Financial Double Takes (Week of Aug 20, 2018)

Grant Davis |

Financial Double Takes

Week Of Date (August 20, 2018)

The world of finance and business is a fun thing to watch from the sidelines.

What makes it fun?

Well first let’s give a little context.

There’s a buyer and seller at the end of every transaction. Two people who value the same thing differently – aka subjectively.

The price depends on what the buyer is willing to pay. And what the seller is willing to give it up for.

One farmer may be willing to give up 20 chickens for one cow. Another farmer may be willing to give up 10. Another one may want to give up 100 chickens.

It’s not whether the farmer is “getting a better deal.” It’s what each farmer thinks the value of one cow is.

Multiply this simple example across millions of different assets.

Chickens. Cows. Dollars. Gold. Barrels of oil. Stocks. Bonds. Cars. Homes.

You name it. A market is always made between buyers and sellers.

But sometimes the value two parties see between two items turns into speculation. Which then turns into frenzy. This is where asset price bubbles can form.

Most bubbles form when buyers are willing to pay any price for an asset. All in hopes of selling it to someone else at an even higher price.

Whether it’s tulips in the 17th century. Tech stocks in the late 1990s. Mortgages in the mid 2000’s. Beanie babies. Pokemon cards. Anything.

Looking back… we wonder how people could have fallen victim to these bubbles.

But it all rolls back into what the buyer was willing to pay for it. And what the seller was willing to give it up for.

This is what brings us to our Financial Double Takes column.

It gives cadence to one of Mighty Trades’ favorite financial writers Grant Williams and his letter: Things That Make You Go Hmmm

Every week we’re going to post facts, articles, or tidbits in the markets that are fascinating. Some that are bullish. Some that are bearish. Some that remind us the sheer size of a company’s operations. Complete government recklessness. Financial bubbles.

Everything.

It won’t just pertain to stocks. It could private equity valuations. Housing prices too.

Really whatever we find that is a remarkable statistic in the world of finance. Good or bad.

There won’t be any personal bias or commentary.

Just the facts. Do with them as you please.

So, without further ado… here’s a couple things that make us do a double take:

  • Japan’s population has been declining for seven consecutive years. “In 2017 there were 946,060 births and 1,340,433 deaths in Japan… By some estimates, Japan’s population could shrink by a third over the next 50 years, and there’s little chance the trend will reverse.” The aging population coupled with deaths have led to twice as many job vacancies as applicants in Tokyo.

 

  • According to credit-rating agency Moody’s, state, federal and local government pension plans are $7 trillion short in funding.
    • “The nation’s 1,400 corporate pension plans are facing a $553 billion shortfall. And, according to Boston College, about 25% will likely go broke in the next decade.”

 

  • Remember, every time you buy is made up of a buyer and a seller. “If we assume the typical individual makes a thousand contracts per year, then the world economy is organized via 7.4 trillion contracts. Per year. That’s how marvelously interconnected this system is. Each agreement is a node in a mind boggling global web.” – Richard Maybury, Early Warning Report

 

  • Disney’s media empire may be more massive than you thought. It makes Disney one of the greatest companies to own “forever.” Click here to take a look at this infographic.

 

  • Money Magazine calculated Bezos’ staggering net growth from Jan. 1 – May 1 of this year and found that he made $275 million a day, which equals $11.5 million per hour, $191,000 per minute and $3,182 per second!

 

  • San Francisco is now spending $37,333 per homeless person. “In other words, if San Francisco simply gave each officially “homeless” person this money, instead of shoveling out the cash to the official do-gooders and bureaucrats, those who are homeless would be receiving, on an after-tax basis, roughly the same as the median full-time American worker (Wikipedia says $44,980 is the median for pre-tax earnings). I think that this is not counting whatever the state and Federal governments spend on these folks, e.g., for Medicaid, SNAP, and Obamaphones. Thus, if they could convert all of their welfare benefits into cash, they would presumably be above-median earners.”