The Signs Are Clear
“God gives every bird its food, but He does not throw it into its nest”, - Josiah Gilbert Holland
During my morning research and study, I am constantly looking for knowledge which may help in the process of dealing with the fast changing world in which we live.
In the third phase of the market cycle, sellers begin to dominate. This part of the cycle is identified by a period in which the bullish sentiment of the previous phase turns into a mixed sentiment. Prices can often stay locked in a trading range that can last a few weeks or even months.
When this phase is over, the market reverses direction. Classic patterns like double and triple tops, as well as head and shoulders patterns, are examples of movements that occur during the distribution phase.
The distribution phase is a very emotional time for the markets, as investors are gripped by periods of complete fear interspersed with hope and even greed as the market may at times appear to be taking off again. Valuations are extreme in many issues and value investors have long been sitting on the sidelines. Usually, sentiment slowly but surely begins to change, but this transition can happen quickly if accelerated by a strongly negative geopolitical event or extremely bad economic news. - Everything You Need To Know About Market Cycles
The Investment Markets Are Not Healthy
I could provide so many reasons why that you would not take the time to read it all. The following is just one example, but read until the end and you will be surprised where this story goes.
Compass, which calls itself the “#1 Brokerage in the US” and has for years hyped its technology, and has billed itself more as a tech company than a real estate broker, whacked folks over the head multiple times a few days ago:
With another huge loss, $101 million this time, bringing the total losses since 2017 to $1.73 billion – a real estate brokerage, for crying out loud!
With Q2 revenues that barely grew and missed guidance.
With shocking cuts in its Q3 revenue guidance, forecasting a 25% plunge in revenues, when analysts had expected revenue growth!
With a morsel from CEO Robert Reffkin during the earnings call: “The Fed took repeated actions, which have had the direct effect of driving down our revenue.”
With another morsel from Reffkin: “We’re preparing for the real estate market this year to be nearly 25% below where industry experts believe it would be just six months ago.”
And with a plan to cut costs, and by a lot – a company whose business model had been “growth at all costs.”
The cost-cutting thing is funny because Compass was never designed to make a profit in the first place. It was designed to rake in cash from investors by promising them forever-growth and then blowing this cash to achieve this growth.
In its startup phase, it raised $1.5 billion, including from the geniuses over at SoftBank, and then it raised $450 million during its IPO in April 2021. Compass spent the past years going around the US blowing this money by overpaying for real estate brokerages and poaching brokers from other brokerages, promising them oodles of money and stock-based compensation to the moon, and by plowing large amounts of cash into developing its much hyped software platform, all based on the promise of forever growth – and forget profits. - Wolf Street
What Does This Have To Do With You?
A good question would be, why would anyone decide to invest in Compass? Further, if some entity did invest in such a company, it would be reasonable to question how that entity did their due diligence, and how their investment policy was designed.
A little research from YahooFinance provides the following:
So, BlackRock and Vanguard own the second most and third most outstanding shares of Compass. This is just one of countless reasons why these two behemoth companies should not be trusted with your hard-earned money.
