Spekulatius

Oddlots –How financial repression in China helped cause the trade war https://podcasts.apple.com/us/podcast/odd-lots/id1056200096?i=1000451738498 It’s pretty good to at explaining the underlying reasons for the trade imbalances (saving rates!) and what may happen next.

I had some thoughts on big banks (and small local ones) after selling my WFC position. My near term concern on WFC is NIM compression due to interest rates, but another thought that occurred to me, partly due to trains of thoughts from other boards here and on Twitter is that the big banks may be the department store equivalent of the financial industry. With that, I mean a company that does a bit of everything, but nothing particularly well. This applies to many business lines like mortgages (in about 80% of the cases, one is better off with a good broker), payments (a lot tech companies here start to dis-mediate and Visa/ MC go after b2b payments), wealth management/ Broker (banks offer discounted trades as a bundle, but who cares when trades at a brokerage firm are free), Credit cards and possible other things. So it seems to me that big banks will be losing market share to innovators and smaller banks may be worse off, since they don’t have IT heft. I am no sure how long takes, but it seems like one can see that over time nimble competitors take more and more share away from what once considered core bank business. I would welcome thoughts here. I have personally decided to ditch my Wells Fargo brokerage and checking accounts (I got a package with 100 free trades annually) that I had since 2006 and use Schwab instead for cash management/checking and brokerage accounts.

The business has destroyed value, because they increased their revenues by 50% , while their operating profit went from $500M to $350M, while interest expense went from $20M to $80M. Furthermore, negative FCF is pretty much guaranteed for a couple more years per plain delivery schedule. Perhaps this will really pay off at some point in the future when this business matures into a cash gusher like the legacy airlines. I doubt that many growth investor give a hoot about any airlines, which can be an opportunity of sorts.

Dish had this stuff all the time going on when I was customer a couple of years ago. It’s a negotiating tactic and the content always came back.

Anyone thinks the chart gap to $115 might close again.“? The stock basically jumped by $20 because of a great presentation. Profits for the next few years will be compressed and if the economy slows down theme parks will be hit. My biggest worry is ESPN bleeding; it’s still a huge profit generator. I sold my DIS shares a while ago, because I felt the shares were overextended. I like the business, but paying up is not exactly in my nature ?

Just because EPD overpaid for assets years ago doesn‘t mean that overpaying now is good idea. They pay 12x EBITDA for a mixed bag of assets, while their own stock trades for 8x EBITDA. no wonder the market gave them another haircut .I owned ETP once until I realized that the game was about empire building not total return. And while I owned it at that time (and never since), the screw job that KW did to its “partners” in 2016 when credit and equity markets closed for a short time is without equal even in MLP land. Well in my opinion, this deserves to trade at a discount to peers.

I don’t own tobacco, but I feel the risk reward may be good at current prices. On a high level, I think the tobacco business will morph into a Niccotine business, where vaping becomes probably the dominant delivery method over time. Also, think about this, the youth vaping has created a new generation of Niccotine addicts that have a pot. enormous NPV for the industry. Niccotine is very addictive and very hard to quite, it is on par with Heroine in terms of addictiveness. So a lot of the teens that are hooked will probably consume Niccotine for their entire lives. Gums don’t provide the same kind of hit that smokers grave, so I don’t think it’s really competition. it’s kind of a sad picture that I write here, but could financially quite rewarding, I almost hope I am wrong. It can be very profitable to kill people very slowly.

Have been doing something similar myself, bit it's based entirely on "when markets do well, Trump has enough flexibility to hang himself with it". As long as that dynamic holds, this trade will be profitable. But hard to know when he finally decides to let things ride OR isn't going to save the market by backing down. It’s basically a bet that Trump blows some kind of gasket, or that an generally overvalued market falls or that the continued weakness in many sectors leads to some economic trouble impacting the stock market. The amazing thing to me is not that any of the above frequently occurs, but that Mr Market returns to a state of piece and quite in between where puts become cheap again (with allow VIX). That said, the 3:0 is probably just luck. There is no free lunch and sooner or later Mr Market will score against that trade.

The US is one of the few countries without law governing how data of individuals are used. We are in good company in that respect - China and Russia don’t have any laws either. This was actually a discussion as early as the 80‘s in Germany, when basic rules were developed. The EU now has laws, although the effectiveness is another matter.

