3 November 2016: Facebook turns red

facebook-redTo people outside of investing, it is sometimes hard to understand how the stock market works. Yesterday, after the close of markets, Facebook reported better than expected results: revenue for the quarter rose from 4 to 7 billion dollars and profits grew with no less than 166%. Yet, the price of the Facebook stock plunged and it lost almost 10% in after hours trading. How is that possible? Key to a growth stock such as Facebook is not revenue or profits, but… growth (you did not see that one coming!). Since its initial public offering (IPO), its introduction on the stock exchange, four years ago, the price of the stock has almost quadrupled. That amounts to an average yearly increase in value of 50%. Such increases can only be justified if the company not only grows strongly in the present, but also in the future. And that is where a spanner in the works was thrown in: investors expect Facebook’s growth to falter in the years to come.

white-chapel-logo-smallVolatility did not ease yesterday, so major US indices lost 0.7% on average and the VIX gained for the seventh day in a row. Our switch from UVXY to XIV started on a positive note, but in the course of the day our XIV ETNs lost more than 2%. Return for the year is now just below 300% and return for the quarter is just below 30%.
White Chapel did not give a signal at the end of the session. So, we hold on to our XIV ETNs.

Accumulated capital at close of previous trading day

Return since start

Return this year

Return this quarter

$39,597

+295.97%

+295.97%

+29.3%

Our initial capital was $10,000 at 1 January 2016. Our average Annual Return is 425%.

silhouetten tdgLast Friday, These Dutch Guys had a meeting in René’s hometown. They combined it with a visit to the Museum of the Image. In the main room of the museum, there was an interesting exhibition within the framework of the Bosch Year 2016, commemorating the fact that the great painter Hieronymus Bosch died 500 years ago. In another part of the museum, an exposition could be found on the tricks advertisers and product designers use to persuade consumers to buy a certain product. An example is the bag of chips depicted below. The bag contains ordinary chips. By using certain colours and pictures, the eater of the fried potato slices that can be found in the bag, will be given the impression that eating these chips means so much more: the sun will start to shine, the sky will turn blue, etc.
It reminded Tim of the time when he was living in the UK to carry out part of the research for his Ph.D. thesis. He did his groceries at a supermarket which carried house brand products under the moniker ‘No Frills’. The packaging of the products was very plain: black letters on a white background which stated nothing more (and nothing less) than what was inside: ‘Beer’, ‘Milk’, ‘Rice’. Below is an example of such a packaging. (However, this should be considered a very fanciful one, because it also contains a black & white image of the product.) Tim noticed that not many people appeared to be interested in these products and bought other products, in more colourful packages. But he thinks these house brand products should be rewarded a design award. There has been at least one artist who probably had the same feeling…

chips-no-frills