I just spent like 15 minutes confirming what I was fairly sure about:

Nasdaq 100 has market cap of what, like 10T? According to:

https://www.betashares.com.au/insigh...times-and-bad/

Nasdaq 100 components have $800B of Cash, compared with $1.3T of debt - for net debt of ~$500B

Russell 2000 I believe is around 2T market cap?

I can't seem to find a reputable source, but it looks like net debt was around $500B in 2017:

https://www.polencapital.com/wp-cont...WhitePaper.pdf

And it's been going up substantially since:

https://seekingalpha.com/article/433...leverage-below

So in terms of the overall debt load, quite clearly, NASDAQ 100 < S&P 500 < Russell 2000

Again, I hadn't look into any of this earlier in detail, but it's fairly common knowledge that smaller publicly traded companies in lower-margin, low-value-add sectors without significant competitive advantages have disproportionately been taking advantage of the low interest rate environment to boost return on equity by adding leverage.

i would be spending alot less than 30 seconds per name.

we can't overlook the fact that alot of people won't have money to spend or will be much more careful about spending going forward.

and that will affect amazon, netflix, google, facebook etc...... all these companies seem to be doing ok so far.

if we leave small busines as its own category, i think it's probably consumer discretionary stocks (ex-amazon) that should have been killed so far.

i think the big 3 sectors in my mind are tech, hcare and financial. and all should be ok (assuming reit's as separate from financials) on direct first stage negative hit.... but i really think they'll be a knock-on effect as the economy goes weak.

And like clockwork, you make the same critical error you've been making this entire thread, which is to conveniently leave out the fact that the world has been under lockdown for 2 months.

What has historically been true means less than nothing. Just like how real and forecasted revenues pre-covid mean nothing post covid. Massive drops in revenues drop earnings which drop return on equity which increases interest expense relative. When return on equity decreases, debt burden increases resulting in the need for more debt, for which there is increased universal demand from companies regardless of the index, which reduces the likelihood of raising the necessary capital to become more liquid. Creditors sorta kinda look at earnings when deciding whether or not to buy debt securities, in case you didn't know.

Small cap debt on the Russell 2000 was already at an all time high last year, with double digit losses in profits across multiple quarters.

But let's just brush away the almost certain huge drop in small cap revenues in the last two months, and use historical trends from market highs and peak efficiency to determine the ability for small caps to raise debt compared to huge diversified companies. I really shouldn't have to post stuff like this, but some people here are still taking you seriously.

Fewer credit options for a lower valued, less diversified company (and this is before historical drops in earnings). Who'da thunk it?

You're again babbling on about irrelevant stuff that no one else was talking about. This was the conversation:

If anything, it's mostly a testament to bigger companies in this case being more essential and better managed:

chytry wasn't saying smaller companies with poor business prospects with unhealthy balance sheets understandably scare away creditors in bad times. That doesn't need to be said or contradict adios' paraphrasing of what I've been saying at all. The implication from chytry here was that the discrepancy is either a mirage or something external to how these companies operate. There was a clear undertone that bigger companies are unfairly benefiting at the expense of smaller companies, but the underlying business reality isn't that different. This isn't a unique perspective here - you see this rhetoric a lot (big vs small is about big rigging the game in their favor) - and the meaning is quite crystal clear. Or do you think chytry's point was that smaller companies were running mediocre businesses (low ROA) that were maxed out on debt to artificially prop up ROE and this being a terrible combination in a macro environment we have? Did that really need to be said in response to adios's point?

Predictions.

Writing this down to revisit it in 2021 and see where I am right or wrong.

Even with a re-open, entire sections of GDP has been structurally changed.

Entertainment. Festivals. Shows. Restaurant. Travel. Tourism. Retail. The supporting industries. Foreign direct investment cut down. Construction industry for commercial office space and retail. Manufacturing reduction for all those supporting industries.

All impacted structurally and even with a re-open will not go back to pre-corona levels for 2020. Not at all. Won't be able to to even process the same level of consumers.

So considering we are already at 20% unemployment across the board for many first world nations and will easily stay above 10% for 2021.

