Axios Markets: Pandemic makes sneakers go boom

Plus: Forecasting under a fog | Monday, May 10, 2021

Open in app View in browser   Presented By ProEdge, a PwC Product   Axios Markets By Aja Whitaker-Moore ·May 10, 2021 Happy manic Monday. I will be steering you through the week while Dion takes a breather. Let's do this! Send tips, or feedback to aja.moore@axios.com or hit me up on Twitter @AjaWMoore. (Today's Smart Brevity count: 1,024 words, 4 minutes.)     1 big thing: Boredom fuels sneaker mania Illustration: Sarah Grillo/Axios   What does a ticket scalper do when concerts dry up? Enter the sneaker market. Interest in rare sneakers as an investment has catapulted since pandemic lockdowns began, writes Axios' Business Editor Kate Marino. Why it matters: Similar to the Robinhood effect on stock trading, sneaker apps gamified and streamlined buying, while social media added community. Sneaker trading has long been lucrative, but the pandemic brought more people — with more idle time — into the game. "We're seeing more and more customers that are thinking about sneakers as an alternative asset class," Greg Schwartz, co-founder and COO of sneaker resale platform StockX, tells Axios. Professional sellers can make a living trading sneakers, Schwartz adds. Eye-popping stat: The sneaker resale market is now worth an estimated $10 billion, research firm Piper Sandler reports. That's up from $6 billion in 2019, according to a Cowan report, which included a growth projection for the market to reach $30 billion by 2030. Case in point: StockX's valuation jumped to $3.8 billion in its financing round last month, up 35% from four months prior. The pandemic reasons for the interest in the sneaker trade are numerous: People were bored, needed to make extra money, had lost their jobs or side hustles — and also just love sneakers. The big picture: The sneaker market runs on hype, and FOMO when it comes to coveted limited editions, like retro Jordans or Yeezys, says Mike Sykes, writer of The Kicks You Wear blog. (Sykes is also a former Axios reporter.) Collaborations with athletes and celebrities generate the most buzz – and sometimes, outsized sale prices. More common trades involve typical Nike limited editions, which sell via lottery for $100-$150 in the retail drop and then rake in 2x-3x in the secondary. It's a nice profit, but as with concert tickets, you need scale to make real money (enter the bots). How it works: A company like Nike drops limited releases on its SNKRS app or through local shops. These are highly sought-after moments where fans queue for the lottery and post on social media about doing it. Most who want to buy, don't get to — and again turn to social to lament the loss. The shoes typically then show up on platforms like StockX, GOAT, Farfetch or eBay immediately after — and even before, if some pairs leaked, said Sykes. The bottom line: Wannabe buyers can sit on apps for hours a day, and monitor social media announcements, trying to win just one pair. For long-time sneakerheads, the market can sometimes feel broken. What's next: Sneaker NFTs. Obviously. Go deeper.     2. Catch up quick The Biden administration declared a state of emergency in response to a ransomware attack that forced the shutdown of the Colonial Pipeline, which supplies 45% of the east coast's fuel. Gasoline and diesel prices could be impacted if pipeline operations don't resume in the next few days. (Axios) Hedge fund manager Dan Kamensky was sentenced to six months in prison for bankruptcy fraud over his misconduct during Neiman Marcus' bankruptcy. (FT) Dogecoin dove 35% overnight after Elon Musk's "Saturday Night Live" appearance in which he (in character) called the joke cryptocurrency "a hustle." (Bloomberg)     3. Data fog clouds forecasting Data: FactSet; Chart: Axios Visuals Friday's huge miss versus the prediction for April jobs gains sparked a knee-jerk markets reaction as investors struggle with what to make of the historic disappointment, Kate writes. By the numbers: The S&P 500 ended Friday with a gain of less than 1%, while yields on the 10-year Treasury dipped initially but ended the day nearly even with the open, at 1.56%. Yes, but: Many economists say one month doesn't change their long-term views on the economic recovery. "We're in a data fog," James Sweeney, chief economist at Credit Suisse, tells Axios. There's no statistical model for forecasting the return to work over the short term, "in the context of a certain rate of vaccinations and very strong recent household disposable income from stimulus checks. So people are guessing," he says. The big picture: The consensus view says last month "will prove a fluke and that data for May and after will look more like that of March," writes Western Asset's Michael J. Bazdarich. The bottom line: Initial trading was largely driven by expectations that the delay in jobs growth prevents any early Fed moves on interest rates. But by and large, "people realize the data are not giving us as much concrete information as usual, especially about medium and longer term trends," Sweeney notes.     A message from ProEdge, a PwC Product Align skills and culture with the changing nature of work     Readying the enterprise for the future typically includes investment in new technologies. But it also requires ensuring your organization has the right skills to make the most of these technologies. Read the guide from ProEdge, a PwC Product.     4. How to improve America's labor statistics Illustration: Aïda Amer/Axios   Speaking of needing better data ... Axios Capital author Felix Salmon writes: We have a very weak understanding of the state of the labor market. That's the main lesson from the massive gap between expectations and reality in April's jobs report — and points to the need to beef up the Bureau of Labor Statistics (BLS). Why it matters: Unemployment insurance is administered by the states, and the states don't send that data to BLS. If they did, America would have much better visibility of local labor-market trends — and more accurate monthly job reports. What they're saying: The fix would make policy decisions much easier, says former BLS Commissioner Erica Groshen in a new paper. It would also provide a lot of missing detail to the existing set of statistics. How it works: While the monthly jobs report relies on a representative sample of workers, the unemployment data covers a much larger number of individuals drawing unemployment benefits. The bigger the base, the greater the accuracy of statistics — especially when it comes to minority groups. The bottom line: Groshen estimates the extra cost of putting together the improved system at about $100 million per year — roughly a 16% increase over the current $609 million budget. That, she says, is both doable and overdue.     5. World's dollar reserves hit 25-year low Data: International Monetary Fund; Chart: Andrew Witherspoon/Axios The percentage of global foreign reserves held in U.S. dollars declined to its lowest point in 25 years during the fourth quarter of 2020, Kate writes. Why it matters: The U.S. dollar is still the dominant international reserve currency. But the downward shift likely reflects central banks' use of other currencies for international transactions — implying a declining role for the dollar in the global economy, according to the International Monetary Fund. Details: A newly released IMF survey says the portion of global central bank reserves held in U.S. dollars fell to 59% in Q4, compared with 61% in Q2 2020. The euro share grew to 21.2% from 20.1% over the same period. What's next: Russia previously said it would shift its reserves away from the dollar. Some expect that emerging market central banks will also do the same — and large shifts could affect global currency and bond markets, the report says.     A message from ProEdge, a PwC Product Align skills and culture with the changing nature of work     Readying the enterprise for the future typically includes investment in new technologies. But it also requires ensuring your organization has the right skills to make the most of these technologies. Read the guide from ProEdge, a PwC Product.     Axios thanks our partners for supporting our newsletters. Sponsorship has no influence on editorial content. 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