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“Diplomacy without arms is like music without instruments.”
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Equity investors hoping for a reprieve in the new year after a brutal 2022 are likely to be disappointed, according to Michael Kantrowitz at Piper Sandler & Co. The strategist, ranked No. 3 in the last year’s Institutional Investor survey, predicts that the S&P 500 will fall 16% to 3,225. The price target is the lowest among Wall Street prognosticators tracked by Bloomberg. Should that call come true, it’d be the first time since 2002 — and only the fifth time in almost a century — that the benchmark index suffered at least two consecutive years of double-digit declines.
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“My yield-curve indicator has gone code red, and it’s 8 for 8 in forecasting recessions since 1968 — with no false alarms,” Harvey, now a professor at Duke University’s Fuqua School of Business, said in a interview Tuesday. “I have reasons to believe, however, that it is flashing a false signal.”
One of the reasons is the fact the yield curve-growth relation has become so well known and widely covered in popular media that now it impacts behavior, he said. The awareness induces companies and consumers to take risk-mitigating actions, such as increasing savings and avoiding major investment projects — which bode well for the economy.
Another boost to the economy is coming from the job markets, where the current excess demand for labor means laid-off workers will likely find new positions more quickly than usual. In addition, he said, given the largest job cuts so far have been in the tech sector, those highly skilled recently fired workers are also not apt to be unemployed for very long.
Harvey’s model was linked to inflation-adjusted yields and he said the fact inflation expectations are inverted — meaning traders see price pressures easing through time — also eases odds for a recession ahead. “When you put all this together it suggests we could dodge the bullet,” Harvey said. “Avoiding the hard-landing — recession — and realizing slow growth or minor negative growth. If a recession arrives, it will be mild.” -
Did not find MCD thread, so will post it here, long but interesting story:
Why did McDonald’s thrive where other fast-food businesses failed? I asked Andrey Dellos, a renowned Russian restaurateur whose holdings include Mu-Mu, a downscale Russo-centric chain, and Café Pushkin, located in a Baroque-style mansion across from the flagship Golden Arches. “McDonald’s success in 1990 was not a question of taste. It was not a question even of food,” he said over espresso at his cafe. “Communists made a fantastic mistake when they closed the doors. They made the United States a dream. For practically all the Soviet people, the United States was a real paradise.” Dellos gestured out the window across Pushkin Square. “And now, can you imagine—a piece, a sample, of that paradise appears just over there?” The Wild Nineties came to an emphatic end in Russia with the 1998 ruble crisis, which saw the near-collapse of its banking system and an exodus of foreign capital from its markets. With imports now a major financial gamble, McDonald’s began what would become a multidecade push to increase its share of locally sourced ingredients from just a quarter. The Russian economy eventually rebounded, and by the late aughts, other chains’ boards were dusting off their strategic plans. Burger King arrived in 2010. Dunkin’ Donuts returned the same year. Cinnabon International Inc. and Wendy’s Co. entered, too. All the while, Russia’s oligarchs looked on with frustration and a desire to domesticate fast food—so the experience would be nash (“ours”), according to Melissa Caldwell, a professor at the University of California at Santa Cruz, who studies food in post-Soviet Russia. They spent fortunes attempting to siphon away customers by shamelessly emulating McDonald’s, echoing a dubious Russian tradition. (Caldwell notes that the Kremlin under Nikita Khrushchev marketed kvass, a fermented-bread drink, as Communist Coca-Cola.) One, Blin! Donalt’s, opened in 2002, attempting to turn Russia’s blini pancake into a Big Mac-killer. Owned by Yevgeny Prigozhin, the billionaire food baron who later became notorious for controlling the Internet Research Agency troll factory, it had red and yellow colors as well. Blin! Donalt’s dissolved in 2012. Far more successful was Mikhail Goncharov. After going bankrupt during the 1998 ruble crisis, he took his mother’s blini recipes and started a street stall in St. Petersburg that became the ubiquitous chain Teremok. Goncharov told me that the banks would loan McDonald’s money, but not Teremok at first. He’s complained to Russian media that this shortage of funds forced him to learn which authorities to pay off and which oligarchs to offer stakes in the company. Seeking to grow, Goncharov conducted a hypertargeted competitor analysis. “At the beginning, I went and found a McDonald’s training manual,” he said as I tried the cheese blini, chicken noodle soup and Teremok-brand kvass that he ordered for me at a north Moscow outlet, pre-pandemic. These manuals were near-encyclopedic restaurant management guides, a 3-inch binder filled with strategy that had been translated into Russian. Goncharov said Teremok followed their instructions carefully. Workers learned to prep toppings in advance and to deploy what he called the “psychological tactic” of smiling to disarm upset customers. Goncharov also became a public thorn in McDonald’s side, seeking to appeal to Russian patriotism. Even as he was expanding his chain to 100 locations by 2010 and more than 300 today, he blasted the rival’s executives as a bunch of “bastards,” demanded regulations that benefited smaller domestic competitors such as Teremok and released a blini that he said “tastes like a Big Mac” on McDonald’s 30th anniversary. For a time, McDonald’s could mostly shrug at the competition. In 2010 it had hundreds of locations spanning from the Baltic Sea to southwest Siberia. Per-store traffic was two times greater than its next-busiest international market’s. It had bought out the Russian government’s half of the joint venture and ranked among the country’s largest corporate landowners. It also boasted of selling the most ice cream there and pouring 1 in every 3 cups of coffee.
