My Debunking BitCoin Propaganda series of articles during the boom-and-bust period of cryptocurrencies was relatively well-read, mainly because it takes a step back from all the noise and carefully dissects the loud cheers and platitudes crypto pumpers were using to drown out rational thought.
Considering the accurate forecasting of those articles, which is still being realized today after a 70% drop (and counting) in cryptos, I figured it would be beneficial to bring that same series of articles to the irrational tech bubble going on in the stock markets.
With Netflix (NFLX) now surpassing the $400/share mark and approaching an absurd 300 price-to-earnings ratio, it’s time to address the propaganda the cheerleaders have been spamming recently, propaganda that has successfully drowned out any rational thought that could have brought retail investors back to reality.
The loudest cheers for Netflix, with the analysts setting the overoptimistic tone via price target increases, are “Content!” and “Subscriber Growth!”
We’ve recently seen these tricks before where buzzwords attempt to hide logical analysis from first principles. Netflix’s “Content!” is to BitCoin’s “Blockchain!” and “Subscriber Growth!” is to BitCoin’s “Network Effect!”.
Let’s address the fallacy that subscriber growth is supposedly paving the way to higher profits and valuations, in the same manner that crypto pumpers tout BitCoin’s “network effect” as the reason why BitCoin should be at $200,000/BTC.
The absurdly high valuations based on subscriber or network growth fail to address a double psychological trap. The first trap involves the consumers of the product falling out of the honeymoon phase. The second trap involves the speculators/investors falling out of their honeymoon phase as a result of not seeing the first trap.
Many NFLX cheerleaders dismiss the negative cash flow problem by saying that subscriber growth is everything, and that NFLX can simply raise prices to make up for the red balance sheet when it needs to, thanks to a wider subscriber base.
BitCoin cheerleaders fallaciously think that being first to market is everything, and as more people supposedly will adopt that particular cryptocurrency with open arms for day-to-day transactions, the stronger the network effect grows and the less likely it will go away.
That argument is fine, if it didn’t exist with the paradox of BitCoin simultaneously going to $200,000/BTC, a valuation that makes the currency completely unusable due to volatility and hyper-deflation, alongside dozens of other paradoxes that must be realized for $200,000/BTC to become reality.
If NFLX deserves to be at $400/share or higher, then it needs to gouge its current subscriber base, inflating its price in the same manner, transferring wealth to the cheerleaders and pumpers wanting their current stock holdings to become even more overvalued.
And that’s how the bubble gets pricked as the psychological switches flip with the gougees, and then the gougers. The gougees, i.e. the subscribers, increasingly growing in numbers but ultimately will start to feel gouged (in the same fashion that people feel gouged by cable companies), thereby ruining any growing “network effect” Netflix has. At the moment, as discussed in a prior article, customers are happy now until they are not:
Anyone can give away loaned money to build up a base of freeloaders, but when the debts need to be paid, don’t expect the cheapskates to suddenly fork over their cash — they will just go out and find the next indebted company to finance their passive entertainment for them.
As soon as the honeymoon phase is over and Netflix has to try to raise cash to make up for its insurmountable debts, subscriber growth will inevitably stall and will likely in fact reverse. This then leads to the disruption of the honeymoon phase with speculators and investors, who will realize, just like with BitCoin, that in order for a high valuation and rapid network growth to exist, they have to believe in a paradox that customers are perfectly fine with getting gouged in the future to bring the profits in line with where it needs to be for the current share price.
Once Netflix slowly gains a reputation of a company that takes advantage of its customers for the benefit of its greedy shareholders, the carnage will begin similar to how it has already played out in crypto markets. Right now, piling on massive debt is what’s holding back the wave of psychological traps, but the dam is about to burst due to rising interest rates, ultimately leading to one of the messiest bubble bursts in history.
BitCoin predicted to go to $200,000/BTC is to NFLX predicted to hit $1,000+/share.
BitCoin now down 70% from its highs is to NFLX … ???
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