OT - Dow plunges 1,175 - worst point decline in history

[godfrey1112000]

Originally Posted by Tony T

No one posts on a good day.
DOW up 400, Nazdaq 155, S&P 43

No screaming up no screaming down📈📉

[oldpotatoe]

Originally Posted by Big Dan

Tony, please tell us when the "trickle down" is supposed to hit.

No kidding...stock holders, owners getting wealthy, workers seeing stagnation and rising inflation(even with a 'loco' FED, raising interest rates)...when the DOW/NASDAQ/S&P go up..."DC/WH's hard work"...when it corrects, 'normal correction'...it's a game played by expensive suits..

[MattTuck]

So, let's look at just one single stock to understand the run up in the market.

Netflix released subscriber numbers that said they added 7 million subscribers.

Here's what they had to say about their free cash flow (in other words, the actual cash flows that the business can use to reinvest in itself or pay dividends to shareholders.)

Free cash flow in Q3 was -$859 million vs. -$465 million in the year ago quarter. As a reminder, our growing mix of self-produced content, which requires us to fund content during the production phase prior to its release on Netflix, is the primary driver of our working capital needs that creates the gap between our positive net income and our free cash flow deficit.

So, how much did they spend on new content, you can check it out here, about $7 billion this past quarter.

They also spent about 1.4 billion on marketing, which we can use as a proxy for "customer acquisition". Ok, so they spent 1.4B, gained 7M customers, which each pay, let's say they all get the premium plan at 13.99 per month, which is 167 per year, which means net revenue from new customers is 1.1B. So, they didn't even cover their customer acquisition costs.

So that still leaves the big question about the $7B in content costs (just in this past quarter!)... how do they expect to make money if your business model requires you to spend more money than you bring in?

Yet, the markets rewarded them with an increase in their share price. Think about this when you are trying to decide if the market makes sense.

[echappist]

Of course it doesnt. I get it re: Amazon, Apple, Facebook, and Alphabet, but it’s sheer madness to throw that much money on a company that hasn’t shown it could make any sort of profit (any as in pre-tax, post-tax, whatever).

Some will tell you that the price is reflecting the future, when they would have turned a profit, but that’s built on a song and a prayer when there’s been no track record to date showing that...

Ditto for Uber, which is just burning through venture capital investment, without having anything to show for actual profit. Granted, it’s a privately held company and all that, but you’d bet people would be buying its stock if it were available.

For some reason, steady profit (aka source of dividends) has become a dirty word, and people would much rather buy based on growth per se, whether the books are in the black be damned...

[Ozz]

Originally Posted by echappist

...For some reason, steady profit (aka source of dividends) has become a dirty word, and people would much rather buy based on growth per se, whether the books are in the black be damned...

blue-chip dividend stocks don't feel like Las Vegas.....steady growth over 20 yrs is boring,

[saab2000]

Originally Posted by Ozz

blue-chip dividend stocks don't feel like Las Vegas.....steady growth over 20 yrs is boring,

Exactly. My savings strategy is based on dividend reinvestment over the years. I do pay attention to those quarterly reports and dividends.

[johnmdesigner]

In the land of the blind...

The one eyed man is king.

[fiamme red]

Originally Posted by echappist

Ditto for Uber, which is just burning through venture capital investment, without having anything to show for actual profit. Granted, it’s a privately held company and all that, but you’d bet people would be buying its stock if it were available.

https://www.nytimes.com/2018/10/16/t...-lyft-ipo.html

Uber has received proposals from the investment banks Morgan Stanley and Goldman Sachs that say the technology giant could be worth as much as $120 billion in an I.P.O., two people briefed on the matter who were not allowed to discuss it publicly said on Tuesday.

At $120 billion, Uber’s debut on Wall Street would be the biggest since the Alibaba Group of China began trading on the New York Stock Exchange in 2014.