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22 hours ago, maplevalue said:
Jack Ma’s Ant Wins Approval for $1.5 Billion Capital Plan
This is much better than just words, of which we have plenty:)
But perhaps fundamentals/growth will be a driver soon.
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Value or not, I actually thought it was cool he loaded on shares with central bank's cash in spring 2020, not many did, even BRK did not.
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16 minutes ago, Luca said:
At current Valuation they bought back around 4% of shares outstanding in half a year. I think prosus knows how to do buybacks and the close contact to management of tencent gives downside protection since tencent really understands the market and regulations. I think they even have people working side by side in tencent offices, heard that in one of pabrais interviews. Prosus is just great because downside is lower thant buying tencent HK shares due to discount and additional basket+mangament that works together with tencent.
One problem i had last year when shares dropped 50+% was that i could not fully understand what was going on, especially because my chinese is non existent and i dont understand the regulations there. Its nice to have a extra layer between the investment so if there are any problems between countries i expect naspers and prosus to have higher chances saving the investment if shit hits the fan+prosus has a basket of other buisnesses where some have also decent potential in interesting markets.
It all depends on chinas regulations and developement, guy spier uploaded a nice video yesterday where he shares what i agree on: China is not going backwards, they are a developing nations which got used to prosperity by markets and trade and that wont change. Yes they might make mistakes and be more radical in regulations but i dont think they will kill tencent or forbid tencent to make investments out of china (which tencent does and focusses more on because they are smart). Just the venture capital arm i believe compounded north of 25% annually and they own a lot of great buisnesses. They also can navigate the chinese market better and invest in start ups there, if the chinese dont go crazy i think a lot of wealth will be created in the chinese tech markets the next decades. Lots of smart people graduating and working there.
From a valuation standpoint i am most bullish on Tencent of all stocks right now, if they are let free to play out their hand. Prosus is just an extra layer that gives me peace of mind and at protects the potential downside.
Thanks for your comment!
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40 minutes ago, Luca said:
Ill throw in BRK as well of course, compounding all weather machine, further buying great assets and growing earnings.
Bullish on TSM although we might see a chip slowdown next year. Long term looks great and PE is fair at 13.5.
Prosus: Buybacks continue every week (around 150-300m € worth of shares!), they are still trading at a decent discount, Tencent is still very undervalued compared to what they can build the next decade (attached prosus buybacks till December). Tencents cloud buisness could be worth current marketcap in a decade, main buisness is great, venture capital arm is amazing.
The rest, amazon, alphabet, apple, meta. All look good longterm.
Luca, what are these numbers?
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As the Covid-19 pandemic sent global markets swooning in early 2020, Saudi Arabia’s Crown Prince Mohammed bin Salman, sensing opportunity, pressed the country’s sovereign-wealth fund to go on an international stock-buying spree. The board of the Public Investment Fund, or PIF, resisted the move as too risky, but soon found itself overruled by an even higher authority, Prince Mohammed’s father, King Salman, according to an October podcast by the PIF governor, Yasir al-Rumayyan. Without sufficient liquid assets to satisfy the prince’s desire to move quickly, the PIF prevailed on the Saudi central bank to give it tens of billions of dollars, despite concerns from government officials that doing so might undermine the local currency’s peg to the dollar, according to people familiar with the matter. Prince Mohammed, the PIF chairman, personally picked many of the stocks the fund bought, fast-tracking the purchases through an ad hoc committee that bypassed normal decision-making channels, these people said. The $35 billion deployed by the PIF quickly turned into $49 billion when markets rallied, Mr. Rumayyan said on the podcast. But the episode escalated a power struggle over the future of the world’s seventh-largest sovereign-wealth fund, now with $600 billion under management, according to interviews with current and former employees, consultants and other people familiar with the fund. On one side is 37-year-old Prince Mohammed, the fund’s chairman since 2015, who dabbled in stock picking as a youth and has led the PIF into investing in videogame makers, luxury-car manufacturers and an English soccer team. On the other is a growing group of professional financiers who are trying to put guardrails around how the kingdom’s oil wealth is spent. The outcome will help shape the future of Saudi Arabia’s economy. The kingdom, flush with cash from higher oil prices, is aiming to grow the PIF into a $2 trillion behemoth by 2030.
