocks, perhaps the potential to become an investing theme that drives returns for months or years.
going into space is not that thing.
Sometimes, that one big thing is obvious. On Monday, it was Covid-19. The
dropped 1.6%. The
Dow Jones Industrial Average
dropped more than 2%. And for good reason: The Covid-19 variants are a big deal, even if the market’s drop proves to be another blip on the way to higher returns.
Sometimes, though, investors need to know what they shouldn’t bother to care about, too. Do you know what today’s least significant story is? It’s Amazon.com’s Jeff Bezos going into space.
The flight while, successful, was a little anti-climactic for live-stream watchers. There were a lot of “woohoos” and “awesomes” uttered by the crew which were audible to the audience. Even a few “amazings.” Still, even 82-year old newly minted astronaut Wally Funk said at one point “It was only about five minutes.”
You wouldn’t know it from the coverage, of which I’ve been a big part. I’m addicted to stories about billionaires spending their money, a little like People magazine is addicted to the Kardashians.
The Kardashian analogy is apt. The billionaire space race is entertainment for investors and little more. It’s the modern equivalent of a huge baroque garden or a Victorian menagerie complete with wild animals from India.
Rich people spending money has always been a thing and sometimes it benefits everyone else. In the garden category, people can still visit the gardens at Versailles. They are impressive, even inspiring.
Everyone, including Bezos, knows the personal rocket company business is ripe for criticism. The Amazon founder admits critics of space tourism are largely right. Still, space supporters point to the potential benefits of pushing technological boundaries. The world, after all, might end up with superfast commercial jets or flying cars a generation or more down the road.
But the “to be sure” of the space tourism saga isn’t the potential trickle-down technology benefits from billionaire space dalliances. Long-term technological enhancements are the theoretical reason any mania can be positive for society. The dot.com era, for instance, left us with
(AMZN) and more widespread internet access.
Not all manias are so giving though. The Financial Crisis was driven by financial technology—collateralized debt obligations and credit default swaps. No one is thanking their lucky stars for those products. There is no guarantee manias result in useful technology. Just look at the most recent financial innovation—zero-commission trades. It’s given us meme-stocks.
But if the space race has done anything, it’s made traveling to the stars cheaper than it’s ever been. Remember, the Space Shuttle ran about $450 million a mission, according to NASA’s numbers, while the orbiter—the spacecraft on the back of the rockets, the actual shuttle—cost about $1.7 billion. Ultimately, a generation of investing in higher than average cost space shuttle technology left America with movies such as Space Camp, U.S. taxpayers with a little more debt, and the lack of astronaut carrying domestic space launch capabilities for a decade.
That’s changed now, but it has little to do with Bezos or Virgin Galactic’s (SPCE)
Instead, space lovers should thank
(TSLA) and SpaceX CEO Elon Musk. He, like other billionaires, has expressed lofty goals to make humanity a multi-planetary species. Musk however isn’t going into space on a tourist flight. He’s the one that brought launch capabilities back to America by pioneering the use of reusable rockets. It is ferrying NASA astronauts to the International Space Station, while launching hundreds of small satellites that offer space-based Wi-Fi to clients around the globe. Partly as a result of that decision, SpaceX is worth an estimated $74 billion in private markets.
That sounds negative, but Herbert rates Galactic shares Buy. He believes clients should put the stock in their portfolios. And his $48 target price values Galactic at roughly $11.5 billion. There might just be a long-term business in space tourism.
That illustrates the real “to be sure” of a billionaire space story. If Bezos, or Branson, wants to build an organization to take them to space so be it. Those are high-paying jobs for bright engineers. Billionaires can do what they want with their money.
Not even Amazon’s stock seems to care all that much about Bezos’s successful flight either. Shares are up about 0.5% at 11:43 a.m. Tuesday, while stock in Virgin Galactic, Blue Origin’s space tourism competitor, has dropped 6.5%. Tesla stock is up though, about 0.3%, rising for the second consecutive day in the run-up to reporting second-quarter numbers on July 26. The
has risen 1.3%, rebounding from Monday’s Covid-19 induced selloff.
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