@snippetfinance

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Snippet Finance is a curation of the most interesting snippets on stocks, investing and finance delivered in a short easy to digest form. To inform and inspire.
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Robinhood vs. E-Trade
  • Trading volumes at $HOOD now vs. E-Trade during dot-com boom and bust.
  • Interesting comparison?
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Does Twitter make Sell-Side Analysts Better?
  • The answer, according to a new study, is yes.
  • Analysts are generally overly optimistic when presenting earnings forecasts (largely due to incentives).
  • As information technology has proliferated, the competition for information production has increased.
  • Negative and positive information are treated differently by human psychology – the former being valued more highly.
  • Analysts looking at Twitter succumb to this asymmetry, biasing their forecasts downwards i.e. negating their over optimism.
  • These are fascinating results (there a few others in the article).
  • $TWTR
Everything is Advertising Now
  • On a long enough timeline everything becomes advertising.
  • This is a slide from $UBER latest presentation.
  • This is happening across the board - from $AMZN (where the ad business is rivalling AWS and is likely very profitable) to Instacart (just filed for IPO) and Walmart.
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Oil - Equity vs. Commodity
  • Despite record 1Q 2022 results and continued capital discipline, the disconnect between the energy sector weighting in the MSCI Wold Index relative to the oil market value is at its widest level since 2000“.
  • $USO
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Electric vehicles and gasoline stations
  • The electrification of cars will have a big impact on gasoline stations.
  • This was a nice piece analysing this impact.
  • It is from Harding Loevner, using Circle K (owned by Alimentation Couche-Tarde $ANCTF) in Norway (which has electrified faster than other countries) as their case study.
  • Positives – charging takes a lot longer = higher conversion to spending customer + longer in store.
  • About 15% of gasoline customers venture inside to make additional purchases during their car’s few minutes at a Circle K pump, while 40% of EV drivers do so during the 20–30 minutes their vehicle is charging.
  • Negatives – three quarters of charging is done at home.
The Best Strategies for Inflationary Times
  • Most investors, including me, have limited experience of inflationary risk.
  • This paper, from 2021, is an excellent guide – looking at passive/active strategies across asset classes over the past 95 years.
  • As we have seen it is tough – unexpected inflation is bad for traditional assets (bonds, equities). Commodities do well but depends which ones. Trend following and active equity are the best protection.
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Top of Book Liquidity
  • Market liquidity is dire.
  • This chart from GS looks at top of book (this is the highest bid and lowest ask) depth.
  • It is very low and at levels, as the bank says, consistent with extreme volatility.
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I love the volatility. Inefficient markets & irrational actors are what opportunities are made of. The Warren Buffet lessons play out fabulously every time there’s panic, fear, and short sighted trades.
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Why stocks go up? Mega-cap Tech edition.
  • It may seem simple but often the main thing that makes stocks go up is defying the fade in forecasts.
  • This is true of mega-cap tech stocks.
  • Despite consistent forecast for deceleration they have maintained 20-30% growth for over a decade now.
  • NB solid line is actual revenue growth average for $AMZN, $AAPL, $CRM, $FB, $GOOG, $MSFT, $NFLX and the dotted lines are average sell-side forward forecasts at those points in time.
  • Source.
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Interview with Jim Grant
  • Jim Grant has been publishing the Interest Rate Observer since 1983 (that is nearly 40 years!).
  • He is a noted contrarian, who has witnessed market booms and busts and all manner of human folly in-between. Always armed with a sharp mind, a wonderful network and a skilled pen.
  • This was a nice recent interview with him on his views especially on the impact of rising interest rates.
  • "That’s what we try to do at Grant’s. We try to imagine how a hardened consensuses of opinion could change—how people think that there’s no alternative but the way things are, and how that could change. So yes, there will be trouble ahead, but also a lot of interesting things to do."
This was an excellent interview Snippet. Great to have Jim Grants take on interest rates, the Fed's actions, Agricultural commodities, Gold and Crypto.

I really like how he ended the interview not with pessimism but with the hope of an alternative-

"I’m thinking that Japan might be a thing. That’s what we try to do at Grant’s. We try to imagine how a hardened consensuses of opinion could change—how people think that there’s no alternative but the way things are, and how that could change. So yes, there will be trouble ahead, but also a lot of interesting things to do."

Thanks for sharing
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