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Re: Angling into GOOG puts
Historically the stock markets lose 40% or so during recessions.
While the Fed will inflate, it is unclear to me whether it will be successful because of the dependence on the US on foreign capital and the continuing increase of the current account deficit.
By success, I mean avoid a recession.
My thinking is as follows: while allowing inflation to jump and another bubble to form is definitely within the US Gov't/Fed purview, they cannot force outside countries and individuals to lend more money.
Furthermore the normal internal manufacturing counterbalance to foreign imports is largely absent outside of defense, airplanes, telecom/consumer electronics, and agriculture.
The vast majority of US consumption is outside of these areas - and food is a very small part of American budgets.
Thus a perception of a failure in US credit from those sending us the clothes, books, cars, oil, packaging, toys, etc - as well as the other commodities the US absorbs yearly - would result in a catastrophic loss of jobs as retail/distribution companies fail due to costs escalating simultaneous with demand loss.
Loss of jobs will then slam the service sector - no job = no money = no service spending.
The Home equity scam is also over - previous $700B/year cash flows are now down to around $140B/year. This is less than the alcohol bill for the entire United States - or perhaps people are withdrawing equity to drink their sorrows away
Thus recession is something very real and very possibly worse than even we iTulip pessimists think.
In this scenario - it is not realistic to expect the stock market to behave as normal in the past 30 years. Think more the decade from 1970 to 1980, but without a Volcker at the end.
As for GOOG specifically - perhaps it is because I know too much about their actual operations; as noted previously GOOG is performing a good service, but they are much less scalable than you think and furthermore their edge is primarily marketing, not technology nor patents or some other type of moat.
However, if you are a believer in the hyperinflation thesis - then logically you should invest in the miners - gold and perhaps some other key producers of commodities. Because in hyperinflation - only those things which are vital to survival and/or are able to hold value will prosper.
GOOG is an advertising company. Since they don't produce a real product and the products which will survive in inflationary times don't need much advertising, I just do not see the company receiving positive margin impact from inflation.
If anything, I would expect in general that overall advertising will suffer mightily as has happened in every other recession in recent history. GOOG might pick up relative market share vs. TV or other media, but then again the overall revenue picture could still be very negative.
So to summarize:
GDII: Google ain't going to prosper - no stock will. Then again, nothing prospers except getting out of the country and country's currency. Good time to buy land in anticipation of being rich in 30 years though - just make sure you can afford the property taxes.
Argentina/Mexico: Google might do ok, but wouldn't do nearly as well as perhaps the gold miners or the agriculture exporters.
Next 3 months: Google could easily go over $800 - the 4 horsemen (AAPL, RIMM, GOOG, INTC) can do no wrong now even though it is clear to me that inventories are swelling and the most recent nice numbers are a complete figment of accounting sleight of hand. Combine that with the last hurrah of the hedgies, anything can happen. But then what? CSCO still is nowhere near their Y2K stock price levels - and GOOG is very much acting like CSCO circa 2000.
Your money, your call though.
Originally posted by DemonD
While the Fed will inflate, it is unclear to me whether it will be successful because of the dependence on the US on foreign capital and the continuing increase of the current account deficit.
By success, I mean avoid a recession.
My thinking is as follows: while allowing inflation to jump and another bubble to form is definitely within the US Gov't/Fed purview, they cannot force outside countries and individuals to lend more money.
Furthermore the normal internal manufacturing counterbalance to foreign imports is largely absent outside of defense, airplanes, telecom/consumer electronics, and agriculture.
The vast majority of US consumption is outside of these areas - and food is a very small part of American budgets.
Thus a perception of a failure in US credit from those sending us the clothes, books, cars, oil, packaging, toys, etc - as well as the other commodities the US absorbs yearly - would result in a catastrophic loss of jobs as retail/distribution companies fail due to costs escalating simultaneous with demand loss.
Loss of jobs will then slam the service sector - no job = no money = no service spending.
The Home equity scam is also over - previous $700B/year cash flows are now down to around $140B/year. This is less than the alcohol bill for the entire United States - or perhaps people are withdrawing equity to drink their sorrows away
Thus recession is something very real and very possibly worse than even we iTulip pessimists think.
In this scenario - it is not realistic to expect the stock market to behave as normal in the past 30 years. Think more the decade from 1970 to 1980, but without a Volcker at the end.
As for GOOG specifically - perhaps it is because I know too much about their actual operations; as noted previously GOOG is performing a good service, but they are much less scalable than you think and furthermore their edge is primarily marketing, not technology nor patents or some other type of moat.
However, if you are a believer in the hyperinflation thesis - then logically you should invest in the miners - gold and perhaps some other key producers of commodities. Because in hyperinflation - only those things which are vital to survival and/or are able to hold value will prosper.
GOOG is an advertising company. Since they don't produce a real product and the products which will survive in inflationary times don't need much advertising, I just do not see the company receiving positive margin impact from inflation.
If anything, I would expect in general that overall advertising will suffer mightily as has happened in every other recession in recent history. GOOG might pick up relative market share vs. TV or other media, but then again the overall revenue picture could still be very negative.
So to summarize:
GDII: Google ain't going to prosper - no stock will. Then again, nothing prospers except getting out of the country and country's currency. Good time to buy land in anticipation of being rich in 30 years though - just make sure you can afford the property taxes.
Argentina/Mexico: Google might do ok, but wouldn't do nearly as well as perhaps the gold miners or the agriculture exporters.
Next 3 months: Google could easily go over $800 - the 4 horsemen (AAPL, RIMM, GOOG, INTC) can do no wrong now even though it is clear to me that inventories are swelling and the most recent nice numbers are a complete figment of accounting sleight of hand. Combine that with the last hurrah of the hedgies, anything can happen. But then what? CSCO still is nowhere near their Y2K stock price levels - and GOOG is very much acting like CSCO circa 2000.
Your money, your call though.
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