scorpioncapital

¨This was a time when P/Es were not high to begin with, and interest rates were not that low to begin with. This time, it will be devastating if inflation/interest rates shot up that high by any chance¨ I think profits would be much higher, even if companies could not keep up with pricing power if inflation was unexpectedly 10%. Therefore even if pe now is say 30x, if profits double will be 15x. The stocks may still go down to say 10x pe but it is not more devastating than in the 1970s. Also it is not clear that stock market crashes are only influenced by inflation. inflation can be high or low when stock markets crash. Inflation does tend to produce sideways markets (and there is a good book called the little book of sideways markets that is worth reading I feel for the period ahead). These are markets that may not go down or up too much for many years. In this scenario, i feel you want income, you can do arbitrage, you can accumulate great companies on dips, but you should not expect 10 baggers except perhaps in some venture capital fields. Even there, there will be more headwinds than has been so far.

say a deal closes in 1 year and inflation is increasing, should the spread widen or it is too short term to matter much? After all even if inflation was 5%, what would an investor buy if 1 year bond rates are repressed and stocks are having a headwind from the higher inflation?

I would like LBTYA even more if it paid a dividend. I don´t want share buybacks from a utility. I want cash in hand, like VZ. I do own LBTYA but have reduced somewhat because I do believe European, including UK pricing will not allow for such higher margins as other countries. Anyone can borrow at 4% and make 8%, I think markets sniff out capital efficiency and ROIC and this will get more and more important especially as more capital needs to be ploughed into the venture to keep the same level of cashflows.

that last point is interesting because if you look at berkshire, a large part of it is infrastructure. I think he finds it as a place to allocate large amounts of capital in fixed assets and stable returns meeting his 10% hurdle rate. Berkshire just cannot do what a smaller investor can do. For a smaller younger growth investor, VZ may not achieve their goals but for Berkshire it is the best practical fit. It also is in the US which has regulatory and knowledge advantages which he likes. Note he dumped a little LBTYA last year and then suddenly the VZ investment pops up.

As the world gets better outside North America, there will be less workers because they won´t want to come. There won´t be a better quality of life. Therefore these countries will need to automate more. If they cannot they will have to pay more, causing very high inflation. Then, these countries will begin to ask, why don´t people want to come here anymore? They will pass infrastructure bills and spend huge amount of money they do not have to try to improve the conveniences and quality of life. This is not always possible as the quality is often cultural and often actually involves overbuilding - but in the right direction. This is a new continent. Europe has had 1000+ years to perfect infrastructure, layout and living. Much of it actually was post ww2 so we cannot say it is time I think. Perhaps it really is an attitude and priority issue. I also think more northern places will always have inferior infrastructure to more southern given the climate issues. Humanity evolved in the mid-tropic regions with mild weather, abundant food, agriculture.. all things being equal living in extreme environments is like living on Mars, you have to be a gluten for punishment. The question is why people do it. Perhaps there are some benefits but it does have economic consequences.

You have to travel and think global. From what I see the world is vibrant, young and plenty of demand in many places. The western countries have followed failed economic policies for decades and have little to offer. I chalk it up to communism and too much government control. But if you look around globally things are not as bad, just in the so called ´western banana republics´. They either smarten up or continue down the road of more stagnation and pain for the dwindling population.

calpers is on autopilot algorithm. a prime example of the dangers of AI or any algorithm without much intelligence behind it.

what kind of Bs is this selective quote about war and WW2? over 75 million died in WW2 globally out of a 2.3 billion global population and so far 3 million worldwide for covid out of a much larger world population of 8 billion. spending is beyond WW2 levels for much less deaths. there is just no comparison.

Deficit spending IS higher taxes...unless you want hyperinflation..which is also a tax. Therefore it is always a higher tax.

If inflation is or is likely to be 2 to 3% as the Fed wants, wouldn´t 1.8% be below inflation growth rate, thus a decrease in real terms? True it´s only for 1 year but already we can say it is negative real growth rate. I guess you could hold defense stocks as bond equivalents but it isn´t very ambitious. One could expect perhaps a slight positive return, better than holding say government debt but that isn´t saying much.

Why would you be short ark? I don´t see anything in there particularly bad or even extremely expensive except in a few cases.

this is exactly the dynamic I'm very worried about. best case flat for a decade or small return for high valued stocks even if Inflation should help the m. it would seem one still wants to own these companies but only on a rolling basis as multiples compress and the masses get bored of watching paint dry or not finding it financially rewarding. in disgust they may move to steady bond income, and then stocks would be great buys. it happened in the 80s. time had a cover page "the death of equities". in today's version I can imagine reddit and the robinhooders just totally silent.

do you know why house prices rose during the 70s and 80s when carry costs were so high ?

I suppose the idea is that the expenses must not increase as fast as the Increased commodity revenues which requires less people and less other fixed costs. probably there are some exceptions like insurance or digital banking.