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Everything posted by Spekulatius
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@Xerxes The part obout the theft of electronic components in Taganrok is pretty hilarious.
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Elevator up and down Syndrom: If oil prices go from $60/brl to $100 brl, underlying oil stock trades at price A Then oil goes to $120, and after that oil goes back to $100 and underlying oil stock trades at B I can almost guarantee you that B < A, most likely significantly so. The reason is simple - probably half the people who owns this don’t have a clue and just play the momentum or the story. They would actually pay more for a oil stock with crude at $80 on an uptrend than the same oil stock with crude $100 and trending down.
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With the Euro or Yen declining, and stocks there declining as well, there ought to be some great values available in Europe and Japan. In Europe, the car makers like MBG or Porsche Holding trade at what seems to me very low valuations. They will make tremendous money with their exports to the USA at current exchange rates. Another one with Airbus. I would avoid something like BASF which is heavily dependent from NG gas as an input and likely will have to switch back to crude oil as an input. However, the electric power will not be an issue and most of the NG powered plants (like dryers for automobile paint shops) can be switched to crude. The car makers can sell everything they can build for this year for sure and probably next year for premium prices. MBG stock yields almost 10% (5 Euro dividend) . Porsche Holding May spin off Porsche which covers a good deal of the EV.
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Bought a bit more GOOGL for my wife’s account this AM.
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Turkey is a NATO ally. As for the Russians destroying grain silos and harbor infrastructure, I think Odessa has a reasonable air defense and it also takes quite a few rockets to do enough damage. It’s not like hitting a fuel tank that is going to explode. The Russians have been using their cruise missiles fairly sparingly indicating that don’t have that many to spare. In addition, the 300km medium range Rockets would bring most of their Rocket bases on the Crimea within reach, so the Ukrainians could pot. wipe them out. Others were fired of from ships ( they got about 40 ships left in the Black sea), so if we can get rid of those by chasing them away from Sebastopol , then they are not a factor either. Russia has some longer range stuff, but they are even more expensive and probably low on those as well.
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Yep, Export ban for refinery products would hurt the refining industry but also our trade partners. I think a lot of gasoline is actually going to Mexico, so they could potentially see shortages which could put their already suffering economy over the edge. It is something that would bring prices at the pump in thr US down in the short term, but probably do a lot of damage long term.
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I would go as far as ignoring the futures prices for oil if you invest in oil equities. I am not sure how useful they are to predict. it is pretty clear to me that prices should have never shot up $140/ brl because Russian oil is gone from the market - well it isn’t. There we’re some idiots saying that gold would go to $3000/ oz because of banning Russian gold in the EU. That‘s totally ignoring how the Gold market works (totally fungible) and ignoring that new Gold supply is minuscule compared to Gold in circulation. Besides the oil, I think NG is actually the energy source with the larger strategic relevance and probably the higher for longer term pricing. Some companies like SHEL have a huge integrated gas business that will benefit, but SHEL seems to be run in such a value destructive manner that it’s still not really worth investigating until it get much cheaper, Imo.
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You can buy similar FCF yields with companies that have very little commodity risk, Examples : GEF-B, WRK and to a lesser extend CE. In my opinion, these may turn out to be better investments in the long run. They have much less ESG headwinds and I would argue secular tailwinds from industry consolidation and substitution (WRK) and electrification (in the case of CE) Or if you like real cash returns ( not promises of cash returns ) look at the miners BHP or RIO. They are currently distributing double digit dividend yields. Those dividends are variable , but they own world class resources (iron ore for BHP etc) that place them as the best quality and lowest cost on global scale. BHP builds a potash mine that is going to be a 100 year life - think about an inflation protected asset here (it will require continued reinvestment but the initial outlay is one time >$7B). It could become a tremendous asset if it operates well (which is TBD). All the above are a much less crowded trade than energy and they have come down a lot from the peak, as have some commodity prices. However I can see that one can get high single digit returns from cash distributions alone without any multiple expansion or price change with inflation at all. Even with modest increases in equity value the returns through the cycle should be double digits. People go gung ho on energy because makes a lot of headlines sind performed well, but there is a lot of stuff out there that seems to scream value and nobody seems to care much. ( I own GEFB right now, but looking at WRK and CE as well). The miners are for later… Edit - if I do invest in this sector, the Canadian oil sands producer would be at the top of list (CNQ, SU) due to have long life resources and likely strong FCF.
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The US oil industry is making a huge mistake here, politically. This sort of stuff does not get them anywhere. Furthermore, Biden could actually bring down prices at the pump by bringing down excessive refining margins by slapping on an export ban for refinery products.? Turn out we are huge net exporter of refined Refinery products . Might be quite popular with the average Joe Sixpack. Its not the first time either we had something like an export ban. For a long time, we had a ban on crude exports in place that benefited the refining industry.
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I mentioned this before, I think crude goes back to $80-90/ brl which is where it was before the Ukraine invasion. Russian oil has not disappeared from the oil market, they export about the same quantities than before, just to different destinations A lot bulls are getting high on their own supply here. The money here is likely made on the short term we see the same nonsense playing out again and again (looks at semis ) and it’s not better than betting on COVID-19 winners. That said, I do think energy prices will end up higher than before the epidemic , but not as much than bulls think.
