Despite being one of the most basic ideas of microeconomics, “sunk costs” are deceptively easy to understand; yet, they lead even the most rational people to make irrational decisions. The basic idea of a sunk cost is quite simple: once a cost has been incurred, it should have no bearing on future decisions (it is “sunk”). The classic example of this phenomenon is the advance purchase of a movie ticket for which one cannot receive a refund.
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Google, YouTube... & Twitch?
YouTube, a subsidiary of Google (GOOG), is completing a deal to buy popular online video streaming website Twitch. The deal, valued at more than $1 Billion, would be the most significant acquisition by YouTube in its short history. Although no official statement has been released, sources close to YouTube have reported that the deal is imminent, despite Twitch’s public relations director stating that “Twitch does not comment on rumors."
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Momentum Investing
Technology stocks, once the darlings of Wall Street, are now facing intense investor scrutiny. Over the last three months, key tech stocks, such as Twitter (TWTR), Netflix (NFLX), and Amazon (AMZN), experienced significant declines in their stock prices. Twitter is down more than 44%, Netflix is down nearly 20%, and Amazon is down about 17% (all since March).
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Beats By Apple
In case you’ve been living under a rock for the past week, or studying for finals, you should know Apple (AAPL) is currently pursuing a deal to acquire Beats Headphones. Made iconic by celebrity co-founder Dr. Dre, and countless athletes, Beats headphones have become a popular consumer device among young Americans. If the deal were to go through, Apple would spend $3 billion of its cash reserves.
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Sprint, Your New BFF
Wireless telecommunications provider Sprint (S) aims to expand its share of the cellular services market by acquiring T-Mobile (TMUS), the fourth largest cell carrier in America. This move would not only cement Sprint’s position as the third largest American carrier, but would also increase its mobile spectrum, allowing Sprint to better compete with Verizon (VZ) and AT&T (T), the top two American market leaders.
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SanDisk Poised For Growth
Last Thursday, SanDisk Corporation (NASDAQ: SNDK), a global leader in flash storage solutions, hit a historically high share price of $90.46 per share. The company’s stock is up 25.94% year-to-date and 55.23% over the last 12 months. In addition, SanDisk recently beat analyst earnings expectations for the fourth consecutive quarter, announcing an actual EPS of $1.31 compared to the consensus EPS forecast of $1.17.
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Two Tech Titans Clash
Last Friday, May 2, a California court ruled in Apple’s favor during an ongoing (and ridiculous) patent lawsuit against South Korean tech giant Samsung. The case, brought by Apple (APPL), accused Samsung of four patent infringement violations. After the courts deemed Samsung had knowingly violated U.S. Antitrust laws, Apple was awarded $119.6 million in damages - a fraction of the $2.2 billion they sought.
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