Spekulatius

Huh, I recall Redding had some very good Mexicans food joints,

I thought this way for a long time, but now I think it is not true. A shitty business attached to a treasure box is very risky, because the treasure box becomes a piggy bank and the next thing, it is gone. Betting that a compounder continues to compound it actually very safe in comparison.

Which downturn? Did I miss anything?

Is anyone aware of any case, where a regulating body was sued successfully for taking over or subsequent actions dealing with an entity, that was deemed insolvent at the time, the institution was taken over? I am not, neither in the US , nor in Europe. There are hundred of banks taken out by the FDIC and also insurance companies were dealt with in one way or another. Has the government ever been successfully sued, in any form these cases, to the point that the former owners received significant value?

Jim Rogers in Investment Biker makes the opposite argument. He says that if governments persistently devalue to keep the economy competitive, companies don't innovate. By contrast, governments that sustain a hard currency force their companies to innovate to compete, and by doing so create real wealth (as distinct from money). Europe would appear to be an excellent example: every single one of the Eurozone currencies devalued against Germany in every single one of the five decades before the unified currency. By contrast the mark was one of the hardest currencies in the world. Which Eurozone country has the strongest companies, the most innovation, and is the wealthiest? Inflation does not create wealth. Mainstream economists hate deflation for three reasons: 1. They think it delays purchases. TCC has rebutted this very well - I would just add that if the money in your pocket keeps getting more valuable, aren't you more likely to spend it because you find you can afford things you always wanted? I know I would be. 2. They blame it for the Great Depression. 3. If they accepted hard currencies and market primacy they'd all be out of jobs in which they teach how clever macroeconomic management can prevent the terrible consequences of hard currencies and market primacy ;) Concentrating on #2: First, deflation can be caused by innovation in a hard currency environment or it can be created by a deleveraging event. The first is not dangerous; the second can be. Second, deflation was a symptom of the great depression, but not the cause. Many people thought it was the cause then, and many still do, but if you understand that money is simply a way of measuring activity then you'll understand that price changes can't really be very causal in driving activity. (Relative price changes do drive activity because they signal economic need and guide the allocation of capital, but general price changes don't.) In the 1920s there was a huge credit expansion, meaning money got created through fractional reserve banking etc. This drove prices up (more money chasing roughly the same amount of assets and produce). Starting in 1929, this process went into reverse and prices started falling. This process doesn't have to be harmful to most real activity. What it does do is show who's been using debt to invest in bad projects, as so often happens in a credit boom. And to the extent that those bad projects stop, there's a temporary impact on real activity. Now, if you allow prices to fall in this situation you're ok: less money, broadly the same activity level, lower prices. But you have to allow prices to fall. If you organise labour to keep wages up, and organise pools to buy commodities to keep their prices up, you will cause chaos. As prices of goods fall companies must be able to cut labour costs or go out of business. As market prices of commodities fall, you need to get to the point where they are so cheap people want to buy them, but stockpiling prevents this by a) holding up the price and curbing demand, and b) causing a huge overhang which does cause people to delay purchases. Hoover did everything he could to stop prices falling, because he believed that falling prices was the cause of the problem. He organised labour and commodity pools. Yet in fact, deleveraging and money destruction was the cause of the problem, and falling prices was a natural consequence of that - and a very healthy one, if left to operate properly. A similarly rapid deflation fixed itself in 18 months in 1921, because nothing was done to interfere with markets clearing. It's important to understand that a deleveraging/deflation episode must come to a stop. This is because while deleveraging can destroy all credit-created money, it can't destroy base money, so the amount of money in the system will never fall to zero. If prices keep falling, they will eventually look so cheap that buyers will be motivated to buy, and prices will stop falling. Credit deflations end themselves naturally if markets are allowed to clear. The other alternative solution to excessive leverage is inflation to make the debt go away. This involves price controls (like the minimum wage and inflation targeting, which I think is a really dangerous idea) and rapid creation of new fiat money to offset money destruction via deleverage. This is politically popular - people don't like wage cuts or having to pay their debts by working hard - but as Rogers argues, it probably impairs innovation and wealth creation, and it also means ever-higher levels of debt. In the next 20 or 30 years, we will find out whether fiat money and stunning debt levels are worse than hard money and less debt. Sorry for the long and very off topic post! When prices fall a lot, a disaster is not that far of. We are not talking about consumables here, if prices of houses for example fall by 50%, a lot of people owe more than their house is worse all of a sudden. We know how this is going to end, because that is what happens in CA for example from 2005-2010. lot's of people will default, banks will have to write of loans, some will go under as well. DOesn't sound to healthy to me. Now with widespread deflation, it's not just houses, it will be commercial real estate, resources, land, etc. Lot's of loans will default, banks and is insurance companies, the bond market will crash. No problem, I get paid half and my groceries cost half, so everything is the same, except - I may not have a job any more, I am underwater a few 100k on my house, my bank defaulted, the 401k is down 75%. Well it's great for the that stored their money under a mattress everyone else is going to be screwed.

