Spekulatius

While I think there is a risk that the protests contribute to spread of COVID-19, there are mitigating factors: 1) a lot of protestors tried some measures of social distancing and wore masks 2) The protests were outside, which reduces risk substantially (of course we do not know what emote stores do before and after) 3) Most protesters as well as front line police are younger. Not only are the less likely to get sick, they are lesser likely to spread COVID asymptomatic ( the latter is my own conclusion). We likely erred on restricting outdoors activities too much. I don’t think there is much reason to close beaches or parks, assuming the people going there behave reasonable. It is likely even opening schools is lower risk than thought, based on observations from countries in Europe which have reopened schools recently. High risk areas are badly ventilated high density indoor spaces like bars, some restaurants, offices, churches, sport venues night clubs, and business that require close customer contacts like nail salons, hairdressers etc.

Yes, they’d a good analogy. Better cellphone tech over time will kill this. Of course Sirius could just become platform agnostic , but then it would have compute with streamers, Spotify and a lot of terrestrial radio stations who went online as well

Quote of the day ?

If you poke around Twitter, the sources indicate that buyers interest has recovered and inventory has tightened. The record low mortgage rates surely help and I think mortgage rates will likely go even lower because the margins to treasuries are fairly high right now. There seems to be a temporary supply/demand imbalance in some areas with little depth to the market and more motivated buyers than sellers. That dynamic will likely be short-lived. This could well be. COVID May be a larger deterrent for sellers to put a house on the market and moving somewhere else than for a buyer to tour a house and buy one. It’s hard to predict though. A lot of people predicted a steep drop in 2001/2002 and the dip was very shallow and short lived back then.

Holy shit! Everyone in the US needs to read and reflect deeply on what Mattis wrote. Mattis is a Republican, a professional soldier, a patriot and has intimate knowledge of who Donald Trump really is as a person and how he thinks and acts as President. This message is not from a partisan Democrat hack. Mattis’ is very clear in his assessment of the situation and the President. Donald Trump is clearly not fit for office (and it is not even close). How anyone with a working brain can continue to support this man completely boggles my mind. No, the alternative is NOT worse. That is a false choice. Read the underlined section below if you still do not understand why he must be defeated at the polls in November. “...Donald Trump is the first president in my lifetime who does not try to unite the American people—does not even pretend to try. Instead he tries to divide us. We are witnessing the consequences of three years of this deliberate effort. We are witnessing the consequences of three years without mature leadership. We can unite without him, drawing on the strengths inherent in our civil society. This will not be easy, as the past few days have shown, but we owe it to our fellow citizens; to past generations that bled to defend our promise; and to our children.“ Being divisive, creating chaos and then trying to benefit from it is Trump’s playbook. It’s pretty much how he works, he is a one trick pony in that respect. It has worked for him for a long time, but at some point, it will stop working. It better be sooner than later.

My twitter sources (I know I know) indicate that used car prices have strongly bounced back after an initial slump in March and early April. Shortage of inventory, especially regarding trucks. That's great, It means demand is out there. Could you provide a link? Edit: here's one: https://www.autorentalnews.com/358893/wholesale-optimism-used-vehicle-prices-up-5-74-in-may#:~:text=Over%20the%20first%2015%20days,day%20and%20averaged%20above%20101%25. "Wholesale used vehicle prices (on a mix-, mileage-, and seasonally adjusted basis) increased 5.74% comparing the first 15 days of May to the month of April, according to data published by Manheim today. This brought the mid-month Manheim Used Vehicle Value Index to 133.0, a 4.8% decrease from May 2019. Manheim Market Report (MMR) prices improved over the last two weeks, resulting in a 2.1% cumulative increase in the first two weeks of May on the Three-Year-Old Index. Over the first 15 days of May, MMR Retention, which is the average difference in price relative to current MMR, was above 100% for all but one day and averaged above 101%. The MMR Retention trend reflected that vehicles were selling above current MMR values and was a clear reversal of what happened in late March and April." And: https://nymag.com/intelligencer/2020/05/how-will-hertzs-bankruptcy-affect-the-car-industry.html "The bankruptcy filing has started a 60-day clock, during which Hertz’s secured lenders must wait before they can foreclose on the 400,000 U.S. cars that were financed through such arrangements. It is possible that during the 60 days, Hertz and its creditors will work out a deal that forestalls that foreclosure. Hertz has unsecured lenders who depend on Hertz’s future revenues to be repaid, and who will be screwed if the secured lenders liquidate so much of the company’s vehicle fleet, so there will be a complex negotiation. But such a deal is still likely to involve the liquidation of a substantial portion of those 400,000 vehicles," So, there's definitely uncertainty in this area if other companies go BK, or people don't get their job back and start selling their cars etc. This guy seems credible based on his posting history. I don’t know his sources,but he is worth a follow: https://twitter.com/druizg80/status/1268199154683006976?s=21

