So I saw all these headlines yesterday saying banks announced very large loss reserves in their earnings announcements wiping out their earnings almost completely. Thought well that is good they are being somewhat honest though I’m sure they are still understating the potential losses.
Clicking through the headlines this morning I noticed that these loss reserves were primarily related to credit cards. Which true, credit card lenders are fucked, but that is just the tip of the iceberg. If credit cards alone are fucking bank earnings can’t imagine the damage when the rest of their loans start getting written down. The only possible out I see is the Fed buying the rest of the banks’ bad debt. Think Fed is already doing that but don’t know details.
Commercial Real Estate is going to get hammered. Every asset class except industrial and maybe self-storage is in trouble.
Office: people realizing work from home is fine, aversion to high density moving forward, widespread bankruptcies, downsizing, etc.
Retail: lol, already in huge trouble, stick a fork in almost every mall
Hospitality: yikes, going to be an absolute blood bath
Multifamily: there was an ongoing trend of building ultra luxury apartments in urban areas, not only is their customer base now unemployed, will people want to live so close together?
What if you’re a bank and you have a construction loan for one of these projects? Assuming the borrower is in technical default, do you fund, assuming you’re willing to alienate your customers and nuke your relationships?
Watching oil profiteers like Harold Hamm get crushed by this has been one of the few things about Covid-19 we should all celebrate. If shale ever gets bailed out here my lawnmower will have a record setting liftoff.
Can someone explain to me a bull case for Netflix? Their P/E ratio is pretty huge (over 100 today I think). How much can they actually grow? 170 million subscribers worldwide already. At some point they hit a cap just by running out of possible new customers. How many people worldwide have internet? How much can they raise their subscription cost with the all the competition? How much money can they make off their original content that is outside of their subscription revenue?
Expansion into advertising or additional packaged services. IDK if that’s their plan or a sensible bull case, that’s just what I came up with thinking about it for about 30s. Obviously I hold no opinion on whether that justifies the price.
They spend insane amounts of money on content, like legitimately mind blowing amounts. I think the thinking is they will eventually be able to reduce this as their library becomes sufficient to keep people from canceling. Also they will in theory be able to stop paying crazy amounts to license Friends-type shows.
There is no sane bull case… unfortunately the bear case is that you think you know when the dumb money is going to realize that it is dumb. That’s 100% as insane as the bull case. The best way to play most of these tech stocks is to not play them at all. You want as little exposure either way to any of them as possible.
I think the story has to be a combination of pricing power and the development of an owned content library (like Disney) that has long-term revenue generation at ~0 marginal cost. As for the first, I would bitch a lot but still auto-renew without thinking if they raised their monthly subscription by 50%. Same with Amazon Prime.
They are going to have to keep expanding their library with good content to keep subscribers(not to mention grow them). Maybe the billions they spend on original content can be reduced, but I can’t imagine by much.
Expected expansion into other services seems like the only avenue for revenue and profit growth that can rationalize its current market cap. Or maybe I underestimate the lifetime profit generation of a show like Stranger Things.
Just got mine as well. I don’t know how to do this without bragging that I’m in the cutoff range, but it’s a dig at myself so maybe that counters it out. I’m going to be getting ~$1,500 less from the stimulus because I filed my 2019 taxes already. My 2019 income was a good chunk higher than 2018 and will be a lot higher than 2020, so I really screwed myself bad by filing my taxes ‘early’ (in like March)
