Investment Myths

A blog sharing my investment articles to my daughters, to friends and whoever interested.

A Value Investor View into Current Yield Surg

March 15, 2021

Mr. Market is always very innovative to create new concepts and excuses to lure investors to buy or sell. This time is an out of control expected inflation, which symbolizes by a surge of bond yield and commodities price. The trigger was said to be a general vaccination in the US and expected re-opening of the market. Technology stocks are under huge selling pressure, while money is rotating into traditional sectors.

There are too many reasons contributed to the share market up and down. Roly is not particular interested to fit a story for every case. What I am interested is even, US Federal Reserve Chairman, Powell has been trying to calm down the market that inflation will be short-lived and it will not raise interest rate soon, the market is still very nervous and the financial market continue to be unrest.

Roly tends to agree with the Federal stand and I shall share my view. At the end of the day, it is also a form of “don’t fight the Fed”. more “A Value Investor View into Current Yield Surg”

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To Diversify or not to Diversify, plus Common Fallacies in a Bull Run

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February 11, 2021

This is an old school topic and probably no one is interesting in the current bull run. Making money is so easy right now. On the other hand, as an experienced investor, Roly has to continue to remind myself to keep my mind clear. My motto is “control your greediness in a bull run”, while, “master your fear in a bear crash”. You will last longer. Time to clear up your mind, and re-position your portfolio. more “To Diversify or not to Diversify, plus Common Fallacies in a Bull Run”

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WeChat (Weixin) Mini program – A Value Investor View

February 8, 2021

Tencent’s share price closed at hkd 564 at the last trading date on 2020. It has surged to hkd 767.5 in January and ended at hkd 733 last Friday. It registered about hkd 169 or 30% increase about a month time. Investment house immediately adjusted their 1-year forecasts; the current most bullish was hkd 876 (adjusted upward from hkd 734) by Citicorp, or a potential up-side of 19.5% from last Friday. In this article, I will share my view on this. more “WeChat (Weixin) Mini program – A Value Investor View”

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US Treasury Act-Big Implications

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February 7, 2021

Former Federal Reserve Charmain Yellen, urged to “act big” on coronavirus relief spending, saying that the economic benefits far outweigh the risks of a higher debt burden on last Tuesday during her testimony. She laid out a vision that Treasury would act aggressively to reduce economic inequality, fight climate change and counter China’s unfair trade and subsidy practices. Taxes on corporations and the wealthy will eventually need to rise to help finance Biden’s ambitious plans for investing in infrastructure, research and development, and for worker training to improve the U.S. economy’s competitiveness. more “US Treasury Act-Big Implications”

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2021 Investment Outlook and LaiSee

December 31, 2020

Finally, have settled a bit on personal matters and resume my blogging after a while. Let’s get started with a common topic on 2021 investment outlook. Human tends to have annual plan and business used to have annual accounting and performance measurement system yearly. However, there is no point to forecast beyond half a year, as things will be quite uncertain.

Let’s get started again with the Macro, the boring part but it is imperative for one to draw an inference or projection based on the upcoming Macro trends. Macro factors are relatively more stable and we need its stability before we can forecast investment medium- and long-term behavior. more “2021 Investment Outlook and LaiSee”

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Investment for Retiree – Part 2

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November 7, 2020

In last article, I shared the 4% rule, Warren Buffet’s 90-10 investment portfolio vs. traditional 60-40 balance as well as an academic paper from Estrada. The main idea is for a retiree is to balance the long-term risk of inflation against the short-term volatility. There is no right and wrong answer, it is a level of comfort for individuals.

In this article, I am sharing my view on how to construct your retirement portfolio. more “Investment for Retiree – Part 2”

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China Southern – Following up on my Trading Portfolio

October 26, 2020

Roly has separated core and trading portfolios. Core are my long term holding, which I believe will out-perform the market in the long run. Roly will try not to short-term buying and selling these performers just for a small profit, as I would likely miss the potential upside. Trading portfolio are more medium and short term. In this article, I will try to following up on some of my trading portfolio mentioned previously. more “China Southern – Following up on my Trading Portfolio”

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Investment for Retiree

October 26, 2020

Roly has been researching on investment for retiree and I am sharing my findings about what likely is your financial planner (watch out if your planner is a Sales and has a quota to meet) is telling you, against what is my findings for your considerations. I wish you might have another viewpoint after reading my article. more “Investment for Retiree”

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La Nina Effect 2020 Winter Investment

October 3, 2020

World Meteorological Organization (WMO) forecasted a La Nina effect has occurred and will last for the Winter. This week, China also issued a La Nina warning that more cold weather to China during autumn and winter. As per China’s National Climate Centre that the average winter temperature in North and Northwest China would be 1-2 degree lower than normal during the previous five La Nina events since 2000. In this article, I will give a brief description on what is La Nina effect and how is such Meteorological climate will affect the economy. more “La Nina Effect 2020 Winter Investment”

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What is Amazon Part 2

September 27, 2020

In my last article, I focus on the business disruption from Amazon AWS, its cloud business and the fastest growing. Amazon grouped all other businesses under either USA or International, but only separating AWS in its financial reporting. Thus, it is difficult for an outsider to really understand the different perspectives of this huge giant. This week I am sharing my viewpoint of other business segment of Amazon.

