Financial Double Takes (Week Of: August 27, 2018)

Grant Davis |

Financial Double Takes

Week Of Date (August 27, 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:

  • “If you had invested from 1960-1980 and beaten the market by 5% each year, you would have made less money than if you had invested from 1980-2000 and underperformed the market by 5% a year.” – Of Dollars And Data.

 

  • Google advertisement revenue (via The Spectator Index):

    • 2001: $0.07 billion

      2017: $95.4 billion

 

  • Last quarter was the fourth straight quarter that stocks of companies that beat forecasts gained less than 1% on average, claims FactSet. – Charts That Matter from Mauldin Economics

 

  • Article of the week (paywall): “Over the past two years, Amazon has almost doubled the size of its physical footprint worldwide, to 254 million square feet, including dozens of new data centers with vast fields of servers running 24/7.” – Bloomberg Businessweek
    • Amazon now uses 2% of all U.S. electricity. And taxpayers bear almost all of its cost.

 

  • Venezuela’s inflation rate over the past year is now roughly 109,000%.

 

  • “Student loans now make up roughly 74% of total debt owed by 25- to 34-year-olds, up more than sevenfold since 1989 when that number was just 10%.” – 13D Research
    • “An overwhelming majority of millenials — 62% — now hold more debt than money saved.”

**Here’s our Financial Double Takes for the week of August 20, 2018.