• “What is going on with my 5G connection?”
  • How much more can these stocks drop?
  • Is the metaverse just “make-believe”?

Dear Reader,

Welcome to our weekly mailbag edition of The Bleeding Edge. All week, you submitted your questions about the biggest trends in technology. Today, I’ll do my best to answer them.

If you have a question you’d like answered next week, be sure you submit it right here.

Not all 5G is the same…

Let’s begin with a question on fifth-generation (5G) networks…

Hi Jeff. I have a question about the 5G rollout. I saw your video about the amazing speeds you were getting at various locations around the country. My experience has not been the same.

I haven’t been to any larger cities except to pass through a couple of airports. I understand some of the carriers are rolling a version of 5G that really just amounts to a slight improvement over 4G.

Most of the time, my 5G connection is the same or worse than what I got with LTE (4G technology). The other day I had a full 5G signal with the “whirly ball of death.” For over an hour, not a signal web page loaded.

Is this a function of my carrier (T-Mobile) or the FAA battle (though I was not near an airport in this instance), or is something else going on?

I really enjoy your work. Thanks.

 – Scott N.

Hi, Scott, and thanks for writing in. I’ve experienced the exact same thing that you have, as I’ve tested 5G networks all across the country. There is a lot of nuance in how the networks are rolled out and at what radio frequencies (spectrum). These things directly impact network performance.

As you mentioned, I’ve already gotten to experience the improvements offered by these upgraded networks on a tour I did across the U.S. back in 2020.

Readers who missed it can take a look at the video below:

And network providers have built out 5G even more since that amazing trip. We also saw record-setting C-band spectrum auctions last year as companies prepare to expand their coverage even wider.

Remember, for each new generation of wireless technology, it typically takes a few years for wireless carriers to strategically acquire spectrum across the country, enabling them to build their networks and deliver services.

And C-band spectrum will ultimately serve as the core of our nationwide 5G networks.

That’s important to keep in mind because, thus far, AT&T and T-Mobile have focused their efforts on the “low-band” spectrum instead.

5G over a lower-band spectrum can cover wider geographic areas with fewer towers. That makes it much cheaper to build. But the performance isn’t great. In fact, low-band 5G offers speeds comparable to 4G/LTE, and as you pointed out, is sometimes even worse.

Those providers have gone this route simply because it’s better for their advertising. They want to be able to claim they have a nationwide 5G network in their commercials. But the trade-off is inferior performance.

I suspect any issues you’ve noticed with 5G are tied to your provider and which frequency band they’ve deployed their network (wherever you live and work).

On the other hand, 5G deployed over the high-frequency millimeter-wave bands delivers ultra-fast speeds above one gigabit per second (Gbps).

This is the 5G I tested on my tour across the American heartland, and it’s where Verizon is aiming most of its attention. The downside is that millimeter-wave bands require more towers and infrastructure. That makes it economical, primarily in very dense urban areas.

The C-band spectrum is right in the middle. It offers performance that is superior to 4G. Yet it does not require as many towers as 5G deployed over the millimeter bands.

It’s a great balance between performance, cell tower coverage, and cost. And when using 5G in the C-band spectrum, you’ll typically see speeds of 400–800 Mbps. It will be a night and day improvement over what we’re used to with 4G (LTE).

C-band 5G networks went live last month across much of the U.S. I suspect many of our subscribers are now enjoying the new speeds and super-low latency. I’ve experienced this myself. And as the year progresses, more and more of the C-band network will be turned on across the country.

Hopefully, you’ll get to experience it soon.

Are we on the cusp of a crash?

Next, a reader wants to know more about a potential market crash…

Hello, Jeff. My concern this year is what if there is a big market crash. How does that affect our biotech stocks? They are really low now! How much more would they drop?

 – Steven B.

Hi, Steven – thank you for reaching out. And you’re right, the drop in the biotech sector has been painful to watch, and I know it affects all of our portfolios.

As many investors know, we have been through a “biotech winter” over the past year. As such, many biotech companies are now trading for cash on the books. There’s just not much downside left when that’s the case, regardless of what the overall market does.

As I’ve shared with my Early Stage Trader readers, I believe we’re on the cusp of a resurgence in biotech.

In a telling industry interview last week, investment bank Oppenheimer’s biotech equity strategist Jared Holz said that this is the dourest Wall Street has ever been on biotech in his experience. The drawdown in biotech from February 2021 through today has been the most significant of any period that investors have been tracking.

It’s always these kinds of extreme situations that mark market tops and bottoms.

Recall the quote from Yale economist Irving Fisher from 1929. Fisher infamously said, “Stock prices have reached what looks like a permanently high plateau.” A few weeks later, the market crashed, and the Great Depression began.

On the flip side, how many articles did we read back in 2009 warning us that stocks were dead and to stay away from the markets? Doom and gloom were everywhere at the time. Yet the markets were about to go on what became the longest bull run in history.

We always see points of extreme exuberance at market tops… and extreme fear at market bottoms. And for the biotech sector, we have hit the latter.

