Is Meta a Buy Now?- Not at Maximum Pessimism

As chronicled by John Templeton's famous bet in the Great Depression, he put in $100 on all the stocks listed in the stock exchange, which was 104 stocks that cost him $10,000 dollars (Equivalent to $185,000 today).

His bet was on the basis that the market has reached maximum pessimism. His good foresight has proven prescient and it netted him close to a 5 times returns when he eventually liquidated all of his positions years later.

The point we are trying to highlight is that the market tends to overreact and therefore, we do not feel Meta have reached the optimal entry-level despite the huge decline in recent times. The bearish trend might just have started and it would need some time to play out.

Let's first revisit some main points that led to Meta's plunge:

1. The fall in Daily Average Users (DAUs) for Facebook- an important barometer of growth.
2. Apple Privacy Policy would cost Meta 10 Billion a Year
3. 10 Billion a year to be spent on research and development for MetaVerse
4. Credible Competitor in Douyin (TikTok)

 

Source: Meta Corporate Presentation

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https://thebigfatwhale.com/is-meta-a-buy-now-not-at-maximum-pessimism/

Russia War with Ukraine- Brinkmanship or For Real?

Contributed by: The Big Fat Whale

With the latest developments looming around the Russian and Ukraine region, where there have been other players such as the US adding fuel by giving intelligence that Russia is going to wage war in a matter of days. 

So is Russia really bent on taking over Ukraine?

Source: BBC

What is Happening?

The threat is real with more than 150000 troops stationed near Ukraine borders. Adding some perspective, there was just close to 5000 troops deployed in 2014 when they seized Crimea from Ukraine.

Understandably, Crimea is much way smaller than the whole of Ukraine. The seizure could be a strategic move given the geographical location of Crimea as could be seen from the map.

Click Here for the Full Article:

https://thebigfatwhale.com/russia-war-with-ukraine-brinkmanship-or-for-real/

No Cash, No Bonds, Good Geographical Diversification for the New Norm- Ray Dalio

Chanced upon this latest interview by Ray Dalio that give advice on the current economic outlook and the geopolitical situation. It is worth your time to digest.

Just a little introduction on Ray Dalio:

Ray Dalio, founder and co-chief investment officer, Bridgewater Associates — the world's biggest hedge fund — manages $150 billion in assets. With over 50 years of experience in macro investing, 72-year-old Dalio has been successful in creating a practical investing template by analysing patterns in history and has helped Bridgewater’s flagship Alpha Fund clock net gains of $46.5 billion since inception in 1991. Dalio’s book, Principles for Dealing with the Changing World Order, examines the big cause-effect relationships of economic events that have shaped the world we live in.

In his latest interview with Fortune India, Ray Dalio discusses his macro-investing template. Here’s an excerpt from the interview:

Dalio: I want a highly diversified portfolio of assets that are not cash and bonds.

I want geographic diversification as much as I want asset class diversification. Regarding my geographic diversification I want to favour countries that have three characteristics and are healthy in the ways we talked about:

First, they are financially strong, that is, their incomes are greater than their expenditures and their assets are greater than their liabilities.

Second, I want countries in which there is internal order rather than internal conflict so that then they can be productive.

Third, I don’t want to invest in countries where there are significant chances of external conflict.

I create two portfolios — first, a portfolio of assets that perform best in bad times and retain their value in the worst of times. And second, a diversified portfolio of the investments.

You can read the entire interview here:

https://www.fortuneindia.com/long-reads/the-conversation-ray-dalio/107064?fbclid=IwAR3SWyRBM-gycDOEivZEvDMFwGo_IEtj5Gi8jgVNgBgIX-LtH0_NFxmqDns

Investing In Women's Best Friends- Luxury Bag Brands

Contributed By: The Big Fat Whale

Just as Marilyn Monroe famously declared, "Diamonds are a Girl's Best Friend", her song was released in 1953.

Since then, there are now a few more additions to the best friends list, namely the luxury bags. We are not too well versed but based on our research, the few that would add a smile to a girl if they are able to add to their collection would be top of the list, Hermes, followed by Chanel, Christian Dior and Gucci.

We are going to analyse 3 companies that never have a price discount and are able to hike prices consistently, yet there is great demand for their products. The 3 companies we will be touching on would be Hermes, LVMH and Christian Dior. Chanel would be a good candidate but unfortunately, they are privately owned.

For Hemes, they have positioned themselves nicely as it is almost impossible to get a Birkin bag if you walk into their stores. Most have to get it from the secondary market.

Source: Seeking Alpha

Of the 3 brands, LVMH is the most complicated in terms of ownership structure as could be seen from the diagram above. They have a minority stake in Hermes and a majority stake in Dior. 

Luxury Goods Outlook

The growth outlook for the luxury goods market would be likely in the single digits of 6%-8% and could reach EUR360- EUR380 billion by 2025 based on the forecast of Bain and Company.

The revived luxury market has been powered by the resumption of local consumption, the dual engine of China and the US and the consistent strength of the online channel. Younger customers (Gen Y and Gen Z) continue to drive growth and together are set to make up 70% of the market by 2025. 

Source: Bain and Company

Click Here for the Full Article:

https://thebigfatwhale.com/investing-in-womens-best-friends-luxury-bag-brands/

Living to 100 Years Old- Is it a Curse?

Contributed By: The Big Fat Whale

It is like a miracle to live beyond the century mark in the past but it is no longer a rarity in today’s world. Japan have the tradition of giving a small swallow bowl made of silver (silver sakazuki) to celebrate those who have reached this grand milestone. It is meant for a ceremonial sip of the sake. Soon after, there will even be a letter of commendation sent to them from the Prime Minister.

Given the numbers reaching beyond 100, the government is looking to downgrade the award. Currently, the centenarian population stands at 86,510 in 2020 as compared to 153 when the records started in 1963. 

100 Year Life

Recently, we just completed reading the 100 Year Life by Lynda Gratton & Andrew Scott and have gained useful insights from their work. What is notable would be if you are in your 40s, there is a 50% probability you will live to 95 years of age. If you are in your 20s, there is a 50% probability you will live to 105 years of age.

What it signifies is that being a centenarian would be a norm rather than an outlier in the future. It brings us to a great paradox of what it entails to our life, society, economy and social structure.

Here is the link for the full article:

https://thebigfatwhale.com/living-to-100-years-old-is-it-a-curse/