Spekulatius

Another small add to WBA.

The stock looks very pricey to me. They need a hell of an earnings recovery to justify the current valuation.

I personally can’t tell what is a symptom and what is the disease, but I tend to think of inverting interest rate as a symptom. Just my opinion, but every time, investors put their hope into Fed, they tend to get disappointed. I suspect the market will take a real dump, if indeed the Fed starts to lower rates. I think it can be be both right? At first it's a symptom - it's markets being concerned about future growth/inflation and predicting a rate cut; however, it can also become self-fulfilling and contribute to the slowdown because the inversion strangles credit supply further slowing the economy Reflexivity. In this case, there are definitely fundamental issues regardless of expectations. Rising rates would have a serious impact, no matter how they do it, the only question is how bad. The method the Fed uses makes things worse, because, well, they are clueless as the past few months have shown. The big unknown here is not the Fed, it's Trump. He called an emergency on the wall. He just nominated someone to the Fed that no doubt he believes will support his views. What else is he willing to do for us to get a happy dead cat bounce? That's my bet, it's not going straight down from here. We will have fun first. Trump regards the stock market as an important scorecard. We have heard this in the news occasionally and Kohn explicitly confirmed this in the Freakonomics podcast that I posted. While none knows the future, I think there is a high probability that the next economic crisis will be caused by a political crisis, as a fallout from the populist movements prevalent in many countries, not just the US. We might see a case of this with Brexit in the UK. As for the Fed, I think people have an exaggerated sense of its impact on the economy and it’s power to control its path. As an investor for quite some time, I can only say that when the pundits put their hope into the feds bailing out the market, we were typically in for a rough time. As for the yield curve, I think we might have imported this basically from Europe. Europe has no negative interest rates almost as far as the eye can see in some countries, so a 2.5% interest for a 10 year treasury may actually look pretty juicy as strange as that may sound. I am not sure what he Fed can do about this either.

It’s a pretty solid offer from Apple for a change. Has the WSJ subscription become so expensive? I think I paid $100 for 6 month print and digital back in the day. The middle column on her front page alone was worth it. I felt when Murdoch (?) took over, the quality went down and the price went up, so I canceled. For $10/month with many other things, it might be well worth it. I th8nk I will give it a shot.

Main retail business is under pressure. Times will be tough. Dividend will be cut to preserve cash. Restructuring story - it not a growth stock any more.

Now how did I miss the fact that this has no foreign transaction fee... I still use my Fidelity VISA. It has 2% cash back and a 1% foreign transaction fee. So basically it is 1% cash back on foreign transactions, same as the Amazon VISA. One of the few cards I have canceled. It’s administered by FIA, which I think is a BofA sub. Customers service is awful if you have a problem and their back office seemed ancient (I had a payment problem). I have credit union cards with 1% cash back and a 1% foreign transaction fee. That’s what I use when I travel. Capital One also works.

My question is does AirBus have the ability to absorb large amounts of orders and efficiently produce them? They are already backlogged with 7k+ planes. https://www.airbus.com/aircraft/market/orders-deliveries.html Boeing also has other planes. Not just the 737. Lufthansa ordered 40 787's the day after the Indonesia crash occurred. https://newsroom.lufthansagroup.com/english/newsroom/lufthansa-group-orders-40-state-of-the-art-boeing-787-9-and-airbus-a350-900-long-haul-aircraft/s/8e28b9e1-a775-4fee-8ea5-391be31d4600 Sure companies could cancel and we undoubtedly will see come choose to do so. But is it a bit premature to assume all 600bn worth of orders are at risk? I think most companies would (especially the ones at the from of the line) would be willing to work with Boeing on this issue. The R&D team is obviously going into hyper drive to correct the issue at hand. You can also assume they are going beyond what is required to root out other potential issues. These backlogs can take years to fill. I can't picture airlines jumping ship if their order is due soon. How many companies could afford to take a new number and go to the back of the line? What happens if Airbus has an issue with one of their planes in the next year or two? But a short position in the near term could be profitable, especially if a few people abandon their orders. I don’t think Airbus has any way to replace BA in the foreseeable time. Airbus would need to more than double their capacity and the airlines have a huge vested interest in BA airplanes (supporting infrastructure, training etc) , as well as an interesting in keeping at least two suppliers. BA will remain here for the foreseeable future. I could see pot. A lot of damage to BA however. The 737 max family is one of BA most important airplanes and was 256/800 planes delivered last year or about 32%. It is also a huge part of their backlog. If the reputation of this airplanes becomes tainted, then I could see airlines pulling orders, suing BA for damages etc. and BA being forced to redesign the airplane quickly, resulting in huge cost, writeoff of exist8ng inventory and probably an extra writeoff due to BA project accounting (which appears to aversg production costs over the expected life of a program). I could easily see the stock being worth less than $200/ share in a worst case scenario. Another risk I see is that BA becomes a prime target for retaliation if the trade war really escalates. It’s one of the biggest US exporters, so if you want to hit back when this spirals out of control, curtailing orders to BA would be one way to do it. On the other side, China for example could be tempted to increase order just to reduce the trade deficit or show high profile goodwill (and a huge $ amount headline order) if the trade negotiations are at least somewhat successful, which I think is the more likely scenario.

