The Long Term Investor

YES......the pandemic boom is over.

The pandemic boom is over. Just ask Peloton and Netflix

https://www.cnn.com/2022/01/21/investing/premarket-stocks-trading/index.html

(BOLD is my opinion OR what I consider important content)

"When the coronavirus pandemic swept across the world in 2020, investors responded by pouring money into companies that would benefit from people spending much more time at home.

Netflix (NFLX) and Peloton (PTON) were two of the biggest pandemic winners, along with video call provider Zoom Video (ZM) and electronic signature firm DocuSign (DOCU).

Now, the pandemic boom is over.

Netflix and Peloton lost roughly a fifth of their market value on Thursday after both companies disappointed investors.
Netflix said in an earnings report that it added fewer subscribers than expected during the fourth quarter. Even more worrying, the streaming giant predicted that it would add just 2.5 million subscribers in the first three months of 2022, compared to 4 million in the same period last year.

Alarm bells: Netflix acknowledged in a letter to investors that competition from streaming rivals "may be affecting our marginal growth some."

Netflix recorded a $607 million profit in the fourth quarter, and revenue increased 15% to $7.7 billion. But investors are focused on how quickly the company is growing, and they don't like what they see — shares are down roughly 20% in premarket trade.

The situation at Peloton is more dire.

CEO John Foley acknowledged Thursday that Peloton is "considering all options" — including layoffs and production curbs — but denied a report that it would temporarily halt production of bikes and treadmills.

The statement came hours after CNBC reported that Peloton plans to pause production of its $1,495 lower-end bike for two months, and stop making Tread machines for six weeks, citing internal documents.

Foley did say that the company is "right-sizing" production in response to "seasonal demand curves," and he alluded to potential job cuts.

"In the past, we've said layoffs would be the absolute last lever we would ever hope to pull," he said. "However, we now need to evaluate our organization structure and size of our team, with the utmost care and compassion."
Peloton shares sank nearly 24% on Thursday.

Quick rewind: Both stocks had banner years in 2020. Shares in Netflix increased 67% that year, while Peloton gained an astonishing 434%.

Peloton shares lost momentum in 2021, while Netflix powered ahead. What unites the companies now is that both are struggling to find new customers as life gradually returns to normal — and investors have little sympathy.
They are not alone. Shares in pandemic darling DocuSign are down 57% over the past six months. Zoom Video has shed 54% over the same period.

Netflix is likely to be the most resilient of the bunch. The company has a huge head start in the streaming wars, and a proven track record of delivering for investors. Its shares are still up over 250% over the past five years."

MY COMMENT

This is medium term investing. Chasing a hot segment......companies that are hot due to outside factors......not......their own business model. Nothing wrong with that.......but.....if you invest that way you had better be pretty good at TIMING your exit.

Unfortunately once people commit to hot stocks like these our brains tend to trick us into thinking that it can continue forever. It is NEW NORMAL. The short term gains overwhelm the rational analysis of the actual business model and the future prospects for the company. It is also INEVITABLE for.....most.....not all....people, that the investor will hang onto the stock way too long and will pay the price.

I dont like stocks that are the NEXT big thing.......unless they have the fundamentals, the financials, and the business model to back it up. That is why I usually dont try to get in on the ground floor of the next hot stock. I prefer to wait a bit and get in while the company is STILL young with big growth ahead.....but....the PROBABILITY of that company becoming a MONSTER is clear.

 

The more things change the more they stay the same. Every time I see someone talking about a NEW NORMAL I just think.....yeah, right.

Jack Bogle’s Rules for Investing

https://ritholtz.com/2022/01/jack-bogles-rules-for-investing/

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"Vanguard founder Jack Bogle’s passed away 3 years ago today. In 2016, I was lucky to have had the opportunity to interview him in his office for Masters in Business.

Bogle argued for an approach to investing defined by simplicity and common sense. His book The Clash of the Cultures: Investment vs. Speculation has 10 rules laid out in great detail in Chapter 9, and they sum up the Bogle philosophy as:

Investing Versus Speculation
1. Remember Reversion to the Mean
2. Time Is Your Friend, Impulse Is Your Enemy
3. Buy Right and Hold Tight
4. Have Realistic Expectations: The Bagel and the Doughnut
5. Forget the Needle, Buy the Haystack
6. Minimize the Croupier’s Take
7. There’s No Escaping Risk
8. Beware of Fighting the Last War
9. The Hedgehog Bests the Fox
10. Stay the Course

Bogle goes into the specific details of each of these 10 rules, with a detailed explanation here. You can also learn more at John C. Bogle, or at the Bogleheads site.

