Spekulatius

I hope this line of reasoning turns out to be correct but one needs to be careful because it may not be for a variety of reasons. The biggest concern I think is that companies may lose a meaningful amount of money over the next year or two (i.e., big negative earnings, not zero earnings) and come out of this with some combination of less cash, more debt, and more shares outstanding. Some may go bankrupt. Also the government stimulus isn’t free and will need to be paid for somehow... If it is paid using taxes then it is likely that corporate taxes rates are going back up. If it is paid via money printing then inflation and higher interest rates will likely follow. We may get both. There may also be other structural changes following this crisis that are unfavorable for shareholders. One that seems quite likely at the moment is a massive shift of supply chains out of China. Things like that can not only cost a great deal of money upfront but can also result in a permanently higher cost structure. I have come to the conclusion that the stock market is also as much about psychology than fundamentals ,especially lately so. I do agree that the Fed has made a big difference on the high yield /junk bond markets. I could tell the difference of the Fed bazooka right away, because bids were noticeable changed after this was announced on differnt stuff that I was looking at (midstream dent, REIT preferred’s). Now how to predict the psychology of the masses is another question.

Past pandemics were different because they killed a lot of productive people and caused labor shortages that forced higher wages for the peasants at that time. The current epidemic really preferentially kills older people and in any case, morbidity is too low to cause a significant impact on available labor in they sense. However when you include secondary impacts like the above welfare programs and possible increased in sourcing from overseas supply chains, the next effect could be quite similar. Note that minimum wages have been rising and it seems like many companies seem to have trouble filling position that benefit from the epidemic (Amazon, grocery chains). I can well see this causing wage increases and possibly also overall inflation. As for the increase unemployment benefits they last until 7/25, but I see no chance in hell they they don’t get extended until after the election in November. Weaning ourself off from this might be quite difficult.

A lot of money in the lower income bracket are going to make more money for doing nothing than they made before working. https://www.masslegalhelp.org/covid-19-unemployment UI benefits + $600/week extra and extra $2400/ month. UI benefits are roughly 1/2 the prior salary, up to a certain limit. So, unless you made more than roughly $4800/ month before, you might be better of not working for a couple of month. Unless, I read these these provisions wrong. It’s quite interesting, my wife works only 1/2 time (more with overtime typically) and may actually be better of not working - as a nurse? Maybe America doesn’t want to go back to work?

Redfin is seeing a trend. It may not last, but nevertheless interesting: https://www.cnbc.com/2020/04/17/redfin-ceo-rural-home-demand-shows-profound-psychological-change-amid-coronavirus.html

I understand that you're not into controlled experiments and use more common sense and hunches. Just for a second though, assume that we could go back in time (at the outset) and somehow the US applies your model (try to selectively protect the at-risk population and keep things going as much as possible somehow; you still need to explain how this would have been done as roughly a third of the adult population in the US is at risk). What do you think the mortality and ICU admissions would have looked like? better? same? worse? Looking at (and comparing) what other countries have been doing may help formulate an opinion? Do you believe in the memory of water concept? I think the interesting thing about how to deal with this epidemic is that so little is known from the get go and everyone learns as we go and adjust to new data coming in. It’s and iterative process not a fixed playbook. Also, none of what happens is deterministic, at the moment orders for shelter in place are givens the future path is changed and we can never know what would have happened alternatively. I think if the government had done absolutely nothing, people would have reacted and some of the things that were ordered would have occurred anyways (social distancing, sports events canceled , restaurants emptying out or being closed etc). It’s less about right or wrong from the beginning, but more how you react to data, using precautionary principles and using proven techniques used to solve similar problems (meaning other epidemics) and iterate from there. A year or two from now, we will much more about this (death rate, asymptotic rate, treatment) and even then, I suspect there will be significant disagreement about what is right or wrong and how to interpret data or deal with newer slightly different situations. People will say “how stupid that none one wore masks” when this thing broke out and future generations may laugh at us just we cringe how they treated the medieval plague epidemics back in those dark times.

This is the small bet I've made with XOM. <5% position but I would like to build to a 5% position in the next month or so. How do you value XOM? XOM doesn’t look cheap to me, except they go back to peak earnings in 2012 or so. It’s just plain overvalued. So many better options out there (not in energy though) That’s the problem, I am not sure the model works at any crude price. Even the majors had problem living within their ash flows at $80-100/brl. The costs have shown a lot of elasticity , both on the way up, as well as on the way doen. Based on FCF, the majors were never cheap. You have to assume that the future is different than the past in order to be successful and more than just a higher crude price is needed. Labor cost, day rate inflation. Marginal projects getting approved. It’s what happens in industries that like to play on the margin. Typically in the past there was a delay due to long project lead times, but when shale started to dominate, the costs and the prices track each other closer.

CNN was clearly wrong. Musk posted a bunch of receipts. ; ) Posted in Twitter? That’s where real men fight their wars now.