I personally can’t tell what is a symptom and what is the disease, but I tend to think of inverting interest rate as a symptom. Just my opinion, but every time, investors put their hope into Fed, they tend to get disappointed. I suspect the market will take a real dump, if indeed the Fed starts to lower rates.

Interesting website above. I bought most of mymposition in LASCZ in 2012 and same store trends were just turning positive. It seems that trends were lagging economic trends which had turned positive way before self storage demand did after the recession. Whether the millennials are really so different remains to be seen. As far as self storage is concerned, clutter is something that gets accumulated over time. Self storage demand also depends on mobility and an apartment dweller (Millenials have lower home ownerships than proof generations) have less storage available to them than homeowners. So it could work out either way. Whatever happens, trends will be very very slow to materialize and there will be time to adjust the business model. Overbuilding of self storage is a much larger and immediate concern, as this asset class has become way more popular.

Yes, most of their investments seem to have a complex thesis (Greek banks, BlackBerry), or are just based on cheapness (Stelco, RFP), while Buffet is jumping 1 foot hurdles like US banks, Apple etc. Note that even when WEB is wrong like he was with IBM, he came out with minor scratches so to speak and didn’t really lose much money. FFH has great companies in their backdoor like Enbridge (which i own) or Canadian banks, or even well managed energy companies like Suncor or CNQ. I feel somehow, they got lost in the search for complexity when it really doesn’t seem necessary.

Just gleaming over the Q4 earnings presentation, the net income available to shareholders ($30.7B) is less than the consolidated net income ($32.5B). But even they explains just a bit more than half the differential (5.6%). I agree that JPM does look cheap, assumin they can keep the numbers up. I am think they will look better in an economic downturn that some of the more profit challenged peers, because with a higher profitability , it will be easier to absorb higher credit losses etc.

At 2x Tangible book, the retail return potential of buybacks seems muted. I don’t think they will do more than 15% ROE over the cycle, if that. So following that thought, lets assume that tangible book remains constant but returns on tangible book increase and therefore net income increases to the point where today's price is a 7 multiple of earnings 3 years out. Would you still think that 2 times tangible book is at the very high end of valuation? Returns that investors receive from owning Jpm are ultimately going to depend on distributable earnings and increases in earnings generated from retained earnings. Imo, focusing on Tbv for valuation purposes only makes sense if you are going to compare their returns on tb to the risk free rate. If you had a bond that paid 15% AND you could reinvest a portion of the coupon at 15% (obviously their is a difference in risk) NOBODY would suggest that 2 times is the upper end of value. And yet that is exactly what people are claiming when they say that. Sorry for the stuttering. When I am stating that 2x tangible book isn’t cheap, I am effectively stating that I don’t think that returns on tangible equity over the cycle will be higher than 15% and probably less than that. Currently, we have JPM with a $55 tangible book and $9 in earnings , so this is roughly a 16% ROTCE. This is not expensive and maybe even cheap for a $100 stock. I think the problem comes from guessing what the earnings and ROTCE going to be the in the future of course. Banking and in particular investment banking (~30% of JPM’s earnings ) tend to be cyclical and depending on interest rate trends. If JPM can show that they become less cyclical, and keep the 15% average over the whole cycle, I think the stock can rerate over 2 x tangible book. Another way to frame this is can you synthesize the JPM banking conglomerate of 2/3 consumer/commercial and 1/3 investment banking cheaper by investing in WFC (or pick another consumer & commercial bank of your choice ) and GS (the latter trades below tangible book and a 14% ROTCE) ? I am guessing that the latter combination looks cheaper, but maybe JPM combined is better?

The fact that you view your example as "evidence" of anything is both telling and alarming. Maybe it’s just me, but I can make less and less sense of SharperDingaans posts, starting at about the same time when marijuana got legalized in Canada.

