How could SpaceX be a Good Investment?

Founded in 2002 by Elon Musk, SpaceX is famous for its reusable rockets that result in the reduction of rocket launch costs. SpaceX is also building one of the biggest space vehicle, Starship, which is designed with a utilmate goal in mind, that is to colonize Mars.

If colonization of Mars isn't lucrative in the short term, there is one SpaceX project that can be, Starlink.

Starlink consists of satellites that provide high-speed, low latency broadband internet. The service is priced at $99 a month, which might not be attractive for urban residents, but may be reasonable for rural or remote ones.

Starlink

According to Ying Lin, about 35% of the population in the world have no access to internet.

With more and more satellites in the orbit, it is possible Starlink can reach more people who have currently no access to internet.

Cheaper to Build

Starlink's internet can be cheaper for remote or rural places where setting up landlines or fiber-optic cables to cover small numbers of people may cost more than just installing few satellite signal receivers.

Security

Starlink's internet can also be more secure than its cabled counterpart.

Landline or cable internet can be hacked and can be damaged by some natural disaster or by humans. Internet cables also need to go through other countries if internet is connected to or through them.

Starlink's internet infrastructure is owned and controlled by SpaceX which can be monitored and supervised by the US government.

Join Team with Big Tech

The more people are using the internet, the more lucrative every online business is. It is possible that big internet platforms such as Google, Facebook, Netflix want more users,

With more people get access to internet, they may be able to grow their revenue and may be willing to work with SpaceX to provide cheaper broadband internet. It's mutually beneficial for SpaceX and Big Tech.

Support Automated Driving Systems

Self-driving cars based on their way of being able to "self-drive" may need to connect to the internet to work. For example, cars may need to talk to traffic lights to decide when to stop or to go. By the way, this is one of many reasons why 5G is important. super-low latency. We don't want to see cars crashed at intersections because of high internet latency, right?

Self-driving cars in the city don't need satellite broadband internet because they already have 5G connectivity. But, in rural or remote places where there is no access to internet, cars may need to connect to satellite internet in order to drive by themselves.

Starlink's Advantages

One big advantage of Starlink is its relatively low cost of launching satellites into orbit thanks to SpaceX reusable rockets. According to Rich Smith, "there could be no one on Earth capable of launching payloads to orbit cheaper than SpaceX".

Space X IPO?

According to Elon Musk, people may be able to invest in Starlink in the future.

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Ying Lin. 10 INTERNET STATISTICS EVERY MARKETER SHOULD KNOW IN 2021. 2021. OBERLO. www.oberlo.com/blog/internet-statistics. Accessed July 21 2021.

Rich Smith . How Much Cheaper Are SpaceX Reusable Rockets? Now We Know. 2020. The Mottey Fool. www.fool.com/investing/2020/10/05/how-much-cheaper-are-spacex-reusable-rockets-now-w/#:~:text=But%20in%20return%20for%20being,BreakingDefense.com%20reported%20last%20week. Accessed July 21 2021.

Is the S&P 500 Index Too High?

As the S&P 500 index continues to break its record highs intermittently, I worry whether it is time to sell some of my IVVs and wait for another buying opportunity or to reduce downturn risks.

Based on its PE ratio, the S&P 500 may be too expensive. According to multpl.com's data, the current PE ratio of the S&P 500 index is 46.31, where its historical mean is just 15.95%.

But according to the S&P 500 90-year historical data, the index might still be going up for a little longer.

The S&P 500 PE Ratio Analysis with Respect to Bond Yields

As of July 19, 2021, the 30-year Treasury yield is 1.88%. The S&P 500 index closed at 4258.19 and its PE ratio for 2021 is estimated to be 46.31 the same day.

If we take the inverse of the PE ratio of 46.31, we get 2.16% which is fairly close to the 30-year Treasury yield, 1.88%. This means it is worth to buy 30-year Treasury bonds because they guarantee at least of a 1.88% return while the S&P 500 index only has an earnings per 1 index point ratio of 2.16%.

However, if the S&P 500 companies continue to grow their earnings, this high PE ratio should not be a problem.

How Much Will the S&P 500 Index Drop If its PE Ratio Returns to the Historical Mean of 15.95% ?

The S&P 500 index will drop to 1466.60 in order to reach a PE ratio of 15.95% if its earnings stay unchanged.

It's a -65.6% drop.

Formula:

1. 4258.19/46.31 = 91.94969 earnings per 1 point of index.
2. 91.94969*15.95 = 1466.60

Other Times When the S&P 500 Had Such a High PE Ratio

In 2002, the S&P 500 index PE ratio was 46.17 and in 2009, it was 70.9.