Not that it matter for Teslainvestment thesis, but Elon’s help with ventilators is a bit of a hyperbole: https://www.cnn.com/2020/04/17/tech/elon-musk-ventilators-california/index.html

I would have thought that recent events have impaired NYC status as a safe haven. You can pick 1) NYC real estate with rampant zombie virus or 2) Potentially lawless emerging markets where currency may devalue I don’t think you are born to be a realtor.

Yeah be careful with ozone--O3 is highly reactive and can damage tissues, can be carcinogenic. And it may not be necessary--if you leave your garage open on a sunny day (or leave contaminated items in a car with windows that don't block UV/windows rolled down, that's probably enough UV light to do the job. The primary way of catching this is likely inhalation of droplets from someone nearby who has it, not from touching fomites anyway. Thanks, didn’t know that O3 can be carcinogenic. The problem with leaving outside is that sun is not always there in New England. Also, my wife often comes home at night, so no sun then. We will keep that in mind and minimize our exposure. the ozone smell is gone in the morning if the let it run for 20 min in the evening after coming home. I am a assuming it will kill the Virus long before it kills us. Thanks for the input.

This is the small bet I've made with XOM. <5% position but I would like to build to a 5% position in the next month or so. How do you value XOM? XOM doesn’t look cheap to me, except they go back to peak earnings in 2012 or so. It’s just plain overvalued. So many better options out there (not in energy though) That’s the problem, I am not sure the model works at any crude price. Even the majors had problem living within their ash flows at $80-100/brl. The costs have shown a lot of elasticity , both on the way up, as well as on the way doen. Based on FCF, the majors were never cheap. You have to assume that the future is different than the past in order to be successful and more than just a higher crude price is needed.

Banks looking at roughly 2 years of lost earnings (20% fair value loss with a 10 PE) and a couple of years if not permanently lower earnings power . It’s not too hard to come up with a 40% fair value loss. Maybe give back some for lower discount rates,but still. I don’t think the share price losses have been much in excess of the fair value losses. They area only a bargain when above assumptions are incorrect and we reverse to the mean quicker.

Pentagon suggests otherwise: https://futurism.com/neoscope/us-military-unlikely-covid-19-created-lab-bioweapon It’s a big enough disaster to investigate closely and maybe even go down some rabbit holes, but the way the virus got started as well as Occam’s razor and existing genetic evidence suggests that this virus got its start in nature.

I think when layoffs occur, licenses get canceled. In good times, companies often forget a out these things, but in tough times, companies turn around some stones and find these savings. I don’t know SAAS pricing well, but I think with any high gross margin product, there here are ways to negotiate. And I would think that price per seat would automatically mean less revenues when people are eliminated As for GOOG or FB.I would think about advertising total being a fixed percentage of GDP - so if GDP shrinks, the advertising TAM shrinks by a similar percentage. Now GOOG and FB may gain some market share as structural winners, but I don’t think they would be able to over come a Let say 20% GDP shrinkage without getting bit hit in revenues themselves.

Yes, mentioned likewise above. I don’t let long lead times discourage me any more since most things are coming much faster. It’s a godsend to have prime now, since it saves so many trips.. They probably should advertise: “America runs on Amazon Prime now!” And it would be somewhat true. It’s one of those stocks where intrinsic value has increased while a lot of their competition is on the ropes.

Apple really should develop and market an Apple Watch with Oxygen Sensor. I bet it would sell like hot cakes, if it comes out in fall. I am pretty sure they are doing this. Might be a nice play to bet on something like this with options come product introduction day in September. FWIW, Oxygen deficiency in the blood is one of the main indicator of serious COVID disease progression. To track the Oxygen value in a reliable way would be very valuable for the wearer when to consult he doctor or go to the hospital and might save lives.

When does speculation become investment? When do you decide that conviction is sufficient to put 10% of your net worth in a specific investment? ---)You need to define a threshold. I fully realize that comparing an investment decision to a life or death situation is different but you (we) need a framework. It has been suggested (from various observational and rational reasons) that remdesivir could result in better outcomes than doing nothing for CV. We don't know the answer to this question. In order to answer that question, trials that involve randomized blind trials with control groups will be essential unless several trials done in different centers with different patients clearly show an advantage (pre-defined targets). When patients are recruited for the studies now, they have a choice to accept (and potentially get drugs that are potentially useful {or not and with negative side effects}) or not. Given the difficult situation, patients may get access to remdesivir through a company-sponsored expanded access program or through a compassionate program. The results do look promising and that should speed up the process. The approach is obviously not perfect but has provided the shoulders on which future generations could see. How could you know if you don't know? The pharma cemetery is full of ideas that looked good at some point. We need a controlled study - Remdesivir for Democrats, hcq for Trump supporters.

This is the small bet I've made with XOM. <5% position but I would like to build to a 5% position in the next month or so. How do you value XOM? XOM doesn’t look cheap to me, except they go back to peak earnings in 2012 or so. It’s just plain overvalued. So many better options out there (not in energy though)

Anyone has an opinion to use an Ozone generator for desinfection? I felt it’s worth a shot and bought a~$100 unit and put it in the garage. My wife leaves her scrub, shoes there and The car doors open and we let this run for half an hour. I do the same coming home. Likewise we keep everything going in he house ( grocery, mail ) and expose it for 1/2 hour plus risk time. Subjectively the ozone smell is pretty strong and lingers for a couple hours when the unit is done. I have read some Chinese papers that seem indicate that ozone disinfection works well viruses ( small particles = large surface to volume ratio) but nothing definitive. You definitely want to be careful running this in the house because ozone can create respiratory issues, but running in the garage should be ok. Any input welcome. I looked at UV desinfection but determined that what obenan buy noncommercially most likely doesn’t have enough power to do much.