If Pot is more expensive in MA than in neighboring states I would bet that there will be arbitragers taking care of this illegally and that will that. It’s really not hard moving this stuff through uncontrolled state borders.

Or buy puts when VIX is<14 and SPY >300. I am 3:0 on this trade. I think I made about 70% on average each time, just closed my last round yesterday. It’s definitely a no brainer, especially when in addition to above Trump says that trade talks are going well. I am almost serious about this.

I like ET’s assets, but hate their management. Kelcy Warren is a terrible at capital allocation (see the latest Semgroup acquisition, which makes no sense whatsoever), but moreover, the shares he issued to himself at the very bottom in 2016 (extra class with a preferred distribution priority) is one of the most egregious examples of CEO theft I have seen. Also, ET is still an MLP, while WMB is a c-Corp. I prefer the latter, it is much more advantageous for opportunistic buying and selling and there are no issues in IRA’s.

Time pressure to invest in something is also a big factor with SPACS. I never got a decent deal when I had to buy something and the seller knows it. These things attract a certain promoters who are better at storytelling than at running a business.

In addition, the base rate for Success with SPAC vehicles is terrible.

I ended up adding to FOX and GILD and bought back some RYCEY

I agree with above. Even if you aren't bullish about NYC real estate, owning something for 60c on the dollar (give or take) with a good management team should be OK. Wework and imitators hitting the skids and restructuring might become a headwind. I do think the concept is going to survive in some way, maybe with way more equity. I could also envision, startups giving away equity slices instead of cash for part of the rent, or similar things.

+1. A few weeks ago I decided to go back on a paleo type diet. Although not as restrictive. The best way to describe it is: eat amounts in this order, eating only the top 3 or 4 everyday: Food to eat daily or almost daily: 1) non-starchy vegetables 2) meat, fish, eggs 3) olive oil, grass fed butter, coconut oil, lard, tallow, heavy cream, sour cream. 4) nuts & berries Eat more rarely: 5) starchy vegetables 6) non-berry fruits 7) Beans and Legumes 8) non-gluten grains (i.e. rice, oats, corn) Avoid almost completely: 9) Dairy (other than butter, heavy cream, and sour cream). 10) gluten containing grains 11) Fruit Juices 12) Anything with added salt Avoid Completely: 13) Anything with added sugar/syrups 14) Grain oils, seed oils, and hydrogenated oils. To bring this back on topic, Beyond Meat Burgers fall into category 14. Sounds like we should do lunch again ?

Sold my SPY puts.

I would like a money back guarantee, if the trades goes wrong. FWIW, I have an account with Wells Fargo (grandfathered 100 free trades/year) and will move it to Schwab most likely at the end of the year. I also have accounts with Fidelity (great, but not OTC stock friendly and Interactive Brokers). I think Fidelity will respond with zero commissions this week.

There are not too many income stocks around right now that don’t make you cringe when looking at it, but this is one of them. Williams is a gas pipeline company and most of its assets are FERV regulated utility like assets (Transco, Northwest pipeline ). In addition to this they own some unregulated and lower quality gathering and processing assets mostly in the Marcellus shale, some of which were acquired from CHK a couple of years ago. For an utility, it looks optically cheap, the dividend yield is ~6.4x, EV/EBITDA is ~10.5 and debt/EBITDA ~4.2x. They ran into some real trouble towards the end of the energy boom in 2015, when ETP dumped them, because with falling equity prices, the acquisition become nonsensical for them. WMB had to restructure, sell assets, fold in their captive MLP (WPZ) and by means of this, and some organic growth the debt load got to a reasonable level. So now we have a stock that yields ~6.4% and can grow the dividend by about mid single digits for the next couple of years, if plans work out. The business is somewhat dependent on NG volumes (mostly the G&P assets) but there is no virtual direct energy price exposure, Yet, the stock tends to ebb and surge with the energy and E&P stock prices to some extend. In my opinion, this opens up the shares to opportunistic buys, which is what I have been doing lately. I believe the valuation is favorable - distributable cash flow (a similar measure to AFFO for Reits) is about $2.5/ share, and should go up next year due to already completed projects, so this is an ~10% “owner earnings yield”. FWIW, WMB Main asset, the Transco pipeline is by many analysts considered the best pipeline asset in NA, due to its connectivity and growth prospects. That’s were WMB expansion projects are smirky focused right now. As long as WMB’s management doesn’t do anything dump (admittedly and if, because they do tend to get the company into trouble every 10 years or so), the stock should return low double digits, with more than half of it coming from the dividend along. https://investor.williams.com/sites/williams.investorhq.businesswire.com/files/event/additional/2019_European_Investor_Meetings-_FINAL.pdf WMB my favorite pipeline co right now. I have invested in pipelines for 10 years and bought some WMB (and more WPZ shares) in early 2016 with pretty good returns. I do buy and sell these opportunistically, but right now I am buyer because I think the valuation and outlook is pretty favorable. << corrected for spelling>>