I remain very bullish on the biotech sector in 2022. And I wouldn’t be surprised at all if biotech was the No. 1 performing sector this year.

As for the markets as a whole, let me reassure you… I do not expect a major market crash this year… We can, however, expect volatility in the first few months of the year.

There’s a chance the market could pull back a little more leading into the Federal Reserve’s Federal Open Market Committee (FOMC) meeting in March. But I expect we’ll see stocks hit new all-time highs before the year is out.

With the recent pullback, the market has already priced in several aggressive interest rate hikes this year.

However, I don’t think the Fed will go through with it. It is clear to me that the Fed is just testing the waters with these statements early in the year for a reason. The midterm elections are coming up in November.

I do not think the Fed will aggressively raise interest rates heading into the midterms. Doing so would cause the stock market to pull back even more – or even crash – which in turn would be bad for the incumbents seeking reelection in November.

As such, there will be a lot of pressure on the Fed not to raise rates aggressively this year. So I expect the Fed to start walking back its threats.

My prediction is that the Fed will raise interest rates one time, or no more than two. It will likely be a small 25-basis point increase. After that, the Fed will stay put through the midterm elections. And the market will respond very positively to this.

Confusion about the “Land of Oz”…

Let’s conclude with a question about the metaverse…

Jeff, in response to your recent Bleeding Edge article on Walmart’s December filing of seven patents to produce and market products in the metaverse… My mind is spiraling into total confusion.

Of course, you’ve addressed shopping and interacting with others in the metaverse on numerous occasions. Every time I read your articles, I cannot help but envision a bunch of avatars (pretending to be us) wandering around in a “make-believe” (pardon the expression) “Land of Oz.”

Why would anyone (other than gamers and children) choose to live in a “make-believe” world and spend their hard-earned money on “make-believe” products for “make-believe” people?

 – Allen W.

Hi, Allen – thanks for sending in your thoughts. I share your feelings on this one. I know it sounds nuts to many of us. We can’t imagine floating around in a metaverse akin to the kinds of games that our children or grandchildren might be playing.

It’s a natural reaction. With that said, two of the most important skills that I taught myself as an investor and analyst are:

  • Never assume that because I wouldn’t do something or like something that others wouldn’t as well.

  • Don’t allow yourself to anchor to the way things are done now, as it clouds our vision of the future.

For new readers, the metaverse is a virtual world in which people can meet and interact with each other. There will be many metaverses, in fact. And with the help of augmented reality (AR) and virtual reality (VR) technology, many people will enjoy a completely immersive experience.

And the simplest way to understand the metaverse’s popularity is to look at social media. The metaverse will be an expansion of the current ways we communicate, play, and even show off to others.

That’s why Facebook has gone so far as to rebrand as Meta – a reflection of its metaverse ambitions.

And remember, back when it launched, many people had similar skepticism regarding Facebook’s platform.

But look at how its monthly active users (MAU) have ticked up over the past 13 years…

Metaverses will have a similar trajectory of adoption.

Still, some of us might have a hard time grasping why people would pay real currency for virtual products.

As we discussed this week, fashion is a good example of this. Soon, people will be able to dress their avatars in haute couture designs from fashion houses like Paco Rabanne. The virtual clothing will be non-fungible tokens (NFTs), and they’ll show status, how cool or different we are, or how “with it” we are.

There’s social value in that for many people. Fashion can also be a form of art, which can appeal as well.

And even if we’re among those who can’t ever imagine participating in the metaverse, it’s still worth paying attention to for the investment implications.

Metaverse real estate sales topped $500 million in 2021. And that number is expected to double this year. And one research firm estimates this market could grow at a compound annual rate of 31% per year from now till 2028.

Meta/Facebook alone spent $10 billion building out its metaverse infrastructure last year, with even more planned for following years. And Goldman Sachs and Morgan Stanley estimate that the metaverse will be an $8 trillion opportunity as this trend develops.

That’s enough capital flowing into this space that it should capture the attention of every investor. So whether we ourselves plan to use the metaverse or not, we should make sure we don’t miss out on the opportunities in front of us.

And one final point about the technology. The metaverses of today are relatively crude. The graphics are typically not great… some are actually childish. And for that reason, they aren’t that appealing to many people.

But if we don’t anchor to today’s metaverses and instead extrapolate years into the future, we can imagine worlds where our avatars are rich and lifelike.

And we can imagine the environment created in any given metaverse is compelling, interesting, and serves a specific purpose like gaming, gambling, entertainment, productivity, and commerce.

Some metaverses will actually facilitate a real version of us that has been captured in a 3D volumetric studio explicitly for our use in metaverses. This will make our own experiences that much more real and lifelike.

That’s why I’ve made sure to keep my readers on the cutting edge of this space. If you’d like to learn more about how to invest in the metaverse – as well as related trends like NFTs and blockchain technology – then please go here to find the details.

That’s all we have time for this week. If you have a question for a future mailbag, you can send it to me right here.

Have a good weekend.

Regards,

Jeff Brown
Editor, The Bleeding Edge

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