Spekulatius

Adding to ABEV

Time for you to step up. You can earn valuable brownie points now.

I don't know details about Spain, but IMO a bunch of Europe reopened too much with no checks. In particular, there is a lot of vacation travel, which was pushed by vacation destination countries for their economy, but which was IMO foolhardy. Plus there was quite a lot of de-mask-ization and social distancing reduction going on - maybe not in all countries, but in some. IMO even in Massachusetts people have relaxed the attitudes way too much. But hey, I'm probably the only person who still pretty much has not met my friends or traveled anywhere. ::) Yes, the recent outbreak in France, Germany and Spain is certainly travel related. It is understandable that young folks like enjoy night live where it’s warm and close to a beach ( been there , done it) but this just doesn’t work in the current conditions. FWIW, the Spek family has traveled and will travel again locally in New England. We keep an eye on the local COVID-19 conditions like we do with the weather and will bail out of any restaurant when we don’t like the setting and it seems crowded etc. It is what it is and not what we like it to be.

Fun fact. The hardest hit district in NYC (Brooklyn) seems to be Corona, NY with a 51.6% positive rate. https://www.nytimes.com/2020/08/19/nyregion/new-york-city-antibody-test.html

Worth mentioning that GD's Bath Iron Works workforce just wrapped up a two month long strike. Yes, HII builds big boats and not (Dr Evil voice) "frickin' laser beams" like some of the other defense contractors. Of course, the same objection could have been made when the company was spun off from NOC and was trading at $30 or $40. You are trading low margins for (1) very high revenue visibility (2) a strong competitive position (3) a biz that doesn't change very quickly. The risks are that (a) margins deteriorate* and (b) US Navy moves away from big boats. Long term, I think margins will be OK, and (for reasons that are too lengthy to get in to here) I also think the Navy will continue to build big boats. If Newport News lays off 50% of its workforce as soon as CVN-81 is delivered in 2032 then I will have been wrong about the latter. * We saw this in Q2, largely due to COVID Yes, HII was very cheap when spun off, but so were most defense peers at that time. I see that the 2021 earnings projection for HII is $11.2/share down from $14.5. Any idea why earnings for next year are projected to fall that much?

Have you considered the possibility that the reason why things are going okay in Lombardy these days is because they actually made significant progress towards herd immunity during their atrocious outbreak in the spring? Lombardy is a region where the official numbers state that there have been 97k diagnosed cases and 17k deaths recorded for a region of 10m people. With a ~17% calculated CFR, clearly the official statistics are drastically under-counting the true number of cases in that region. So, run the calculation backwards, beginning with the number of deaths to infer a plausible number of infections in the region. If you are in the camp that believes that the IFR is likely around 0.5% or 0.6%, then the 17k deaths implies about 3 million infections. A region of 10m people with ~3m infections could be quite far advanced along the path to herd immunity. So, are the current daily numbers in Lombardy indicative of good management in the present, or poor management in the past? SJ Specifically around this exchange about herd immunity, in early June, the Bergamo province reported population antibody levels at 57% which would clearly not support the notion that much lower antibody levels prevalence would be sufficient herd immunity under any circumstances. However, the numbers suggest that herd immunity had become a contributing variable going forward, at least for those who could mount one (immune response). ----- Bergamo has meaning here because it's a nice city perched on a hill that marries well the ancient with the modern and is a great example of the mixed human nature of the Piedmont region. Its geographical features also make it an ideal place for the start or the finish of cycling race. It's also relevant because this CV threat, for me, became really real when first accounts (early March when choices had to be made for survival and when army trucks were handling coffins) of what was happening in hospitals made it to my email box. This is when i decided to establish a scorecard looking at the effectiveness of various national public health organizations and leaders across the world in dealing with this phenomenon.. The Bergamo province and Northern Italy had a similar experience compared to various areas of Spain, New York and my jurisdiction with a large spread occurring before the actual implementation of measures (spontaneous, encouraged and imposed). In hindsight, whatever the causes (close to high volume international airports, large events as super-spreading catalysts, older and more fragile population etc), it looks like every day counted and it is reasonable to suggest that the outcome would have been a 100x better if measures that were actually applied had been applied about 2 weeks earlier (with obviously a much lower cost). It's been shown that the viral load is highly determinant as to whether one catches the disease or not and how sick or dead one can become. The viral load concept can be applied to the population level and is one more argument suggesting that herd immunity is a dynamic concept. Bergamo showed that a high population viral load will drive up the population herd immunity required to contribute to flattening the curve. There are several quantifiable and sophisticated ways to report on what happened in Bergamo. Here's one example (and i'm sorry to say a preventable one): Note: to understand, there is no need to speak Italian or for fancy statistical knowledge. ----- Even though the value in the hotspot is 57%, Italy as a whole is far from herd immunity with only 2.5% antibodies overall. https://medicalxpress.com/news/2020-08-italians-covid-north.html Another tidbit, for whatever it’s worth. Italiy’sVOVID-19 fatality rate is 586/1M. When the US reaches 198k death (we are currently at 177k and increasing by almost 1k/day) we will be just as bad as Italy. That should occur around mid September at latest. I recall folks talking on Italy’s incompetence back in February. Well, it took a while but we have beaten them to it. What happens when NJ/NY are removed from the fatality rate? They are definitely in a league of their own. Well, if we remove the Lombardy from Italy’s fatality rate, Italy looks great too. You can check out worldodometer for the US state level fatality rates. Massachusetts, Michigan, Mississippi, Pennsylvania, Louisiana, Georgia, Florida and others all have fatality rates higher than Italy, so it’s not just NY either. FWIW, the highest fatality rate is with your state NJ, not NY.

