🎞Netflix is Sydney McLaughlin-Levrone - Market Update Oct. 14-18, 2024
Netflix is running away it!
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Welcome back to the Rambling Mind Newsletter. This is your Market Update.
Summary of Topics:
Economic News
❌Usubbing Just Got Easier
Company News
🤐Did Tesla Lie?
🛠More Big Tech Nuclear Deals
🎞Netflix Is Sydney McLaughlin-Levrone
Stats of the Week
❎300,000 Voted on Day 1 in GA
Looking Ahead
🚘Tesla Reports
Sports I Love
⚽Man U is Still Man U-ing
⚽Real Madrid looking Beatable
🏀NBA Season Begins
🏈Atlanta Hosts Super Bowl 62
🏀WNBA is Mad Popular
Extras
🚀Catching A Rocket
Markets
New day. New All-Time Highs.
At this point, I sound like a broken record. The stock market has been on an incredible run this year. I expect October to be a bad month cause historically, it had been that way. Yet, all we see daily is greener with arrows going up and to the right. I ain't mad but I kinda am. Because as a young early investor, I need the market not to be so good. But oh well, yay to making more money .... I guess 😑.
Tale of the Tape
Economy
After Years of being preyed on by these greedy vultures known as subscription-based companies. We will finally be able to cancel subscriptions without having to sit in purgatory.
🔎Details: The FTC just passed a new rule last week called "click to cancel". The Idea of the rule is to remove all the tricks and traps that businesses use to take advantage of some of the impulses and frailties we have as humans. Such as:
Abnormally long customer service calls when we want to cancel a subscription
With an average of 5 transfers
Not having an online option to cancel a subscription
Having to go in person to cancel a subscription even though you signed up online
Having to juggle, sing, laugh, cry, put on a drama and a comedy just to get Planet Fitness to cancel your subscription that you never used.
According to Morning Brew, the new rules will go into effect in 6 months, and they are as follows:
Online memberships should take the same number of clicks to cancel as they do to initiate.
You need to be able to cancel via the same methods used for signup (but in-person signups should also have remote cancellation options).
For free trials, companies need to be clearer about their auto-renewal policies and can’t start charging customers without “informed consent” (which might just look like another box to check at signup).
😤Takeaway: Economists believe in a perfect system a bad business will lose customers over time due to their bad practices. They also believe that since consumers can always choose, they will always make the best option for them. Therefore, they tend to hate regulations like these because they believe it inhibit progress.
I call BS on that. What they always leave out is that we do not live in a perfect system. We live in a world where there will be those who have more information, more power, and more control. They can use those things to force certain outcomes. Companies like Planet Money and HelloFresh are examples of this. Once you agree to a one-time subscription, they pull out all the tricks to ensure you never leave. Those tricks are not better service but rather loopholes to ensure that you are as frustrated as can be and wear you down enough to just accept the situation you are in.
🙃My Takeaway: This is why Regulation is important. Regulation helps to balance out the lack of information and power on certain sides. Ensuring one extreme is not taking place. However; over the last 50 years or so, Capital has been in total control. They have been able to do basically whatever they want. Now we are finally seeing pushback and I am here for it!
Companies
One of the biggest stories of the week was the "We, Robot" event held by Tesla. It was supposed to be Tesla's time to shine as they announced their brand-new autonomous fleet of vehicles aka Robotaxis. Unfortunately, that was not the big takeaway from the event.
🔎Details: Tesla has been promising that their fully autonomous vehicle was just around the corner for basically the last decade. They finally showed off their cars and it looked and felt more like a promotional vehicle and a proof of concept than an actual product ready for primetime. No real details were presented about the car's progress and possible date of availability.
Immediately following the event, investors showed their displeasure by sending the stock down more than 10%.
🤔Controversy: If that was all that happened, it would have quickly been a non-story. However, during the event, Tesla also showed off their robot, the Tesla Optimus. Tesla showed off the robots in a way that made most people believe initially that these things were fully autonomous. Then people discovered that the robots were being controlled. This led to more controversy about the robotaxis. People started asking if the cars were autonomous or were being controlled from elsewhere.
😑Takeaway: As Morgan Stanley analyst Adam Jonas said in a report, "Overall, we did not pick up on anything new/novel about Optimus that clearly showed significant progress including little incremental detail from the company that the market was not previously aware of."
Basically: This was a waste of everyone's time and showed us nothing we didn't already know.
Tesla has positioned itself as the autonomous company of the future. The entire market cap of the company is built on the idea that it is not a car company but a tech robot-AI company. Seems most of that story was just that, a story.
🥁My Takeaway: I would never bet against Tesla and Elon, but, interestingly, as much focus is on this company to bring robot taxis to the market. We already have a company that is making money doing exactly that. Google's Waymo continues to grow into new cities. It has partnered with Uber to offer rides from the app.
