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Editor’s Note: I’m excited to announce that we’ve added Jason Bodner as our newest TradeSmith analyst. Jason has an impressive resume of becoming a partner at Cantor Fitzgerald at just 26 years old and going on to execute multibillion-dollar transactions for America’s elites. Now, he’s bringing his expertise to you. Enjoy your Thursday — Keith Kaplan, CEO, TradeSmith
When I made my first foray into the high-stakes world of Wall Street back in 2001, my managers at the venerable Cantor Fitzgerald required me to read the books “Option Volatility and Pricing” and “Options as a Strategic Investment.”
At 1,001 pages, the second of those was a hefty read.
But it wasn’t an exercise in drudgery.
Just the opposite, in fact. The realization that you could make as much money trading volatility as you could options or futures or some other asset was an epiphany that blew my mind.
It energized me.
One of my first moves was to school myself in the “Greeks” of the financial markets — the alpha, beta, gamma, and other terms that each had their own meaning and that, in turn, opened up even more doors for me.
That’s the power of inspiration.
My bosses at Cantor knew how to ignite that thirst for success. And I’m always on the lookout for other companies that share resources with their employees to expand their horizons.
Like Oculus VR back in 2016.If you worked at Oculus, Mark Zuckerberg had snapped up your company just two years before and handed you a copy of “Ready Player One” — a dystopian novel about a virtual reality simulator in which folks pursue real-life tasks like working, shopping, and going to school.
Written in 2011 but set in 2045, “Ready Player One” has an eerie prescience, talking about shortages, weather disruptions, deep social schisms — and how people have willingly shifted their real-world activities into the digital realm. I’ve seen that shift in my own home with my own sons.
When I was a kid, my friends and I had the run of the neighborhood — with parents watching from behind the curtains, making sure we weren’t knocking each other’s teeth out.
Today, if I peek into my kids’ room, I see only them — though they are still “hanging out” with their friends.
Digitally speaking, of course.
Anything my sons can do in the real world, they can do virtually: play games, have conversations, play sports, watch (and make) movies, listen to music.
And those virtual vistas will just keep expanding, thanks to the metaverse. The metaverse is the next big venue in business and technology, and the next big opportunity for investors — which is why Zuckerberg rebranded his company from Facebook to Meta Platforms Inc. (META).
“Today we’re seen as a social media company. …But increasingly, it’s not all we do. In our DNA, we build technology to bring people together. The metaverse is the next frontier in connecting people, just like social networking was when we got started,” Zuckerberg said in his “Founder’s Letter, 2021” post.
Through the investing lens, the metaverse of 2022 is a lot like the internet of 2002: A hype-fueled frenzy whipped it into the overbought stratosphere, after which the disappointed instant-gratification crowd dropped it into the oversold dumpster.
As a veteran investing pro, I’ve learned to remain above that kind of whipsawing — to tune out the get-rich-quick gambits and irrational froth.
Because with the metaverse, if you focus on its “business cases,” the wealth potential here is downright massive.
There’s the “tokenization” of finance, which can create new trading opportunities, just like when options and futures made their debut.
There’s decentralized finance, or DeFi, which opens the door to low-cost, high-security “smart contracts.”
And there’s virtual reality, which has all sorts of high-value uses, such as training, immersive product simulations, and data visualization.
Let me show you why this opportunity is so big…
What Zuckerberg Sees in the MetaverseIn February, META said Apple Inc. (AAPL) had changed its mobile operating system in a way that would make it tougher to target iPhone users with mobile ads. That’s a huge deal for META, which is a huge player in the digital ad realm.
But in the long run, Zuckerberg is courting a new cash cow — one that will dwarf mobile ads.
That’s the metaverse.
Banking giant Citi believes the metaverse could be worth up to $13 trillion by 2030.
Citi includes virtual advertising in that estimate — and that’s what Zuckerberg plans to target inside the metaverse.
Revenue from sports, music, films, and other live entertainment in the metaverse could reach $200 billion in 2024, according to Bloomberg Professional Services.
That could be an incredible opportunity for Meta: It can serve as the “host” of those events, and peddle event ads to companies wanting to use all the gathered eyeballs to market their own wares.
Even without those live events, companies are already testing what metaverse ads might look like — and projecting how effective they might be.
Wendy’s launched the “Wendyverse” in April through the Horizon Worlds app, developed and published by (you guessed it) Meta Platforms.
Those with a Meta Quest 2 headset could enter the Wendyverse and shoot hoops in the Buck BiscuitDome virtual basketball arena — where they would see ads for $1 breakfast biscuits.
Look, this may sound a bit disconnected — or even a little bit silly — but in the latter half of this decade, Zuckerberg believes the metaverse he is helping to create will have a population of one billion people.
And those people are going to spend very real money within the metaverse.
“We hope to basically get to around a billion people in the metaverse doing hundreds of dollars of commerce, each buying digital goods, digital content, different things to express themselves, so whether that’s clothing for their avatar or different digital goods for their virtual home or things to decorate their virtual conference room, utilities to be able to be more productive in virtual and augmented reality and across the metaverse overall,” Zuckerberg said in an interview back in June.
That’s a lot of eyeballs for marketing and advertising departments to target, and they will be priming themselves to sell their goods and services directly within the metaverse.
In the meantime, META has the muscle to weather the storm currently battering the tech sector: It has $40.49 billion in cash — and debt of only $16.68 billion.