Besides just the fact that they keep investing in crap business, they don’t seem to dump the losing bets either or they can’t. The Stelco investment really got me to second guess. I think they are like 0:3 with their commodity investments. Why don’t they just put some money in Enbridge or something like this. It huge and liquid too and Canadian. They could just cash in the dividend checks yielding ~6.5% and wouldn’t really need to think. This would work even if the shares don’t go anywhere.

The thesis is broken because my valuation models gives me NPV numbers far below EV when I put in higher churn numbers. The business model may work, but I think the valuation doesn’t. One pretty much needs to assume that they generate growth besides the music vertical to justify the current valuation, or higher profitability or growth rates than the generous assumptions in Aswath spreadsheet. I like the management, the branding, but it seems that their profitability is restrained by the cut that labels allow it. the music ecosystem is interesting and attractive, so maybe I just need to find another way (buy a company owning the labels like Sony or Bollore) to make it work within my valuation framework. Or perhaps Aswath and by extension my valuation is wrong, but I haven’t seen anything they suggest otherwise.

A coworker once told me, after we had some political discussion at work, that “Opinions are like A$$holes, everyone got one, and no one cares about any except their own.” I guess it’s basically true, especially when discussion politics. I have also decided to block out the board, I have enjoyed to sometimes post (or troll there), but I think it’s just a waste of time and energy.

DAL‘s market cap is ~$37B roughly, the $47B was simply a typo. I agree with your post DAL looks like a better bet right now, risk adjusted.

DAL vs AAL. This is a fun comparison! The top half of their Income statements are very similar. Revenue's are even ($44b), AAL have slightly higher gross margins and SG&A's are even. The bottom half is different, AAL has a massive "Other Operating Expense" (not sure what's in this bucket), higher interest costs, lower taxes & net income. Cash flow statements is where the real differences are though. Over 2014 - 2018, DAL averaged FCF = $2.8b/yr, compared to AAL's negative Free Cash Flow of -$500m/yr. Both have prioritized returning capital to shareholders. AAL funded their buybacks through asset sales ($2.3b) and raising debt ($6b). DAL funded their's through FCF ($14b). Having said all this, in the 2019 Q2 conference call the AAL CEO said he expects to "generate significant free cash flow in 2020 and 2021." How much is "significant"? I don't know. Also, the AAL fleet has an average age of 10.6yrs, compared to DAL's 16 years. Average fleet ages have remained relatively constant for both DAL and AAL over the past 5 years, so I'm not sure how much this affects valuation. Yes, I am aware that AAL’s fleet is younger. This should reduce their operating expenses (fuel, maintenance) compared to DAL, because newer planes are more efficient, except I find no evidence that this is actually happening in the numbers. For example , DAL breaks out their fuel expenses for 2018 at 23%, while AAL’s are 23.6%. So there are other things going on. Overall, DAL looks much more appealing to me than AAL. That’s also what Buffet thinks apparently. How attractive is DAL. FCF per lastest investor presentation will be $3-4B, that’s an 8-11% yield on $47B market cap give or take. This is cheap, but it’s not extremely cheap. There are a lot of stocks with less volatile in their business with similar or higher FCF yields (FOX is one I own) or even BERY at ~13%. They all have some warts, but so have the airlines. Anyways, unless I’d have further insight, I would diss AAL and buy DAL and go along with Buffet who certainly has looked at these business in much more detail than I have.