Consultants and people who work with the PIF said it is like any company or investment fund around the world that is dominated by a big personality or deal maker, and much of what the prince—or the governor, Mr. Rumayyan—recommends is based on a broader economic rationale. A case in point: Prince Mohammed’s interest in electric vehicles is well-known. In 2018, the PIF began putting money into EV startup Lucid Group Inc., investing $3.8 billion in all. Its 60% stake is now worth roughly $7 billion. Meanwhile, the California-based car maker has broken ground on a factory in the kingdom slated to create jobs for the Saudis, a win for the PIF’s dual strategy of investing for financial return while developing the domestic economy. Other times, the crown prince’s interests have led the PIF into investments like Noon.com, an e-commerce website that planned to take on Amazon.com Inc. In the past two years, Noon suffered losses of $520 million, according to the PIF prospectus. The value of PIF’s current stake or whether it has invested further couldn’t be determined. Noon declined to comment. In 2018, after Prince Mohammed, an avid gamer, tried an augmented-reality product from a buzzy startup called Magic Leap, the PIF invested $400 million. At the time, the investment valued Magic Leap at more than $6 billion. By 2021, when the PIF took a majority stake, the company was struggling financially and the valuation had slipped to $2 billion. The prince’s biggest bet, a $45 billion commitment in 2017 to SoftBank’s Vision Fund, has lagged behind the overall market and hasn’t produced the flurry of foreign investment by technology companies into the kingdom envisioned by the PIF leadership. The PIF invests domestically in dozens of new companies and real-estate developments such as a 75-mile long skyscraper, as well as internationally in private equity and stocks and sports initiatives such as the Newcastle Football Club and LIV Golf. “Our results speak for themselves,” the PIF said. “PIF is helping drive the transformation of the Saudi economy and generating strong financial returns and economic opportunities for the people of Saudi Arabia, our ultimate stakeholders.” Saudi officials said Prince Mohammed listens to his advisers and sometimes argues with them about how best to manage the government’s finances and the PIF’s investments. But he has the final word in both arenas, they said. “He’s very passionate about the economy, and sometimes we spend many hours arguing, including with His Royal Highness,” said Finance Minister Mohammed al-Jadaan, a PIF board member who has championed a series of moves to shape how PIF money is spent. In an interview, Mr. Jadaan called the 2020 central-bank transaction an extraordinary one-off episode.
In the spring of 2018, Prince Mohammed asked Mr. Rumayyan to buy a stake in Tesla, spending $2 billion on shares available on the public markets, people familiar with the request said. Later that year, Mr. Rumayyan met with Tesla Chief Executive Elon Musk for a discussion about further investment, a meeting that became the precursor to a set of tweets Mr. Musk posted saying he was taking the company private and had “funding secured.” The Securities and Exchange Commission later sued Mr. Musk for allegedly fraudulent statements and he settled the case, while denying wrongdoing. The debacle unsettled PIF executives, according to people aware of their thinking. When Tesla’s share price recovered to above the fund’s entry, Mr. Jadaan asked PIF executives to sell the shares, according to people familiar with the directive. Tesla’s shares later rocketed, and the PIF’s stake in the company would now be worth roughly $11 billion if it had simply held on to the original investment.
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They just days ago again cracked down on online education and brokerages, providing foreign trading. And is Didi app already available? Would be far better indicator for me, than his greetings...
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2 hours ago, Castanza said:
Not specific to ChatGPT but this is absolutely mind blowing. Worth a listen even if you only listen for 5 minutes.
There is this idea, that AI could disrupt some current content creation, especially on social media or future metaverse:
https://stratechery.com/2022/dall-e-the-metaverse-and-zero-marginal-content/
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“Bodies are overflowing everywhere,” said the employee, who asked not be named. “You’ll have to wait a month if not.” While funeral homes warn against trusting brokerage services, some middlemen are using creative ways to reach anguished families. On Douyin, China’s version of TikTok, videos featuring colorful visuals and stirring music advertise Mercedes-Benz hearses, elaborate burial clothes and Babaoshan cremation slots. “We couldn’t afford to live under lockdown,” wrote a person on Weibo, sharing a view commonly expressed on the social-media platform over the past few weeks. “And now we can’t afford to die.”