A few other people have tried to reduce this to its most basic rules for investing, including Bogleheads and Wikipedia :

Bogle’s Rules
1. Select low-cost funds
2. Consider carefully the added costs of advice
3. Do not overrate past fund performance
4. Use past performance to determine consistency and risk
5. Beware of stars (as in, star mutual fund managers)
6. Beware of asset size
7. Don’t own too many funds
8. Buy your fund portfolio – and hold it

Do not underestimate the power of their simplicity — this is far more subtle and nuanced than appears at first glance. And for many people, it is much harder to follow than you might imagine."

MY COMMENT

YES......simplicity and consistency.....to me the two PRIMARY words for successful investing.

 

I agree Zukodany that Netflix is not the same story as Pelaton....right now. I see them as the streaming leader....by a long way.

BUT....this area is going to quickly evolve greatly over the next 5-15 years and these stocks......at least to me......are one trick ponies. It is all about content and the market and consumers of entertainment content are very fickle.

Personally I see one of the greatest dangers to these sorts of companies as political correctness INFECTING their content.

 

I agree completely with this little article.....capitalism to work must be.....FREE.

Starbucks, Omicron and the COVID endemicity endgame: Morning Brief

https://finance.yahoo.com/news/star...demicity-endgame-morning-brief-101329577.html

(BOLD is my opinion OR what I consider important content)

"There was no shortage of market-moving headlines in Thursday’s session: Netflix’s subscriber growth outlook let down investors, while battered tech stocks struggled to claw their way out of correction territory. And Peloton shocked the world (and its investors) by halting production on its high-end exercise equipment, according to a bombshell CNBC report.

However, kudos to Yahoo Finance’s Anjalee Khemlani for honing in on what was arguably the day’s most intriguing theme, which also ties into another surprising development that involved Starbucks (SBUX). In the wake of last week’s Supreme Court ruling that partly struck down the Biden administration's COVID-19 vaccine mandate, the coffee giant became the first major company to backtrack on its own requirement that workers be inoculated.

Khemlani’s conversation with University of Saskatchewan virologist Angela Rasmussen yielded an insight we at the Morning Brief recently explored — namely, what the arrival of the hyper-transmissive Omicron variant means for society, and for a patchwork of restrictions that are becoming more counterproductive by the day.

Employing the concept of “endemicity” — a highfalutin epidemiological term that, in the interest of full disclosure, I literally just learned how to pronounce a few weeks ago — Rasmussen essentially dashed hopes that we can vaccinate our way out of the pandemic.

“I don't think that elimination is going to be possible with this virus,” she told Yahoo Finance Live, as the virus moves from pandemic to endemic. That sentiment was reinforced by the World Health Organization's director of emergency programs, Dr. Mike Ryan.

"We won't end the virus this year, we may never end the virus. These pandemic viruses end up becoming part of the ecosystem," Ryan told the World Economic Forum, Khemlani reported.

Previously, the Morning Brief has argued that whatever specious utility vaccine protocols may have enjoyed early on has been upended by the appearance of a variant that's infected scores of the vaccinated.

Among other things, the debatable efficacy of mandates has isolated the unvaccinated in ways that deprive struggling businesses of patrons, and needed workers of gainful employment. For those reasons, the Czech Republic’s newly-elected government rightly reversed a plan to require vaccinations among citizens there, a move designed to avoid "deepening fissures" among the electorate.

The New York Times hit the nail on the head by highlighting how Starbucks’ move to quickly abandon its employee mandate shows how “retailers and their advocates had been among the most vocal critics of the federal government’s vaccine rule, saying it would have exacerbated their struggles to hire or hold on to workers when millions of unemployed Americans remain on the sidelines of the job market.”

To be certain, the coffee giant and other brands will need to comply with state and federal guidelines, and there’s no indication states like New York and California will back away from their insistence on vaccine restrictions.

Yet both (blue) states have seen an uneven recovery that's sent many citizens in search of greener pastures in (red) areas — mainly in an effort to escape COVID-19 restrictions (alas, a story for another edition). The variant’s rapid spread among both the vaccinated and unvaccinated have shattered the illusion that the virus can somehow be mandated into submission.

And the unexpected spike in the latest jobless claims data served as a timely reminder that even a white-hot jobs market isn’t entirely impervious to uncertainty stemming from COVID-19 — or, for that matter, ill-advised restrictions that block workers from jobs, or force companies to get rid of them if they don’t comply (looking at you, Jamie Dimon)."

MY COMMENT

The more government involvement......the WORSE.....the economy and business.

 

It was very hard.......but....I was in a hurry.

I was SHOCKED to look at my account a minute ago and see that I was in the green. I had three DOWN stocks at the moment.....Tesla, Honeywell, and Amazon.

Poor Amazon.......they are now down by 7% over the past one year time span. BUT.....they are positive by 78.8% over three years and 275% over five years. It will be good to see where they are on their earnings in about two weeks.

The markets are all over the place today.......no clear direction at all.

 

On those sentences Emmett. There should have been a coma after "meantime".