Looks like he made a bad trade. Hopefully he will be alright.

Have you considered the possibility that the reason why things are going okay in Lombardy these days is because they actually made significant progress towards herd immunity during their atrocious outbreak in the spring? Lombardy is a region where the official numbers state that there have been 97k diagnosed cases and 17k deaths recorded for a region of 10m people. With a ~17% calculated CFR, clearly the official statistics are drastically under-counting the true number of cases in that region. So, run the calculation backwards, beginning with the number of deaths to infer a plausible number of infections in the region. If you are in the camp that believes that the IFR is likely around 0.5% or 0.6%, then the 17k deaths implies about 3 million infections. A region of 10m people with ~3m infections could be quite far advanced along the path to herd immunity. So, are the current daily numbers in Lombardy indicative of good management in the present, or poor management in the past? SJ Specifically around this exchange about herd immunity, in early June, the Bergamo province reported population antibody levels at 57% which would clearly not support the notion that much lower antibody levels prevalence would be sufficient herd immunity under any circumstances. However, the numbers suggest that herd immunity had become a contributing variable going forward, at least for those who could mount one (immune response). ----- Bergamo has meaning here because it's a nice city perched on a hill that marries well the ancient with the modern and is a great example of the mixed human nature of the Piedmont region. Its geographical features also make it an ideal place for the start or the finish of cycling race. It's also relevant because this CV threat, for me, became really real when first accounts (early March when choices had to be made for survival and when army trucks were handling coffins) of what was happening in hospitals made it to my email box. This is when i decided to establish a scorecard looking at the effectiveness of various national public health organizations and leaders across the world in dealing with this phenomenon.. The Bergamo province and Northern Italy had a similar experience compared to various areas of Spain, New York and my jurisdiction with a large spread occurring before the actual implementation of measures (spontaneous, encouraged and imposed). In hindsight, whatever the causes (close to high volume international airports, large events as super-spreading catalysts, older and more fragile population etc), it looks like every day counted and it is reasonable to suggest that the outcome would have been a 100x better if measures that were actually applied had been applied about 2 weeks earlier (with obviously a much lower cost). It's been shown that the viral load is highly determinant as to whether one catches the disease or not and how sick or dead one can become. The viral load concept can be applied to the population level and is one more argument suggesting that herd immunity is a dynamic concept. Bergamo showed that a high population viral load will drive up the population herd immunity required to contribute to flattening the curve. There are several quantifiable and sophisticated ways to report on what happened in Bergamo. Here's one example (and i'm sorry to say a preventable one): Note: to understand, there is no need to speak Italian or for fancy statistical knowledge. ----- Even though the value in the hotspot is 57%, Italy as a whole is far from herd immunity with only 2.5% antibodies overall. https://medicalxpress.com/news/2020-08-italians-covid-north.html Another tidbit, for whatever it’s worth. Italiy’sVOVID-19 fatality rate is 586/1M. When the US reaches 198k death (we are currently at 177k and increasing by almost 1k/day) we will be just as bad as Italy. That should occur around mid September at latest. I recall folks talking on Italy’s incompetence back in February. Well, it took a while but we have beaten them to it.

We don’t even need a chinese retaliation. If US high tech companies can’t do business any more with Chinese companies then Some tech business like semi equipment will be very vulnerable. AMAT and LRCX for examples that are pretty typical and have ~30% of their business in China. You couldn’t tell by the charts though.

