Spekulatius

Economic problems are man made too. What all’s these estimates don’t take into account is cascading effects or reflexivity. If I had to make a guess, the 20% lay-off number is closer to the truth than 10%. Who is going to buy a house, car, fund a startup or invest in new business opportunity in this pandemonium? Sure some will remain, but those somewhat decretionary things will be severely cut. The indirect cascading effects will at least as high than the direct effects. That’s why it important to soften the blow to the economy.

It’s a spread business. It’s hard to hedge duration when duration can drastically change. Also, the leverage works against them when there are issued with MBS valuation, even if short term. I think some mortgage funds did. blow up and had to raise capital in 3008 but I don’t recall details.

I suppose if they were willing to give up their Bank charter. And if they weren't a bank, it would free up Berkshire to acquire Delta without worrying about the Fed fretting over a very material commercial relationship... The government wouldn't help Delta if Berkshire already owned them. They'd tell Berkshire to help Delta. So Delta would tie up Berkshire's capital in times like this. So maybe it's worth more operating alone rather than being owned by deep pockets? Yes, that’s a pretty good argument against BRK ever to wholly own an airline. Airlines are inherently risky business, operationally levered, safety issues, labor relations, pandemics. BRK would assume a lot of tail risk.

Do you even need primers? Just study the income and foremost the cash flow statements and everything else flows from that. Primers tend to get you into rabbit holes that make you blind for collective shortcomings of an industry.

CMCSA is quite cheap and the broadband business should be stable even in a downturn. Seems way less risky than DIS to me and also the valuation is lower.

I think a lot of people have incorrect concept of "full lockdown". I had questions about how the heck things work in a full lockdown in California. So I searched. The list of "essential" businesses that are open is quite longer than you'd think. In case you wonder if you can get strawberries: agriculture is not shut down. In case you wonder if you can get anything from China: port of Long Beach is not shut down and railroads are likely not shut down either. In case you wonder if you can get a loan, cash a check, or do a refi: banks are not shut down (though some might have limited staff in branch and/or shorter hours). In case you wonder if you can get your appliances repaired or purchased: appliance repairs is essential business and not shut down; purchases might be more mixed bag. I just bought an appliance (but we are not in full lockdown as California is). I'm not saying that "lockdown" is "just like a flu" ;D. It is bad. But it's not 100% stoppage of economy either. BTW, I find it really funny that with "lockdown" in effect, I can easily buy non-essential products like window blinds from China, but I cannot buy such essential product as US made toilet paper. ::) A lot of business are considered essential, including the one I work for, since it supplies defense as well as some medical equipment companies. A lot of companies continue to operate, utilities operate, public services operate and lots of folks work from home. Even in a lockdown, most people are working every day and get a paycheck.

Totally unrelated to recent messages has anyone else noticed a run on ATM‘s? My wife ventured out today and noticed long lines at drive through ATM‘s. Is this now a toilet paper 2.0 hoarding run?

I'd say wrong. It’s all relative, I have a Discover card too. They had decent standards in the last, typically 700+ scores. ADS, COF (spending on cards), SYF Target lower income folks. Amex is higher income and scores than DFS. I think most issues have slacked off on the credit quality in recent years after being really tough after the GFC for a couple of years. The business has been just to damn profitable not to do so. DFS also reduced their equity from 13% CETC to ~10.5% CETC ratio with buybacks, which also could end up biting them. I think they have to rebuild their equity ratios a bit. SYF did likewise.

You are correct.... https://saraacarter.com/coronavirus-china-has-us-by-the-throat-majority-of-u-s-drugs-manufactured-off-shore/ "Dr. Oskoui, a cardiologist affiliated with Sibley Memorial Hospital, said because 95 percent of all antibiotics are manufactured in China and this poses a very real national security threat to the United States, particularly when dealing with the global pandemic COVID-19" "He said that the pandemic has spurred important discussions on the failure of the United States pharmaceutical companies to manufacture the much needed and critical medicines, including medical equipment inside the country. Dr. Oskoui warned that outsourcing the manufacturing of much needed medicine leaves Americans extremely vulnerable and dependent on China." “It’s unacceptable that the Chinese have us by the throat and make 95 percent of our antibiotics. And that’s the critical thing that’s got to change soon…actually make it a priority.” “The United States of America should never be in that position,” he said. “I think we need to turn to people we know that worked for Pfizer, worked for Merck, work for Amgen, work for Gilead, worked for Bristol-Myers Squibb the U.S. drug companies and say ‘you know we understand that you have few share obligations to your shareholders but you also have an obligation to your fellow Americans, as American citizens as an American drug companies’ you need to start making it here just because you can make huge profits abroad we shouldn’t be vulnerable to economic and political blackmail and vulnerable to the medical downside of these drugs being manufactured off our shores.” It’s the generics that are manufactured in China and India and those companies have nothing to do with this. The generic companies are internationals like TEVA and it’s a low margin business now. I do agree that this is something that concerns nation security unlike steel for example which the current administration considered as such. The way to do that would be to require production in the US and pay a bit more for generics and also to deregulate Pharma/FDA a bit because believe it or not Europe is less regulated in this area than the US and it shows in prices.

Do sucker bids really work in RE? price expectations from sellers are quite sticky and need to grind down, which takes a while. Public market rerate much faster, as we have seen with SPG, VNO and pretty much everything else. In the long run, I see the low interest rates as a tailwind at least for residential RE. Keep in mind that mortgage rates are still ~3.3%, so haven’t really followed down the treasuries all that much. I expect to see the lower 2% range some time later this year.

