My biggest complaint with modern-day consumerism is the desire to find “deals.” People purchase goods and services, not because they need them or even want them, but because they’re a bargain. A pair of jeans on sale for $50 (from $250) are far more attractive than a pair of jeans that have always been $50. Why?
Because we’re getting a deal!
What Is MSRP?
MSRP is the Manufacturer’s Suggested Retail Price.
In other words, it’s:
Retailers understand your brain better than you do. That’s why on just about every price tag there are 1 or 2 other prices that have been marked through. They want you to feel the “deal.”
Stop falling for it.
Speaking of falling, let’s talk about Facebook’s stock.
Facebook Looks Like a Deal!
Facebook initially traded around $38/share. A few weeks ago, it was trading at $21/share when I told you not to buy it. Now it’s trading at $18/share.
That’s over 50% off! What a deal!
In the same way donks look at the MSRP and think they are getting a “deal,” donks also look at discounted shares of FB and think “this shit is cheap!”
And they’re right. Relative to where it started, it’s cheap. But it needs to be cheaper.
To Put It Into Perspective
Most people see the shares of Google and Apple and think, “Wow that’s expensive!”
But Google ($685) and Apple ($665) are much better deals than Facebook ($18) because share prices ultimately follow earnings.
Google is trading around 14x forward earnings. Apple is trading around 11x forward earnings. Facebook is trading around 30x forward earnings.
Interesting, isn’t it?