Spekulatius

FOX, RHM.DE and LDO.MI ( the latter two are plays on my European defense theme)

Thanks for the walkthrough. I guess I didn’t take into account all those adjustments. I wasn’t aware of consensus numbers either. Of course doing a ton of adjustment such that you canneries truck between the GAAP and the adjusted results isn’t necessarily a great thing either. At least the price of the stock reflects the troubles. We will see.

Doesn’t the cost moat disappear over time. JBLU for example is struggling to keep its cost advantage , although they have shown recently success with cost cutting. DAL has a huge advantage with hubs they basically control (Atlanta) and their credit card business. They also did a good job keeping older planes flying, their lower fuel efficiency doesn’t matter as much with low kerosene prices.

Energy. It’s already down on the ground and now it gets a swing with a baseball bat to the head.

I haven’t lived in NY state too long, but that’s exactly how you eat Pizza in NYC. Use a fork and they will use a pitchfork and chase you out.

Results are out: https://s3.amazonaws.com/mz-filemanager/89e54f51-9039-43b3-9c2c-45e55fab990c/c6fbad5c-6fd4-4685-ba41-9d3e69e5806a_ATTO%20Fiscal%202019%20Q4%20earnings%20release%2003.03.20.pdf I hear a sucking sound.

Agreed. The crazy thing is in 3 months the story could once again get flipped on its head. Not saying its likely but things are moving very fast right now; hard to know where we will be when the dust starts to settle. I do not think that interest rates are likely to rise in the mid term (2 years). There is just no way we are seeing an increase before the election. I think we are going to see another 0.25% cut within a short time.

Banks stocks are performing terrible. The 0.5% rate cut (with probably more to come) will reduce operating earnings for years to come. Add some loan losses to this, which have been largely absent and you have to reset expectations for earnings and ROA permanently lower. Sounds like perfect a value trap to me. I guess we will find out.

Valuation multiples really don’t matter. We heard already in another thread that with a 1% discount rate , a 2.7% FCF yield is a great bargain. Now if interest rates go to 0.1% even a 0.27% FCF yield is a great deal too. That’s a 10x upside right there, no growth needed. Europe and Japan are ahead of us and it has worked great for them.

I just refinanced and see me doing it again in a couple of month. Sounds like our banking system is going the way of Europe and Japan. I guess we can buy them for 1/2 tangible book in a couple of years, when they earn 2% NIM.

A lot of commodity business ( energy, mining, steel etc) and their suppliers may succumb to lower prices/ demand and possibly tighter credit. E&P‘s had structural issues before and weaker prices may make the situation far worse ( if that’s possible). Same with steel.

SAVE and JBLU have solid balance sheets and are hard hit. I agree it seems overdone. @rkabang - what strike price Jan 2022 calls did you buy? They seem pricey, due to the high volatility. I do agree it’s a good idea. I would probably just stick with thr common though.

I think the best similar case is that we can expect a mild form of 9/11. I expect travel and related industries to take a hit. Travel is responsible for about 10% of the global GNP, so if you haircut this by 10-20%, it’s going to be a 1-2% hit to global growth. Then there are trickle down effects on restaurants, malls, sport events, conventions and possibly business travel, aerospace (especially aftermarket parts) Best case scenario , this blows over in a few weeks and it’s just a minor speed bump with a bad quarter in GNP growth. Worst case, this leads to lockdowns to slow down the epidemics and then it comes back next winter and cause more lingering effects. Some countries like Greece, Spain, Thailand etc skid in recession and need a bailout. https://knoema.com/atlas/topics/Tourism/Travel-and-Tourism-Total-Contribution-to-GDP/Contribution-of-travel-and-tourism-to-GDP-percent-of-GDP

Do you think a lockdown in the US is priced in? I don’t think so. A couple weeks of lockdown would do considerable damage to the economy, considering how large a percentage of US lives paycheck to paycheck. US is most likely underreported because so few people have been tested. The hospitals my wife works (nurse in dialysis) in here still don’t have any protocol for this or tests done on as far as she is aware of. Europe is getting worse though and markets continue to drop. Italy may be past containment with so many new cases and most likely this is going to jump to other countries in the same area.

