Spekulatius

I think the CPI shelter index with lag represent what the majority of the people who own houses or rent actually see. Market to Market rents matter if you happen to change apartments. The CPI is designed (or tries to) to measure what the population actually sees in reality, so I would argue it matters. Sure the market to market rents arena leading indicator, that’s true, but why shouldn’t care? Or should the Fed in the future bump up rates immediately when market to market rents rise?

Investorvillage - what a blast from the past. I used to be there too, it this board became an echo chamber during COVID. Totally useless for investing. It‘s just grumpy guys ranting at this point.

Looks like inflation comes in a bit hot: https://www.cnbc.com/2023/10/12/cpi-september-2023.html

@John Hjorth Open ended credit funds without carry are essentials. CEF‘s. They won’t end badly for BX or KKR, but they will end up badly for their clients (meaning they will trade a discount to NAV), if they trade at all in some secondary markets.

I Wasn't aware of the insider buying cluster until you mentioned it. I agree it makes ZBH more interesting. I don't really have a clever question other than how ZBH product (hip/ knee replacement) compare to SYK (the big kahuna) in terms of pricing and function. I just noticed that ZBH gross and EBITDA margin is higher than SYK. I thought its the other way around, but it may be a result of a different product mix. SYK also spends more on R&D as a percentage of revenue and of course in absolute terms. I just wonder if we buy a cigar but like market share donor (to SYK here). Then I guess his view on how the GPT-1 weight loss craze may impact the hip/knee replacement business would be interesting. Thanks for doing the expert call.

Since med tech was mentioned the kidney dialysis plays $DVA and $FMS are down ~18% (on Ozempic news), $BAX ~9% and ZBH $5.6%. I am more interested in $BAX and $ZBH then the former $ZBH is close to a 52week low and has produced decent (but not great numbers). BAX is heavily leveraged at around ~5x EBITDA, but at least they cash flows have been improving. BAX has a business supplying kidney dialysis consumable which was supposed to get spun off. I am not sure this is an option now, but we will see. $BAX dialysis business is less vulnerable to GPT-1 disruption than $DVA and $FMS because it is mostly foreign (imo). GPT-1 seems like wrecking ball for the med tech sector. If you regard this as a zero sum game than the gains of LLY and NVO are coming from the med tech co's that have business connected to diabetic and overweight people. For example, ZBH business (hip and knee surgeries) has a disproportional exposure to this group because overweight people tend to have bad hips and knees. On the other hand, nothing will change quickly here.

Skunk works is good but if you prefer the audio format (which I do nowadays) then the Acquired Podcast episode is very very good. I personally also will go through older annual reports for some business, I posted the Lockheed Corp annual report from 1958 and they are just such a wonderful read. I whish they would write annual reports like this nowadays.

Guys, keep it topic. Oil up or down is the question. Iran has oil, but there is none in the Gaza Strip.

There is likely no large war between Iran and Israel. I can see some air strikes in Syria or Lebanon against the Hamas or Hezbollah proxys. That has happened before and Iran has a history to do nothing in those cases - they tend to leave their puppets hanging if they get into trouble. As for the Energy markets- if Iran oil get sanctioned beyond the current measures, there will likely be a spike towards much higher prices, but it won't last. I think Saudis will crank up the oil spigot in this case. I think even the Israel Saudi piece deal has a good chance to happen eventually. Likely after the dust settles after the Gaza is bombed to smithereens. The Saudi's don't care, it's just business for them.

@dealraker Xes, looking the big strategic picture as well as the current valuations, I like LHX and RTX in particular. Both have issues to work through that I think are going to be either gone or at least much smaller 2 years from now. The business itself will be around ages from now. I posted this in another thread , but I am reposting it here as I lifted an old annual report from Lockheed Aircraft corporation from 1958 (from Mergent archive lifted through my library access) reading this old annual reports. Interesting how they talk about the newly developed C-130 transporter and that airplane is still around today 65 years later. Other stuff like that circular space station never got off the ground. Lockheed 1958ß.pdf

There is no direct impact on defense contractors business - I don’t think Israel needs any US assistance either, assuming this does not escalate into a real war ( this more like a terrorist attack than a real war right now). I do think it highlights the risk we live with and the need to keep defense spending. We have seen now Ukraine and now this being another reminder that’s security is not a given. It seems at odds to me that some defense contractors were going to 52 weeks lows (presumably on the house speaker mess that lead to concerns about another government shutdown ) at odds with the performance of the business as well as with geopolitical security situation.

