Stock market is a "fully-fledged epic bubble" and will burst
Discussion
vulture1 said:
Amazon are still barely making a profit.
…by choice…The Kodak analogy above seems mis-applied to me; Kodak could have led the market transformation (digital revolution) but chose not to. That’s very different to the situation now, so i don’t understand why that comparison would fit?
vulture1 said:
Amazon are still barely making a profit.
I do feel with Amazon that this is primarily because they don't need to 'show' a profit and then pay taxes when their shareholders traditionally have preferred them to focus on the share price going up. It's plausible that in order to stop the share price going down in a weak consumer market they could, for example, start paying a dividend if the need really arose.
DonkeyApple said:
vulture1 said:
Amazon are still barely making a profit.
I do feel with Amazon that this is primarily because they don't need to 'show' a profit and then pay taxes when their shareholders traditionally have preferred them to focus on the share price going up. It's plausible that in order to stop the share price going down in a weak consumer market they could, for example, start paying a dividend if the need really arose.
bmwmike said:
That's always been the way with Amazon, they plough spare cash (profit) back into the company, R&D and acquisitions etc.
That's my understanding. And if the shareholders suddenly want that to change and to pay a yield then the company can do that. AMZN is not a company I see as a tech business in reality. And while revenues will probably dip as consumer spending pulls back, I don't see any particular risk to the business?
dingg said:
This thread started on 7th January 2021
Dow then 30829 now 32925
Sp500 then 3748 now 3901
Nasdaq then 12740 now 11102
We have the headwinds of increasing interest rates, rampant inflation and war in Ukraine
Interest rates probably near a peak as is inflation.
We've been a lot higher and a bit lower, the bull is still in play, time to rotate into more tech maybe....
LONG LIVE THE BULL!!
This is what the FRB are fighting. Optimism.Dow then 30829 now 32925
Sp500 then 3748 now 3901
Nasdaq then 12740 now 11102
We have the headwinds of increasing interest rates, rampant inflation and war in Ukraine
Interest rates probably near a peak as is inflation.
We've been a lot higher and a bit lower, the bull is still in play, time to rotate into more tech maybe....
LONG LIVE THE BULL!!
They won’t ease until people are fearful of spending money or investing it, thus ending the crushing levels of inflation.
Derek Chevalier said:
DonkeyApple said:
The issue with small caps is that we are in a phase of market readjustment where companies that can't feed themselves are being selected out of the heard and shot.
The small cap sector is much more exposed to the issue of cash burn being greater than cash revenue so my thinking would be that while small caps may look cheap by some metrics, there has to be more culling yet to be done?
I'd be happier sticking with despised, dull futureless companies that persist in selling goods and services that are needed and keeping the powder dry for the more glamorous stuff until we've seen more of the market shift?
Small cap value has tended to do slightly better during rubbish times according to recent research by Avantis.The small cap sector is much more exposed to the issue of cash burn being greater than cash revenue so my thinking would be that while small caps may look cheap by some metrics, there has to be more culling yet to be done?
I'd be happier sticking with despised, dull futureless companies that persist in selling goods and services that are needed and keeping the powder dry for the more glamorous stuff until we've seen more of the market shift?
https://www.evidenceinvestor.com/how-do-small-stoc...
"As you can see in the table below, covering the period 1973-2021 and showing average monthly returns, while small value stocks did earn negative returns during the first half of recessions, their losses were actually slightly less than those of the overall market."
As NowWatchThisDrive points out, the key is in screening out the poor quality and lottery style stocks.
Developed markets small cap (arguably mid cap) value is positive YTD (in GBP), and there are systematic, low cost funds that can capture this return.
Speaking of "cheap", interesting to hear Rob Arnott's views on relative valuations - US vs rest of the world.
https://blog.validea.com/show-us-your-portfolio-ro...
Edited by Derek Chevalier on Monday 31st October 18:40
Mr Whippy said:
This is what the FRB are fighting. Optimism.
They won’t ease until people are fearful of spending money or investing it, thus ending the crushing levels of inflation.
I didn't think they were anti-investment, just spending. Wouldn't people investing (or saving) help bring inflation down ?They won’t ease until people are fearful of spending money or investing it, thus ending the crushing levels of inflation.
Carbon Sasquatch said:
Mr Whippy said:
This is what the FRB are fighting. Optimism.
They won’t ease until people are fearful of spending money or investing it, thus ending the crushing levels of inflation.
I didn't think they were anti-investment, just spending. Wouldn't people investing (or saving) help bring inflation down ?They won’t ease until people are fearful of spending money or investing it, thus ending the crushing levels of inflation.
I think I read that stimulus in the US over covid was in the region of 5tn of jet ski tokens?
Mind you, crypto and meme stocks have eradicated a few tn of global Covid cash but globally theres tonnes of it remaining and the remaining issue that global manufacturing can't produce enough junk to absorb it and get it buried in landfill.
I'd love to know what amount of current inflation is due to the end of VC capital subsidising the goods and services of loss making enterprises and those firms having no choice but to be profitable by not deliberately selling everything for a loss?