Every one of the defense contractors I follow has done well, except HII. HII has done considerably worse than GD with their shipyard business, it seems they have operational issues. Luckily that’s the one I don’t own, because I consider it low tech. They do have a substantial backlog, but need to execute better.

You realize that this is likely party sanctioned and a big middle finger to the US? They claim no community transmission since May and have every one tested in Wuhan. One should at this with caution, but the claims are likely directional correct, otherwise this party wouldn’t happen. In the mean time we can’t even open up our universities and schools.

For value to work (low price/ book, low PE etc) you need someone else to flip your shares too, for a higher multiple than you paid for. Right now, the counter party for this doesn’t exist. There are folks who are willing to pay higher and higher multiples for compounders not tech stocks, but there is no one, who is willing to pay higher multiples for “average” stocks. That’s the problem with value stocks, the clock starts ticking the moment you buy them and if nothing happens, it’s dead money or worse a loss.

I think an application of the punch card method will lead to more thumb sucking, not less.

The counter argument to the 15-20% immunity is that high infection rates of 80% have been seen in some settings ( prisons and a Korean psych ward if I remember correctly) Anyways the herd immunity threshold depends on the R0 from a pure mathematically perspective, which is a highly volatile and setting dependent number.

I own a bit of AMBEV (I actually added a hit last week). My thinking is that folks will drink beer again way before they fly. Nevertheless, the Mexican airports are attractive because they have good balance sheets. They will make it too the other side without dilution. The worst of the currency devaluation for the Latam currencies seems to be over already because the USD is silently devaluing too against most major currencies.

My wife drew this picture describing how she felt about a colleague at work during the Coronavirus surge. Very fitting when you see some of the postings here:

Thanks for your thoughts Spek. There are definitely some good frameworks for thinking about the issue in your comments. Here are a couple of questions. Wouldn't a 0.1% position still likely lead to regret? And how is that different from thumb sucking? Would a tracking position mainly differ by scale (0.1% vs 0%?) and the benefits of having a position might come at the cost of diworsification and increased tracking costs. Should we be looking to improve the odds of fully committing to the correct decision? I like the idea of using pepper oils to prevent thumbsucking, but I see a couple of issues: -First, have you already made the mistake by the time you are sucking your thumb, or is the thumbsucking itself the problem? -Second, we really want to encourage the right decision which is to take an action in the real world and take a risk on other people or a company, which is more akin to sucking someone else's thumb. Putting pepper oil on someone else's thumb might prevent you from sucking that thumb, but that would mainly be of use when it would be inappropriate to suck on someone else's thumb, and what we are looking for is the rare opportunity when you should encourage yourself to act in scale when an opportunity presents itself. Plus, it is a little socially complicated to try to go around putting pepper oil on other people's thumbs. So maybe we should be looking for positive reinforcement, rather than negative reinforcement? I find that putting 20-30bps into a position forces me to look at it and pay attention. Lots of time, I don't add to it After 18 months or so, if the fundamentals aren't improving, I sell it. If the fundamentals are working out, I'll add to it. It helps. CEO of Markel talks about this. I see it the same way. It forces you to get involved and pay attention. If it doesn’t work out or you bought you too expensive, the loss is manageable. For me, the biggest issue to pass on opportunities is valuation. I think some stocks/business looked good, but were too expensive At that time. i these cases, I should probably should still buy some. If the business is good, but the starting point was unfortunate, I might be a chance to buy more at a lower price. If I don’t have a bit of skin in the game, I often forget about this entirely and end up doing nothing. It’s a mental crutch, but I think it works for a lot of people.

Same here. Looks pretty solid. Their trust business revenue and AUM keeps rising at a decent clip.

I recommend buying a tracking position (0.1% perhaps) when the valuation is in doubt. Those tend to be my largest regrets. So far, I have never regretted investing in lousy companies and fraudulent stocks, even when they do end up going up. As for the real thing, try rubbing your thumbs or finger tips with Ghost Chile’s or habaneros. It sure will at least remind you that you are sucking thumbs, which typically is 80% of the battle ;D

Why is that? Currency devaluations , inflation , or something else? In my opinion, it is a higher country risk premium. Or look at the central bank interest rate (I wouldn’t call it risk free), it is currently at 4.5%. Brazil is in a very similar situation. https://countryeconomy.com/key-rates/mexico FWIW, these countries stock markets are interesting, because those rates are coming down. That should boost equity valuation, but may also weaken the currency.

