#113 - What 'Luxury Beliefs' Do You Subscribe To? Holding Facebook Accountable, Netflix as the King of Mediocre, & Big Banks as a Shrewd Source of Financing.

  
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In this week's episode of Reformed Millennials, Broc and Joel explore Rob Henderson's idea of luxury beliefs. We'll unpack three different examples of luxury beliefs from recent tech news - first on the back of the Instagram/Whatsapp outage people calling for the break-up of Facebook, second that the Netflix series Squid Game is actually a bad show, and lastly that we wouldn't be able to survive without meal prep or grocery delivery apps.

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👉 For specific investment questions or advice contact Joel @ Gold Investment Management.


📈📊Market Update💵📉

EVERYONE needs to take a look at Copper Prices. If you have any exposure whatsoever in the market, stocks, bonds or otherwise, then this is a resolution that will interest you and most certainly impact the value of your portfolio.

So is this a massive top in Dr. Copper? Or just a continuation pattern that will resolve higher, in the direction of the underlying trend?

I don't know how this will resolve, just like you don't know either. No one does.

But if we're above that neckline near 4, we want to give the benefit of the doubt to the bulls. If prices are holding below that, then there's likely a problem with this trend.

If US Interest Rates are going higher and 10s are going to 2%, then you're probably going to see Copper resolving higher.

If interest rates continue to spike, long duration tech inside of ARKK is going to struggle. If the opposite happens, you can expect those names to rip…


💸Reformed Millennials - Post of The Week

Investing for Christmas and the Next 3 months:

According to Gallup, 60% of US adults couldn’t buy something they wanted over the summer due to product shortages.

According to the BofA chart above, that summer snag may extend through the holidays.

LET’S CHECK IN ON THE STATE OF RETAIL AS IT IS RIGHT NOW:
  • Nike is running out of sneakers

  • There aren’t enough parts for gaming hardware

  • Costco is rationing toilet paper and Christmas tree prices are up 25%

  • The scarcity of Rolex watches isn’t strategic, they just don’t have the parts to make them

  • Burger King, Chick-fil-A, Starbucks, and others are having a tough time sourcing ingredients

  • Abercrombie & Fitch and Adidas might not have enough merchandise for the holidays

Possible ACTION: Own the king of eCommerce AMZN & SHOP. Logistics magicians DSG & KXS. Santa’s workshop PKT & Santa’s sleigh CJT.

CHART 2: BANK M&A ON PACE FOR 2008 LEVELS

At this point last year, bank merger deals totaled just $17B. This year, $54B in deals have been announced so far, which puts it on pace for the biggest year of M&A since 2008. Back then, a little thing called the Great Financial Crisis (perhaps you’ve heard of it) went down which forced many big banks to sell themselves to avoid collapse.

So why are banks hitting the throttle on M&A now?

It’s a continuation of a 2019 trend that was cut short by the pandemic. The difference is this time the size of the deals is much bigger.

You see, the pandemic limited banks’ extensive due diligence process, which can take weeks or months. They were also hoarding cash, fearing COVID-related defaults. Now that the fear has dissipated and the loan defaults never came, it’s full speed ahead with time to make up for and money to do it with.

Facing increased competition from the big banks and FinTech, smaller banks are realizing they need to up their digital game and expand their reach to keep up. Expect this bank merger activity to continue.

Possible ACTION: Long large Canadian & US banks and take another look at PayPal, Square and some other fintech that are eating the world.


The Facebook Files - Final Thoughts

I think that ultimately yes, we would be better off without Facebook.

But I also think that it’s a convenient boogeyman. The internet removes friction, which enables the best and worst of humanity.

People blame Facebook for inherent flaws in our nature.

We are $FB shareholders and intend to remain so despite the constant negative press coverage.

I'm not oblivious to FB's follies but disagree with the motivated inferences of the detractors. I do, however, have sympathy for some concerns.

  • I admit any social media has an incentive structure that makes it difficult for the company not to optimize for engagement.

    If everyone logs into FB for just a minute/day to get the relevant stuff they want and logs off promptly, an ad-based model cannot work in such a case.