Source: multpl

In 2002 and 2009, the 30-year Treasury yields were above the inverses of the S&P 500 index PE ratios, which could mean the current S&P 500 index is not as expensive as it was in 2002 and 2009, because the higher the inverse of the PE ratio, the higher the earning is. In 2021, the estimated PE ratio's inverse is still greater than the 30-year Treasury yield.

Year	PE Ratio	PE Ratio Inverse	30-Year Treasury Yield
2021	46.31	2.16%	About 1.88%
2009	70.9	1.41%	About 4.5%
2002	46.17	2.17%	About 5.37%

Source: macrotrends

Why might the S&P 500 Index Keep Rising?

If we look at the 90-year historical data of the S&P 500 index, we can see a rising pattern, perhaps, toward 2022.

This result is based on technical analysis of the S&P 500 index recovery cycles after 1929,1968 and 2000 financial crises.

After the S&P 500 index made its previous highs after an above mentioned financial crisis. it could keep rising for some more years from a technical analysis point of view.

Source: macrotrends

Conclusion

The S&P 500 is too high, taking into account the inverse of its PE ratio being close to the 30-year Treasury yield. However, it is not as expensive as it was in 2002 and 2009.

The S&P 500 might still keep rising for a little while based on the technical analysis of the recovery cycles after previous major financial crises.

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multpl. S&P 500 PE Ratio. www.multpl.com/s-p-500-pe-ratio. Accessed July 22 2021.

macrotrends. www.macrotrends.net. Accessed July 22 2021.

3 Industries that may Keep Growing for the Next Decades

Industries can grow or shrink, and different times had different industries being the main driving force for economic growth.

Industries Driving Economic Growth Change Over Time

Before the Industrial Revolution,

the economy was food-centric. For example, whoever had more cattle or more strength to till the land could produce more food comparatively. Therefore, cattle and manpower were the economy drivers.

After the Industrial Revolution,

it had become that who had the skills to build machines or the access to energy such as fuel had economic advantages. Even farmers could produce more food with the access to machines.

In the Information Age,

televisions, cell phones, computers are not just for entertainment, but are also for productivity. For example, Google, Netflix and Amazon use data analytics for marketing. As opposed to using traditional marketing strategy of "product first, then marketing", they are able to target audience first and decide what products to make, which greatly reduce marketing and production expenses. They can even sell their data analytics results, which could not be imagined possible without the help of internet, computer programming and mathematics.

What are the Next Big Industries?

The Renewable Energy Industry

With limited amount of fossil fuel, we will have to find some other sustainable ways to produce electricity, otherwise, our lives will go back to the pre-industrialization age. Renewable energy such as wind or solar power can be the best candidates for it.

Companies that produce products that use renewable energy will just become more and more important to humanity. Car companies begin to research how to produce electric cars. Factories begin to put up solar panels to generate electricity.

The Recycling and Reuse Industry 

Just like fossil fuels, materials such as gold, copper and iron only have limited amount. It is crucial to develop and improve the recycling and reuse industry.

Companies that hold key recycling or reuse technology will play a key role in the future.

The Space Industry 

The space industry is pretty young, considering not when space shuttles were invented, but how asteroid mining or space tourism can be possible.

It is quite surprising that space industry can even be a "private" driven industry, taking into account the resources it takes to fire a rocket into space and how much to make one.

I guess there are two reasons why space industry can become reality:

1. New technology can reduce costs of rocket launches.
2. The overall economy has grown to a level where more and more people can afford more expensive things.

Signs of Growing Renewable Energy Industry

There are more and more electric cars on the roads, which could be a sign of the growing renewable energy industry.

In theory, electric cars are not as efficient as their gas counterpart with respect to using the same source of fuel, gas. Electric cars can use electricity produce by a gas power plant and during the electricity transferring process into the cars, some electricity energy was lost.

However, car makers have started putting a lot of time and money into researching and developing electric cars.

Tesla, for example, has become one of the largest electric car makers in the world and was even accepted as an S&P 500 company by the end of 2020.

Tesla Earnings Per Share History ¹

year	EPS
2020	$0.64
2019	$ -0.98
2018	$ -1.14
2017	$ -2.37
2016	$ -0.94
2015	$ -1.39
2014	$ -0.47
2013	$ -0.12
2012	$ -0.74
2011	$ -0.51
2010	$ -0.61
2009	$ -1.59
2008	$ -2.49

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1 macrotrends. www.macrotrends.net/stocks/charts/TSLA/tesla/eps-earnings-per-share-diluted. Accessed 21 July 2021.