We lopped off a section of our gdp that won't come back. 10% yearly gdp collapse for 2020 is my minimum prediction.

Beginning of 2021 is where I predict the true bottom will be economy wise.

take netflix for example,

the CV has probably caused a surge in usage. and probably in new subscriptions.

but in time, large swaths of the population won't be able to afford and/or will be belt tightening.

i will say that cable tv had proven to be pretty high up people's spending priority list in past economic downturns.

there's no way if someone told you a year ago, that gdp was going to go down 40% and probably not reach prior levels for 3 years that the stock market would only be down moderately

Re NFLX and similar, the problem isn't that they will start losing customers overall. They are priced for significant growth so if that just slows down, look out below.

For sure. The market is high because of huge injections of stimulus. That stimulus won't be used by corps to spend, it will be used to strengthen balance sheets and prop up stock price. We are witnessing that right now. That is literally the fundamental goal of financial management: high stock price.

However, without strong underlying consumption those businesses' market valuations are bound to fall. I think things get shaky as Q2 earnings roll out and crack when businesses see Q3 isn't much better or we hit a new lockdown.

The Russell 2000 was an interesting sideline; I think mass failures will begin there with the small caps.

The reason there is such huge pressure to open the economy right now is because they know if they don't this will be a massive collapse. I dunno how you get around mass reinfection.

Which industries will continue to suffer post vaccine?

Commercial office space construction.
Shopping malls.
Residential construction industry?
What else?
Every single industry via mass unemployment?

10-15% unemployment translates directly to depressed consumer spending across the whole board. Nearly every segment of consumption suffers.

You don't get around re-infection. Its 8 weeks or more into the "lockdown" and we are re-opening everywhere. We will literally live with constant infection until vaccine comes out.

A couple of thing - 1) analysts aren't going to overreact to this unless there are good reasons to think the fundamental growth story is over:

2) The subscriber growth for Netflix is coming almost entirely from overseas. So you have to analyze this country-by-country as most of the world hasn't been hit as hard as the US.

Source? My understanding is that the massive increase in the unemployment rate is relatively specific to the US:

https://www.fitchratings.com/researc...ope-18-05-2020

As mentioned, the actual expected drop (according to some of the most pessimistic estimates) is around 12% Q/Q.

Do you think it will take 3 years before the GDP reaches pre-crisis levels? For the US or globally? I think most projections have the global GDP being back to pre-crisis levels sometime in 2021 and the US GDP being back by ~Q2 2022.

Still early and there's room to drop but consumer sentiment isn't looking that bad despite a record high unemployment rate.

https://www.marketwatch.com/story/co...aid-2020-05-15

This was while the unemployment rate is probably at or near the peak for this crisis. It's possible some of the unemployment benefits ending in July would cause the sentiment to drop significantly, but there should be some payroll gains between now and then.

The growth story is over. The stock is prized like it already captured its realistic TAM.
What's left? Pricing power?

Candybar do you honestly think they bake recessions and coronavirus pandemics into growth forecasts?

One of the major reasons for market corrections is because long bull runs have a tendency to overestimate long term growth.

Why is the growth story over?

https://www.theverge.com/2020/4/21/2...-entertainment

"Netflix added 15.8 million subscribers, more than double the 7.2 million that were expected — a growth of more than 22 percent year over year."

Are you saying it's undervalued? It's still pretty clearly growing its subscriber base.

Constantly moving goalposts after you've been trounced, repeatedly changing context, acting incredulous of obviousities, narrow focus on exceptional companies that aren't as affected by pandemics, and cherry picking facts to back up your claims.

Netflix itself doesn't even believe what you're writing:

So even despite a huge boon to their growth as a result of the pandemic, which they admit is an exception, they luckily brought in as much as they expected. And they don't expect that to continue, because

Now just ask yourself what that does to investor confidence. Is it higher, the same, or lower than before the pandemic?