Global QE is at all time highs (Europe and Japan) and money is leaking to the US, is my guess. Plus China stimulating like crazy and I suspect money is flowing out. With QE, the money is never going, where it is supposed to go. Rather than stimulating the economy, tends to inflate assets often where it is not beneficial. My guess is that a commercial RE crash could cause trouble. Cap rates are at all time lows, but a lot of business renting (banks, shopping malls) are being disrupted. Higher interest rates together with structural problems (malls becoming obsolete etc) could cause a crash that would also affect the financial system, since so many loans from smaller and mid sized banks are secured by commercial RE.

+1 +2 It's funny; I Thought the same thing, but could not express it as poignantly.

DNKN I didn't know it was public again either. I remember it being public and being taken private. The quality stocks like V, MC or even Apple may not go down that much. I think there will be quality stocks that not that many investors now about (in more cyclical industries) that will sell of way more than warranted and those may be the best buys. Think Chemicals, machinery, semiconductors, car suppliers, electrical equipment, distributors and similar business. The highest returns will be from sub $1stocks that make it through the downturn.

it depends on he sure you are about the business and the fact that they won't go bankrupt. For me, both are more or less identical, the first is safe, but has lower owner earnings, the second one is more risky (due to leverage). If Think the business is very safe (think utility), then the second company with a reasonable amount of debt is better.

You are right. Timing is everything. I will say that I have never, ever been able to nail a full sized position all at once at the bottom. It just doesn't happen. I have however, built giant positions during extreme periods of negativity and done extremely well years later when I looked back. Almost every time however, the stock moved against me for some period of time before rebounding. Often times it was a 33% move or more. I expect this. It's just part of the game of being a contrarian. You are betting against the masses and you are wrong until you are right. Maybe I should learn to stay out of the way until it's obvious things have turned.... But then, in exchange for that secure feeling, I end up buying Noble at $13 and riding it up instead of accumulating way more at lower prices when everyone is dumping indiscriminately. At this point, there is no guarantee that NE will survive without restructuring, depending on how long the downturn lasts and the rig market develops. These things always seem to get way worse than anyone expects. I also second looking at debt. When owning debt at the right price, a restructuring can even be beneficial in the long run, when the debt becomes equity close to the bottom.

CFO's don't like bankrupty's on their resume. I think a CFO leaving is generally much worse than a CEO leaving, because the CFO does know the numbers (or at least should).

It already is and always has been low margin hardware, particularly on the passenger vehicle side, don't think anyone is making respectful margins BMW, Daimler, Porsche, Audi, Ferrari have pretty good margins, however the value lies either in the brand and proprietary hardware know how. The latter is going to be less important going forward, which I think could hurt the margins of luxury car makers. Who cares about having a sporty car, if they don't drive any more. Maybe not an issue for the super luxury cars like Ferrari, but certainly for the likes of Mercedes, BMW or Lexus.

How did you know that? :o But I guess that's normal with this guy. Having been burned by the Chinese reverse mergers, I guess he finally saved enough money to get back into the game again, so he is desperately needing to swing through the fence and make a large profit. Then he can start bragging about his legendary trade. In his Seeking Alpha I believe he's disclosed taking out a loan and owns 60,000 prefs or something https://twitter.com/donotlose/status/774516681334980608 I think he posted in his newest article that he might default at the end of the month on his loan and/or sell some of his Fannies. All balls and no brain.

Elon Musk strikes me as somebody who always doubles up. Keep doing this often enough and he will go broke. That is what I think will happen to Tesla as well. Somebody else may pick up the pieces and make it work in financial terms. I do give it to him that he did come pretty far. I would not be afraid to invest in a car company because of Tesla. I think the bigger risk is that more and more know how is going to be in the software (self driving car ) and companies like Google and perhaps Apple may make the hay and the exisiting car makes may deal with low margin hardware, just like with smartphones.

If I read a 10-K (often I don't), I spent like 30min on it. I sometimes spent more time, when I try to understand details that management is not talking about (pensions, asbestos liabilities, footnotes), but often it is clear by then, that if I need to dig so deep to understand the true financials, that the stock is not worth investing anyways. I spent some time to read CC Transcripts in Seekingalpha. I like to compare what industry leaders/ good managers say, compared to what the management of the company I am interested states. I found some of the best tidbits in competitors CC or presentations. I agree with others that it is important to understand what drives and industry, what metrics to look for and to distinguish between spin and facts.