 

Perhaps this is part of the cause of some stocks being up today..........economic data.

U.S. leading economic indicator rises strongly in December

https://finance.yahoo.com/news/u-leading-economic-indicator-rises-152918659.html

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"WASHINGTON (Reuters) - A gauge of future U.S. economic activity increased solidly in December, suggesting the expansion would continue despite challenges from the COVID-19 pandemic and anticipated interest rate increases from the Federal Reserve to tame high inflation.

The Conference Board said on Friday its Leading Economic Index rose 0.8% last month after advancing 0.7% in November. Last month's increase was in line with economists' expectations.

"The U.S. LEI ended 2021 on a rising trajectory, suggesting the economy will continue to expand well into the spring," said Ataman Ozyildirim, senior director of economic research at the Conference Board in Washington.

"For the first quarter, headwinds from the Omicron variant, labor shortages and inflationary pressures, as well as the Fed's expected interest rate hikes, may moderate economic growth."

The Conference Board estimated that gross domestic product growth would slow to a 2.2% annualized rate in the first quarter. It is forecasting growth of 3.5% this year.

The government is scheduled to publish its snapshot of fourth-quarter GDP next week."

MY COMMENT

Of course....the economy in general is not the stock markets.

 

Zukodany mentioned the drop in Bitcoin....supposedly a safe haven. For a while I was putting about $100 per month into Bitcoin. I have not been doing it for a while now. With this DROP.....I now have about 1/38th of one Bitcoin.

Bitcoin rout 'not over yet' as selloff quickens, risk aversion hammers crypto, stocks

https://finance.yahoo.com/news/bitc...aversion-hammers-crypto-stocks-153559722.html

(BOLD is my opinion OR what I consider important content)

"Bitcoin (BTC-USD) plunged by over 9% to below $40,000 on Friday, with the rest of the cryptocurrency market following suit as risk aversion created a downdraft for markets, ahead of the Federal Reserve’s widely telegraphed plans to raise interest rates.

With Russia's move to ban crypto assets lighting the fuse of the latest plunge, Bitcoin's price moves have become closely linked to technology shares, which have slumped on rate hike fears. On Friday, the Nasdaq tumbled deeper into correction territory, after Netflix (NFLX) surprised investors with weaker-than-expected subscriber growth.

Bitcoin has been “hit by another wave of risk aversion in the markets,” said Oanda analyst Craig Erlam, sinking below a key level of technical resistance at $40,000, where bulls and bears have fought for days.

Separately, cryptocurrency exchange Kraken set its bear case for Bitcoin at $26,300. In its 2022 cryptocurrency market intelligence report, Kraken said the crypto market as a whole isn't expected to perform as well this year compared to last, when Bitcoin rocketed to a record at over $67,000.

Ethereum (ETH-USD), one of the hottest digital coin trades that have soared in popularity thanks to the non-fungible token (NFT) boom, tumbled more than 12% and now trades below $3,000. Other smart contract layer-1 tokens like Cardano (ADA-USD), Terra (LUNA1-USD), Polkadot (DOT-USD), and Solana (SOL1-USD) all swooned by double-digits in intraday trading.

“More rates hikes is generally going to cause more pain for risk-on assets, and Bitcoin especially,” said Chris Matta, president of 3iQ Digital Assets US. The leading digital coin normally benefits from expansionary monetary policy, but is now getting hammered by expectations of a more hawkish Fed.

According to Matta, even if Bitcoin is still being looked at as an inflationary hedge by some investors, the Fed’s move to curtail inflation “isn’t going to put it at the top of the list” of many crypto investors.

Regulatory uncertainty and the crypto market’s top-heavy derivatives fueled by speculation are also weighing heavily on the market. On the derivatives side, about 200,000 positions were liquidated in the last 24 hours, totaling $745 million in losses and growing according to Coinglass.

Those liquidations enhanced the selloff, with 82% happening on the bull side, but Matta argued derivatives did not spark this drop.

For the past two weeks most of the funding rates in crypto futures has leaned to the short-seller side according to data from The Block Research.

“Considering the uncertainty right now around aggressive rate hikes, I think we could definitely see further sell offs, putting Bitcoin under $35,000 or potentially lower. It's not over yet” Matta added.

Within the sector, further sell offs could come from the sale of reserve assets by Decentralized Autonomous Organizations (DAOs) and cryptocurrency miners, he suggested, which potentially must sell off more of their funds to meet operation costs.

In one example, since the start of December, OlympusDAO’s token (OHM-USD) has sold off more than 30% from a market capitalization of $4.3 billion to just over $827 million, according to Coingecko."

MY COMMENT

Seems like Bitcoin is not a hedge against anything. It is generally following stocks and funds. NOT something I am interested in owning with all the tax ramifications. I guess I just dont have the Crypto.....gene.