The market for tech I.P.O.s has surged in 2018. Nearly 200 companies have raised more than $53 billion in initial public offerings in American markets, making it the busiest year for tech newcomers to Wall Street since 2014, according to data from Dealogic.

But a blockbuster public offering for Uber, which has burned through billions of dollars since it was founded in 2009 and does not appear to be close to sustained profitability, would mark a significant increase in risk-taking for investors in publicly traded companies...

[tuscanyswe]

Originally Posted by MattTuck

So, let's look at just one single stock to understand the run up in the market.

Netflix released subscriber numbers that said they added 7 million subscribers.

Here's what they had to say about their free cash flow (in other words, the actual cash flows that the business can use to reinvest in itself or pay dividends to shareholders.)

Free cash flow in Q3 was -$859 million vs. -$465 million in the year ago quarter. As a reminder, our growing mix of self-produced content, which requires us to fund content during the production phase prior to its release on Netflix, is the primary driver of our working capital needs that creates the gap between our positive net income and our free cash flow deficit.

So, how much did they spend on new content, you can check it out here, about $7 billion this past quarter.

They also spent about 1.4 billion on marketing, which we can use as a proxy for "customer acquisition". Ok, so they spent 1.4B, gained 7M customers, which each pay, let's say they all get the premium plan at 13.99 per month, which is 167 per year, which means net revenue from new customers is 1.1B. So, they didn't even cover their customer acquisition costs.

So that still leaves the big question about the $7B in content costs (just in this past quarter!)... how do they expect to make money if your business model requires you to spend more money than you bring in?

Yet, the markets rewarded them with an increase in their share price. Think about this when you are trying to decide if the market makes sense.

hmm but that doesent take into account that those new customers will likely still pay the annual fee for quite a few years on average with no additional marketing cost to keep them doing so, no?

[Tony T]

Originally Posted by Big Dan

Tony, please tell us when the "trickle down" is supposed to hit.

I don't recall that being used as a 'theory' recently.
Last time I heard it being used seriously was with Reagan.

[echappist]

deleted

[Big Dan]

Originally Posted by Tony T

I don't recall that being used as a 'theory' recently.
Last time I heard it being used seriously was with Reagan.

Trickle down is a basic Republican idea.

[ColonelJLloyd]

Originally Posted by Big Dan

Trickle down is a basic Republican idea.

And was most certainly used to justify the TCJA of late 2017 whether or not the specific word "trickle" was employed.

Originally Posted by tuscanyswe

hmm but that doesent take into account that those new customers will likely still pay the annual fee for quite a few years on average with no additional marketing cost to keep them doing so, no?

Agreed. I'm on board with the general sentiment that that many/most tech stocks are overvalued, but Netflix doesn't seem like a great example with which to make that point.

[echappist]

Originally Posted by saab2000

Exactly. My savings strategy is based on dividend reinvestment over the years. I do pay attention to those quarterly reports and dividends.

which companies actually give out decent dividends these days? any that yields 2.5%?

also, if you the companies are invested via a fund, is there one that you'd recommend (preferably on Schwab, Vanguard, or Fidelity)?

Originally Posted by tuscanyswe

hmm but that doesent take into account that those new customers will likely still pay the annual fee for quite a few years on average with no additional marketing cost to keep them doing so, no?

That’s assuming their expenditures on content acquisition would decrease

What you say would apply to the viewership acquisition charges, assuming low cancellation %

Originally Posted by Big Dan

Tony, please tell us when the "trickle down" is supposed to hit.

around the same time that the Laffert Curve is proved to be correct

[oldpotatoe]

Originally Posted by Tony T

I don't recall that being used as a 'theory' recently.
Last time I heard it being used seriously was with Reagan.

Being ‘used’ today with the phony tax cuts for Main Street and YUGE benefits to corporate America.....’cept not trickling anywhere but into investor’s and owner’s pockets..plus anybody that takes this administration seriously is nutz...