The wildest IPO market since 1999

Here are three of the week's top pieces of financial insight, gathered from around the web:

'Low volatility' bets backfire

"An investment strategy for reducing risk in the long run" has largely failed in the pandemic, said Jason Zweig at The Wall Street Journal. So-called low-volatility funds were supposed to invest in stocks that fluctuated less than the broader market, limiting losses. Investors put $36.5 billion in these funds, convinced by marketing that showed the strategy would have worked well in past downturns. But some of the funds "lost at least as much as the market in February and March, but later lagged far behind when stocks shot up." When the pandemic came, industries such as tech that seemed positioned to profit did well, while safe sectors such as financials and utilities seized up. The lesson: "Historical returns often paint a distorted picture, and rigid rules have unintended consequences."

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The wildest IPO market since 1999

The average first-day return on IPOs this year has been "higher than any calendar year's average since 1999," said Mark Hulbert at ­MarketWatch — and that's cause for worry. Snowflake, last week's massive software IPO, went up 112 percent in its first day of trading. That's on the high side, but not out of line for this year; for 44 IPOs, the average first-day gain was 58 percent. The last time we saw numbers like that, the hangover that followed was terrible. When the internet bubble burst, the Nasdaq index lost 77.9 percent. Jay Ritter, an economist who has studied IPOs for decades, says that the situation is somewhat different now, because there is less of a "disconnect between the valuations of the tech sector and the rest of the market." Still, says Ritter, "there can be no denying that there is speculative excess" in the frenzy for new issues.

New bans on 'cashless' stores

An increasing number of cities and states are ordering "businesses like restaurants and retail shops to continue accepting cash," said Ann Carrns at The New York Times. New York City is banning cashless stores later this year, joining New Jersey, Philadelphia, and other locales that passed similar laws last year. Stores "like electronic payments because they speed up purchases and reduce concern about theft." But the move to cash-free has spurred concerns about discrimination against buyers who have no credit or debit cards. Consumer groups are backing federal legislation that would require all brick-and-mortar stores to take cash — still used in a quarter of all purchases and for "almost half of the payments under $10."

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