Markets Reverie

With reelections in the UK coming up and moderately high inflation still being hard to combat over the world, it’s a good a time as any to do a deep-dive and evaluate the British economy and stock market. Brexit has had undeniable effect on the UK economy as well, Goldman Sachs says that "the UK has significantly underperformed other advanced economies since the 2016 Brexit referendum, with lower growth and higher inflation". Their analysis shows that the British economy is 5% smaller than it would have been had it remained in Europe. Moreover, UK debt spending has been increasing at a concerning rate year over year. The IMF listed the UK in its Fiscal Monitor publication last week as one of four large economies that “critically need to take policy action to address fundamental imbalances between spending and revenues”. They project UK debt to hit 98 % of GDP by the end of the decade - which would still leave the country below the US, Italy and France, but the IMF say that th

I’ve noticed a recent phenomenon with many apps I use these days. The slow but gradual erosion of value as I see Ubers get more expensive, meals on DoorDash get more costly and arriving slower and more remarkably streaming services like Amazon Prime taking on ads to a subscription that used to previously not serve them for the excellent price of $14.99. Before I dwell further into why I think these things are happening and why we are continuously losing out as customers, it is pertinent to start at the beginning of a tech companies’ life-cycle and observe how the grow and then dominate their field. Blitzscaling is an old-school startup strategy of burning as much cash as quickly as possible with the help of dedicated Venture Capitalists in order to gain significant market share in their industry. We can see examples of this in companies like Uber, Airbnb and DoorDash. In order to gain increasing market, share these services have to be good value propositions for customers so they can

Now's as good a time as any to have a comprehensive report card about prominent technologies that have been extolled to save the planet, namely electric vehicles (EVs). Sales growth of electric vehicles has slowed dramatically this year. Tesla delivered 20% fewer cars in the first quarter of 2024 than in the prior quarter, and BYD saw sales decline more than 40% over the same period. BYD’s EV sales were still up 13% when compared to the same quarter a year earlier, while Tesla’s sales were down 9%. Both companies have been slashing prices to stimulate demand. Another possible sign of an EV downswing can be seen with Hertz, the car rental company, announcing in January that they would be selling 20,000 EVs from their rental fleet, citing a lack of demand from rental customers and high repair costs. They said that they would use the proceeds to buy more internal combustion engine cars. It is important to understand why EVs are seeing lower sales and whether the issue comes from the d

With the start of the year, a growing number of newly public companies are changing course and going back to being private again. 10 companies that went public in the boom years of 2020 and 2021 have decided to sell themselves to private equity firms. As the US economy headed towards a downward trend in its economic cycle, a majority of the 2020-2021 class of initial public offerings have had a dismal performance, resulting in the decision to go private once again. Grill maker  Weber  agreed to be bought out by BDP Capital Partners in December of last year  for $8.05 a share, well below its $14 IPO price less than 18 months earlier.  Sumo Logic  Inc. agreed in February  to be bought by private-equity firm  Francisco Partners for $12.05 a share, down from the data-analytics software company’s $22 IPO price. However, not all companies are selling at a loss. KnowBe4 Inc. in October agreed to go private again in a deal with Vista Equity Partners, that valued the cybersecurity firm at ar

 On July 12th, something unprecedented happened. The Euro reached parity with the US Dollar, meaning that 1 Euro is now worth 1 Dollar. For the 20 or so years the Euro has been around, it has never reached parity with the Dollar, but now that has changed. One reason why this has occurred is because the Federal Reserve has been steadily increasing interest rates in the US in order to combat inflation, while Europe has remained inactive in comparison. Another issue is that the ongoing Russian invasion of Ukraine has caused mass capital investment flight out of European markets & into American ones, increasing demand for Dollars and pushing up its value, thus making it stronger relative to the Euro. This stronger dollar has its advantages and disadvantages. A key disadvantage for multinational companies is that big currency fluctuations can have a significant impact on profitability. American companies with large international footholds will take a hit from converting their foreign sa

Since the beginning of July, there has been an uproar in the investing community & Wall Street, over news of Chinese regulations. In early July, Chinese authorities ordered app stores to remove DiDi from their service, while also announcing a cybersecurity review of the company due to concerns of data security. China had previously given a warning to DiDi prior to their IPO launch on June 30 to allow them to investigate these concerns, but DiDi pushed forth to launch the IPO. As a result, Chinese authorities took action. Since then, China has launched cybersecurity reviews on three more Chinese companies listed in the US. Around the 23 rd of July, China made the move to restrict for-profit education companies from making money through foreign stock listings, while foreign capital cannot invest. Finally, China’s antitrust administrator ordered Tencent Music Entertainment to give its exclusive music licensing rights for online music. These three incidents that have occurred over the

  If you’ve been reading the news lately, there has been a lot of noise about the rising inflation, especially in the US. In May 2021, the US CPI rose by about 5%. The Fed (Federal Reserve System) currently doesn’t seem fazed by the rising inflation, as they believe that this period of inflation is only occurring due to transitory factors. However, it seems that consumer’s see things differently, as can be seen with recent consumer survey results showing that median inflation expectations for the next 12 months is 4.8%. These survey results come from the New York Fed’s Survey of Consumer Expectations. It should be noted that 4.8% is considerably higher than the Fed’s prescribed healthy inflation rate of 2%.  It should be noted that expectations for high unemployment a year from now have a reached a new low of 30.7%, which indicates that the chances of stagflation are low. Before I discuss any further about the situation with current rising inflation, let’s break down what inflation i

  Introduction This may have taken longer than I wanted it to, but I've finally finished a complete 3-Statement for Activision-Blizzard.  However, I still intend to present this 3-Statement, because I'm proud of the work I put into it. Rather than droning on, I think it's best to begin.  P&L and BS Source The source for the financial data of Activision-Blizzard from 2018 to 2020 was mainly Yahoo! finance and the company's 10-K for the years 2020 and 2019. I simply inputted the values to the corresponding year, to get a corresponding P&L and BS for the years 2018-2020. In terms of trends in the P&L, there has been a significant increase in Total Revenues from 2019 to 2020, where it goes from $6.5 billion to $8 billion. This increase in revenue seems to be part of the general part for the games industry in 2020, which saw a surge in revenue. MarketWatch even claimed that video game revenue surged 20% to about $179.7 billion. This surge can be attributed to th