#90 - What The Canadian Housing Bubble Means For Millennials, the Yolo Economy, $LUV, $ABNB, $NFLX, and Why Content is King.

  
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In this week's episode of Reformed Millennials, Broc and Joel talk at length about the Canadian Housing Bubble. Netflix earnings and the impact of content on customer acquisition.

Listen on AppleSpotify, or Google Podcasts.

If you aren’t in the Reformed Millennials Facebook Group join us for daily updates, discussions, and deep dives into the investable trends Millennials should be paying attention to.

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


📈📊Market Update💵📉

Earnings season is here. 🎉

Tesla tumbled 4.5% following last night’s “numbers”.

Crocs cruised 15% to close at an all-time high.

UPS delivered better-than-expected estimates as the stock flew 10.42%. 

After hours yesterday we got numbers from Google, Microsoft, AMD, Pinterest, and many more.

Round-up below with an earnings review example for Google. 🤠

Microsoft

Microsoft beat expectations thanks to strong growth rates across the board. Specifically, its Azure public cloud unit, Xbox content, and services unit kept the momentum.

Here are the numbers

EPS: $1.95 vs $1.78 est
Revenue: $41.71B, +19% YoY growth

$MSFT tumbled 3% after hours.

AMD

AMD met Wall Street expectations thanks to “...strong execution and robust market demand.

Here are the numbers

EPS: $0.45 vs $0.44 est
Revenue: $3.45B, +94% YoY growth

$AMD advanced 3% after hours


🔎 Google’s Impressive Q1 Update

What’s the best business capitalism has ever come up with?

Answer: Search

I’ll admit, in 2018 we were starting to think the days of 25% topline(revenue) growth were the stories from the yesteryears. Well, Q1 revenues grew by 34%!

GOOG's *annual* topline in 2013 was $55 Bn. They just did the same in a quarter. Search, YouTube, Cloud: GOOG is really firing on all cylinders here.

Operating income more than doubled and margin expanded by a whopping ~1,000 bps. This was driven by ~800 bps margin expansion in Services, and massive improvement in GCP’s operating losses.

What are the drivers for Google search?

  1. Number of queries

  2. Percentage of queries that have commercial potential

  3. Click-through rates

  4. Cost Per Click (CPC)

For us it’s difficult to see how any of these drivers will be down in 3/5/10 years from now.

77% of respondents say they used YouTube to learn a new skill during 2020. Violative view rate* is down 70% (now 16-18 views per 100k views) over the last 4 years. 

*It is the % of total views on YouTube videos that eventually get removed because of YouTube’s policy violations.

  • “With over 2 billion monthly logged-in users and over 1 billion hours of video watched every day, YouTube is offering advertisers efficient reach to large audiences”

  • “more 18- to 49-year-olds are actually watching YouTube than all linear TV combined.”

  • “DR was practically nonexistent on YouTube a few years ago. And it's now a large and fast-growing business, and we're just getting started, in my view.”

  • “And I think we're still scratching the surface on what's possible really with commercial intent on YouTube”

  • “for Google Cloud, our approach to building the business has not changed. We remain focused on revenue growth, and we will continue to invest aggressively in products and our go-to-market organization given the opportunity we see.”

Google will continue to invest in office space and will hire 10k people in 2021.

  • “We are looking at less density per employee. So even with a hybrid work environment, we will continue to need space.”


🏘Canadian Housing Bubble🎈

Canada’s increasing reliance on housing activity as an engine of economic growth could create a ripple effect throughout the economy, depressing asset values across the board.

Wolf Canadian PM:

“Housing is becoming a dominant player in GDP in a way that is dangerous,” Wolf said in an interview Thursday, noting Spain, Ireland and Greece had housing-dependent economies just before the financial crisis. “These turned out to be epic housing bubbles that led to severe recessions.”

Residential real estate now accounts for nearly nine percent of Canadian economic output, the highest share on record dating back nearly a century.

