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Market Cap Indicator: Snapchat Edition

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You can learn a lot about the valuation of a company by comparing it to the valuation of other companies. That is especially true in the land of social media stocks where revenues and earnings sometimes don’t exist. Snapchat, a social-media startup that only recently started generating revenue is valued at $19 billion. Don’t know what Snapchat does? Me either. According to Quartz, Snapchat allows users to share disappearing photos. Hmm…I guess that qualifies as innovation today. The table below comes from Quartz. It compares Snapchat’s market value to companies with similar market … [Read more...]

Trading Short-term Pleasure for Long-term Pain

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Should you take investment advice from the mainstream internet (if I can coin a phrase)? Bloomberg posted an article on their website yesterday with the following headline: “Goldman Sachs Sees More Value Outside of ‘Stretched’ U.S. Stocks” Bearish views from Wall Street’s eternally bullish big banks are always of interest to me. Bearish views from Wall Street strategists are few and far between. Why? Being bearish on Wall Street is like opposing motherhood and apple pie. The big banks make more money when their clients are bullish. When investors are bearish fewer deals get done, fewer … [Read more...]

Bespoke Gold

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You should be able to buy a fine suit with an ounce of gold. Good luck with that at Marc Allen. Over the years I’ve been fortunate to work with Marc Streisand, owner of Marc Allen fine clothiers in Providence, RI. Marc travels the world-over in search of hard to find fabrics and crafts bespoke suits that are truly made for you. The suit is literally pieced together to fit you and the touch of the fabric between your fingers makes you smile. But an ounce of gold will not get you near a Marc Allen suit, or even a Hickey Freeman for that matter. So if you’re in the market for a fine suit … [Read more...]

The Monday Melee: Emerging Market Future?

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Emerging Market Debt Growth: Debt growth in emerging markets from 2007-2014 has put them nearly on par with developed countries in dollar terms. In the 2000-2007 era, emerging market debt growth represented 22% of the $37 trillion in new debt. In the last seven years, emerging market debt growth represented 47% of the $49 trillion total growth in debt. What We're Reading: The historical and cultural differences that divide Europe’s union: (Financial Times) "The Fed Is Nervous, And Maybe That's A Good Thing" (Forbes) A Muddle of Mixed Messages From the Fed (The Wall Street Journal) 4 … [Read more...]

VIDEO: BP Energy Outlook

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For a moment put aside the impracticality of trying to forecast anything for 20 years, and listen to BP’s chief economist Spencer Dale explain some trends in energy and economics. Keeping an eye on big trends in industry and the fuels it’s powered by is important for anyone considering where to invest going forward. Even though it’s impossible to get it all right over a 20 year period, BP does an admirable job trying. You too should focus on the long-term. Executing an investment plan based on big, long-term trends will beat the short-term, earnings-focused, Wall St.-alarmist strategy of … [Read more...]

The Most Bullish Economic Indicator Nobody is Talking About

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Household formation in the U.S. is soaring to heights not seen since the economic recovery began. According to the Census Bureau, over the last 12 months, almost 2 million new households were formed in the U.S. Rising household formation is positive for the housing market and the economy. A rising number of households signals greater demand for housing units. The broader economy should also get a kick from rising household formation as newly formed households spend to furnish their homes and stock them with consumables. … [Read more...]

Gold for all in India

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Big changes could be coming to the gold market in the coming Indian budget. Sources have signaled that the government is likely to cut the 10% tariff on gold imports to 8% or 6%. The Reserve Bank of India has already eliminated some curbs on gold import, including a prohibition on banks selling gold on consignment. Now banks will be able to sell gold as long as they aren’t fronting the money for the inventory. Reuters quoted Prithviraj Kothari, executive director of the India Bullion & Jewellers’ Association as saying he expected as much as a 125% increase in gold imports per month. The … [Read more...]

The Monday Melee: Game On

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What We're Reading "The Fed Is Nervous, And Maybe That's A Good Thing" (Forbes) The historical and cultural differences that divide Europe’s union: (Financial Times) Larry Summers cheer-leading for an inflation outbreak. (Financial Times) G-20 recommends zero sum game to make all better off! (The Wall Street Journal) ‘Peasants With Pitchforks’ Seen If Profits Get Any Fatter (Bloomberg) The Future of the Gaming Industry   Quotable: "Of course, we are applying advances in technology. But when you use those advances just to boost the processing power, the trade-off is that you … [Read more...]

How Much can you Lose in the Stock Market?

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If your portfolio isn't properly diversified, the answer is a lot, but even if you craft a diversified equity portfolio your losses can be substantial. How substantial? Most would agree than an S&P 500 index fund qualifies as a diversified portfolio, so let’s look at the maximum losses sustained on an investment in the S&P 500. In the chart below, I show the drawdowns of the S&P 500 (not counting dividends) over the last 65 years. Drawdown sounds a bit jargony for a Friday. What does it mean? A drawdown is simply the maximum loss on a portfolio or an index from the prior … [Read more...]

Greek Drama: The Final Act?

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Greece is back on the front pages of the financial press. Why is a country whose GDP is a rounding error in the $75 trillion global economy making headlines? Even at 175% of GDP, Greece’s outstanding government debt is about one-half of one percent of the world’s total. Greece made its way back into the headlines when its parliament failed to elect a new President in December, which resulted in snap elections. The snap elections were held on January 25th and the victor was the left-wing anti-austerity party Syriza, led by Alexis Tsipras (pronounced sipras). Tsipras campaigned on a … [Read more...]