Thanks for thoughts on CMG.TO. I think the only odd thing I found is the dividend bing higher than the earnings, while at the same time, they have a lot of cash on their balance sheet and the SharePoint creeps up due to dilution from stock based compensation. It’s a pretty interesting way to play a recovery in the E&P sector wth way less risk than owning an E&P outright. Thanks for posting.

^ Good comments regarding double counting the midstream when using PV10 value and adding midstream market value to arrive at NAV. I think this is what most sum of part valuations are missing. For me, there are most likely safer plays out there with less debt. Possibly CNX ( which also has bought back stock using asset disposition proceeds. Showing undervaluation in PP presentations to investors won’t solve the issue, the undervalued companies need to take action, dispose of assets and generate FCF from operations and reward shareholders, plain and simple.

Exactly. It’s a rubber cell in the asylum that prevents the inmates from running over the rest of this place. I kind of regret my occasional visits there. ::)

Nigeria looks pretty cheap if these ETF stats can be trusted: https://finance.yahoo.com/quote/NGE/holdings?p=NGE

There is a difference between what you want and what you can get unfortunately. I don’t think that plant closures and layoffs would be seen favorably by the current government or any government for that matter and I think those would be inevitable, because where else would the savings come from? So while a GM Chrysler tuneup would just restore the GM market share from 30 years ago, I just don’t fit the current narrative of saving blue collar jobs in the Midwest. So I am guessing that a tie up with Peugeot May be perused as a second best solution to win scale and bail out the European Fiat operations. These are just guesses of course, and they would have to have benefits for both parties and palpable to politicians on both sides of the pond.

Huh? What have the Fed hikes to do with politics ? Powell was chosen by Trump, by the way. Anyways, I can’t see how a 2.5% interest rates (real interest rate is 0.5-1% after inflation) can cause a problem. It sure seems to be a preferable situation Europe, where interesting rates are virtually nil and the economic is crawling to a halt nevertheless. My guess is that the recent drop in LT interest rates in The EU is caused by Brexit uncertainty, which is an exogenous event for the US. I also note think that every value investor should love volatility.

After reading up on Peugeot more, I agree with compounding that a tie up with FCAU would make a lot of sense. It is indeed impressive how Tavares has turned around Peugeot within 3 years and in struggling car market and with international markets breaking away. This turnaround is even more impressive than FCAU’s I think. I also believe that an Italian / French ops tieup would be easier to facilitate than with any other car maker due to cultural proximity. A tieup with FCAU also solves another problem for Peugeot, as it gives them access to N.A., which is a black hole for Peugeot right now. Peugeot has announced plans to renter the N.A. car market but it would certainly be much cheaper on the back of an existing distribution network. I think we will hear more on this end. The French government, as well as the family and Chinese Dongfeng are large stakeholders and would have a say in a tieup. I feel there is quite a bit opportunity to create value for shareholders in the auto sector, way more than the market is giving the companies credit for currently.

Recession would occur with and without the Fed. It looks like the yield curve inverses due to rates in the EU being inverses, not because the economy is too weak. I don’t see credit freezing up, nor do I see a recession. The only issue I see is that the Fed is talking about what they are going to do and it seems counterproductive. I suggest they do whatever they want to do and shut up about what they are intend to do in the future. I personally like some volatility in the stock market. Another panik run this year would be great.

Interesting company and nicely profitable, but revenues went nowhere for a couple of years, due to the mamaise in the E&P sector. They are paying a dividend in excess of earnings and sort of paying with this in shares (proceeds from stock option exercises). Looks like a bet on E&P recovery or possibly a takeout.

I doubt that a takeover of Fiat in Europe by the Chinese would go through, much less atakeover of Chrysler. The US government found a security risk with Canada and Europe supplying steel to the US so one can be sure that they would find a risk with a Chinese company buying a US car company. The problem with the car industry is that the pool of buyers is quite limited. I doubt that a GM Vhrysler combination would go though - maybe Ford Chrysler, if Ford gets into trouble, but if they do, how would they pay for Chrysler and Chrysler buying Ford defies the whole agenda of getting out of the car business for the Agnelli’s.

The fact that he holds stake in many airlines means that he is unlikely to complete take over one, I think. I agree this topic should get more love.

Probably no surprise. When I started working in the US after about 2 years, I went through a merger where the company I worked for was acquired, and my first boss explained me how this works for employees: “We work for a whorehouse that just got sold to the highest bidder. The only certainty is that we get screwed.” He is a wise man.