Spekulatius

Personally, I think you got this blatantly wrong, but time will tell. I also looked at VVV, but the balance sheet and pension deficit have kept me away.

Sees candy is lousy chocolate. That’s why they never could expand outside of California. Their moat is habitual (which is a strong moat actually) , but they can’t expand. Lindt on the other hand has a true worldwide franchise and moat around chocolate. Since I went low carb, I am eating 86% cocoa chocolate with my cappuccinos. I also like Ghiradelli‘s (which is owned by Lindt, I believe). Coke is out for me. I drank it from time to time (diet) but stopped years ago. I also think it’s habitual.

The Situation is hopeless, but not serious. Die Lage ist hoffnungslos, aber nicht ernst. (Bonmot from Vienna, around WW1)

I mean could we ever really know if the bullet killed the man, or if he happened to die from complications of hypertension just as the bullet entered his skull? Causation can be tricky after all, and we should study it further before deciding conclusively! M. Why would anyone assume the hole in the head was caused by the gun going off? People are always jumping to conclusions. The liberal media has brainwashed everyone. The real question that everyone is waiting for, did this person has covid-19? If he did, he obviously died from it. In real life, things are not so simple and binary. In many cases, there's the immediate cause of death, the proximate causes in the chain of events and also contributing factors. When Newton sat under a tree, he could have concluded that the reason (cause) the apple fell was a gust of wind and one could argue, under a certain framework, that this would have been the right conclusion. I was not familiar with the US death certificate but the model is quite universal: https://www.cdc.gov/nchs/data/dvs/blue_form.pdf Personal note: One can get used to see people dying, to some degree and depending on the person, but filling out this form requires to evaluate the person (corpse) to confirm the death, an act that cannot ever become routine, at least from my perspective. Why is this relevant for CV and investment implications? Individual death is dramatic by definition but this post is about investment implications. In a cold and actuarial way, the excess mortality that will be caused by the CV will rise but will likely not cause a large visible outlier curve, especially if seen from a long term perspective, although there will be a certain amount of concentration of events in the short term with visible consequences given the relative lack of spare capacity inherent to most health care systems. In comparison to the Spanish flu for instance, the economic impact of the virus itself would be moderate and short term in nature. However, the investment and cost related to mitigation have been and will be very large (one may agree or not with this social 'investment' and how the NPV is calculated but I guess it's the underlying question). https://www.nber.org/papers/w26866.pdf "There is clearly a difficult tradeoff here concerning lives versus material goods, with very little discussion about how this tradeoff should be assessed and acted upon." Obviously, My example is extreme, but I want to make a point of the difference between a chronic and acute conditions, where the letter is probably the cause of death or is it caused leading cause? The question about the cost to keep the containment up is a Real one. So far, people have only seen the epidemic numbers (infection rates, death rates), but not the economic ones. Nobody has added up cost of the lockdown either and how impacts the future. It’s clear we will get higher taxes from this, because it is truly a war every war that I know of has lead to higher taxes, often much higher taxes. Once the Virus infection rate start to fall, which hopefully will be these questions and economic tradeoffs will have to be decided. My guess is by May will will have decide on economic economic impact vs saving lives. If we can’t get the disease under control by then, goodnight all. There will be flareups when the open the Economy for a while, it will be a whack a mole game, until we have a vaccine. I wonder about the anti vaccers....

I like GD and bought some, averaging down. Sold it after the bounce on Thursday. Good business and Uncle Sam will pay the bills. I also think the corporate Jet business may actually benefit longer term because the upper crust will avoid flying with airlines for fear of infections and because so many flights will remain cancelled. short term there will be cancellations, but they have a huge backlog. I don’t think Uncle Sam will cancels nuclear submarines and these types of things. If anything, the epidemics will increase international tensions. I also like BAESY, same idea. I Buy them back on retrenchments.

So if I shoot a bullet through the head of a fellow with hypertension, the cause of death is: 1) bullet wound 2) Hypertension 3) Hard to tell

Human ingenuity at work.

Pretty good recording from Focused compound about economic expectations and impairments. In short, he beleived a 30% haircut for banks is justified for example. This one can also listened to as a podcast.

Yeah, it seems that defaults become a sport or go viral so to speak. I am not sure what rabbit holes this leads us to, but it is certainly not bullish for banks. The above are just things that I started to notice. Maybe it’s something, maybe it’s nothing. Most will play out over the long run. Near term, the Potus talk about quarantining NY makes it almost inevitable to do it, unless he walks this back immediately. That would be interesting.

Some mostly unrelated thought what might happen: 1) There will be an onslaught of lawsuits. Covid-19 infection at work - lawsuit. Restaurant (preferably a deep pocketed chain) has a Covid-19 infected worker who may infect people - lawsuit. US sues China? 2) Cheesecake Factory told landlords they that don’t pay rent in April. It’s not that they can’t pay, they just decided not too. Evict us, if you don’t like it. unlikely that they will remain the only one. Just not paying your bill might become a national sport? Calvinball time? 3) Bankruptcy courts may get clogged up for a long time from the volume of cases. What happens if you declare bankruptcy and can’t get court date? I’ have no idea. 4) UK’s credit rating just got downgraded from AA to AA-. What about hard hit countries like Italy or Spain? This is probably causing another debt crisis in Europe and elsewhere. Is the US safe? 5) Even with the aid packet, I don’t think the airlines will last a long time - they will run out of cash in a couple of month, due to operating leverage. how can they restart national flights with hotspots all over the place. NY and NJ quarantined? other hotspots will flare up? International flights are even worse. 6) Even if you open up restaurants and small service business open up, will customer come back? What is safe, how can we tell? This is our first recession that is led by the service industry, which employs way more people than manufacturing or any other sector 7) President talk a out quarantining NY and NJ, what are the consequence of this. Are other states going to be closing borders too? I don’t think this was ever done before - US becoming more like the EU?