Yup, the USA is #1 producer of energy and food in the world. Totally self-sufficient. Should be the same for drugs, medical & tech. President has been correct about China all along, no doubt. The open borders and free trade crowd will never admit it. Nor will all the fools in the media that have marveled at China's economic miracle at the expense of political suppression, organ harvesting, and interment camps. No problem trusting China for our critical antibiotics, heart medicines and cancer drugs - once this is over right? Fortunately, if the US economy gets destroyed we will have plenty of cheap energy and food, since we don't depend on China for this too. I mean, why ruin China's reputation at the expense of saying DT has been correct all along? Forest Trump started the trade war with a salvo Canada targeting Canadian steel imports for national security reasons. Canada is a country that supported the US in every war for the last 29” years starting with WW1. It is a time tested tactic in any war to shoot at the allies first.

GD - they do have exposure to cyclical business jets (which may even benefit from the covid epidemic in the long run if you think about it), but most of the business is defense. Full order book and very cheap. They do have some debt, but considering their largest customer is Uncle Sam, it looks like a save bet to me.

That's a very interesting take, and the ruble trade is something I haven't considered. In fact, I just watched a CNBC video this morning talking about the Russia / SA price war, and they mentioned that the ruble has been tanking. I compared it to other petro related currencies like CAD, and it's down about 20 to 25%. Looking longer term from the oil bust after GFC till $60+ oil, it looks like Ruble is down against both CAD and USD. I'll probably just go long oil via the majors. I'm thinking refinery operations will recover the fastest. VLO and CVX look good. I like BP and Shell based on their cash balance sheets. This Daniel Yergin book sounds interesting. Care to provide a TL;DR? Pretty much any foreign currency has been taking against the USD, but oil related currencies like MXN or NOk and RUB have done the worst. MXN and NOK are down 20% compared to the USD.

No idea. I got in per invite. I love it, best of the bunch imo, mostly because I love checking out underperforming foreign stocks. :o

So much for the "there's nothing that can be done" argument. Oh wait, those people will now use the "but they are Asian! So they are better prepared/used to dealing with this/more compliant with containment/etc, so there is no hope for us non-Asians!". And destroys the "let it spread and achieve herd immunity" nuts too. Sounds like an ounce of prevention was worth pounds and pounds of cure. 2 Trillion $ of cure. But $2B cut from the CDC budget in 2019 to do exactly what? Not that the CDC would have prevented this, but still. Some people just like to drive without insurance. 99.9% of the time, nothing bad happens and they are right.

I don't see Spirit on there. Interesting. They have been excluded from pretty much all coverage. It is kind of strange. I guess the other airlines can afford better lobbyists. I also think that the Delta, AAL, LUV, Alaska gang would love to see them go under. Be careful out there, it’s Calvinball time: https://www.nytimes.com/2020/01/06/crosswords/heck-calvinball-crosswords.html

It’s a great opportunity to redeem themselves. I think the Fed will grant this request.

Same here at the MA/ NH border. My wife works as a specialty nurse (dialysis) in several hospitals and they are all,pretty much empty and preparing for a flood of new patient by rearranging the hospital rooms and opening “droplet control?” areas. So far only one COVID-19 Patient that my wife knows about (but not in her care).

Is WFC really better deal than other banks that don’t have operational issues? BAC, USB would be pot. buys before I would touch WFC. They are all cheap anyways.

Yes, I think it is correct. the financing on an asset level means that can amputate limps and keep the torso alive, so to speak it won’t help with obtaining new clients and also means shrinkage and lower fees. Babcock and Brown that I mentioned upstream was an Australian asset manager which collapsed when equity markets tanked and debt markets were closed in 2008 and they had substantial corporate debt to roll over but couldn’t.

Yes, I am looking at this thread as a means to develop a framework. I am not keen on predicting the future, but I do want to have a framework in place, in order to understand what might happen. It is easier to make sense of events as they unfold, if you have a mental model (or several of them ideally) and then test them against the new developments and data coming in. Simple example - Andrew Young’s UBI. This was fringe idea proposed by a fringe candidate and seems outlandish and quite frankly it is socialist, but look at where we are know? This idea has gone from fringe to mainstream and Trump may sent out checks very soon. That’s a huge paradigm shift. I asked in the Coronavorus Thread if a health insurer could go bankrupt. Most seem to think no, which probably is right. But what happens if we get a pandemic and it makes a large insurer like UNH insolvent? Quite frankly, their capital cushion isn’t all that impressive and if there is a huge surge in claims, I could see that happen. What would happen then? Nationalization? Bailout? In what Form? And what would happen to the insured? Medicare for all? It‘s just a possible scenarios and purely speculative, but I guess we will see in the next 12 month things that we never thought to be possible. At least that’s my thinking. I also like the term New Deal 2.0 because I think that what I think we will be getting. I have no idea what it will look like though. It’s an interesting time to be alive and hopefully stay that way.

No comment: https://www.cnn.com/2020/03/20/media/trump-rant-at-nbc-news-peter-alexander/index.html

I don’t think demand will stay strong. When all these hoarding buys are completed and there hoarders see full shelves whilst they have 1/2 year of canned food in their pantry, they will stop buying. I give this another week and then it will be over.

I hope you are well. LAforeverHall (formerly known as ScottHall) mentioned it on twitter and it’s interesting. The Billboards business certainly will be affected in the near term, but mid/long term I can see this bouncing back quickly.

So does Wells Fargo. That said, I was customer with US Bank once and wasn’t impressed.