Bill Chen on Real Estate:

@thepupil I don’t expect PE to get destroyed as a business model, but a couple of bad vintages will filter through their income statement over time and typically stocks react to a couple of bad earnings years. In this case, the PE stocks have generally been bullish this year, do people already look beyond the cycle?

I am surprised private equity has held up that well. All except Brookfield entities and CG are close to their highs and up bigly this year. Makes no sense to me, the higher cost of capital ought to make their business much harder.

Strange that the defense contractor stocks just made 52 week lows again a couple days ago and now this… Some thing change and some don't

I have trouble finding older annual reports from GM as well. The Boston Public library has access to Mergent database which also has archived annual reports. Like Lockheed aircraft company from 1958. But no dice with GM. Perhaps there is an angle I am missing. I also love going through old annual reports. Lockheed 1958.pdf

The weakness of BN (or BAM) versus most peers has been quite surprising. BN has underperformed against all peers except CG by a huge margin. BN has issues with real estate , but so has BX. I think one factor has been that Brookfield is Canadian, but the other factors are complexity and probably more forward looking management in case of BX, APO. There has been a lot of dispersion in the group since the September low in 2022

Interesting to read this thread on reddit: https://www.reddit.com/r/Semaglutide/ What I gleaned, people eat less (they simply feel full and can’t digest large meals any more), drink less alcohol (can’t keep it down), go out less (restaurant food, drinking - see above ) exercise less because eating less calories makes them feel tired quickly and what’s the point anyways if you are losing weight without. Probably great for supplement producers, clothing (due to rapid body changes), cosmetic surgery (remove excess skin etc). I think the effects will be quite observable in many different business. Bigger than AI.

@rkbabang Cobalt prices have come down too. Maybe the children working the mines in Congo are working for less now or new mines elsewhere have started to produce. I remember an old illustrated Sci Fi book in 70’s that tried to I ageine what the future looked like 50 years from then, which would be about the current time. They were projecting a network of hundred of nuclear power complexes in shallow ocean water floating islands to supply power for the world, vertical agriculture (to save farmland space), a permanent and autonomous mar settlements, regrowing injured limbs with electric stimulation and hypersonic magnetically propelled trains (Maglev) crossing oceans in vacuum pumped pipeline tubes (to reduce friction ) to replace airplanes and many other things. It not all bad news, nobody predicted the internet or that everyone would have his own computer with a touchscreen in his pocket to scroll at other people pictures on something that would be called social media.

https://en.wikipedia.org/wiki/SICPA

Governments almost never pay down debt, it’s getting rolled over. If you follow the discussions here, - the government deficits are what creates money basically, so paying down debt would be very deflationary. It’s not going to happen. I do not understand the logic behind government debt being deflationary. Creating government debt is inflationary (if rate of change is faster than GDP) and reducing government debt is deflationary.

On another note- I am quite sure that Hamas attacked Israel, because the talks about a 3 way deal between Israel, the Saudis and the US (as a guarantor) are very threatening to Hamas. That piece deal has an Energy side deal attached, as many here know. https://apnews.com/article/israel-palestinians-gaza-hamas-rockets-airstrikes-tel-aviv-11fb98655c256d54ecb5329284fc37d2 I think this is very obvious what Hamas is trying to do here and my guess is that it will be seen as such and the deal goes through.

Sure, but to refinance into a confirming mortgage , you still need to have 20% equity with an appraisal. So if the value of your home goes down, you can’t refinance with lower interest rates into another conforming mortgage unless you inject more equity to reduce the balance. That’s something that happened to homeowners during and post the GFC.

I think consumer staples are selling off more due to higher LT interest rates than due to GPT-1 threats. The GPT-1 issue is just one more nail in the coffin and caused more selling pressure.

If you think the EV transition is going to take a long time, look at the Tesla sales prices. They are down by 33% this year. A Tesla car is already cheaper than a Camry, if you live in California or other states with subsidies for EV’s. Check out Lithium prices - they have collapsed since going up by 5x in 2022 and I think they are heading back to 2021 levels. We are starting to go into the steep S- curve part of EV adoption. I would not be surprised if 5 years from now 30%+ of the cars sold in the US are EV’s. It’s going to be higher in Europe and China for sure. Things start slowly, but once you hit the 5% threshold, the adoption typically happens very quickly. Of course ICE cars keep driving for more than a decade after the last one are sold. On the repair side, we are looking at less frequent but very expensive repaid. The Teslas are already known to be hideously expensive to repair. Same with Rivians according to some news blips I have seen. There is probably going to be a great aftermarket business for replacement batteries, sensors, more business for tires (high torque of EV’s causes more tire wear) and a few other things like sensors.