When you're fighting for pies this big, the growth rate matters because if you're not growing fast enough, it lengthens the time it takes to dominate and thus increases the risk that some other player gets there first. It's a land grab. If Netflix grew much faster, Disney would be less of a threat now. If Netflix had grown much more slowly, Disney would be a much bigger threat. There's a lot of value in dominating a market and growing too slowly can permanently shrink your share of it. Nothing grows at high rates forever - high growth rates are about 1) proving the size of the market, 2) shortening the time it takes to get a huge chunk of it, and 3) demonstrating a substantially greater degree of profitability than is directly reported, whether due to operational excellence or market dominance (growing is expensive).

Recessions and pandemics don't figure heavily into the calculations unless they demonstrably reduce the size of the overall pie (in case of streaming, it's likely done the reverse), they specifically hurt your chances of getting a large share of the pie or reveal other structural or operational weaknesses. In terms of the overall valuation, they are factored into the risk premium - equity risk premium is high because businesses don't always work out.

For growth companies, the level of uncertainty even outside of business cycles is extremely high - the game is about becoming an Amazon instead of a Buy.com, a Walmart instead of a Kmart. Investors pay close attention to growth rates because they reflect fundamentals, which means exogenous shocks don't matter as much.

None of that answers my question. Do you honestly believe that growth forecasts include recessions and coronavirus pandemics?

Put another way, are growth forecasts the same now as they were before the pandemic?

Some more questions for you:

Are long term growth forecasts affected by anything? Do they ever change? How accurate would you say they are-highly accurate, somewhat accurate, or not very accurate?

Are short term forecasts more or less accurate than long term ones, and why? Do sharp changes in short term forecasts affect long term forecasts?

How much of the early 2000s recession would you say had to do with bad long tern earnings forecasts?

All possible growth is already priced in by standard valuation metrics.

Do you know what a TAM is?

What on earth are you talking about? Someone said Netflix's growth story is over so I responded with factoids that contradict this narrative.

Not that this is new but it seems like you're moving the goalpost again? I'm saying Netflix is still a growth stock. Netflix isn't saying their growth story is over, simply that recent growth that was much stronger than expected was more about bringing their future growth forward and doesn't meaningfully shift the long-term growth trajectory. Which, if you are following my explanations about how growth companies are valued, is exactly what I've been saying. If it went the other way (as it did for other companies), it would be just as inconsequential. I mean it's always positive to have the growth booked earlier than later, but the long-term trajectory is what matters most.

It doesn't change anything right? Are their competitors unaffected? Also, I think you're misunderstanding what they are saying - "temporarily reduced the number of product innovations we try." here means they are doing less of throwing stuff at the wall to see what sticks, likely due to the overall usage being both higher and more essential and their staff potentially less responsive due to remote working. The overall conditions mean it's more important than before to avoid regressing the overall user experience (most "product innovations" aren't that good, the improvement over time comes from the selective launches of those that turn out to be "good") and 2) the risk and the cost of infra outage are both higher.

If you own a farm somehow growing its land by 10% per year for the next 10 years, how much less would it be worth if there was one bad harvest next year?

Why don't you provide what you think is the TAM and also how that TAM would feed into your valuation metric of choice.

Oh I see, I misunderstood you the first time - between growth is over, they are priced as though they captured TAM, I thought you meant that they are not growing their subscriber base any further and they are priced as though their current captured market = TAM. But what you meant was that their *stock price growth* story should be over because they are already priced as though they will capture TAM for sure. That's a fair statement and sorry about misunderstanding the first time.

I would still disagree though - their market cap is 188B and I think video streaming can easily support over trillions in market cap globally. I think their problem isn't so much of their market cap being out of line with TAM but the absurd amount of competition they currently have and will face on the way.

You responded with this:

This fact says nothing about "the growth" of Netflix, which Netflix admits in your own source, candybar. Netflix admits it's a temporary boon caused by the lockdown, and that they would have made far less money than they forecasted had that growth not doubled temporarily. This fact is cherry picked.

They're so much more conservative about their own earnings now that they have slowed their innovations significantly.

I'm not claiming that Netflix will stop growing. Your 'fact' has nothing to do with their long term growth wrt comment that was posted by chytry.


Blah blah blah. Obviously no one claimed netflix will stop growing.



It means they're being less risky, because their earnings are right on projections despite a temporary doubling in their forecasted new subscriptions.