Spekulatius

Developers seem iffy in this environment. Might be difficult to fill/lease up buildings.

KAR had a nice bounce and position is gone (small loss).

Though it is unfortunate, I think it is less odd considering the following factors related to how people process information: I think part of the reason why watching the developments with caution doesn’t really apply here is be Successful in investing you need to anticipate movements rather than just react to it. In the current situation, the ground is rapidly shifting and the outcome is quite unclear. It is a situation that is somewhere in between the GFC and 9/11 in my opinion, but others think that it’s just a flu. The divergence of outcomes and opinions is immense and there I are lot of type A personalities here (typical for finance), so this quickly gets very heated.

sorry to hear that. Do you know their ages? Both in the 50s. @Muscleman , very very sorry to hear. Reoccurring infections have been reported in China (my wife told me about it) and so far seem inexplicable and scary. Probably different strains of the Virus ( solely my conjecture).

While that is a good point, as presumably the go forward economic effects are similar, I think the starting valuation matters as well. The US markets were considerably more euphoric than the Italian ones, so a larger fall doesn't necessarily seem disproportionate. I thought of that, but then which economy is more tolerant of shocks? I thought the US had a stronger economy and that should count for something. A lot of the Italian companies aren’t really “Italian” , they operate Pan-European or even world wide. I bought bit of LEO.MI (Leonardo), which is a defense companies (and helicopters). Has a strong US business (DRS). European defense should do well, since government are practically to raise defense spending as % of GNP. LEonardo has one issues running the business (weak FCF) but that should be fixable. Pirelli ( high end tires ) a bit similar. Quite cheap considering their almost best in class profit margins (close to Nokian) due to being mostly in the premium segment. This is a world wide operating company (albeit in a crummy sector currently) that just happens to be trading in Italy.

Yes, that was a pretty good press conference. No sugar coating, stating what is known and admit was it not. Simply factual and forward looking. Compare this to Trump’s press conference yesterday. It was a clown show with a bit of campaigning and boasting thrown in. Spek, I was thinking the exact same thing about Trump. It really is mind boggling. PS: I also owe you a thanks. When you posted about 2 weeks ago that you were busy selling a bunch of stuff due to your concerns it aligned with what i was thinking at the time and likely helped with my decision. :-) Thanks for sharing. An act of leadership by Inslee, hoping actions will speak louder than words. I'm not sure if you were being sarcastic - I don't think a US epidemic is priced in. Clusters in some states yes, but if they have 1000s of infected patients in more than a couple of states moving freely across the country, I don't think the kind of interventions that will be needed and economic disruption that will ensue are priced in. I think it was Vikings comments that near term developments are priced in, it mind. This is most likely correct. I am not sure it is priced in that we may have large scale lockdowns, airports shut down, schools shut down (already happening) some of this possibly nationwide. Also if this peters in summer, it doesn’t mean it is over either, but that we need to prepare for a second wave that most likely is going to hit next winter. It is unclear if we have a vaccine by then and even if, it will most likely to be only partly effective. So I think this is going to be a big deal, similar than 9/11 but most likely worse in terms of economic outfall. Sounds pessimistic, but I tend to be optimistic. I just want to get rewarded for risk taken. valuations are getting better and there are some cheap stocks around, but overall markets haven’t priced in these risks yet. I am about 75% invested (from 50% when I sold, since I rebought a bunch of stuff cheaper ) and I think it’s still too high. I can easily see us breaking the lows from 2018. More importantly, me and my wife both have elderly parents we are worried about. My wife wanted to visit her mom this spring break in CA, but she cancelled this trip, out of concern about travel risk and exposing her, as well as the risk of getting stuck in a lockdown.

Interesting thread from reddit about conditions in Italy. Looks pretty dire. It also seems that they are not as incompetent as some here believe, as they clearly prepared a week ahead for an avalanche to patients that they new was coming. Italians may not have the strongest government, but are masters in improvisation at a local level. https://www.reddit.com/r/medicine/comments/ff8hns/testimony_of_a_surgeon_working_in_bergamo_in_the/ I can vouch that this is real of course, pulled it from twitter. Make of it what you want. If the hospitals prepared at a local level 1 week ahead, they are better then the hospital my wife is covering which seems to have done nothing (no protocols for COVID-19 patients in place, no N95 mask etc.). I hope it never hits as hard as it hits Italy because quite frankly, I don’t think we will look better.