Thankfully there's no libido in there. There's no questioning of personal tastes but somehow the combination of Orthodox Jews and libido doesn't really do it for me. If interested in the topic with time restraint, here are two useful references: http://faithandworklife.org/wp-content/uploads/2010/12/faith_and_fortune.pdf https://financialpost.com/opinion/a-hard-look-at-paul-reichmanns-long-goodbye Paul Reichmann was a true genius but was also a gambler. In the end, this was about financial libido. A potential problem occurred when the collateral that banks relied on was substantially related to the reputation of a single individual. The best ways to 'kill' a man is to prevent him from working or to give him unlimited credit. They also mentioned Dome Petroleum. Oh, the memories.

Of course there are many variables, but still, it's a data point that doesn't help support the approach. Also, since about May, many European peer states are just as open than Sweden. Schools for example opened in late April or May in Germany and Denmark. I don’t know about France though. One of the issue that caused the recent outbreak was travel during the summer. There were issue with crowds in Mallorca (around the infamous Schinkenstrasse etc) and contact tracing showed 25% of thr confirmed cases due to travel and the real number is likely much higher. On the same note, I think father day and 4th of July likely caused the recent surge in the surge that seems to be ebbing no. I expect another surge when schools reopen and on thanksgiving. @Castanza- the protests certainly didn’t help, but most protests were in blue states and that’s not where the surge happened. So, I don’t think the protests were the main reason for the surge.

It's the almost-G7 countries. I didn't make the list. I think it shows a pretty stark difference in success in containing the epidemic, don't you? I think I saw that the US had more daily deaths right now than Germany had daily cases (Germany is smaller, but still has 80 million people). You may not be able to vacation in France, but if I had a choice between vacationing in France or in Florida right now, I know where I'd go. Certainly there have been different approaches and different outcomes so far from one country to another. Europe had an aggressive outbreak and then countries like Italy, France and Spain locked down for 9 or 10 weeks to get things under control. Looking at the daily numbers, I question whether France and Spain won't be back in that exact situation by mid-September. Italy's numbers are bit better, but they are trending up too. So, will it be another 10 week lock-down from mid-September to mid-November across a large swath of Europe? It does call into question the sustainability of some of the management strategies if it ultimately ends up being a situation where they lock down for 10 weeks, open up for 16 weeks and then lock down for another prolonged period. If I had to guess, I'd say that we'll see a less agressive set of measures and a greater tolerance for the spread of the virus in Europe (time will tell). FWIW, my concern about vacationing in France is not about the risk of actually contracting covid. The larger concern is the risk of travel restrictions being imposed by other countries (the UK has already put in place measures against travellers from Spain), and the risk that the French could once again impose restrictions on travelling within the country (during their lock-down, the French imposed the use of a sort of self-signed ausweis for their citizens when they needed to leave their home for any reason). In short, there is a small-ish risk that it could become very difficult to find a flight home. In contrast, I would have no such concerns about getting home from Florida, but the risk of catching covid is likely considerably higher. SJ I definitely wouldn’t travel to Europe right now. I do agree there is a risk of getting stranded or in a lockdown situation. Most of the lockdowns in Europe now are local. Germany has a protocol where this goes county by county based on local infection rates based on a 7 day average, for example. I also think that if you fly in from the US, you need to quarantine for 2 weeks anyways. It is actually similar in the US in some states (VT, Maine) where you need to quarantine based on the local infection rate in your county. Coming from FLA would certainly have to. Whether they enforce it is a different question. With my wife being a nurse, ignoring these regulations is not an option.

Well, if you truly want to go passive, you can also go throw crowdsourcing platforms or become LP in a RE partnership through other means. Example are crowdstreet, Realestatemogul. Often, you need be accredited investor, but you can invest in smaller chunks from 20-100k in most cases. Compared to public REITs, you are only invested in one property (Apartment complex’s) , the leverage is higher (debt/equity 2:1) and there mostly is a planned exit after 5 years. No affiliation with anyone, but crowdstreet seems to have a decent flow on Apartment housing deals. https://www.crowdstreet.com/ I am sure others have more experience with these sort of investments. I am just in the learning phase...

RKT is an interesting case. It’s a mortgage originator with a growing market share. IPO stumbled out of the gate @$18/ share. They seem to have negative equity due to a ~3.8B dividend recap prior to the IPO. The structure seems optimized for the founders tax and to keep total control. https://www.sec.gov/Archives/edgar/data/1805284/000104746920004448/a2242208z424b4.htm No position. Closest public peer is PFSI.