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5 hours ago, SharperDingaan said:
A couple of one-liners from the dark continent!
https://www.motivation.africa/top-30-funny-south-african-jokes.html
The only way to know that small things irritate is when you share a room with a mosquito at night.
The quickest means of communication is to trust a girl with a rumor and then make her vow not to tell
You don’t need a parachute to skydive, but you will need one if you want to do it twice.
The sole purpose of your middle name is so you know when you are in real trouble with your mother
No matter how far you urinate, the last drop always falls at your feet
Never underestimate the power of stupid people in large numbers.
You cannot run and scratch your anus at the same time.
The monkey who tries to see the hunter clearly collects bullets in its eyes
SD
With enough thrust, pigs, can in fact fly
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1 hour ago, SharperDingaan said:
Wherever possible, just walk or bike everywhere, and eat better but less.
Physically move, experience the world around you, and think independently. Throw the skinny bike seat away and get a real one that doesn't break your ass. Go with the small quantity of chef prepared steak and a top-shelf wine, versus the buckets of 'line cook' fare.
Periodically do a bike trip in someplace new (ideally Europe). Taxi's move your shit from hotel to hotel; you just ride the bike between places, about 40-50 km/day, and take the whole day to do it. Experience the culture, stop whenever and wherever you feel like it. Share a bottle of 1st Cru every 2nd night with friens.
Tossing metal around is for machines!
SD
Actually your advice on bike seat resonates with me quite well:). Especially it is a problem for few weeks after winter break:). In a summer I ride bycycle almost every day. Somtimes I go to a completly unknown places, without plan, as we say "where eye can lead". In winter...well maybe home bike trainer is also much more for machines, but still I like it:)
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BRK. Still not overpriced (or even yet below market valuation). Safe, defensive, somewhat resiliet to higher rates etc. I think still way better vs just SNP.
FFH. Also higher rate proof, value/short duration, otherwise not much to add.
JOE. Not much to add. Actually it is old economy stock, but longer duration rates wise. But i like it already, despite of where rates will be.
META, GOOGL, AMZN. META is already value stock:), GOOGL at or even bellow market multiple and AMZN I think at least not overpriced:). As a group of by ~50 per cent, trading at simillar ot cheaper than market valuation, while arguably much better and much faster growing businesses. I think these are also somewhat inflation resilient in terms of their businesses (strong market position, low capex, pricing power), but perhaps would suffer more valuation wise, if rates would be higher, then expected. Maybe TSM could be added to this group.
UMG. Maybe not obviously cheap looking ar current multiples, but really wonderfull business, with tech like growth, yet more long term visibility. Maybe, looking similarly, LVHM is also interesting.
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9 hours ago, Spekulatius said:
I recommend checking out the documentary “Winter on Fire” about the Euromaiden revolution on Netflix. It also provides background and it is clear that the war in Ukraune started in February 2014 not 2022, it just went cold for a while.
Before Viktor Yanukovych was ousted , Ukraine was on its way to become a Russian vassals state like Belarus by means of a treaty with Putin that pivoted Ukraine away from its path to the EU toward Russia. When people revolted and ousted Yanukovych, Putin took military action and invaded the Crimea and also started a proxy war in Donbas that never really ended.
Now in 2022, Putin came to finish the jobs he started in 2014 but what while the West and the US did nothing in 2014, to Putins surprise the Western response was unified and impactful and that’s got us and Ukraine where we are right now.
Based on my read of the story line of history and and Putin, this will not end with Ukraine becoming neutral or anything of this sort, because Putin knows that the people in Ukraine tilt toward the west and sooner or later any Russian friendly regime might fall.
So in my opinion, the only way to end this is to help Ukraine to become part of Europe in the end and likely part of NATO or associated with it. Anything else will just make the conflict a temporary cold one and Putin will strike again at an opportune time for him to get what he thinks belongs to Russia.
I have no idea if another Russian leader would look at this the same way. Possibly any Russian leader would, be skeptical towards the west, but I don’t think about anyone would start a war - that’s a choice not and inevitable thing.
I agree with your view, nothing to add.
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2 minutes ago, Spekulatius said:
There are supposedly 40k conscripts alone in the Bakmuth area and if you want to see grizzly footage on how they are doing there , there plenty of it.
