Thoughts on META

I watch a few Youtube videos on Meta:

Stratechery has an interesting post on busting 5 myths on Meta

Some points

1) Meta has been falling rapidly after its Q3 announcement. The fall seems to be due to higher expected expenses next year, weaker free cash flow and (to some extent) stagnating revenue. Other reason is Meta's insistence in high investment in Metaverse

2) Meta is un-modelable. It has declining financials and its future depends on Metaverse.

3) In short run, Meta is monetising some new products: Reels and Clicks-to-Messanger

4) Metaverse is interesting and probably have real life use case in future when the hardware and software gets better. Imagine one can meet people virtually and see their facial expression, write on virtual whiteboard and avatar showing real faces. Or one can work with laptop but a few large screens in metaverse. (This may affect monitor industry.)

5) Buying Meta is not on its financials, but rather it's on the belief that Metaverse will be a winner for Meta in long run. 

I am not vested in Meta currently. I have not decided if I should invest in Meta. 

 

On REITS and Interest Rate

This post is on Larry Swedroe's article - How do Interest Rates impact on REIT returns? , in case I need to return to it in future. 

Takeways (extracted from the article):

When the initial equity REIT valuation level was low (risk perception high), rising nominal interest rates (indicative of a stronger economy) were associated with higher equity REIT valuation (higher NAV premium, higher P/FFO and lower implied CAP). 

REITs’ future three-year returns were negatively related to the level of the nominal rate—a higher level of the nominal rate was associated with lower future returns and vice versa. 

If rising rates reflect strong economic growth, the expected returns to REIT investments might also be good. This could reflect stronger demand as well as the likelihood of a falling risk premium, which causes valuations—for example, price-to-earnings ratios—to rise. 

On the other hand, if interest rates are rising because inflation is growing faster than expected, the markets could become concerned that the Fed will begin tightening monetary policy. That would likely put a damper on economic growth and probably cause a rise in the risk premium, which causes valuations to fall. Thus, there are some periods when rising interest rates are likely good for REITs, and some periods when they are likely to have a negative impact. 

The current period is akin to what was described in last para -- rising interest rate due to high inflation. 

Likely to see lower returns for SG reits down the road.