Hmm, time to rewatch escape from NY? Snake Plissken had some great one liners...

It is idiotic to announce a potential quarantine before doing it. It creates nothing but a mass hysteria. If you need to quarantine, quarantine, but don’t say talk bout it before. Grossly incompetent.

The story is an extra $1 of sustainable earnings from cost cutting is $15 a share at 15x earnings. These extraordinary pay increases over the next 5 months don't noticeably erode that. Real estate exposure is way more of a concern than energy, which is pretty limited. If real estate gets impaired broadly then a lot of dominos will tumble. In the end, banks are just levered bets on the economy. Lower NIMs and much higher loan losses are not a great combination.

Is the 80k projection based including the shortage of beds and ventilators? Yes, otherwise those input parameters wouldn’t matter. With these models, the absolute numbers are probably less impotent than how the output reacts to changing input parameters. not something they can be done using the website, one would need to play with their model (which is downloadable, but that’s way more than I am willing or capable of doing).

It is very clear that the folks who said “ it’s just the flu” were incorrect. First of all, this is an investing board and this flu has just stole all the headlines and the stock market is down 30%. I don’t think a flu has ever caused a stock market selloff of 30% so from an investing perspective it’s not a flu. Second, the argument that the flu may kill 50k doesn’t hold water either. If that were the case, why did 9/11 which killed just 4000 people and destroyed some asbestos laced building caused such a reaction? Yet it caused a major recession and tremendous expenses to prevent this from repeating. The Vietnam war killed 58k US military personal - equivalent to a bad flu season? What’s the big deal? Why did a generation go up in arms about this? Clearly context matters. Even if it doesn’t matter for you personally, but matters for everyone else, it is going to impact everyone.

The Model (for which I can’t vouch for) expects max medical capacity use mid April. This assumes distancing measures in place. https://covid19.healthdata.org/projections Of course peak usage differs from state to state. 500 peak death/day for NY alone sounds pretty scary. Overall death in the US ~80k.

Yes.

It doesn't have to be 100% effective. More effective it is, the shorter it is, but I saw something that ~90% reduction in interactions lowers Ro such that infections will decline. 90% is not the same for every area and not exact Depending on how familiar you are with exponential behavior, the talk of Ro may or may not be helpful. What's important is non-perfect shutdowns work if they are generally effective Italy has clamped down and the lockdown is working. If they can do it, everyone can. Yes we can!

The difference in perception how serious this epidemic is clearly split across partylines. I see it not just in this board, but also in other social media platforms I follow (FB, Nextdoor etc). I am trying not judgementAl here, but thats how I see it: Republican leanings : This epidemic is just a flu and a media hoax and grossly overstated. US needs get back to work. The cure is worse than the disease. Democrat leaning: This is not a flu, it is an serious epidemic . Highly contagious, without vaccine and it could kill hundred thousands if not millions in the US. Similar to the Spanish Flu and most likely worse. I don’t know what to make of it, we look at at the same data , but based on our political leanings, we tend to disagree on how to interpret it. Personally, I was leaning to the flu thing until late February and then I changed my opinion, as I saw what happened in Italy and did some simple multiplications probabilities , infection rates, growth and morbidity rates and quickly changed my opinion. To be fair, I also know of one Republican leaning friend, who is scared since late January. I attribute this to extensive extensive contact he has in China (he is product line manager for an US company doing a lot business in Asia including China) so he got some first hand accounts. Everyone else I can pretty much put in one bucket or another based on his political preferences.

My take is that the lower interest rates are an indication of a crappy economy, which doesn’t lend itself to lower discount rates. Japan and Europe are cases in point.

Schwab aus better for OTC stock than Fidelity. Fidelity allows to buy some OTC stocks, but many are restricted.

Yeas, this is kicking the can to the next guy, but someone still eats the loss. Can a large landlord like SPG force bankruptcy? They have taken over distressed retailers in the past and have the means to run this operation. CAKE is a pretty good business in normal times, so taking them out and eliminating the equity could be highly profitable in the long run. Or another take, perhaps this is the end of fixed lease payments. Make the leases variable cost and pay the landlord a percentage of the revenues. To some extend this exists right now, but is only a small part of the lease payment, it could be made a total variable cost. There interesting angles on this, but it is clearly a high stakes poker game.

Last sentence is the key one and why I think the piecemeal to turn back the economy County by county doesn’t work. Air travel for example can’t really be turned back on before the US is essentially Virus free. Even if you would allow it, would people actually travel? Some would but many would not I think. It’s even harder with international flights. I guess you could do it Nation by Nation, but how long will this tear. The Airlines are all Toast if this last anywhere more than a few month.

Yay, Amerika is finally embracing communism! gets a monthly check for doing nothing, but we have to stand in line for toilet paper.

It is not optimistic, the starting point $163 in earnings for thr SP500 in 2021 is and assumes a V shaped recovery. Also Implied is no tax rate increase, which I think is inevitable with all that spending. Global supply chains may be localized, which I think also will pressure profit margins. Another datapoint - the last 2 recessions led to 50% + drawdowns. 50% drawdown would be 1650 the SP500. My conclusion is that we are above where there stocks should/could trade for using several frameworks.