This is not very pleasant video, but here you are, some managment lessons from Donbas:
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2 minutes ago, backtothebeach said:
Predicting currencies is hard.
I don't think it is so clear cut, either. Euro zone debt to GDP is about 96%, U.S. debt to GDP 137%, thanks to the binge spending of Trump and Biden. On the surface Europe can afford higher interest rates (while supporting Greece and a few other high-debt countries) better than the U.S.? On the other hand the U.S. can just pay interest with new debt, which the Fed buys up, all the while keeping inflation under control, until the end of days (see Japan)?
I don't claim to understand the intricacies, or if the debt to GDP is entirely comparable between Europe and the U.S., maybe wabuffo can chime in.
As a frequent traveller, from a buying power point of view, I think 1 EUR = 1 USD sounds about right.
As an investor I don't hedge between USD / CAD / EUR. Over the long term it should average out ok. There actually seems to be a smoothing effect sometimes: US stocks go up more than EUR stocks for a period, but the dollar is weakening at the same time, and vice versa.
I do not hedge currencies either. However not hedging plus borrowing in EUR would be much more like making a bet on currencies. Regarding EU I am much more sceptical, total debt maybe still ok, but just look at Italy, and it would be hard to fix its debt like Greece's, because of different size. But most important difference from US I think is potential long term economic growth rate. Just from demographics its 1 or even more per cent defference? And then all inovation, government size, energy independence, now security, millitary and other issues. But yes, I am no way considering USD undervalued after last year or two, and it could move against such strategy painfully at any time. But what odds of EUR gaining against USD in 5 or 10 years?
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For all its complexities, America’s nationwide housing crisis boils down to a problem of supply and demand: The country needs a lot more homes than it has, yet even ambitious reforms won’t provide developers with enough incentive to bridge the gap. Addressing this dilemma could well be the defining public-policy challenge of the next few decades. The problem is enormous: To close an accumulated shortfall estimated at 3.8 million units, the pace of housing construction would need to be about 50% higher over the next decade.
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11 minutes ago, Xerxes said:
Ha, my family had Lada, very similar to one in the photo, I grew up riding this car:)
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We had a similar period in my country with temporary money, just after Ruble went toilet paper. The problem with such strategy was nobody would lend you any serious money for a long term in shitty currency in the first place or interest rates would be prohibitively high. There were some who were able to borow from the state owned banks, while making serious money in such way, but those were not market based transactions so to speak:).
However, and I am not sure about this in the near or mid term, but I sometimes I wonder if borrowing EUR to fund investments in USD or other currencies would be a good strategy in the long term. EU, because of its debts, demographics etc, not to mention new energy and war issues, seems to be under some serious pressures and structural disadvantage vs rest of the world. I can not imagine very high EUR rates for a long term or relatively vs USD, and region could be forced to revert to zero rates just like JPY in the future, so 1. interest rates on EUR loans probably will stay lower with 2. a possibility for further EUR depreciation. It would be interesting to hear what other think about this, especially those based in EUR? If you invest in US/USD and use some leverage, do you borrow in USD or EUR?
Cryptocurrencies
in General Discussion
Posted
https://www.wsj.com/articles/silvergate-raced-to-cover-8-1-billion-in-withdrawals-during-crypto-meltdown-11672895207
Crypto-related deposits plunged 68% in the fourth quarter, the bank said in an early release of some quarterly results. To satisfy the withdrawals, Silvergate liquidated debt it was holding on its balance sheet. The $718 million it lost selling the debt far exceeds the bank’s total profit since at least 2013.
Silvergate was able to survive such a steep decline in deposits because it isn’t structured like most banks. It sold off much of its traditional banking operations and branches to focus on providing bank accounts to crypto exchanges and investors. Crypto-related deposits account for some 90% of the bank’s total, and it keeps almost all of its deposits in cash or easy-to-sell securities. At the end of the fourth quarter, Silvergate said it had more cash on hand, $4.6 billion, than its $3.8 billion in remaining deposits. And it held another $5.6 billion in debt securities such as U.S. Treasurys that could be sold quickly. Daily average volume on Silvergate’s network rose in the fourth quarter, the bank said.
On a call with analysts Thursday morning, Silvergate executives said customers didn’t simply close out their accounts; rather, they told the bank they were moving their money out of crypto and thus didn’t need to keep so much of it with Silvergate. Even customers who are focused on digital currencies pulled their cash to invest in supersafe assets like Treasurys, executives said. “Our customers have taken a huge pause,” Chief Executive Alan Lane said.