Yes, that was a pretty good press conference. No sugar coating, stating what is known and admit was it not. Simply factual and forward looking. Compare this to Trump’s press conference yesterday. It was a clown show with a bit of campaigning and boasting thrown in.

Managed to get my grimy hands on a few more units today at a good price. I feel like a collector ?. They announced a small raise in distribution to $25 so business seems to be going on somehow. https://www.otcmarkets.com/stock/LAACZ/news/Distribution-Announcement?id=255435 Eric is correct that if you actively manage your own real estate with significant leverage, you can get higher returns. I personally expect a compounded return in the high single digits (8-9% conservatively), consisting of a 4-4.5% distribution yield, some organic growth ~4% and share repurchases 0.5%. 4% organic growth shouldn’t be too hard with some inaction and some organic growth from upgrading properties or purchasing new ones from retained earnings. I have owned this since 2012 and they expanded from 47 wholly owned to 59 owned properties just with organic growth. It’s like watching grass grow, but in a good way. Easy to understand and no worries.

Who doesn't love a roller coaster. Wheeee! I think we get more bumps, These roller coaster always have straight stretches.

Thank you for your well reasoned post. I also read the news from Italy from German sources and it seem clear that their health care system is breaking down under the onslaught of patients and possibly some panic too. I don’t think we should dismiss Italy and in particular Northern Italy just as a badly managed country. The reason why Italy got hit too hard is because they got hit first (besides China) and didn’t have time to prepare (as German disease experts point out). Other countries, including the US don’t have that excuse. Germany is at risk too with several outbreak clusters, and at least they have clear escalation protocols in place that I believe are going to be used as necessary. Italy didn’t have they in place and that’s why they are paying the price.

Understood.I wonder if it is really true that only Democrats worry about the Corona Virus and Republicans don’t give a damn? It’s not that simple, I know some Trump supporters who are very concerned (even before I was), because they frequently travel to Asia. One fellow self quarantined himself as early as January after traveling to Thailand, because he was afraid of infecting his family. Or is this a coastal vs a middle country thing? Trying to wrap my head around the psyche here, because even after living here for mehr than 20 years, it continued to surprise me in many cases. My wife is immigrant to so she doesn’t understand everything either....

You mean the school is canceled due to concern about epidemic and the kids use the free time to go to a theme park? Way to go. . I think we are one step from getting mass gathering restricted , which most likely will include theme parks. Large scale lockdowns are strong possibility in my opinion as well and they could easily be nationwide. US is huge, so less likely that the whole country is locked down than in Europe, but it’s still a non zero chance.

Even if customers don’t get bankrupt, how much life is there left on this business? Terminal value would be determined by liquidation proceeds?

Bought some Tosnet Corp 4754.T. Security service provider. Found it using Kenkyo Investing Magic formula screen. Very cheap and growing. Substantial net cash and FCF.

IBM, GE and GM are much more likely to get into trouble than the big banks, due to the size of their total pension liabilities relative e to their earnings power and market cap. Then the defense companies gave huge pension funds, but those are more or less indirectly funded fed by tax payers.

The way energy is going, the whole greater Houston area may have a lot of office vacancies soon. If they do what are the odds big tech pushes in like they did in Austin? Texas if fertile ground for California expansion. Austin is way more trendy than Houston. Even DFW. Houston is just Texas’ armpit.

Yes, I studied I too and bought into the decline. A small lot at $90 and another at $80, then sold at $78.5 as things stopped making sense. Yes, PSX is well managed and to some extend insulated from lower crude prices. However, if shale dies in the US how can PSX make a living. Their midstream assets will be impaired to some extend, chemicals are in the gutter and in the end, if shale dies, many of their refineries won’t fare well either living on Imports, especially those highly currently profitable ones in the mid continent. PSX is part of the US energy infrastructure fabric and if the E&P dies, everyone else in this business will have a hard time too. I sold because I have no idea how it will shake out and the outlook for the whole sector looked so abysmal. I might go back in, but not too soon, I think.

Italy is now entirely locked down. I hope we can avoid this, but it may happen here too. I think it will happen in more European countries. https://www.cnn.com/2020/03/09/europe/coronavirus-italy-lockdown-intl/index.html How long needs a lockdown last in order to be effective? I guess longer than the incubation period which would be 20 days that Taleb has mentioned. If we lose 20 days, that would 20/260 work days or 7.6%. Even with a 2% base growth rate they would be an almost 6% negative GNP print this year. Ouch! I was a buyer today. So I hope we can avoid this, but I am not sure. I don’t think that -6% GNP is priced in.

