Thoughts: Investments

I am considering making an investment, of sorts. Perhaps it is more gambling than investing. But I would like to put money on the claim that Facebook stock will be substantially lower (below $250 per share) in January 2023 (current price: $370). There are a few reasons I am bearish on Facebook, some of which should be reflected in the stock price by the beginning of 2023:

  • Facebook is no longer really a growth stock in any sense. It has reached market saturation. It has no chance of entering China, and has a majority market share in every other country of note. Zuckerberg’s talk of becoming a “metaverse” company sounds like classic late-stage corporate bullshit.

  • The current P-E ratio of 30 is fairly high, even considering the extremely good profit margins. Unless Facebook does continue to show growth, the stock price will surely fall.

  • There is substantial anti-trust risk, both in the US and Europe. I can imagine several remedies that would impact Facebook ad profitability.

  • There is substantial risk of competition. New social networks seem to spring up every two or three years. The “next TikTok” should arrive in 2022.

  • There is substantial risk of governments offering a complementary product; a National ID system that lets you identify your friends and family and communicate through some form of Digital Mail. With all the concerns and desires regarding vaccination passports, I am somewhat surprised nobody has done this already.

  • Moore’s Law is dying. The issues caused by physical limits of reality are getting more severe. Rowhammer attacks. Faulty CPUs. DNA storage is a bad joke by people who have never used tape libraries. Very soon, computers will stop getting smaller and faster and cheaper. And Facebook’s future-cost model will look more expensive.

The problem with this is structuring the investment to be profitable. If I simply buy Jan 2023 PUT 250 options (current price 13.80), I can spend $41400 on 30 contracts, equivalent to being short 3000 shares. If FB does close at $250 in January 2023, those contracts are worth … literally nothing, I have lost my whole investment. If FB closes at $350 in January 2023 and then drops to $150 by the end of the year, I have still lost my whole investment. If FB closes at $200 in January 2023, those contracts are worth $150000, a substantial profit. But I am not sure I am so confident of timing this correctly; I would want more than a 3x return of risk here.