Snapchat worth the investment

Snapchat a mobile app used for image messaging, short video recording and picture taking was created by Evan Spiegel and Bobby Murphy. These Stanford University graduates first had the idea and created the app while in University. An idea coined out of a college project is now worth millions of Dollars.

This 4 year old business is ready to hit the streets, with an IPO (Initial public offering) expected to lunch early 2017, investors can get ready to jump in and have a piece of the cake, or a dry bone, oops!!. Reuters.com has it that the chosen underwriters for the IPO are Morgan Stanley and Goldman Sachs. The question is …If everything turns out as speculated, do you think it’s a good investment?

The primary source of income comes from advertisements. Snapchat introduced “Discover “which allows media publishers have a daily content on the app, there are about 11 publishers including CNN, ESPN, Cosmopolitan and etc. These companies get charged a lot to feature on the app and therefore generate income for Snapchat.

The company Snap.inc definitely has the potential to be a good investment. Why? The answer – Facebook offered to buy Snapchat for $3 billion in 2014 but Spiegel and his team declined the offer. Snapchat has about 100 million active users attracting 60% aged 13 to 24. This makes it attractive to companies who want to showcase their products or services. The company is also likely to go into the camera business the “Spectacles” (a sunglass that records short videos). Furthermore, in 2015 the total revenue worldwide was $59.2m, in 2016 went up to $366.7m and its expected to go up to $935.5m in 2017.

This is all great news for small investors, but until the IPO is out you just have to sit and wait but don’t sleep off when the cake arrives.

Please read my disclaimer page.

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EU Referendum

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eureferendum.blogspot.com

The UK won’t leave the European Union

The benefits outweigh the disadvantages. There are also good reasons to leave the EU and I can honestly say it’s a double edged sword and this is why it’s very unpredictable what the outcome would be. The EU has always pursued economic integration as a means to prosper and create a great strong force for its members. The economic benefits of remaining in the EU are great and it will be detrimental to the UK economy if they leave the EU. Whether in the long term or in the short term.

The effect of leaving the EU

Turbulence in the financial market: as soon as the EU decides to leave, the turbulence would kick in straight away. We can expect big financial companies to move their headquarters to other favourable regions. At the moment there is a halt in investments and job recruitment because of the referendum. It is difficult to operate in an unstable economy and so if Brexit happens, there would be a prolonged period of uncertainty, of course the situation would stabilize but a lot of damage would have been done. A typical example stems from the 2008 financial crisis; it was evident that a sharp downturn took the UK a long time to recover. The question is this: is it wise to put a strain in the UK economy just to have control over the borders and make laws that are suitable?

Trade with EU: a change in the terms of trade with the EU will be renegotiated, The UK is unsure on what will change. The question is could Britain win a better deal by leaving the EU? It is nearly impossible to imagine a deal that would match the status quo.

Increase in prices: several economic factors will cause prices to increase. If the UK vote to leave we can expect the pound to plummet which means that we would need more pounds to import goods into the country thereby increasing the prices of goods. Also, once the UK leaves, all goods coming into the UK from Europe will be subject to custom fees which will increase the prices of goods. Inflation is likely to kick-in in small doses as it will be noticeable first with food and clothes but it usually spreads out to other commodities.

Change in Immigration status: if the UK votes to leave, there will be no immediate change in the number of immigrants from other EU countries because the EU nationals already in the UK will be allowed to stay. Also, for the 2 years of Brexit negotiations, there will be free movement of EU workers. However, it is unknown whether or not that will change after the 2 years.

My Opinion: it’s simple, Let’s just stay in the EU.

Oil Prices

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financialtribune.com

The downturn in the oil industry has been in the top list of the most discussed topics. The downturn in oil price is not just bad news, but its good news too. Consumers are able to save a few bucks in their pocket because of the low prices. However, the story is different for the oil producers. Whether its the companies or countries that depend on exporting crude oil. The cost of a barrel of oil has fallen about 70 percent since 2014.2016 has seen the lowest price drop since 2003. Oil prices have been in the range of $70 – $100 a barrel but in 2016 the price went as low as $27 a barrel. The low prices have caused loss of jobs, a halt in exploration and production, bankruptcy etc. A few factors have contributed to the drop in prices.

Why the drop in oil Prices?

Increase in oil production

Overtime the US has almost doubled their production which has kicked out countries that were once exporting oil to the US. This means countries like Saudi, Algeria and Nigeria are forced to sell to other countries. Canada, Iraq, and Russia have also increased production.

Iran sanction Lift

Mid January 2016, the Iran sanction was lifted after the United Nations nuclear agency declared Tehran fulfilled the commitment to scale back its nuclear program.

Technology advanced cars

The demand for fuel is lagging behind because vehicles are becoming more energy efficient. This doesn’t have as much effect as the other points mentioned. However, it’s a factor to consider in the future.

Going forward

Russians and Saudis have agreed to freeze production. Major producing countries will meet on the 17th of April in Qatar, to discuss a possible price freeze to stabilize the price. Some analysts say we might see a possible increase in oil price. At the moment, global oil supply is at 95.4m Barrels per day vs. a demand of 93.9m barrels estimated. So it’s a 1.5m barrels per day over supplied. According to Mike Kelley from the seaport global securities, he sees a balanced demand and supply in 2017.

Who is affected?

Oil producers have been hit really badly during this downturn and also companies that support energy sectors have seen their share prices drop. The oil industry can be grouped into the upstream companies and downstream companies and the integrated companies. The upstream companies have been affected the most because they are involved with exploration and production of crude oil. On the flip side, downstream companies deal with refining and distribution. Since the price at which the upstream companies sell is regulated by the market they are hit the hardest, and most of their cost of production are fixed. However, most large oil companies are integrated companies meaning that they have both upstream and downstream operations. These companies have experienced a hit due to their upstream operations. Companies such as Exxon, Chevron and BP are integrated oil companies. Until an agreement is made on regulating production of crude oil, the prices are likely to remain low.