Unfortunately when there is a lot of blood in the streets almost everyone is dead. I frame it that way - politics determines the price here, so it makes sense if things don’t make sense. I had a costly mistake in this sector(now almost a decade ago) that stays with me to this day. You can get 99/100 things right with these and still just get blasted. Way to many moving parts and things out of the control of management/company. The toll collectors sounded like a solid idea as well, but often the capital structures just made them too much of a pain. I fuckin hate energy. Drill, baby, drill, should be explained to the shareholder as kill, baby, kill. Cuz thats what happens with your capital. That, and the cyclical nature of many, almost guarantee repurchases or dividends are done peak cycle...not appealing. I have been investing (if you wan to cal, it that ) in midstream since 2008. The issue is capital structure as you mentioned which makes the sector vulnerable to stress in credit markets (seen in 2008 and 2016j, but it is wrong or right correlated with energy prices. For the most part, it doesn’t really make sense, because the midstream are toll keepers, but to some extend they are tied to the mast , so to speak. If shale really goes to hell, a lot (but not all) midstream will go to hell with it, because E&P bankruptcies will impact the midstream as well. WMB has two sides of the coin - the Transco/Northwest piper , which is basically and utility and demand driven, but they also own G&P assets (which tie into Transco and Northwest pipes). If the producers will go bankrupt, one can see that the economic of the G&P asserts will be impacted to some extend. While it is correct, that the G&P contract is third to the land, not the E&P entity it could still occur that the next owner drills much less and hence pays much less for G&P toll fees. What we are seeing now is most likely an overreaction in midstream, but I think we are seeing looking at an extremely unfavorable newsflow with some economic impact on the midstream said too. Maybe it is priced in, but in my experience those things are nice priced in before they actually happen. For example, CHK looks quite distressed and they own many NG producing asset that feed into WMB pipes in the Northwest (WMB actually bought them from CHK a couple of years ago). What will happen when CHK inevitably raises the white flag and declares bankruptcy? There is no way they can survive with the current capital structure.

Yes, this seems to make sense and I think the author is correct and overall mortality rate will come down. The mortality rate varies a lot from country to country. Korea’s mortality rate is fairly low while Italy’s is surprisingly high. I guess age distribution and the detection/testing rate account for the difference.

Today is my fastening day, but that doesn’t mean I can’t drink. The Cali Syrah essence goes straight where it’s most needed.

The way energy is going, the whole greater Houston area may have a lot of office vacancies soon.

The thing is, how many will you have grounded "for a year"? For, even though they may not lose much in terms of value, they are not generating any income, but they are generating expenses - the debt lessors use to buy the aircraft does not get grounded. Also, as for the newer planes being less likely to be grounded, isnt price at least as important? ie, an aircraft 10Y old is certainly not the latest technology, it may consume more etc, but if the lease cost is such that it makes for that and more... The only planes that will sit from AER's perspective are ones where the carrier goes bankrupt. If they stop flying the planes but keep paying (because of contractual obligation) that actually helps AER because when they get the plane back it will have less cycles. When parking planes temporarily, non-bankrupt airlines tend to park their owned planes and continue flying the leased ones. Now, some airlines will go bankrupt, and AER will be stuck with their planes, just as some planes will come off lease. But the newer planes will burn through less of their remaining lifespan while parked. Also, a big discount on a short lease is more compelling on a new plane than an old one. A 50% discount on a 2 year lease is 30% off your total cost of ownership if the capital cost is 60% and op cost is 40%. On an old plane where maybe op cost is 80% and capital cost is 20%, a 50% discount on the lease is only a 10% reduction in total cost of ownership. Again, I dont know the exact ratios, but the relationship will hold at any ratio. Thay means newer planes are more likely to get picked up sooner, keeping AER's payments made. My concern with the aircraft leasing business is they if there is an oversupply for airplane, airlines will dump planes coming of lease to keep their wholly owned planes running to save the lease payments. This makes sense, even if a wholly owned plane is older, as right now kerosine is dirt cheap. I think this optionality is why some airlines lease part of their aircraft fleet.

It seems right and I am a buyer as well. One of the few recent IPO’s where value and growth potential somewhat intersect.