Spekulatius

Re MMM, the combat earplug and PFAS lawsuits will be expensive and take a long time. I think they are depressing MMM stock.

If stocks are cheap enough to pay out cash to shareholders, you don’t need rerating. I only buy energy stocks that pay our more than 10% on equity annually over a cycle and preferably much more. That way, you would get a return no matter what Mr Market is doing with the multiples. More often than not, betting on an expanding multiple is a fools errand especially for an entire sector. It could happen, but may not or may even go the other way. If I had to make a bet, hydrocarbon extraction is going to be a substantial business 50 years from now but probably smaller measured by volume than it is now. As for prices, I have no idea and they probably continue to fluctuate wildly.

It is important to keep in mind that this interview was done in August 2022 when Russia had advanced as far as they ever came, just having captured Severodoneskt. Since then, the Russians have lost a huge area around Kyiv as well as Kherson. Not a whole lot winning as far as I can tell here. So it seems like Lex Friedman has been wrong on this matter, plain and simple.

These buybacks only work LT (over many years) not short terms though. My guess is that energy securities have caught a bid, maybe funds want to show something that looks like a winning trade at the year end. We have seen similar things in the past. Who knows. As I stated, I think it gets resolved one way or another and the correlation between crude and XLE will tighten again.

I am looking forward at the first school essays written by this ChatGPT:

The AI mistakes seems surprisingly human like. Depending on what you want to accomplish this can be good or very bad.

Looks like energy stocks have diverged from the underlying crude. I think this divergence will close one way or another:

Bought a small Spec position in $PUBM this AM. Looks bombed out but is profitable (Sell side ad market place). It looks like something that could get bought out. Bull case here:

LOL about Bye Bye personal trainers. Pretty much everyone knows what they are supposed to do but nobody does it by himself due to lack of motivation. That's why personal trainers exist, not because of what they know. FWIW, i can see already about feeding garbage inputs into the AI and then getting people killed. Just like the people who drive off a cliff because they trust their GPS more than bother checking their environment. This does look like a fun tool though and I will try this out myself. Maybe let it try to write one of my sons college essays since he is limping along with those.

good read: https://www.wsj.com/articles/natural-gas-terminal-engineering-feat-germany-11670513353?mod=hp_lead_pos10

Hmmm: https://valueinvestorsclub.com/idea/GOOSEHEAD_INSURANCE/2028354943#messages The 50:50 split for recurring business sounds egregious to me too, why would anyone agree to this as a franchisee?

There is a VIC writeup from 2019 when it traded at current prices. The stock is cheaper know since the business has been growing. it seems to me that GSHD is more like franchise business. https://www.valueinvestorsclub.com/idea/GOOSEHEAD_INSURANCE/2028354943 I don't own it, but it does look attractive to me.

It is correct that the median US household is FCF negative meaning it spends more than it has income. The overall savings rate is 2.3% ( a 10 year low and I think we were only lower pre GFC once) and the saving rate is heavily skewed by high income households. So there is some truth to above.

Most homes in Europe don’t have air conditioning ,even a lot of offices do not. So raising thermostats in summer is not going to do all that much. As for the winter, I think Europe is already at ~25% savings run rate. Barring a very cold weather, I think Europe will get through this winter better than most expected.

I think banks will be around 50 years from now. I don't think banking as a business will change fundamentally all that much. Lending has been around almost as long as money. Of course surviving as a bank through the cycles is not easy.

BRP belongs in this basket too. It's an aggressive rollup.

Maybe I am nitpicking, but MSGS didn’t really buy back shares, their sharecount is 24.3M shares in Q3 which is actually up from 24.1M 12 month ago due to SBC dilution. The special dividend was welcome though. Companies that actually did buy back shares are COF (-11% share reduction) and PFSI (-16% share reduction) both measured over the last 12 month. COF (which I have been adding to recently) did reduce their buybacks in the last quarter though, presumably to build up capital for a pot. Consumer recession. They are in economically sensitive business like credit card lending and car lending both of which may have issues if there is a recession (used car prices are coming down a lot recently impacting collateral) I don’t like the business PFSI is in (mortgage origination and servicing) but management seems to be doing a really great job here and they vacuum shares up via buybacks like crazy (16% of outstanding in the last 12 month). Earnings in mortgage origination are down, but that also means they need less capital so they buy up shares at a high clip below book value. This is certainly one to keep an eye on. Are those LT winners? Maybe they don’t have to be - I could see both companies trading at the same market cap in 10 years and the shareholders would have done quite well.

I lost confidence in META. I did buy more at $90 or thereabouts but considered it a trade at that point. But then again I usually buy and sell too early.

Sold remainder of my META (overall loss).

We don’t have to burn text books because inflation in Turkey comes down from the ~80% annual rate. https://www.statista.com/statistics/895080/turkey-inflation-rate/ Similarly, we can’t do victory laps when inflation goes down form 9% to 6% in the US either. While the 2% target was deliberately chosen, it is a number that makes a lot of sense. It is low enough that it does not do much damage to buying power and does not cause distortion in the economy and but is high enough that it is far away from a deflationary negative inflation. So the US central bank settles on 2%. If the central bank were to settle on 5% and would indeed be able to create a stable 5% then that would be fine. Chances are however, that with a 5% inflation target, we have a much more volatile inflation environment and have 2% one year, 8% the next, maybe 5% too once in awhile, but generally speaking we have inflation jumping all over the place and nobody would know what is temporary and what is not, until you have 3 years in a row of 8%+ and then you have a runaway inflation train wreck that is very hard to stop.

The energy industry self liquidates by paying out dividends and buying back stock, That’s one reason why I don’t see it returning to its former weight in the stock market indices. Nothing wrong with this and it doesn’t mean that returns can’t be good going forward in this sector. As for the bear case, it’s demand destruction (EV transition, China pivoting away from a Capex driven to consumer driven economy) and perhaps OPEC or some OPEC countries doing something unexpected on the demand side. EV transition just shifts energy demand away from crude to other sources , some of which are fossil. I think NG might keep growing longer than crude demand for example.

I don’t think it’s the end of the world either, but it does beg the question how much hot money has been flowing into these Alt real estate assets that thinks they own an asset invested in real estate with little downside but considerable upside with almost money market like liquidity due to the redemption option. The risk that these hot money flows disappear or even worse reverse in short order is the real risk here. This could mean lower AUM flows and/or more redemption requests, BX is not to blame here and I think it would affect all Alt investment /private equity asset managers.

Nice commercial. The chat has some funny comments: “The demon has risen” “Iran has left the chat”

In the financial world it's always like this - You can have your money back as long as you don't ask for it. You can borrow money if you don't need it. When they state "our liquidity is strong", they are about to become insolvent. I am reflecting on reflexivity here.

Thx. My position is quite small at this point. Riding fully and yours and other posters coattails here, but felt it looks beaten up enough to take a small bite at this apple. I also bought KKR a while ago, similar story. Done right these private equity / alternative investment shops are terrific business, that's for sure.