Hi Everyone, Sorry for my delay in posting. I had to deal with midterms last week. I've also been busy working on a PowerSchool app that I plan to publish next week.
On January 6th, I wrote a post analyzing Starbucks. I was correct in that Starbucks failed to beat most of Wall Street's estimates and its stock took a dive to $68, about 12.5% below the price which I sold it at and 18% lower than its all time high. It's at $70.57 today, which is more than $12 below its high. I made a good call in saying that it's time to sell SBUX.
Starbucks wasn't the only company to not beat earnings. In fact, the entire economy seemed to have sunk a bit over the past couple of weeks. The DJIA dropped 200 hundred points in a single trading session and the S&P 500 posting one of its biggest 2-day slides in the past year. Economists have blamed disappointing manufacturing data from China and US earnings.
On top of that, unusual weather patterns have been negatively effecting the globe. Extreme storms pounding America have caused entire regions of the country to shut down for days. Not only is that causing tens of millions of Americans to be unable to go to work, but also millions of businesses to shut down and billions of dollars to not be spent. Outside of America, Brazil has been hit hard with a draught estimated to cause nearly 30% of its coffee crops to die. If Brazil, the world's largest exporter of coffee beans, loses nearly a third of its export, coffee bean prices around the world will rise, negatively affecting consumer spending.
Emerging Markets: I found this interesting observation Paul Krugman published a couple of weeks ago about emerging markets. He described that most economists were debating if we faced secular stagnation. Secular stagnation is a situation in which the amount people want to save exceeds the volume of investments worth making. If we are facing secular stagnation, investors disappointed by low returns would pour money into emerging markets, which is what most investors are doing now. Krugman believes this would boost the economy for a while, but investors would eventually realize that it was an ill-conceived investment and the money would dry up. This entire process would involve bubbles followed by recessions, not an encouraging thought as it looks like the emerging market's current bubble looks like it's going to pop.
That's all I have right now. I'll try to write a bit more over the upcoming days/weeks.
