Shack Up, Stack Chips, Get Rich

Will Disney Buy Netflix

As of this writing Netflix (NFLX) is up over 32% from its 52-week low of $79.95. In the last two days the stock is up over 9% largely do to rumors either Disney or Apple are interested in acquiring the streaming service. In the video below, I give my take on whether I think Disney is a viable acquirer and if Netflix is fairly valued.



Politics

Stephen Colbert Mocks Trump’s Tax Spin: ‘Only a Genius Can Lose $1 Billion Running a Casino’ by The Daily Beasey


I and the clients of Brick Financial Management owned shares of Netflix at the time of this writing.

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The Stock Market Always Goes Up… Eventually

Portfolio and Market

Just a few closing thoughts for this week in a post-Brexit world.

The S&P 500 was down -3.59% for the day. Its largest one-day percentage decline since Aug 24, 2015. This leaves the S&P 500, considering the reinvestment of dividends, flat for the year. Although no one really knows exactly how the Brexit situation will play out in the markets, the near term uncertainty has investors in a tizzy.

One thing to keep in mind though is that historically, U.S. stocks have always gone up… eventually. Sure, stocks have days, months, years and sometimes decades when they do not increase. But over the long term, no matter what else is going on in the world, stocks have increased. The following is a chart of the stock market returns over the last 140+ years. Embedded in that chart are recessions, a Great Depression, assassination attempts on presidents, wars, natural disasters, and many stock market crashes. Yet, the needle keeps going up, up and up over the long run.

brex_large_large

The question to ask yourself in the short term is, is any of your money you have invested directly in stocks needed by you and your family within the next five years? If not, the turmoil in the market should offer a buying opportunity for you, not the trigger to sell or panic. Your five year money should be in other asset classes like cash (SHY), long term bonds (BLV), and maybe gold (GLD). All of those asset classes were positive today.

Readers of this blog likely know I run three portfolios for clients. A concentrated stock portfolio, a portfolio of ETF positions in the equity market, and a portfolio of ETF positions in the cash/bond/commodity markets. As of today, year-to-date they are down about -9% (versus up +39% in 2015), up about +1%, and up about +6% respectively. I have my clients’ money allocated to each portfolio based on their individual circumstances. Thus, today’s events, and any future events like them should do little to affect the long term plans of my clients.


Disclosure: I and the clients of Brick Financial Management owned shares in SHY as of this writing.

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Donnie Needs A Geography (Or Economics) Lesson

Politics

Donald Trump seems to think Scotland voted to leave the European Union.

Um, not so much.

results-by-country1
Source: The Telegraph
EU referendum results and maps: Full breakdown and find out how your area voted by The Telegraph

This dude is the Republican nominee.

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What Brexit Means To Your Portfolio

Portfolio

Here is the quick and dirty on the UK’s exit from the European Union and what it means to American investors:

The markets will be volatile.

This morning the VIX, which measures the volitility is S$P 500 futures, is at 4 month highs according to the CBOE. Generally when the VIX is above levels of 25 or more it indicates a high degree of selling in the markets. For long term contrarian investors this is generally seen as a bullish (good) sign as investments become cheaper offering better buying opportunities.

2016-06-24_VIX

The markets may go lower in the short term.

See above. Long term investors will be presented with buying opportunities.

Companies that have large operations in the UK will be affected.

Companies that do business in the UK will be affected. Starbucks (SBUX) for instance has about 840 stores in the UK. Experts agree an exit by the UK from the EU has depressed the British pound to its lowest level in 31 years. Experts also agree Britain may also suffer a recession due to the move. It will be a much tougher environment for Starbucks to sell coffee in the UK during a recession. And when it does sell, its patrons will be buying with depressed British pounds. The upshot is, those 800 stores only represent about 3% of Starbucks’ stores. Any negative impact should be negligible.

The British economy will suffer if immigration is negatively impacted.

This might be a lesson for us here in America. Immigration helps economies more so than it puts pressure on economies. Overwhelmingly immigration (over the long term) serves to both create consumers for products and services and fill jobs that need to be filled. The UK has benefited from the open movement of migrant workers throughout the EU. The chart below demonstrates the employment rate in the UK.

uk employment

If Trump’s anti-immigration America is to come to fruition, it could threaten the US economy in a similar fashion.


Markets

Brexit 101: What just happened, and why it’s important for Americans by CNBC

Brexit: what happens when Britain leaves the EU by Vox

Brexit Explained by Vox


Disclosure: I and the clients of Brick Financial Management owned shares of Starbucks (SBUX) at the time of this writing.

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