Amazon is a Barney and Nobles and a Walmart

Barney and Nobles, the biggest bookstore in USA was the first-target victim of Amazon in its digital disruption program. Barney and Nobles quickly responded with an internet shop against Amazon. Roly recalled the time when I was studying my MBA degree. We, classmates grouped together to order our text books from Barney and Nobles instead of Amazon online. The reason was very simple, price is transparent over internet.

If Amazon was only targeting the bookstore business, it could have already countered by Barney and Nobles, which in today terminology, had a better O2O (Online to Offline) delivery model than Amazon.

Amazon did not stop here and accordingly on Aug 1998, it announced it would move out beyond books. Before 1998, Amazon was diverting everyone focus onto Barney and Nobles, but in fact it was building its delivery logistics in preparation for the Walmart giant. Amazon targeted big from the beginning.

Amazon also revolutionized the concept of e-book with the Amazon Kindle on 2007 which was countered by Barney and Nobles, Nook (which was discontinued) and virtual Books Store from Apple on its IPAD.

Amazon is a Fedex

Amazon announced Prime membership offering free two-day shipping within the contiguous United State on all eligible purchases and a flat annual fee of USD79 on Nov 2005. Amazon was building delivery stations in the densest ZIP Codes in the USA. Nowadays it could handle about half of its last mile delivery, while offloading most of the rest last mile delivery to US Postal Service, which has a legal obligation to cover the whole USA delivery.

Amazon is its own largest delivery company and in fact the network has been offering service to non-Amazon packages and stealing revenue from UPS, FedEx and US Postal Service.  Amazon has a DNA of turning its internal self used structure into a revenue generating business.  AWS is a typical example, which started as an internal IT systems which eventually branched off as a world-class business.  I will not be surprised if Amazon started it delivery business against Fedex, DHL, UPS…etc.

To further tackle the challenging last mile delivery, Amazon is relying on technology for future development. Amazon Prime Air, the future delivery system is exploring to use Drone for the delivery.

In June 2020, Amazon announced its biggest investment into Zoox, a self-driving start-up. It was speculating that Amazon will use the acquisition to produce an autonomous fleet not only for its last-mile delivery and beyond into autonomous Uber.

Amazon is a Netflix and iTunes.

Amazon Prime is a worst nightmare marginal competitor. Via Amazon Prime, it is offering free video, music, e-book reading.

Marginal competitor is defined as a firm which would just be induced to enter an industry by a small rise in profitability, or would just be induced to have the industry by a small worsening in market conditions.

In an economic standpoint, firm has to make profit after recovering its fixed and marginal cost for its operation. However, there is firm that will enter an industry by just considering the return of its marginal cost. The firm usually has its own industry and its fixed cost has already covered.

A good example is of a marginal competitor is Super Market during promotion issues coupons for customers to accumulate. After accumulated enough coupons, customers can redeem cutlery or cookware at a very attractive price. Super Market, which its core business is not cutlery or cookware, only needs to cover its marginal cost of the promotion. However, in doing so it will dilute the affected industry players.

A short promotion may not impact the affected industry players too much, but in the case of Amazon Prime, is a long term free of charge offering. We could imagine it must be diluting Netflix and Apple iTunes business.

Amazon Alexa Smart Home Product

Amazon markets its AI based Smart home product under the name Alexa. Smart home is a new market referring to a convenient home set up and networked devices (IOT – Internet of Things) for energy management, temperature control, lighting control, entertainment, and security.

For environmental control, there is traditional system control company  such as Honeywell Control on commercial building. Amazon Alexa is penetrating this market from the domestic side.

For security, Amazon Guard can help to protect your home for intruders, fires and water damage and medical emergencies…etc. It has two options, the simple one which has no monthly fee and another one is 7/24 professional monitoring system. Both options are diluting traditional security company, such as Chubb.

Amazon is a Video Gaming eSport Player

Twitch is Amazon life streaming video platform and community for gamers and fans alike. It was bought by Amazon on 2014. Accordingly, there were an average of 15 million viewers tune into Twitch each day to watch, host and cheer on eSport live stream. Similarly Twitch resembles YouTube, it makes money via advertisements, which integrated with the stream traffic and also making money via a subscription model.

Twitch can be considered as an interactive Multi-media entertainment company.  They are diluting traditional entertainment business especially TVs.

Data Mining by Amazon

In the digital world, data is gold and data mining are the process of discovering pattern in large data sets for useful information. It can help business to better understand their customers, to develop more effective marketing strategies, to increase sales or to decrease cost. Amazon is the biggest online store. It has millions of customers throughout the world for it to perform its data mining discovery.

Amazon understands what you have bought previously, in your CART, on your wish list and what you have reviewed. It can use predictive analytics to target marketing to increase customer satisfaction and build company loyalty. For example, you have purchased a DVD, it would recommend similar customer purchased Movies for you to buy on impulse…. etc.

Wrapping Up

Amazon is also expanding into banking, financial services and fintech. Its fintech products include payments, cash and lending…etc. And I am quite sure the more you investigate Amazon, the more surprise you will find from this companies.

The Author is holding Amazon.

For further reading, you can go back to my home page for related articles.

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Roly

26 September 2020.

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