Well, the Russians were ripping the US and the rest of the world off, because they had no competition. The design of the Space shuttle was from the early 70’s, and the idea was that a ) partly) reusable spaceship would make space cheaper. That really never worked out, because the space shuttle was complex and the end, it cost about ~500M to launch. I guess it is a case of and project management , where every little of the many steps make sense and the end result doesn’t. The US should have pulled the plug on this in the 80’s after the first shuttle blew up,Knut I guess it was just from an institutional POV just easier to save face and soldier on. The real savings are when you look at what Russia was charging the US to ferry astronauts to the ISS. It was something like $80M per astronaut so $160M per launch with US astronauts. As an American I had heard/read very little about SpaceX's primary competitor Arianespace but the price war between the two is fascinating and it will be interesting to see what Arianespace comes up with. Just the ability for US companies to launch from the Cape as opposed to French Guiana has to translate into significant savings. https://en.wikipedia.org/wiki/Space_launch_market_competition

If you poke around Twitter, the sources indicate that buyers interest has recovered and inventory has tightened. The record low mortgage rates surely help and I think mortgage rates will likely go even lower because the margins to treasuries are fairly high right now.

Who exactly encourages the protests and the property damage (which was done by looters not protesters)? The protests are unfortunate, but they were not organized by any party and they are not Trump’s fault either. He just poured gasoline on them by sending the national guard and the tweeting stuff like “after looting comes the shooting”, which surely didn’t help.

Sold short a bit $RGA (Life reinsurer) at the open when reading about their stock offering at $81. I was surprised it opened as high as it did ($89) and then even briefly went higher. I first thought it was a potential long until I read the 424B offering filing. It appears that they loose about $400-500M for every 100k death in the US or 1.4M worldwide, so it is very levered to excess death (which is basically the risk they insure). I closed this out for a small gain later, but I really think this has a potential as a short as I think we could be a few hundred thousand dead in the US before this is over and potentially a million. In the latter case, RGA likely would be toast. Anyone has a clue how to get statutory filings. Pre- Corona, they had ~$700M in excess equity and COVID probably took $400-500M of this, so I assume their actuaries got nervous and that’s why their raised capital. It’s cheap and trades far below book, but every financial on its way to going broke looks cheap and below book. RGA suffers from a double whammy of excess death and low interest rates so it could be really in a bind right now. I know it’s kind of Macabre to bet on a demise of such a company, but hey what happens, happens whether we bet or not. If nothing else, it could be a way to insure against the tail risk of the virus getting worse again. I own some so insurance positions like TRV, ORI and BRK that I wouldn’t mind protecting.

RGA - Life reinsurer raising cash. They were estimating 100k death in the US in their last CC which is obviously too low. Their largest exposure is US (45%) and the UK (17%) which both have high mortalities and are not well contained. https://finance.yahoo.com/news/reinsurance-group-america-announces-pricing-035400964.html Doesn’t seem that bullish to me, on the other hand RGA was considered well managed. Based on a cursory look at the 424b filing , it seem like each 100k in US death cost them $400-500M in claims. They are raising a bit less than $500 in equity right now. Maybe it’s a short the way things are going...

My twitter sources (I know I know) indicate that used car prices have strongly bounced back after an initial slump in March and early April. Shortage of inventory, especially regarding trucks.

That’s always the answer you get when you ask a barber if you need a haircut.

The problem with the Swedish approach is that it still takes a long time to get the herd immunity. Stockholm was at only 7-8% (if Remember correctly) with the rest of the country far behind. They also have no the problem they the rest of Europe or at least the part who have contained the Virus to very low levels may not allow free border movement from states like Sweden or the UK out of concern of importing cases. They probably need to way of testing everyone coming in. I posted already upstream that the Swedish economy is not doing any better than the rest of Europe anyways. I do think there is a large benefit fit of keeping the schools open and we have to find a way to do this too. Anyways, the Swedish way is sort of a success because they avoided total disaster like Italy, NYC or Spain and their citizens followed the guidelines from the government voluntarily. Their approach seems to be supported by their citizens, so who are we to judge. However, their path Forward seems to be as murky as anyone else’s with a huge economic tolls to pay.

The idea to reuse rockets For cost savings is very old, at least early 70’s. In a way, the Challenger was build around this concept. However it’s not easy to make it happen. For me, the most amazing part is to bring the booster rockets back on their feet on a drone ship.

The relative speed between the ISS and the dragon module decreases, as the dragon comes closer to the ISS Orbit. That’s why it takes the dragon so long to get to the ISS station.

A small step for mankind, a large step for capitalism.