Mind you, crypto and meme stocks have eradicated a few tn of global Covid cash but globally theres tonnes of it remaining and the remaining issue that global manufacturing can't produce enough junk to absorb it and get it buried in landfill.
I'd love to know what amount of current inflation is due to the end of VC capital subsidising the goods and services of loss making enterprises and those firms having no choice but to be profitable by not deliberately selling everything for a loss?
DA do you think we’re finally going to see the end of these zombie companies at long last? I’ve found it quite unbelievable how these companies can keep getting funding when the fundamentals never added up.
We compete against one and it just cannot stack up, they do crazy deals knowing the capital involved it can only be creative accounting keeping the ball rolling.
As a company we point blank refuse to take part with daft schemes but quite seriously it’s felt like we’re missing something for the last 10 years.
In saying that I’m extremely grateful we haven’t gone mad I wouldn’t fancy trying to renegotiate huge debts at the moment. (Or will they all be bailed out again!)
We compete against one and it just cannot stack up, they do crazy deals knowing the capital involved it can only be creative accounting keeping the ball rolling.
As a company we point blank refuse to take part with daft schemes but quite seriously it’s felt like we’re missing something for the last 10 years.
In saying that I’m extremely grateful we haven’t gone mad I wouldn’t fancy trying to renegotiate huge debts at the moment. (Or will they all be bailed out again!)
DonkeyApple said:
I'd love to know what amount of current inflation is due to the end of VC capital subsidising the goods and services of loss making enterprises and those firms having no choice but to be profitable by not deliberately selling everything for a loss?
I'm not sure there's going to be much of that - mountains of VC cash have been burned but relatively tightly concentrated by segment being mostly services or goods to hang a service off, and a lot in stuff that's very much discretionary. In the grand scheme I suspect it's a relatively tiny contribution compared to everything else.
DaveA8 said:
The problem with both these methods is the time lag especially removing liquidity, it's not a problem and then suddenly it is.
The good old brick on elastic - you do something, wait ages for it to have any noticable effect, then by the time it starts doing anything it's already on its way to coming back and smacking you in the teeth. The outcome is inevitable yet economists always end up with the same 'unexpected' result.
Joscal said:
DA do you think we’re finally going to see the end of these zombie companies at long last? I’ve found it quite unbelievable how these companies can keep getting funding when the fundamentals never added up.
We compete against one and it just cannot stack up, they do crazy deals knowing the capital involved it can only be creative accounting keeping the ball rolling.
As a company we point blank refuse to take part with daft schemes but quite seriously it’s felt like we’re missing something for the last 10 years.
In saying that I’m extremely grateful we haven’t gone mad I wouldn’t fancy trying to renegotiate huge debts at the moment. (Or will they all be bailed out again!)
It's hard to say. 'disrupters' became so on trend. Businesses were actually proud that they sold everything they did for a loss. It's been a weird time watching so many companies actively celebrate being really bad at what they do. We compete against one and it just cannot stack up, they do crazy deals knowing the capital involved it can only be creative accounting keeping the ball rolling.
As a company we point blank refuse to take part with daft schemes but quite seriously it’s felt like we’re missing something for the last 10 years.
In saying that I’m extremely grateful we haven’t gone mad I wouldn’t fancy trying to renegotiate huge debts at the moment. (Or will they all be bailed out again!)
It's seems inevitable that fewer will be born now and many that exist will get put down. Also, some 'disrupters' will get revealed for the layering operations they really are.
I do suspect that it's gone on for so long and is so prevalent in all industries that the loss of these serial under bidders for revenues and over payers for inventory must have some material impact in the market place?
pquinn said:
I'm not sure there's going to be much of that - mountains of VC cash have been burned but relatively tightly concentrated by segment being mostly services or goods to hang a service off, and a lot in stuff that's very much discretionary.
In the grand scheme I suspect it's a relatively tiny contribution compared to everything else.
Maybe but the number of businesses burning cash to collect names they can tell shareholders are 'clients' has been enormous. It also goes beyond just an entire business selling at the wrong price to try and gain market share before imploding, in that most companies have been running 'lost leader' lines left right and centre. As consumers we've been benefiting enormously from investor capital burn and margin giveaways. In the grand scheme I suspect it's a relatively tiny contribution compared to everything else.
DonkeyApple said:
Maybe but the number of businesses burning cash to collect names they can tell shareholders are 'clients' has been enormous. It also goes beyond just an entire business selling at the wrong price to try and gain market share before imploding, in that most companies have been running 'lost leader' lines left right and centre. As consumers we've been benefiting enormously from investor capital burn and margin giveaways.
I guess that's true but that's going well beyond just the VC space. Seems to be a shake out happening in at least some spaces as some customers finally realise an unrealistic price doesn't necessarily get you what you want, and the low bid might not be the best. Some good money in picking up the pieces on re-awards, which didn't exist went the original bids happened and people were driving things well below cost.
As consumers 'cheap stuff' is always nice but someone was always going to get stuck with the bill eventually. Has been funny seeing the wheels inevitably come off the new paradigm again, though as usual plenty of cash has been skimmed off along the way. Amazing how well people can do off the back of abject failure.
