Hot Investing Tip: Get Your Money Out of Cupcakes Immediately

Pop goes the cupcake bubble.
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Sometimes, things just make sense. Like when a handheld cake that masquerades around like it's actually some kind of viable breakfast option for any person with even a remote notion of "personal health" finally gets found out. That's what appears to be happening with the gourmet cupcake company Crumbs, according to the Wall Street Journal:

After trading at more than $13 a share in mid-2011, Crumbs has sunk to $1.70. It dropped 34 percent last Friday, in the wake of Crumbs saying that sales for the full year would be down by 22 percent from earlier projections, and the stock slipped further this week.

Crumbs is a New York City-based chain with 67 stores—as in: 67 "gourmet cupcake stores"—and they maintain that much of the hit has come from Hurricane Sandy. They've re-adjusted projected sales for this year down to $57 million from $75 million. However, sources in the story attribute Crumbs', ahem, crumbling to America growing tired of what is basically a lump of bread covered in different shades of fructose and occasionally slivers of cured meats. "The novelty has worn off," one spokesperson said. "You're not going to Crumbs every day," said another.

The Journal story then cites a few other tri-state-area cupcake outfits with quick mentions of their struggles in hawking pastries named after a drinking receptacle. And the piece ends with another spokesperson-type suggesting that Crumbs just grew too quickly, which makes more sense than anything. The cupcake bubble—as written about by Slate, NPR, and The Times—may be popping, then. As Daniel Gross wrote at Slatefour years ago:

In America, bubbles form because any good business idea gets funded a dozen times over. That's the American way. Cupcakes are now showing every sign of going through the bubble cycle. The first-movers get buzz and revenues, gain critical mass, and start to expand rapidly. This inspires less-well-capitalized second- and third-movers, who believe there's room enough for them, and encourages established firms in a related industry to jump in.

Which is pretty much how things went. It's not that people don't like cupcakes anymore (sadly), they just don't need so many cupcakes. As with all bubbles, though, that air goes somewhere else, and a new one builds up. Looking to invest in some other kind of hybrid desert-that's-not-totally-a-desert? Alcoholic Dippin' Dots are the future. Trust me on this one.

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