July 15, 2021 Sign Up

by Overheard on Wall Street

"The right solution is expensive. The wrong one costs a fortune." — Shane Parrish

Good morning! A large number of tennis stars are pulling out of the Tokyo Olympics set to begin in a week. Roger Federer became the latest casualty, joining Rafael Nadal, Serena Williams and Dominic Thiem. Players are pulling out due to extreme pandemic restructions and there are also no rankings points or prize money on offer. World #1 Novak Djokovic, enroute for the Golden Slam this year, is on the fence too but has not pulled out yet.

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1. Story of the Day: Netflix Goes Gaming

Netflix is making its first move beyond TV shows and movies, and expanding into video games. It has hired Mike Verdu, ex-EA Sports and Facebook, to lead the effort. Netflix stock was up 4% in extended trading yesterday, while fan-favorite GameStop tanked as much as 13%.

The idea is to offer games on the Netflix streaming platform as a new "genre," similar to what Netflix did with documentaries and stand-up specials. It won't charge extra for the content but will lure an additional demographic of the market. None of its streaming competitors, Disney, AT&T's WarnerMedia and Amazon, provide gaming within their main video services. Eventually the move will make it easier for Netflix to justify price increases.

The California-based company has yet to settle on a game-development strategy. Netflix will be building out its gaming team in the coming few months and has already started advertising for game development related positions on its website.

Short Squeez Takeaway: As Netflix's US market saturates and competitors become stronger (Disney+ has amassed 100m+ users since launch in Nov'19), Netflix needed to find ways to keep its pole position in the streaming wars. Building out a gaming platform will give it new subscribers and growth in existing markets. For context, Netflix has 208 million subscribers, while Roblox (gaming platform that recently went public) has 42 million users.

2. Markets Rundown

• S&P 500 logged a modest gain, while Nasdaq rang up its 2nd consecutive loss, after Jerome Powell told a House Committee that inflation will taper and the Fed can combat rising prices if they run hotter

Movers & Shakers

• (+) Compass Minerals ($CMP) +13% after the mineral company said it found 2.4 million metric tons of lithium carbonate equivalent (key ingredient in EV batteries) at its Utah site.
• (+) Moderna ($MRNA) +5% after health officials warned of another wave of Covid-19 infections later this year.
• (–) Glaukos ($GKOS) -21% after William Blair downgraded the stock.

3. Top Reads

4. Book of the Day: Infinity Investing: How The Rich Get Richer And How You Can Do The Same

This book is not offering a get rich quick plan. It takes time to implement long-lasting strategies that lead to financial independence. The author (Toby Mathis) has created a road map for you to follow to create wealth over time.

Toby has spent years studying wealthy people who have built their wealth over time by creating a solid plan and sticking to it. He breaks down what these people do and don’t do, so that you can follow their path.

You will learn how to properly calculate your income spread, how to become a stock market landlord, how to increase your financial class and learn where the wealthy invest.

5. Daily Visual: Countries at the Center of the Shark Meat Trade (Shark Meat Exported '09–'19 in USD)

Source: Statista

6.  Daily Acumen: Occam's Razor

Occam’s Razor is a problem-solving principle that serves as a useful mental model and it states that the simplest explanation is preferable to one that is more complex.

The principle was developed by William of Ockham, an English philosopher and theologian, who is believed to have been born in 1285 in Ockham, a small village in the UK.

Occam’s Razor can be used in many different situations to make quick decisions without having all the evidence.

For example, scientists choose to opt for the simplest solution as the current data permits, while remaining open to the possibility of future research allowing for greater complexity. 

Albert Einstein used Occam’s principle when working on the Theory of Relativity and used to say “Everything should be made as simple as possible, but not simpler.”

Even though the simpler explanation has a higher chance of being correct, it’s not always true and it’s not intended to be a substitute for critical thinking.

7. Memes of the Day

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