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That Odd lots shows a solution: https://podcasts.apple.com/us/podcast/odd-lots/id1056200096?i=1000568476294 The US/NATO navy would escort freights ships through international waters like thry did in the late 80‘s in the Street of Hormuz during the tanker wars. I think digits the Ukrainians some longer range rockets (which fit on the rocket launchers deliver to Ukraine I think) would make a lot sense. 300km Range gets from thr Ukrainian coast line to Sebastopol. Destroying some Russian warships right in Sebastopols harbor (if possible) would would be nice victory and likely chase them away where they can’t threaten the shipping routes to begin with. Just taking Putins toys away or make them worthless has a huge strategic value, Imo. It also makes breaking the blockade of Odessa harbor much easier.
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I think it’s likely that some tokens have value, but I don’t see much happening that seems interesting. I think we are probably 10 years away from business using the blockchain to produce something that has a significant economic benefit. The focus has been on cryptocurrencies because that’s where the quick money is. It’s also the title of this thread.
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Discount or the ratio of price/ book looks like we in the 20% range,not the 10% range yet. During the pandemic, it appears the discount was larger. Welcome to the boards @This2ShallPass!
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Buffett/Berkshire - general news
Spekulatius replied to fareastwarriors's topic in Berkshire Hathaway
He has got 30% of his fund in it. If he puts much more in it, why would anyone invest in this fund rather than buying BRK stock himself? -
@Parsad I don’t think crypto is that big. All these cryptocurrencies ad up to probably less than $700B in market cap. Then we have various crypto companies like $COIN, Ripple (private) that I don’t think add more than $100B in total, so that $800B. It’s a lot of money, but it really pales relative to stock markets or real estate. FWIW, I do think that at some point crypto was worth more than $2T so the difference to now is at least $1.2T of quantitative tightening in a way. Crypto coins are really money created out of thin air in way, at least as long people accept these coins as money. I do think that crypto is interesting as measure of sentiment. Since there really are no fundamental to speak of (it’s not like a crypto coin can miss earnings) it’s probably a great measure how greedy people feel. I do think if we get a way larger decline than the customary 80% from The top, it might be a good idea to play BTC for a bounce. Or maybe start from the base where the latest bull market started - around 10k for BTC.
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The SEC / Fed needs to make sure that our financial system and whatever crypto Defi system exists remains totally segregated. Otherwise I think there is chance that we will get some sort of an overnight crash that takes down financial institution that seemed fine when we go to bed and are wiped out the next morning when we wake up. As long as the crypto guys just blowing themselves up, I am not too concerned.
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Seems like consumer confidence and sentiment in the stock market is correlated. Who would have thought? If anything , this looks very very bullish for stocks now.
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There are more faulty assumptions in his video, like the fact WTI has decoupled from equity prices. While I think that equity prices will be correlated to WTI spot, it makes no sense that those curves should be identical. He is also neglecting that a stock in downturn can be zero and never recover while underlying commodity can recover most likely. So logically a commodity stock index will not fully recover even if the underlying commodity does in this case. Like most reports, it’s way to US centric. Why do we bother looking at US data like inventory levels so much when it’s only ~10% of the supply and demand? Makes no sense. Better check out the EIA reports which look at the world wide supply and demand situation. Those also indicate a tight supply/ demand situation, but at least it’s more balanced. https://www.iea.org/reports/oil-market-report-june-2022
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There is no question (imo) that crypto is a Ponzi. I think the question is if we are early or late in this Ponzi.
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Thanks, that’s a nice list. By definition, if you create a lot of wealth, you change the world. I think you forgot the money that went and will go to the Gates foundation and will do a whole lot of good there.
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well, that's true for E&P's as well, as they need to replace their reserves. Drilling and exploration will get more expensive. Both tend to be expensive when oil is expensive and cheap when oil is cheap creating the Catch 22 that contributes to the boom bust cycles.
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What exactly do you see falling apart? Stonks and crypto?, So if Real estate would go down to 2019 levels, would that warrant a "falling apart" call or can we call it normalization? I don't think many people thought that real estate was cheap in 2019. Maybe COVID-19 just screwed up everything and we go back to where things were before COVID-19 or thereabouts. Or take baseline appreciation rates from 2019 levels. That's a simplified mental model that I think warrants some merit.
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Yes. probably switched my thought mid word while typing. Now that you point it out, I onkly like it.
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He got enough to be more cheerful than he seems to be.
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Just a reminder that an interest rate of less than 2% has never caused a recession by itself. Even a raise buy 2-4% onkly causes a recession ~35% of the time. So i think the Fed can raise a bit from here and likely won't cause a recession. Now that does not mean that a recession does not occur for other reasons. technically we could be in one - because the 1 st quarter inflation adjusted GDP was down already - but that was because Q1+Q2 2021 were monster quarters with >6% GDP growth. So I guess it's a tough comps recession that most people won't really notice.