This year has both seemed interminably long and really flown by. I for one will be glad to finally put 2020 and all its travails behind and move on to (hopefully) greener pastures.
My mission here at Alpha Beta Blog continues to be to bring you insightful analysis about businesses, financial markets, and the economy. If there are subjects that you would like me to explore or specific questions you have, please drop me a line in the comments.
There are a subset of investors who like to track the positions of famous hedge fund managers and copy their positions (you can only do so at a lag by the way, because by the time quarterly 13-F filings are out, the positions are already at least a few weeks stale).
Many hedge fund managers have been jumping on the Bitcoin bandwagon:
From the article:
Those risks haven’t deterred investors such as Wayne Sharp, a retired investment adviser in Columbus, Ohio, who bought her first bitcoin in September, investing $10,000. She said she was swayed by arguments about bitcoin’s value as an inflation hedge, as well as the respectability conferred by investors including Mr. Jones. …
Given that I’ve been writing a lot about inflation lately, I’ve also been reading a lot about it. If an article pops up with inflation in the headline (and looks like it has the chance to be even a little bit insightful, I will give it a read). One interesting one that caught my eye this weekend is this one by Richard Cookson:
Mr. Cookson argues that a successful vaccine (and the normalized economy it brings) might finally be the spark that lights the inflation flame. He points out a few interesting things — manufacturing capacity and supply chains are probably compromised at the moment due to the pandemic (and it’s not like the vaccine will magically and instantly unravel compromised supply chains). …
A recent WSJ (Wall Street Journal) article had the headline “China Borrows at Negative Rates for the First Time”.
China only raised around $4.7 billion, small potatoes in the world of sovereign debt. But the fact that it was able to do so at a negative yield is notable. Here’s a quote from the article I found amusing:
“You can think of it as a yield grab: you are starved for return and any opportunity you get to pick up some extra premium on a yield, you’re going to buy that up quite quickly,” said Rohan Khanna, a rates strategist at UBS. …
By all the official statistics there’s barely any inflation. The latest year over year inflation rate of 1.2% is significantly below the long term average. It’s also below the Fed’s (Federal Reserve) 2% target.
If we look at 5 year and 10 year inflation expectations, we see that investors believe that inflation will remain stable and low for a long time. The breakeven inflation rate is the difference between the yield on a Treasury bond which is not inflation protected and the yield on a TIPS bond which is inflation protected. …
I write for builtin on technology and business every now and then. In my latest article, I wrote about network effects:
A network effects is one of the most powerful forces in business. Once it gets going, it’s like a snowball that grows ever larger by sucking in more and more suppliers and customers. It’s also the force that keeps new would-be competitors at bay.
Many of today’s most successful companies exhibit massive network effects — Visa, Apple, Google, Facebook, Amazon, Microsoft, Square, Airbnb, etc.
A network effect is a feedback loop. In the business world, it occurs when there are at least two sides in a marketplace — app suppliers and app users or content makers and content viewers or restaurants and hungry people. …
Not intended to be investment advice. I do not currently own or plan to initiate any positions in the individual companies discussed in this post.
The markets can shift on a dime sometimes. This past week that dime was Pfizer’s announcement that its vaccine had a preliminary efficacy rate of over 90%. This is some of the best news on the health front since the pandemic began.
Whereas in the week prior, investors were bidding tech stocks up in anticipation of a Biden presidency and a split Congress (which lowers the risk of regulation), the most recent week saw a rotation out of tech stocks and pandemic winners and into pandemic losers like travel, airline, and energy…
The more I write about businesses, the more I realize the importance of trust. Trust has always been important. Consumers trust businesses to produce products that at worst do no harm. And if there are long-term adverse effects, to be upfront and transparent about them (sugary foods, alcohol, etc.).
Back in the pre-Internet days, “trust” was generally earned by branding and marketing. Commercials and advertisements were meant to make consumers feel good about a company or a product. And this good feeling was converted into sales when the consumer saw the product while shopping at the market. …
Not intended to be investment advice. I neither own nor plan to buy shares in Stitch Fix at this time.
I’ve been doing some reading on Stitch Fix lately. I find businesses that intersect technology, data, and physical goods (in this case, clothing) fascinating.
Also, ever since I wrote the article below:
And found that Stitch Fix data scientists were some of the highest paid in the industry (by the way, the pay numbers in the figure below doesn’t include bonuses and stock compensation), I’ve been mildly curious about what exactly Stitch Fix data scientists do, and what secret sauce(s) they are able to add to the business to make it go. …
Not intended to be investment advice. I do not currently own or plan to buy shares in Netflix.
I’ve been thinking more about Netflix since I finished this post the other day:
Netflix likes to invest in and release large volumes of new shows and movies including possible blockbusters all at once. This is really different from a movie studio’s strategy where they want to stagger the releases of potential blockbusters.
Again, it comes down to the distribution model. Movie studios want a blockbuster to remain in theaters for just the right amount of time because movie distribution is a scarce resource — there are only so many weekend nights in July and only so many screens in each theatre. Too short and there is the opportunity cost of lost ticket sales. …