A $ in my own pocket, is worth more than a proportionally owned $ in a companies pocket, I own shares in. So, I think cash on a balance sheet should be discounted to some extend, how much depends on the quality of the management

I am a WFC customer (Wellstrade and checking account) and it is clear that there is a lot of pressure to sell more products. I got bombarded by emails and snail mails and every time, I went in a branch (which now very rarely happens, maybe once a year), they try to sell me insurance or a savings account. With that much pressure, it is not surprising that employees start to crack and game the system, some for their benefit, but many just keep the job. I suspect with branch traffic going down due to mobile and online transaction, that the sales pressure must be even higher - what else is the branch really good for? Just from my own employment experience, there is a very fine line between incentivizing people and applying pushing productivity and basically forcing people to cheat. If you get a make your number or else management, you will have a certain percentage of people cracking and starting to cheat for sure. from my experience, most do it more for fear, than for benefit. It seems like WFC has overstepped that boundary.

I have bought more cash recently and had to sell shares to do so.

Formula 1 is very popular in Europ, Asia and South America and I think there is potential in NA as well to make it a white collar racing version of the NASCAR. It's a prime entertainment property. I remember as a small kid watching races live in the Nürburgring Race course and we did get in there for free. That was in the very early 70's. It is certainly better marketed now.

Agree in general with your statement. . However, the primary price increase thesis is based on customer adoption to higher tiered plans. Why would anyone voluntary upgrade to Gbps plan with such a low data cap? Reading the online forums, CableOne has been very forceful on enforcing these data caps. The price increases are going to come from either customers voluntarily upgrading to a premium product because it is truly better or by forcing customers to upgrade to a premium product when they violate their data caps. If you read through the forums, customers think the Gbps plan is very expensive and silly. So, you can't ignore the customer unhappiness because the voluntary upgrades may not happen system wide to cause ARPUs to go up. Also, I don't want to count on CableOne using its "monopolistic" position to force customers to upgrade when they violate data caps. Even if they do, how much will such a strategy cause ARPUs to rise? Lastly, I looked at the FCC Form 477 data that gives broadband coverage data. It is *not* true that CableOne has a monopoly position. CenturyLink is in almost all the counties that CableOne operates. The prices CenturyLink offers are quite competitive (and in fact lower). I will put the data in a format that is readable and share it if you are interested. Very few areas are true monopolies in terms of broadband internet. in most areas, there is at least one somewhat viable competitor (mostly a on one company that offers a modified DSL service like Uverse (ATT) or similar. If you squeeze your customers too much, they will go elsewhere

Jurgis, good points on starting out in an expensive market. I looked at some of his pics and none of the stroked me as particularly cheap. The stock market relies too much in multiple extension for return, but can you get rich buying mid to high single digit growers at 15-20x earnings? Maybe as an investment manager you can do well, if your performance is better than the indices, even if they are low in absolute terms, but I think that will be tough as well.

Media companies like DISCA, FOX, SNI come to my mind to qualify as strong cash generators and have decent growth, unless you think that the business model for content is broken.

I always get question marks when i see so much stuff to defend an investment, shouldn`t a compelling investment be easy to describe? While i don`t think that LILA is expensive here, i really wonder why Malone hasn`t bought one share in the open market until now when this is such a compelling opportunity? When i see how much he is selling of his other holdings, he should have plenty of cash. Maybe it isn`t the opportunity of the year at an EV/EBITDA of 8 or 9. At a very cheap multiple of 5x2017 EBITDA it would trade down to 7$, at 6x it trades down to 14$. (And yes even LBTYA traded down to that level once in the past decade). 9x EBITDA is not cheap for LILA. For one thing, their cost of debt is much higher than for similar assets in the USA or Europe, because the interest rates in local currencies are much higher. Sure, LILA's debt is mostly USD, but that means that they need to by swaps to protect against currency drops. Some of LILA's markets are very competitive as well (Chile, Puerto Rico). I don't see the bargain here, but if it does trade down for <7x EV/EBITDA, I would take a sharp look.

Great comments Oreo- I can see that the weird style of self promotion through feigning humility or showing of us brilliance rubs many the wrong way. It's also clear that he want to be seen as more experienced than he is. But then again, he is just 22 year old, started his own asset management firm and had a good start, hard to argue with that. If I were his dad, I would advice him to write less and let his performance do the talking. And I would be very proud of my son.

Yes it is. The main capitalization is the government guarantee. I am no expert on this matter, but I think the preferred will not work out. I don't understand the legal issues very well, but my 10000 foot high perspective goes like that: 1) You are suing the US government on technicalities. Fannie and Freddie were broke many times at the time they were seized. now, they are profitable, but possibly because they have access to cheap capital, due the government guarantee. The lawsuits will be endless, because the government will not easily accept a loss. 2) If the lawsuits do work out and Fannie/Freddie do become private again, they need to raise a lot of capital. More expensive mortgages would be a huge political issue and not likely to happen. The government will compete with them, by opening up a government sponsored institution doing the same thing, capitalized with $1 US, and a guarantee by he US government. Good Luck competing with that.