Tesla may be the loudest in the room because of its CEO, but it's like my dad always said, "The empty barrels make the loudest noises." Tesla is becoming vaporware of the highest form. Everything is talk with no substance.
🦺In Other News: Tesla is, ONCE AGAIN, being probed by the National Highway Traffic Safety for its "full self-driving" feature after a pedestrian was killed by one of their cars.
Another Week, Another Big Tech Company Buys a Nuclear Plant
Long Title but you get the idea. Amazon just agreed to a deal with Dominion Energy to buy power from a new nuclear reactor Dominion will build. Amazon is investing $500 million to find the project.
🔄Background: Ordinary Data Centers are very power-hungry, but AI data centers are magnitudes more power-hungry. To meet their energy needs for their AI data centers, Big Tech companies are taking matters into their own hands. Utilities are heavily regulated and can't just make massive investments without government approval because those investments will increase bills for ratepayers (aka us paying for power). Companies like Microsoft and Amazon can make these investments to speed up the process.
Also, a $500 million investment for a utility is a lot of money. But for Amazon, Microsoft, or Google that is equivalent to maybe 10% or less of their free cash flow in a quarter.
Making these kinds of investments for their business is a massive win for them because they will recoup the money back in no time and they guarantee that their energy needs will be met.
Benefit for us: The good news is Big Tech is essentially funding the move of the US from coal and gas to green energies. It keeps costs lower for ratepayers (you and I) and adds much-needed capacity to the grid.
My Takeaway: The capacity being added is great; however, that is just part of the problem. The bigger issue is transporting the energy where it needs to be. This means we go back to a key problem currently in the US, INFRASTRUCTURE. In this case, it's the power lines needed to get the power where it needs to be.
I love these announcements, but I need to see a follow-up agreement on supporting infrastructure being built by federal, state, and local governments, for me to get excited. But this is also why Amazon said its data center will be right next to the reactor. So it does not have to deal with infrastructure.
Why So Salty: I work in the utility industry and regularly deal with these issues hence why I sound so jaded.
Earnings Round-Up
Netflix Is Sydney McLaughlin-Levrone
Last Thursday, Netflix released its earnings report for Q3 and blew expectations away.
🔢By The Numbers: Revenues increased 15% from last year to almost $10 Billion
Overall subscribers increased by 5 million
The ad-supported tier which has been the focus of everyone grew by 35%
Free Cash Flow for Q3 was $2.2 Billion and $7.7 Billion for the year.
Netflix is expecting Q4 to bring in over $10 Billion which would mean a full-year revenue of $44 Billion.
They had initially forecasted $39 Billion
📈Stock Move After Earnings: Needless to say, investors loved the report. The stock rose over 10% after the report.
👀What to Watch: What kind of boost will Netflix receive from its foray into sports this winter? It will have 2 NFL games this Christmas. Then there are the annual Christmas movies that will be released plus Squid Games 2 is slated for this winter as well.
While other streaming services are fishing for ways to become profitable. Netflix has turned the corner and is looking like Sydney McLaughlin-Levrone
There is a possibility that Netflix will raise prices next year as its subscriber growth continues to slow. I do not like this. Netflix last raised prices in 2022.
Stats of the Week
The first day of early voting in the state I live in, Georgia, was October 15. Over 300,000 people voted early. It is the highest voter turnout for early voting in Georgia's history.
Looking Ahead
👀 What to Watch
Tesla reports on Wednesday. Expect lots of questions about everything discussed above.
Sports I Love
Man U is Still Man U-ing
The Scoreline would make you believe that Man U played well. The reality is Man U got away with the game. Nothing new here. This is the new normal with this team, if they do not get lucky they do not win.
Real Madrid Looking Beatable
There is no reason why this game was close. Yes, Real won but they looked in disarray. The defense of the team is nowhere as good as it was last year. Celta could have won this game with a bit more clinical finishing. With the number of injuries they have in defense, it is starting to affect the way they play. On the other end of the ball, they are still figuring out how to play their three best players (Bellingham, Vinicius, and Mbappe) together.
I am glad they won but on Saturday they have an even tougher challenge. It is El Classico, if they look this open against Barcelona they will lose.
Super Bowl 62 in 2028 will be hosted by the city of Atlanta. I include this news because I live in Atlanta. I do not share out of excitement but out of dread for that period.
Also, I wonder what and where I will be in 4 years. It feels so far away but it is not that far.
Ratings of the WNBA Playoffs have been through the roof. The rise of Caitlin Clark and Angel Reese has brought an unprecedented level of attention to the sport. It is so popular that bars are seeing a summer bump from WNBA games. Men are showing up at bars and asking for the game to be put on the big screen.
Extras
SpaceX caught a rocket as it was landing!!
