Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.
It seems folks believe that things are going back to exactly how they used to be Real Soon Now. I find this particularly reflected in restaurant stocks. Gloomy sourpuss that I am, meh, I don’t think so. My view is that we’ve simply pushed prices back up to major reversal levels. I offer you the following dark visions of doomed dining.
The biotech sector fund symbol XBI has a nice little head and shoulders pattern that is almost complete.
And now, apropos of nothing. You’d think about fifteen years of doing this, I’d have an incredibly acute awareness of my traffic. But I’ve only started paying attention. Turns out Monday is huge. Much bigger than I expected. But the big surprise for me is that Friday is way less popular than I imagined. It’s truly like people enter the trading week rarin’ to go, but by Thursday night, they’ve had enough. Interesting.
The tech giants are trading at valuation ratios that are close to unprecedented for such large companies. Currently, Amazon trades at a nosebleed price/earnings multiple of 122. Apple’s multiple is 33 which is extraordinary for a hardware manufacturer. Netflix clocks in at 84. Tesla leads the pack at 752, but that is largely due to its miniscule earnings. Overall, it is hard to look at these valuations without thinking “bubble.” But there is another interpretation.
At Cornell Capital Group we asked: What if the major tech giants (and I would exclude Tesla from this group) are trading as if they were quasi-bonds? That is a combination of their technology, their market power and the impact of Covid is such that their projected earnings are virtually locked-in. They are largely immune from the risk of competition and the fluctuations in the economy. If that were true, then the discount rate may be a good deal lower than that implied by traditional asset pricing models. To get an idea what this means, let’s go back to the basics.
(more…)The standard method of determining what industry a company is in is by looking at its underlying business. By that standard, Tesla is clearly in the auto business. Virtually all of the company’s revenues and costs are related to building, selling, and servicing automobiles. But there is another way of checking whether a company is an industry that has implications for investors. The idea is that if two companies are in the same industry, then their stock prices should tend to move together. For example, when the Covid-19 crisis arose, the stocks of all major airlines collapsed together. This raises the question of whether using this second criterion Tesla is in the auto industry. Before turning to the results, a couple caveats are in order.
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