Solution: Jack up property taxes and make them deductible against other taxes to target foreign homebuyers. In this way, the government would collect much-needed revenue and support the Canadian economy in a way hiking rates would not.

“If you try to cool the housing market using interest rates, you’re going to hit a lot of other things and hurt an already heavily-indebted economy.”


🎥Netflix Disappointing Earnings📽

Huge miss from Netflix. 4m subs instead of a forecasted 6m

Why:

As seen in the weekly growth chart above, in early Q1, with the benefit of Bridgerton, Lupin, and Cobra Kai, we were following a growth trajectory similar to recent years. As we’ve noted previously, the production delays from Covid-19 in 2020 will lead to a 2021 slate that is more heavily second-half weighted with a large number of returning franchises.

This is a lie. It’s really a lack of hits on the quarter generating subs which tells a much larger overall start that matters not just in streaming but all businesses.

Content, not marketing, is the real customer acquisition cost.

the streaming world is fundamentally different than the old cable bundle: every streaming service, including Netflix, has to come up with hits on their own because customer sign-ups are a choice, not just an item on the new home checklist.


🕊Tweets From the Episode


🌊Best Links of The Week🔮

  • Apple's 'privacy' war 🍿On Monday Apple released iOS 14.5, flipping the switch on the new privacy moves we've been talking about for 9 months. IDFA becomes opt-in, meaning you can't track a user from an ad to the App Store to an app install, and ATT means any app must ask a user to opt in to any in-app tracking or analytics. Together with the Great Cookie Apocalypse, this sets off a bomb under half of the online ad industry, starts a big fight with Facebook (and to a lesser extent Google), causes real problems for any small business trying to advertise, and (like FLoC) raises all sorts of interesting competition issues - especially given Apple runs its own ad business, with user tracking that will remain opt-in (because, like FLoC, it happens on the device) and that apparently it plans to expand. Links: Apple on ATTApple ad expansion

  • The US starts looking at app stores - The US congress held a hearing into app stores, prompting the usual grandstanding and some interesting data points. Match pays Apple $500m in commission each year, yet can't get Apple to stop minors downloading its apps. Tile also testified (though, its problem isn't really about the store at all) and so did Spotify, which has an open EU case that I strongly expect to change a lot about in-app billing. Link

  • UK pauses Nvidia's ARM acquisition - The UK is pausing Nvidia's purchase of ARM from Softbank, on 'national security' grounds, pending a market study. ARM is indeed structurally important to the global tech industry, but I'm not sure why Nvidia would be a riskier owner than Softbank. Link

  • Gamework - Games & Culture - This “video essay” is a fascinating look at how and why so many modern video games simulate work instead of play. The host explores what this reveals about our “penchant for optimization, industry, and uselessness.”

  • Hemmingway - A Ken Burns Documentary - If you have not seen this documentary already, it should be next on your list of content to stream. This documentary by famed director Ken Burns takes an incredibly in-depth look at the life of Ernest Hemmingway, one of America’s greatest writers

  • https://www.usebraintrust.com/ - Braintrust’s mission is to build the world’s most compelling talent platform — one that is user-owned, aligns incentives and redistributes value to Talent and Organizations.


This blog is presented as a general educational, informational, and entertainment resource. While the author of this blog, Joel Shackleton, is registered as an Associate Advising Representative with Gold Investment Management Ltd., a firm registered as a portfolio manager and located in Edmonton, Alberta, this blog does not provide, and should not be construed as providing, individualized investment advice, nor as containing any recommendation to buy or sell any specific securities or otherwise make any other form of investment or investment decision. Joel Shackleton and Gold Investment Management Ltd. specifically disclaim any reader of this blog from relying on any of its contents as investment advice or as an investment recommendation. The views and opinions expressed herein are the personal views and opinions of the author only and do not necessarily reflect the views or opinions of Gold Investment Management Ltd. or any of its other registered individuals or employees.  For a comprehensive legal disclaimer please visit GIM’s website at https://gold-im.com/legal/