They're too focused on GAAP earnings and not sufficiently focused on cash flow and intangible assets.
"Jeremy Grantham’s firm expects investments to lose money in 10 of 11 asset classes over the next seven years. Emerging-market value stocks are the lone asset class GMO expects to have a positive return over the next seven years." bloomberg.com/news/articles/…
"Japan small value stocks are also attractive, GMO said. “Our forecasts are not all doom and gloom — in fact, they’re far from it,” the company said in the report."
"We don’t know what lies ahead in terms of the macro future. An investor’s time is better spent gaining a knowledge advantage regarding ‘the knowable’: industries, companies and securities. The more micro your focus, the great the likelihood you can learn things others don’t.” HM
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"Netflix will license some games... Netflix's intellectual property is a key differentiating factor against other rivals in the space. The first of those [differentiating factors] is about the IP we create." google.com/amp/s/www.cnbc…
2/ For a clue about the answer read my two blog posts on Reed Hastings. The posts are free, which is priced to sell:
1/ Operating a business in space (space-to-space) or from space (space-to-Earth) involves a "cold start" or "chicken and egg" problem.
Some business activities aren't feasible until the cost of getting to space is lower (e.g., finding new services with product market fit).
2/ The price of something like transistors, communications or access to space dropping significantly creates optionality.
Optionality is the property of asymmetric upside (preferably unlimited) with correspondingly limited downside (preferably tiny).” 25iq.com/2013/10/13/a-d…
2/ "When you see something occur in a complex adaptive system, your mind is going to create a narrative to explain what happened—even though cause and effect are not comprehensible in that kind of system. Hindsight’s a beautiful thing."
I can do this about the Internet bubble.
3/ One spark causing one phenomenon underlying the dotcom part of a lollapalooza occurred in 1993 when it was finally legal to use a business application on the Internet. This change in the law caused people like Jim Clark to invest in firms like Netscape. 25iq.com/2018/03/03/bus…
1/ You find a lamp and after you rub it a genie appears and offers you one of two businesses:
1. Business A generates $10,000 in "earnings" each month;
Or
2. Business B generates $10,000 in "free cash flow" each month?
Would you select Business A or Business B?
2/ Cash flow rather than reported earnings is what determines value for an investor. You can't spend someone's opinion that a business generated an accounting profit. Earnings are only a clue about future cash flows. That and other clues about cash flow can be misleading or not.
3/ Why do so many investors focus on earnings rather than free cash flow ?
"convenient availability, single-number simplicity, auditors provide presumed authority and a shortcut, freeing investors from the need to assess long-term cash-flow prospects." expectationsinvesting.com/pdf/earnings.p…
The 1993 to 2001 period in history isn't simple to explain. I'm not guessing since I was actually there. The era involved many simultaneous phenomena interacting to create a lollapalooza. If I had to select one triggering event it was creation of the commercial internet in 1993.
The triggering phenomena that created the commercial internet in 1993 were chips appearing in devices, running software and connected by wired and wireless networks. When this happened, many new ways to create value were possible and the process of sorting that out was exuberant.
People creating new value based on chips in devices connected by networks continues today ~ thirty years later. There's still a lot of exuberance as the efforts of businesses get sorted out. What's different? Central banks did not take interest rates to zero and beyond in 2001.
1/ "Our goal at SpaceX is not to go bankrupt," Elon Musk said at Mobile World Congress in Barcelona.
The most unknown and fundamental challenge with space-based businesses is economic. A survivable business model is a core element of product market fit. google.com/amp/s/amp.cnn.…
2/ There's only one geostationary orbit, and that is over the equator at 36,000 kilometers. By contrast, SpaceX satellites orbit at about 500 kilometers. Everything in space (almost) involves tread offs. Close means better propagation but it's hard to offer committed data rates.
3/ With the combination of a high minimum vertical angle to low Earth orbit satellites--to overcome blocking and signal problems with Ka or Ku bands--and the low altitude, geometry takes over, and a constellation of hundreds of satellites is required to continuously cover Earth.