Cigar but, interesting that you bring up that kids (and probably young people) are not very good spreaders of COVID-19. I’d have looked a fair amount and couldn’t come up with an example where a kid (through school or otherwise) was identified as a superspreader. In Germany, the schools have reopened again a couple of weeks ago, but the superspreader events that did occur were in churches and restaurants involving older people. The absence of evidence is not proof ,but somewhat telling. In any case, the main risk with opening schools is not that the kids get infected, it’s them serving as a vector for transmission to more vulnerable people (teachers, parents ). If that risk is low, than opening the schools starting with smaller kids (who likely have younger parents and teachers ! ) should be strongly considered now. I am likely biased as well, since I have a teenage son at home and we noticed ( despite seemingly taking the quarantine well) a noticeable degradation in academic performance as well as some psychological issues at home. Not sure what to make of it sample size =1), but our small School district is now trying to hire “emotional coordinator” and based on some hints from other parents, they have similar issues as well. In any case,I believe they if we close the schools for another semester and try to continue online only, we are likely creating a disaster here for the kids. As a parent, I would rather take my (fairly good) chances with the Virus, based on what I know.

First time I hear the term infodemic but it rings very true. Jut went though a pretty good article (in German) about Sweden. Some folks in twitter seem to believe that Sweden is the model for how to deal with en epidemic and it is true - Sweden so far has avoided shutdowns and hasn’t really descended into a disaster like Italy or NYC. However, looking at what actually is happening there, it is obvious that the Swedes did show restraint that is on par what happened in other countries in Europe simply based on recommendation from the government. While this is great, it is not clear to me that the same would have worked anywhere else in Europe, much less on the US. Second, economy (Based on forecasts) is actually not doing better than in other countries in Europe. Actually, if you accept the above, then it’s not really a surprise either. Below charts show two different graphics - GDP forecast for 2020 and google cell data for presence at work. Basically the data for both for Swedes is middle of the pack, which means that the Swedes have done what others European countries did just based on their government recommendations. https://www.spiegel.de/politik/ausland/corona-krise-schwedens-sonderweg-eine-zwischenbilanz-in-zahlen-a-c7b3cea2-63be-4072-8df9-afdb765afb54 As to whether the same nudging has a chance of working in the US, we can draw our own conclusion.

Rolls Royce will survive, but if current equity owners benefit is another question. About 50% of their business is commercial aerospace engines, but if you count the ITP business, the dependency to commercial aerospace growth to ~60%. Then we have the power business, which isn’t exactly thriving either. When I put my smallish bet on RR, I thought that this business needs to keep an investment grade credit rating, just because of the huge amount of liabilities and assets resulting from the long tail nature of their business (service contracts, hedges etc ). They have -3GBP of equity and a ~35GBP of assets which is a pretty large balance sheet for a company of RR size. if the counterparties get nervous, they need to recapitalize, no way around that and that could mean partial nationalization. Hard to handicap, so I decided to get out when I saw this coming. What really is going to happen is anyone’s guess, but they have challenges abound.

So, here we are - RR.L credit rating cut to junk (by 2 notches) to BB. Since they make their living on LT service do facts, that’s not going down well with customers. They probably will get some backstop from the UK government, but there is no way to tell what it is going to cost for equity holders (UK holds a golden share in RR). Europe isn’t like the US as far as bailouts are concerned, and bailouts often wipe out or impair equity. https://www.reuters.com/article/us-health-coronavirus-rolls-royce-hldg/sp-cuts-rolls-royce-credit-rating-to-junk-on-covid-19-hit-idUSKBN2343DB

Searched on Youtube, and came up with these two playlists: This one looks serious: And this one seems a bit more fun: What do you reckon? Kahnemann’s Books should be a must. Economics and psychology are joined at the hip as Munger correctly stated.

Pretty good summary of COVID-19 from a medical POV. https://www.bbc.com/news/52760992

LOL, know i remember the 2008 case. Makes everyone feel better to get looted twice the same way, LOL. Between the US leaving the WHO, US inner cities looking like a trailer for the movie “Purge”, and looking at the COVID-19 scorecard of China vs the US, I suspect Xi Jinping and the fellows running the CCP must be giving themselves high fives all around. Complaints about HK protests? Well.... Quite sad actually.

This is an interesting problem for clothing retailers, or anyone else that sells seasonal goods. How far in advance does the typical clothing retailer acquire inventory, e.g., by mid-march I assume most winter clothing is already gone. Is the mid-march inventory primarily spring or summer clothes? Either way, it seems like there is going to be alot of out-of-season clothing around. Would off-price discounters benefit from that? Also, someone's going to have to eat most of that. Will brands take some of it back? Maybe off-price can buy tons of stuff cheap, but who wants Easter stuff after the holiday? How many people just don't need new swimsuits at any price if they are cancelling their trip to Hawaii? Plus, we were at all time high consumer sentiment in February....how's consumer sentiment now? All of my friends are delaying or cancelling vehicle/house purchases, and sticking to the necessities, even if they have money. Who is going "shopping" even if stores re-open? And to what extent was BURL's target market (women with incomes $25k-100k) affected financially? Well, they showed a huge loss as predicted, but BURL stock is up ~20% since this post. It’s strange, the balance sheet is in much worse shape, but yet the stock and in particular the EV is higher now than pre-COVID, despite far worse fundamentals. I know they mentioned higher sales in the stores they are open, but still, that’s a lot to pay for some green shoots in a scorched yard, imo.