Yesterday I posted about how infrastructure beats growth. Sure enough, after the post was published, Google posted another quarter of massive earnings. The stock gained 9% in afterhours trading. Or to put it another way, a $1.8 trillion dollar company instantly gained $200 billion in value, which is insane. It grew earnings 40% despite the pandemic. Also crazy, but not surprising either, as it agrees with my thesis of the accretive process of big tech on the economy.
Summary: Full year 2021 revenue $257B, 41% year on year growth. Net income $76B, up from $40B yoy.
Quarterly: Q4 of 2021 they made $75B revenue, most of it came from Google Search, $43B up from $31.9B in Q4 2020. Youtube $8.6B of ads, Google Network $9.3B from ads.
This is the closest thing to investing in Renaissance Technologies. The CAGR since its IPO in 2004 is the same as Renaissance too. Rather than executing millions of trades, the profit is from millions of clicks. Like Renaissance, massive statistical analysis is involved, such as tracking click patterns and optimizing the ads.
There is no limit to how high this will go. More and more economic activity is being funneled into these dozen or so mega-tech companies, which is how they are able to grow annual revenues at 20-40%/year despite 3% GDP growth.
What if search growth slows? Google’s busines is way bigger than search. Its AdWords program displays ads on 3rd-party publisher websites, so Google’s influence is seen and felt all over the entire internet, not just its search engine. Bloomberg.com for example has Google ads. Multiply this by thousands of large websites and millions of clicks, but also mobile devices. After factoring in mobile, people are spending more time than ever connected to the web in some way.
What if earnings growth slows? As discussed yesterday, highly profitable companies do not necessarily need growth to still generate shareholder value. Google’s earnings and profit margins are high enough that they can deliver billions of dollars of value every quarter to shareholders absent of growth. [Google generates about $70-80 billion in profit annually now, so that is money that must be delivered to shareholders even absent of growth.] It’s counterintuitive how a company that is not growing can still generate strong investor returns, but that’s what the math shows. Doesn’t even matter if GDP is flat.
What about ad blindness? Again, this is overstated. Google is developing ways to making the ads blend in better with text. Although some of their revenue probably comes from accidental clicks, nevertheless, advertisers must still be getting enough value to continue to spend money even if there are a lot of accidental clicks. Also, there are ads that cannot be easily hidden or ignored, such as video ads.
What about ad blockers? Ad blockers have been around for a long time and do not appear to be hurting Google’s business. Also, ad blockers do not work as well on mobile devices or on video ads. Also, Google is always finding ways to evade such blockers. And finally, many people still do not use ad blockers at all and probably never will.
What about antitrust? As I correctly predicted many times, being one of the greatest investors and economic forecasters ever, this went nowhere. No one has the political impetus to take on big tech, and the bar to prove antitrust impossibly high–high enough to ensure its failure.
I saw this story going viral about the national debt crossing $30 trillion for the first time. From crypto-shill Dan Held:
Posted without comment. pic.twitter.com/FGhArjsHVM
— Dan Held (@danheld) February 2, 2022
What did Bitcoin do? Crash of course, falling $1500 to $37,000. Yet again, another narrative torpedoed (about how Bitcoin is supposed to do well due to high inflation and the national debt surging, which is laughably false). Also, as I predicted, Bitcoin would lag the S&P 500 and Nasdaq, which is what is happening today. As discussed earlier, stocks are a vastly superior inflation and debt hedge compared to Bitcoin.
As discussed a few days ago, the media, Twitter, YouTube, Facebook, etc. are now hyping Bitcoin and NFTs after initially being opposed to it, so that Trump supporters (who are generally more enthusiastic about crypto compared to Biden supporters) lose money and become demoralized, which could affect the outcome 2024 election. If you observe closely, you will notice that the only conservatives who do not get de-platformed are either pro-vaccine or are shilling crypto. For example, I saw these tweets by @Cernovich yesterday:
I know a guy in his 30’s who dropped dead well before Covid shots existed. He was in great health. Heart attack. https://t.co/cKNdeYfzMD
— Cernovich (@Cernovich) February 1, 2022
Men work in logging and on oil rigs. Risking your life for your family is as old as masculinity.
You think the vaccine is more dangerous than those fields?
— Cernovich (@Cernovich) February 1, 2022
This is effective propaganda because it toes the party/state line on the most important issue (vaccines), but he defects on issues of secondary importance (such as CRT). This way his followers are misled to believe that the propogandist is on their side (regarding CRT), but are then subconsciously influenced by the other parts (such as about vaccines). It’s a sort of bait and switch. Twitter has no problem with being pro-vaccine and anti-CRT. Or pro-crypto and anti-CRT.
Would really like to know the truth about these vaccines, whatever it is.
Hopefully in twenty years rather than a hundred.