If one dead is only worth 200k, the 3000 killed in 9/11 would be worth a mere 600M. out in the value the asbestos contaminated WTC ($500M) and the goal cost would not have been more than $1.1B. Yet we spent more than 1000x that much to wage a war against terrorists and protect us against a second one. I think you are forgetting about 2 things and both are related. 1) reflexivity - it does matter what actually happens, it matter what people think what may happen 2) tail risk - with a new thing like this, nobody knows exactly what it going to happen. So preparing for the worst and hoping for the best actually makes a lot of sense. We know already that there is going to be an economic slowdown which probably kills profit growth this year if not worse. Otherwise we might have seen a 5% if not higher profit growth, so a 5% hit is entirely rational. If you assume a worse scenario, the current 10%+ correction from the top, bringing us merely back to last October’s Levels not irrational. So while there is some irrationality about the selloff, there was quite some irrationality about the rise before that, so it’s not clear to me that the market is overly pessimistic or too optimistic. The only thing I am sure about is they the volatility is going to go down. If I had to guess, there are going to be nasty surprises in I’d individual stocks that miss their forecast by a mile in the next round of earning releases, which makes it hard to handicap what to buy in affected sectors or those that are economically sensitive.

By far the most level headed logical approach to this situation. Castanza, "Level headed" ? - Please look at the "/6" and read it again. Basically all countermeasures to contain this thing are now enabled. It's BS. Level headed as in not inducing panic. The facts we have are the facts we have. Speculation to the extreme doesn’t solve anything. I’m not saying this guy is 100% correct in his analysis. One thing I have learned in financial markets is that you want to panic before everyone else does. ???

If America finds a cure faster than other countries then perhaps the fattening of the pharmaceutical companies has been worthwhile. Do you think another country (socialized medicine or otherwise) has a better chance? Well during the last Ebola outbreak it was a lab in Winnipeg that developed the vaccine. And a lab in Saskatoon that was created to deal with exactly these types of viruses and has tons of experience with corona viruses (including developing vaccines for them) has a already been working on this for a while. So we'll see... Vaccines are cheap. Not that much money to be made bd a minefield for lawsuits. It’s one of the best return on investment for public health, but not for Pharma or biotech companies. It’s one field where public funding is needed.

So the upside is book value , assuming they get a bit more than book and we subtract some for the corporate overhead.The downside is that the PR assets can’t be sold and with a pretty lousy 83% occupancy rate they become C mall assets and basically worthless. I guess I would really like some PR assets sold as a proof that they are worth something or is there any mark for these assets that demonstrates value. PR is slowly recovering from the hurricane events, but I have no clue how this translates into the value of retails assets they and if they cover the mortgages.

Air travel will rebound much faster than cruises, which are often planned many month ahead. Also, a cruise is just a form of vacation for which there are substitutes, but there aren’t really good substitute for air travel.

Plato, I [, me, personally, now living in a Northern European state for several years, with negative interest rates] think this line of thinking is somewhat flawed. Negative interest rates on deposits are only a part of the whole equation. In short, it about Net Interest Margin, not the interest level. NIM is correlated with absolute risk free interest rates. I don’t know any country they had high NIM and low or zero risk free rates. Even right now, when you look at the NIM trends of all major US banks, you can see that they have been trending down since the rate cut. The current interest rate trends in the US clearly forebodes lower profitability going forward for quite some time for banks.

We will find out in the coming months how individual countries are handling the outbreak. My focus on the US is i am coming at this from an investing perspective. If things get ugly in the US then financial markets are going to tumble. The word on the German stock exchange used to be “ if Wall Street gets the flu, Frankfurt gets pneumonia”. In fact, German markets are down more than US markets.

Interesting to note that Hk stocks have held up reasonably well. I am watching CK Holdings and other stocks and they are down maybe a fe % with no panic selling at all. Of course they have gotten whacked already due to protests, so maybe they are at a point where the bleeding stops regardless of newsflow, which generally is a very positive sign. Also, the numbers of new cases is down a lot in the Wuhan epicenter? Maybe the needs is all fake, or the containment efforts of the Chinese are actually working.

Usual suspects - everything that is not good for you: Guns (perhaps defense), booze, cigarettes, crappy food (Domino’s pizza) and perhaps add social networks to that list (FB). perhaps AMZN as people avoid stores and buy online. And yes people will watch more TV. NFLX stock is up, but the rest is down, might be an opportunity. CMCSA has some exposure in their theme park business and if Olympics get cancelled (NBC has the rights). I bought more this Friday regardless. The bulk of their cash flow (broadband, TV) should be fine, especially TV in an election year.

Fascinating story about the 1918 flu epidemic. It finally explains many details, - the fact that this flu was first mild, and the a second second wave much more severe killed many more people, why it is called ‘Spanish Flue’ (nothing to do with its origin) and how it may have shaped history. It’s an awesome piece of journalism: https://www.smithsonianmag.com/history/journal-plague-year-180965222/

Vitaliy Katsenelson likes it too: https://contrarianedge.com/equinor-a-good-crisis-is-never-wasted/