Amazon recently launched a financing product for its businesses customers. It is supposed to offer sweet cash-advance for sellers future sales for a fixed capital fee, without credit checks and etc. The capital availability is between $500-$10 million, depending on business eligibility.
Sounds like, they are also getting into "leveraged loan" sector ?
Sounds like, they are also getting into "leveraged loan" sector ?
ooid said:
Amazon recently launched a financing product for its businesses customers. It is supposed to offer sweet cash-advance for sellers future sales for a fixed capital fee, without credit checks and etc. The capital availability is between $500-$10 million, depending on business eligibility.
Sounds like, they are also getting into "leveraged loan" sector ?
Is that where they hold inventory? Arguably, putting some of their cash pile out to lend at much higher rates than they can get in the market must make sense? Especially, if the clients' inventory is in their control?Sounds like, they are also getting into "leveraged loan" sector ?
In some ways, I would think firms like Meta, Twitter or Netflix would be easier to compare to Kodak?
One trick ponies that excelled for years at that one trick but now face a situation where they know they must innovate and change in order to stem the flow of customers away to newer, better, more desirable products/services but no innovation is forthcoming and all they can do is enter into a price war against competition they know from te outset can undercut them.
I don't think we'll see these firms collapse like Kodak but I'm pretty sure we will see the business model they built themselves upon die within the next few years, especially meta and Twitter who both seem extremely stale and hard to see as anything other than advertising business warranting very little premium in the face of declining users, decking data control and declining advertising budgets?
One trick ponies that excelled for years at that one trick but now face a situation where they know they must innovate and change in order to stem the flow of customers away to newer, better, more desirable products/services but no innovation is forthcoming and all they can do is enter into a price war against competition they know from te outset can undercut them.
I don't think we'll see these firms collapse like Kodak but I'm pretty sure we will see the business model they built themselves upon die within the next few years, especially meta and Twitter who both seem extremely stale and hard to see as anything other than advertising business warranting very little premium in the face of declining users, decking data control and declining advertising budgets?
DonkeyApple said:
In some ways, I would think firms like Meta, Twitter or Netflix would be easier to compare to Kodak?
One trick ponies that excelled for years at that one trick but now face a situation where they know they must innovate and change in order to stem the flow of customers away to newer, better, more desirable products/services but no innovation is forthcoming and all they can do is enter into a price war against competition they know from te outset can undercut them.
I don't think we'll see these firms collapse like Kodak but I'm pretty sure we will see the business model they built themselves upon die within the next few years, especially meta and Twitter who both seem extremely stale and hard to see as anything other than advertising business warranting very little premium in the face of declining users, decking data control and declining advertising budgets?
Netflix has at least managed to innovate their platform and content over the years, and has pivoted as the market shifted. Some clever technical approaches too, their only real downfall has been the expensive hubris among the 'creatives' who latched on once they got into doing their own production. One trick ponies that excelled for years at that one trick but now face a situation where they know they must innovate and change in order to stem the flow of customers away to newer, better, more desirable products/services but no innovation is forthcoming and all they can do is enter into a price war against competition they know from te outset can undercut them.
I don't think we'll see these firms collapse like Kodak but I'm pretty sure we will see the business model they built themselves upon die within the next few years, especially meta and Twitter who both seem extremely stale and hard to see as anything other than advertising business warranting very little premium in the face of declining users, decking data control and declining advertising budgets?
Market fragmentation hasn't helped, though that's an unnatural state and I'm sure it'll consolidate again.
Meta and Twitter on the other hand were simple ideas (and not particularly unique) that got lucky. Problem is where do they go from where they are? Or make decent money that isn't from the fickle & variable pot of advertising? Also lumbered with management convinced of their own genius which wont help.
pquinn said:
Netflix has at least managed to innovate their platform and content over the years, and has pivoted as the market shifted. Some clever technical approaches too, their only real downfall has been the expensive hubris among the 'creatives' who latched on once they got into doing their own production.
Market fragmentation hasn't helped, though that's an unnatural state and I'm sure it'll consolidate again.
Meta and Twitter on the other hand were simple ideas (and not particularly unique) that got lucky. Problem is where do they go from where they are? Or make decent money that isn't from the fickle & variable pot of advertising? Also lumbered with management convinced of their own genius which wont help.
Or Google.Market fragmentation hasn't helped, though that's an unnatural state and I'm sure it'll consolidate again.
Meta and Twitter on the other hand were simple ideas (and not particularly unique) that got lucky. Problem is where do they go from where they are? Or make decent money that isn't from the fickle & variable pot of advertising? Also lumbered with management convinced of their own genius which wont help.
Searching the internet (spying on you)
Free email (spying on you)
Cloud storage (spying on you)
Office type apps (spying on you)
Browsers and phone OS (spying on you)
All to sell adverts for stuff. The efficacy of which I’d argue is highly questionable, hard to measure and attribute.
In a prolonged recessionary period advertisers will be gutted.
Like Apple (who are the best given you pay for privacy), Google are somewhat entrenched because of their phone OS.
It’s a market ripe for disruption.
Apple built-in obsolescence and huge price, Android/Google spyware.
Lots of gaps for a new successor to come along.
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