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Showing posts from May, 2021

Better together: WarnerMedia and Discovery

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Oh, great, another streaming service. That might have been your reaction to the news that AT&T and Discovery are planning to merge their media assets together, to better take on the streaming giants of Netflix, Disney & Amazon. For the companies involved, this deal makes a lot of sense on paper. Both AT&T and Discovery, the former of which has a sprawling telecoms business, have seen relatively lackluster corporate performance in the last 5 years — which has been reflected in their share prices. This deal hopes to take the underperforming media assets from AT&T, which includes HBO, CNN and the Warner Bros. studio (responsible for Harry Potter and many other titles) and combine it with Discovery's relaxing cooking, home renovation and nature content. Although it may take a while to happen, presumably the plan is to merge the assets under one big streaming brand. That brand would have an ~80 million strong streaming subscriber base, with 15 million coming from Discove
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Peloton's management of the Tread+ has been a disaster

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Today, Peloton announced that it's recalling all treadmills and its CEO John Foley finally apologized for not cooperating with the U.S. Consumer Product Safety Commission (CPSC) sooner. Honestly, as an investor, I'm shocked the CEO has not resigned yet because his handling of this crisis has been a disaster. Peloton was the epitome of a Coroneconomy thriver. Its stock ~5X'd in 2020, as its connected home fitness products flew off shelves. It has been trying to expand beyond its spin bikes — so it launched treadmills. Those are causing major problems. In March, Peloton's CEO disclosed that a child had died in an accident involving a Tread+. The CPSC said people should stop using Peloton's Tread+ if small children or pets are at home. The CPSC cited 39 incidents involving a Tread+, including instances of children and pets getting sucked underneath it. So instead of following rule #1 of crisis management, i.e overcorrect, Peloton got defensive - the company called the
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China creates a digital currency, PayPal should be worried

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China just created its own digital currency: the digital yuan (digi-yuan). It's the first major world economy to launch an e-currency. China isn't just putting cash into a virtual bank account — it's minting cash digitally, turning legal tender into lines of code. For each digi-yuan it issues, it essentially cancels a paper yuan. Unlike a cryptocurrency, digi-yuan is a state-backed currency controlled by China's central bank (like how the US $ is backed by the US gov't and controlled by the Fed). Also, unlike crypto and cash, there's no anonymity with digi-yuan. The Chinese government knows where your yuan has been. Digi-yuan gives China not more money control but also more control over everything. For example, it is testing digi-yuan expiration dates that could encourage people to spend within a certain time frame (to support economic stimulus). China uses hundreds of millions of facial recognition cameras to surveil and fine citizens for things like jaywalking
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Bitcoin and the 99 other coins

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So far Bitcoin is having a decent 2021. It hit a record high of more than $41.5K last week, continuing the upward trajectory it has been on since April of last year, when a single Bitcoin cost less than $5K. That rise now means that the sum of all Bitcoins in existence is worth more than $700B.  Because Bitcoin dominates much of the media's attention, it can be easy to forget just how many other cryptocurrencies there are. A quick look through the full list from coinmarketcap reveals over 100 alternative cryptocurrencies with a "market cap" of more than $100M. Each hoping that their unique take on the core blockchain technology will be enough to propel them out of obscurity, to where Bitcoin is today. With some of the names on the list you can't help but think someone is having a joke, or planning something nefarious - there is a "dogecoin", "YEP COIN", "OMG" and even "SushiSwap" (???). This time it's... different? Some of
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Why the stock market is beating expectations

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  In the early stages of the pandemic, the S&P 500 index dropped a third of its value. Since then it has roared back, soaring more than 50 percent from its low in late March and setting an all-time high last week. This seems very implausible when set against the current state of the economy and the ongoing devastation caused by the pandemic. So why is the stock market rallying in the face of a pandemic and bad economic news? Several explanations are plausible. The stock market is not the economy: The stock market represents publicly traded companies only; it’s not the whole market. Most importantly, it’s always forward looking; i.e. it’s an indicator of the future earnings of those companies and how they would fare in the future. A rising stock market indicates that investors think these companies will do better in the future. On the other hand, a falling stock indicates that investors are pessimistic about the future earnings of companies. Continued income support for the econom
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Netflix: No more burn?

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In the last article on Netflix , I discussed why Netflix's promise to premiere a movie every week is not an overly ambitious strategy for the streaming giant. It's a brilliant move that isn't risky because Netflix can keep spending at this high rate for a long time. Yesterday's earnings call confirmed this. During the call, Netflix announced that it does not intend to raise any more capital, through debt or equity, as it plans to be cash-neutral this year and cash-flow positive beyond 2021. Looks like all those price increases are flowing through to the bottom line. Of course, saying you don't need any more capital is a really great way of getting people to offer you more capital at even more attractive rates (if you ever did want it).
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