Just put them all on PPP and preserve the resource for future generations. It’s cheaper.

FED will be cutting out the middleman and lend directly. Nobody can beat their cost of capital. Problem solved. In a way, that’s already happening right now.

How many of these parents take the summer off when their kids don't have school? Not many take the entire summer of, but most do some vacation. Which won’t happen this year. Also most activities like summer camps /soccer won’t happen. Staying with friends/family/in-laws won’t happen. My sons does now school via Zoom. I don’t think this works LT either, but this probably depends on the kid. He now need to organize himself to make sure he doesn’t miss any classes if none of us is at home, which sometimes fails. My wife usually works only half time as a Nurse but since this virus popped up in our area too, she works more hours than I do.

The company was barely profitable in Q1 even after ignoring this huge stock compensation expense (hasn’t looked why it is so huge and if it will smaller). Not something I would invest in after a cursory view.

Today, yes, I think the risk is acceptable, based on general reports of curve flattening and general lack of overwhelmed local ERs and ICUs. The "re-opening" of local economies should be conditional on: 1. universal mask usage 2. maintaining 6-ft social distancing 3. no large crowds This can allow many businesses, restaurants, maybe some schools to re-open. The decision regarding timing, pace, and extent of re-opening will be left to state governors and local authorities, who can fine-tune the above conditions, based on local factors. If a surge of serious cases start to show up in ERs and ICUs, they'll have to clamp down again. The federal government level can mostly give permission to states and localities to open up around April 30 (maybe even before), when they feel ready. They can veto crazy decisions that might happen in some regional southern areas, such as large church services, movie theaters, sports arenas. As you say, there is no good medical treatment/vaccine, and testing has been disappointing. (Whenever you rush out with new tests for a new disease, being unable to evaluate accuracy and reliability systematically, we really can't trust the results.) But you don't need testing or treatment in new pandemics, since the only effective measure is various levels of quarantine and travel restrictions. (If South Korea had no testing but had only lockdowns, they would have still been fine.) Today, I think the risk of economic recession/depression (deaths, suicides, depressions, lack of confidence in authorities) is greater than the risk of swamping the medical system, especially if the heavy lockdown extends beyond April 30. I think this feeling is widespread, and is percolating from the bottom-up. Any heavy handed top-down governmental restrictions will be answered by spontaneous bottom-up rebellion - so in a way, I think your question is moot. Improvement in testing should go on, but their utility will primarily be in retrospective analysis for future outbreaks. We don't need precise knowledge from test results to know what to do now (again, the only thing to do is isolation with masks and some form of quarantine). And even if a vaccine is developed, I don't have confidence that it will be effective or safe enough, especially if it comes earlier rather than later. I agree at most people will get tired of this lockdown. I believe the economy will have to be opened up in May, possibly in baby steps. One concern I have is that you can’t really open up the economy without opening up the schools,which isn’t exactly a baby step. Perhaps open up kinder gartens first, then middle schools etc. This would still take a lot of time and I incur quite a bit of risk. Without schools being open, parents with kids are screwed. Then,what you describe interns of going out with mask, social distancing ET still doesn’t really help any service business like restaurants, hairdressers, bars, sports venues etc. Maybe they could operate,but at much reduced capacity. There is another can of worm with liabilities. What happens when there is an outbreak that can be traced at a business. Trial lawyers will go after this, show that some protocols weren’t followed and here we go with huge number of lawsuits. I don’t think it will be possible to buy insurance for this unless the government creates one.

LOL yea, or that the government response was a disaster, even though the numbers turned out to be pretty underwhelming. Or that Cuomo and De Blasio did a great just, when NY was the dumpster fire, WHILE broadcasting that the entire US was basically going to be Italy, when in realty it only ended up being his state and his elected officials... He didn't commit to things on purpose though, a lot of hucksters do this. That way, either way, they can claim they were right. Its a very NYer way to behave. I would put more blame on Blasio than on Cuomo for handling the COVID-19 epidemic. As a major, he is responsible to keep his city safe foremost and he failed to do so. When you look around the county, there were many majors (in Texas- DFW and Austin- etc) example), where majors before the state did and sometimes county the state advisory. Blasio failed in that regard it just continues his track record of failure (in my opinion) and while Cuomo wasn’t particular proactive either did manage the crisis well. The real hero’s (if you want to call it that) are Gary Newsom and Jay Inslee who were proactive, and despite having early exposure squashed this thing before the problem snowballed. It also can remind on the then derided decision of the SF major to shut down the city even though there were no cases at that time (February 25). Those folks deserve way more credit than Cuomo in my opinion.