Are equities disconnected from the real economy?
In this continually-evolving crisis, we update our investors again with a brief summary of how we are assessing the risks for our global equity portfolios.
The Frankenstein Fed Is Not Saving Everyone
Despite unprecedented actions by the Fed in the wake of COVID-19, high yield borrowers do not have a Fed liquidity back stop. Fundamental price discovery should continue for these businesses with respect to their balance sheet solvency (i.e. capital structure) and cash flow solvency (operating structure / business model). Over the long term, no amount of liquidity will save a broken business model, while a broken balance sheet will destroy a lot of capital and replace existing shareholders.
Ad Dollars Follow Eyeballs (Most of the Time)
In advertising it is often said that ad dollars follow eyeballs. Despite the fact the people are consuming more digital media due to the current COVID-19 crisis we are seeing evidence of the digital ad market taking a hit. The COVID-19 pandemic has shown a remarkable ability to disrupt even the most resilient of businesses.
Insights from the MS TMT Conference
In this article we cover the main themes and trends raised by a range of companies at the annual Morgan Stanley Technology, Media and Telecommunications conference in San Francisco last week. The theme which received most attention is understandably: the impact of the coronavirus on firms.
Blackstone: a valuable platform of satellites
Blackstone (NYSE: BX) has grown to become one of the world’s largest and highest-quality asset managers – managing a staggering US$571 billion in assets across the major asset classes. We believe Blackstone is well-positioned to capture: (i) the ongoing shift towards a core-satellite approach to portfolio construction; and (ii) the asset price appreciation that continues to flow from the ongoing structural decline in interest rates.
TAM: Linear Thinking in a Non-Linear World
Traditional measures of TAM can be directionally misleading, not only in the early years of a true disruption, but at practically any point along the path. As disruptive technologies / businesses tend to consume adjacent markets, make others obsolete and create entirely new ones along their journey, it is incredible difficult to determine what is reasonable and what is not when assessing TAM.
The importance of a Competitive Advantage Period
Competitive Advantage Period is a key investment concept that is often overlooked by investors. An understanding of this concept can help investors better determine what they’re paying for when they buy a stock.
Searching for Alphabet’s Growth Engines
Last week Alphabet, the parent company of Google, released its financial results for the final quarter and full year of 2019. For the first time management disclosed the revenue contribution of two key growth engines of the company: YouTube and Google Cloud.
The inequality of low interest rates
As global interest rates continue their march towards the floor, we continue to see asset prices inflate. But interest rates do not treat all humans equally. The benefits of compounding asset values accrue largely to the few who are already wealthy. In a lower-for-longer interest rate environment, this dynamic will only accelerate.
What might be the economic impact of the coronavirus?
The coronavirus that originated in China recently has had a devastating human impact. From an economic perspective, this article explores some high-level numbers that might assist investors in grappling with the economic impact of the coronavirus.