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Netflix > $75b
Netflix > $75b 150 150 JP

Netflix has a market cap now under $75 billion and still boasts more than 222 million users globally. Could they charge $20 a month for a subscription in the next 5 years? Still don’t know what the market will handle. The company’s current price hike has (along with inflation across the board) caused slow subscriber growth. At the same time, there are many more options for streaming and consumers have to choose or bundle.

If only Netflix could also have a partnership with Disney, Hulu, Amazon, and/or YouTube AND they could create a better UI (user interface). If nothing else a better UI would make for a better UX (user experience) and adding some traditional media things like live sports would be great. All that said, it’s a bargain a this price. People always pay a high price for the only game in town. That’s not the case anymore.

However, the company still generates over $5 billion in net profit on $30 billion a year in revenue. That is done with 46% gross margins, 15% net margin, a 31% return on equity, and the best content selection available. Also, I hate waiting for the next week. Binge watching is still the preferred way to consume content for me. What the market decides if Netflix changes its model at all, only time will tell.

And, at $74.4 billion, Berkshire Hathaway could buy it like it should’ve bought Disney. Long-term, people will still join and watch its streaming service and the prices will continue to rise and the content library will continue to grow and get more valuable. Buffett should bag this elephant.

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Ready to Question Your Reality?
Ready to Question Your Reality? 150 150 JP

The following videos with Donald Hoffman and Robin Hanson are possibly the most thought provoking from Lex, especially in terms of humanity, our place in the universe, even reality itself. In total it’s 8 hours of play time. Thankfully, each is broken down into different segments and timestamped on the video.

Two interesting insights…

  1. Your conscious brain is not the king of your mind. Instead your conscious mind is just a press secretary making up stories to justify actions, avoid accusations, staying within ritualistic norms, et al.
  2. The world we see with our eyes is completely detached from objective reality and is nothing more than a GUI. Fitness > Truth and close to zero probability to survive not see reality.

Okay! This gets super deep from conversations that were not influenced by drugs at all.

 

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No money manager wants this deal
No money manager wants this deal 150 150 JP

In the finance world Warren Buffett stands alone. There are plenty of others that make investors money, but very few to the same extent and none as ethically. When he started his investment partnership in the 1950’s he basically guaranteed a 4% return with the caveat his partners would split the profits above that hurdle with him. It was a good deal.

As he began to manage more money, that arrangement evolved into a 6% hurdle (no guarantees) and 25% split. He crushed it, to say the least. Then he found a way (via Berkshire) to provide zero management fees or incentive fees and still build wealth for himself and investors. This progression is not one many take in today’s business world.

I’ve always thought it would be worthwhile for investors to demand a hurdle rate closer to that of the S&P 500, even making it variable. And, then negotiate the splits above and beyond that rate. Even if the manager matched the fees of a Vanguard index fund as their management fees, it would be fair on both ends. I’m not sure what firm is doing this, but the model seems to be worth trying.

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PLTR: Dollar Cost Average
PLTR: Dollar Cost Average 150 150 JP

Palantir offers transformational software for business and government use, both large a small. It’s the leader in terms of quality, value, and impact in my opinion. To that note, as with the rest of the market, it’s taken a hit. I originally wrote about it in October 2020 when the stock was hovering around $10 a share. In that time, it’s triple in price and then come crashing back to earth. Long-term, I think it’s a $100 billion company, or more depending on how much dollars are left circulating. That would be a 7x increase from today’s closing price of $7.29 per share. So, even if you bought it at $10 or $30, if you have the money to dollar cost average, it likely makes a lot of sense to do so.

At $10, let’s say you bought 1,000 shares for a $10,000 investment, you need to buy 1370 shares at this price. That will bring your average price down to $8.44. If you put $10k up at $30, doing the same now will bring your cost average down to $11.76. In both cases, if the price just gets back to it’s high in 2021 you net over 200%. If it does reach the $50+ mark you make 4-5x. Don’t get me wrong, the stock could still go to $5 a share. I just think long-term Palantir continues to be the dominate player with the niche data software it sells.

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The largest Ponzi ever
The largest Ponzi ever 150 150 JP

I’ve written a lot about cryptocurrency (still a misnomer) and you can read from the list below. It’s still a trillion dollar business collectively. At one point, I really did like the idea of digital assets and in some cases it still makes sense, just not a the prices people are paying right now.

In 2015, I thought Bitcoin was huge buy at around $200 based on all the VC money getting into it. I still thought it was a fraud as money and even its original thesis was complete garbage.

Anonymous? Nah.
Better transaction? Not even close.
Limited Supply? So What, there are thousands of coins now.
Money? Be careful. Only a sovereign government can print money.

The reality is that it’s a huge ponzi scheme with no real value. Debate it all you want. Even if it becomes the money of the internet, it’ll still be a ponzi. The video below sums it up pretty well straight from the mouth of crypto’s largest exchange FTX. Also, check Berkshire Hathaway’s annual meeting for updates on Buffett and Munger’s thoughts.

Everyone building a crypto company is trying to make a market out of whatever niche they’re focused on. It’s all built on blockchains and its monetizing parts of life that may not need to be monetized, and unfortunately, it’s complete bullshit. Maybe I’m wrong and in the coming years or decades blockchain will revolutionize the internet bringing to fruition web3. Doing this only adds more complexity than necessary to an already complex world. The truth is that blockchain may be good for the banking industry, or to the financial sector as a whole; however, a decentralized ledger that’s public seems like a really bad idea for most businesses, especially financial ones.

Jonathan Poland © 2022

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The next chapter…

In 2018, I had ceased publication of my paid newsletter and while I was still writing articles for GuruFocus, my main work was with business leaders. By 2019, I had started a company called Key Bridge, named after a landmark here in Washington, DC; and as a foundational tenet of the new service. A pandemic and many rounds of golf later, we’re building again.

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www.thekeybridge.com