Weekly Insight

Longhorn Investment Team Weekly Insight: Roundup Edition (3/31/19)

3 minute read

Welcome back to Longhorn Investment Team’s Weekly Insight, a place for you to catch up on key market news and trends. Nursing yourself back to health after Roundup? Well when your friends start trading party stories, it’ll be the perfect time to impress everyone with your “intellectual horsepower.” Keep reading to discover some finance-related party tricks.

Lyft goes Public

Overvalued? Maybe.

“We have a history of net losses, and we may not be able to achieve or maintain profitability in the future” – Lyft investor prospectus

Despite gaining market share over the past few years (up to 39% from 22% in 2016), Lyft reported a net loss of $911 million last year because investors keep subsidizing their “grow first, profit later” strategy. High investor demand despite no current earnings may sound reminiscent of the dot com bubble. At the time of its IPO, Lyft received a $24 billion valuation (props to JPM for advising). Let us know if you think this valuation is baloney or not.

The Big Picture: Lyft marks the debut of the widely anticipated tech IPO class of 2019. While most of the hottest tech companies were content as “unicorns” (unicorn = private startup worth over a billion dollars) for years, the wait for common investors is finally over. Other IPOs on deck include Slack, Pinterest, Airbnb, Postmates, and Uber. We’ll be giving more analysis on the new wave of IPOs over the next few weeks.

An Update on Space Warfare

On Wednesday, India PM Narendra Modi announced the country’s first successful test of their anti-satellite (ASAT) missile test. In other words, they blew one of their own satellites up with a ground-based rocket. What does this mean?

  1. Space is getting hot. India is just the latest country to jump in the global space race, which is currently dominated by China, Russia, and the US. Satellites are the name of the game in space warfare, as successfully jamming or destroying another country’s key satellites can send their military back to the stone age, which can be pretty scary. Space Force jokes aside, V.S. Vereshchetin, Director of the International Institute for Space Law wrote in 2010, “[U]p to now outer space has remained free from weapons as such. The situation would radically change should the plans for space-based weapons go ahead and trigger a new spiral in the arms race both in outer space and on earth […] which is not formally and specifically prohibited by any treaty in force.”
  2. Space is getting dirty. Ignoring the warfare aspect, ASAT weapons themselves – even their tests – create massive amounts of space debris. India’s test created 250 pieces alone, and China’s notorious 2007 ASAT test single-handedly increased the likelihood of a satellite collision by 37%. The takeaway: keep space clean so our satellites don’t crash and create more space debris. Also stop shooting satellites with rockets.

Blackberry (BB) Shares Soar on Q4 Earnings Beat

Not saying we called it, but four of our members pitched a long position on Blackberry two weeks ago. Check it out below to get a glimpse of their new business model.

Other News:

The US government is trying to force the sale of gay dating app, Grindr, from a Chinese corporation, Kunlun Tech Co., based on concerns that Chinese officials can use app data to blackmail US officials or contractors. There is no public evidence of privacy abuses or extortion actually occurring.

Krispy Kreme, Keurig, Dr. Pepper, and Panera Bread used to be run by Nazi’s who used forced POW slave labor during World War Two. That’s a bad look for the Reimann family, the owners of JAB holdings who recently pledged to donate $11 million to an undisclosed charity following their exposure.

LIT Weekly Insight:Spring Break Edition

3 minute read

Welcome to Longhorn Investment Team’s Weekly Insight, a place for you to catch up key market news and trends. For this edition, we’ll dive into some of the business news that everyone missed out on during their spring break mission trips.

S&P 500: 2800.71 (-.77%)
DOW: 25502.32 (-1.34%)
NASDAQ: 7642.67 (-.60%)

market performance from 3/18 to 3/22


The market’s spring break rager came to a crash on Friday when the bond market showed some uncanny signs of recession (oh no!). That’s right, the 3month/10y year US Treasury yield curve went flat early Friday. Every time this has happened in modern history, a recession followed within the next two years.

So, what’s a yield curve?

A yield curve shows the difference in bond yields as time increases. Typically, a longer-term (10 year) bond has a higher yield than a short-term (3 month) bond. Why? Because bonds become more prone to fluctuations in interest rates the longer they are held, so higher yields compensate for that risk.

However, long term bonds yields have been pushed lower due to higher demand from investors, which pushed up the price of these long-term bonds.

Because bond yields and prices move inversely, the difference between short-term bonds and long-term bonds essentially vanished.

Why is this bad?

Well, why are more investors wanting to buy long-term bonds all of a sudden? People are losing faith in the global economy and assets tied to economic growth (ie. stocks) and shifting their money to safer investments: long-term treasury bonds.

Not all hope is lost. Some believe that the low bond yields are simply tied to the FED’s decision to keep interest rates low for the foreseeable future, which could indicate slow and steady growth over the next few years.

Our conclusion: things don’t look good.

One could argue that the FED is accounting for weaker economic growth by keeping rates low, but the federal budget certainty does not, as it assumes 3.1% GDP growth. An unproductive spending boom is typical cause of recessions in the inflationary boom-bust cycle, and we seem to have a recipe for just that.

Google’s Virtual Game Console

Meet Stadia, Google’s cloud-based gaming service that will stream games directly onto your laptop, phone, or TV. While Nvidia, Sony, Microsoft, and even Amazon are pushing similar products, Google is trying to differentiate Stadia in three key ways:

  1. Leveraging existing products and technologies: Google has both the back-end servers to facilitate cloud-based services and the user-facing platforms to deliver content. The vision is for you to be able to see a game clip on YouTube, click the “Play Now” button, and be stomping noobs in a matter of seconds.
  2. Teraflops on teraflops: AMD is providing a custom GPU (graphics processing unit) with 10.7 teraflops of power (teraflop = floating operations per second). That’s roughly twice the processing power of a PS4 or Xbox One.
  3. Catering to developers: Google is investing in features such as machine-learning tech that allows developers to apply their easily apply their own graphics styles. Google is also creating its own studio for exclusive Stadia content.

Why is Google doing this? The video game market is valued at $180 Billion.

Other News:

Netflix is rolling out a $3.25 per month, mobile-only streaming plan for customers in India. It’s no surprise that companies are targeting India’s less mature smartphone market, and it’s not uncommon for these firms to compete on price here. However, mobile Netflix plans can only grow as fast as the handset market, which faces its own challenges. A lack of affordability, education, and gender equality are all impediments to further smartphone diffusion in India.

Fun Fact:

Six Flags (SIX) charts look like the Texas Giant.