  • A subscription-based model could work for such a "social media".

    Of course, any subscription product comes at the expense of lack of access which was a non-starter for Zuck from Day 1.

It's instructive to read the very first sentence Zuck wrote in his letter on FB's S-1:

"Facebook was not originally created to be a company. It was built to accomplish a social mission — to make the world more open and connected."

FB's role was intended to connect people with the pollyannish assumption that connecting itself is inherently good.

Attention is a coveted commodity in the digital world, and the competition for that attention is SO intense that I believe it is disingenuous to demand FB change its algorithm to make it less "addictive".

Attention and engagement are the very business Facebook is in, so is almost every digital company out there, especially the ones dependent on ad dollars.

In fact, even subscription-based businesses also seem to crave attention/engagement even though they aren't as dependent.

Reed Hastings, for example, cited "Sleep" as the real competitor of Netflix in 2017.

So this inherent incentive to keep users engaged is a feature, not a bug unless you want to pull a "CCP" and give a timer to everyone on how long you can use/access a particular app/site.

Therefore, although I admit the twisted incentives FB may have, it is very much a macro problem, not a micro problem.

The micro/FB specific problem I'm more concerned about is its role in international markets.

  1. First of all, true to its mission, FB is perhaps the only company that truly deeply cares about connecting even the "internet illiterates". For perhaps hundreds of millions of people in emerging and frontier markets, Facebook IS the internet. The access and connection did enormous good for most people in those countries. Of course, the ill-effects that we hear about every day here in North America are very much prevalent in those markets as well.

With fledgling democracy and thin-skinned ideology of freedom of expression in many of these countries, along with FB's own lack of preparedness in responding to the demands of these countries, when things go wrong, it goes really wrong.

Here to incentive comes to the equation.

FB doesn't make much money on many of these international markets and investing heavily on security and infra to make it as good as the US may not make a lot of financial sense. Plus the media attention is also very thin there.

It is perhaps fundamentally impossible to understand the urgency, nuance, and significance of how FB is being negatively utilized in some of those countries when you are sitting in Silicon Valley.

The debacle in Myanmar reflects such parochialism and I hope FB learns from it.

While it concerns and bothers me, I continue to believe FB is on the right side of history in attempting to connect the world.

I don't have the unreasonable expectation that FB will erase all social ills, but do hope it will learn more to amplify the good and suppress the bad.

Given FB eats almost everyone's lunch on the attention economy, I don't expect to see many friends come to their defense.

I don't mind the critics; they aren't inherently wrong and it's possible they are good for FB in the long term as they may keep FB focused on the overall health of the platform…

Conclusion - FB is a net positive for society and it’s doing a darn good job separating those that can handle the technology of today and those that cannot.


Luxury Beliefs - Rob Henderson

  • Facebook should be deleted tomorrow

  • ABOLISH THE POLICE!

  • Religion is BAD!

  • Monogamy is so yesterday!

A former classmate from Yale recently told me “monogamy is kind of outdated” and not good for society. So I asked her what her background is and if she planned to marry.

She said she comes from an affluent family and works at a well-known technology company. Yes, she personally intends to have a monogamous marriage — but quickly added that marriage shouldn’t have to be for everyone.

She was raised by a traditional family. She planned on having a traditional family. But she maintained that traditional families are old-fashioned and society should “evolve” beyond them.

What could explain this?

In the past, upper-class Americans used to display their social status with luxury goods. Today, they do it with luxury beliefs.

People care a lot about social status. In fact, research indicates that respect and admiration from our peers are even more important than money for our sense of well-being.

We feel pressure to display our status in new ways. This is why fashionable clothing always changes. But as trendy clothes and other products become more accessible and affordable, there is increasingly less status attached to luxury goods.

The upper classes have found a clever solution to this problem: luxury beliefs. These are ideas and opinions that confer status on the rich at very little cost, while taking a toll on the lower class.


🌊 Canadian Companies To Peruse🌊

  • Autoleap - Raised $18m Series A October 1st - AutoLeap is a powerful all-in-one auto repair shop software that helps to keep complete track of your business – from scheduling appointments to managing technicians and generating invoices.


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