Spekulatius

Everything from Richard Branson Kelcy Warren (Energy Transfer) for MLP’s Bill Ackman (Gotham Partners) Everything Marc Cohodes shorts....

You don't understand. The fact that revenues are down 20% means that the stock should be flat or up. Since the revenue growth will be 25%+ just to get back to the old revenues! Market is forward looking, duh! Not happy to admit it, but I very clearly do not understand! For the company, I work for (manufacturing business) the costs have gone up across the board. Higher salaries (temporarily) additional consumables (PPE) and cleaning and the occasional shutdown when someone tests positive. We also had some supply chain disruptions although those have waned.

There was at one point a belief that the sickest were shedding the most virus, but now there have been study results indicating that viral shedding is highest when pre-symptomatic, if that is true, you may be a little too optimistic Another issue is that shouting has been estimated to shed 1000x as much virus as simply breathing. Think of the indoor choir practice example that is often cited. I saw many examples of a someone without a face covering screaming right in someone else face from less than three feet.. I hope they weren't infected because that's got to be extremely high risk. Yes, the highest Viral shedding is asymptomatic shortly before shortly symptoms. My Thinking based on what I can stitch together though is that people they never show symptoms will never show high viral shedding at any time. Which makes sense if you think about it they people who never show symptoms likely als ways keep the virus in check with their immune system. At least that’s a plausible explanation why the largely asymptomatic kids never seem to create much transmission to more susceptible adults in schools. If transmission from kids to adults in a school setting were common , it would already have shown up as infection clusters in Denmark and Germany, but so far that it not the case. The stuff they doesn’t happen is often as insightful than the stuff they is happening. When we think for example about the much commented upon spring break parties in Florida a while - well we never heard much about infection clusters that could be traced back to these events. It’s also a fact that Florida did much better than many expected in this epidemic. The likely factors that helped were that the spring break parties occurred mostly outdoors and involved mostly younger folks. Invert this and put a bunch of older folks in a badly ventilated (I assume) confined place, which we call assisted living or nursing home and we very much know what happens. All the above is not a sure fact, more of a hypothesis, but it matches the observations so far. If we know about the do’s and the Don’ts we can open up the economy smartly with reasonably low risk.

Have you looked at EMGC? There's a (public) writeup on VIC. EMGC is a fundamentally different business. RGA stock up 12% today. Glad I covered yesterday. they also closed a subordinated bond offering. Looks like they are trying to reinforce their balance sheet, which is a smart move.

While I think there is a risk that the protests contribute to spread of COVID-19, there are mitigating factors: 1) a lot of protestors tried some measures of social distancing and wore masks 2) The protests were outside, which reduces risk substantially (of course we do not know what emote stores do before and after) 3) Most protesters as well as front line police are younger. Not only are the less likely to get sick, they are lesser likely to spread COVID asymptomatic ( the latter is my own conclusion). We likely erred on restricting outdoors activities too much. I don’t think there is much reason to close beaches or parks, assuming the people going there behave reasonable. It is likely even opening schools is lower risk than thought, based on observations from countries in Europe which have reopened schools recently. High risk areas are badly ventilated high density indoor spaces like bars, some restaurants, offices, churches, sport venues night clubs, and business that require close customer contacts like nail salons, hairdressers etc.

If you poke around Twitter, the sources indicate that buyers interest has recovered and inventory has tightened. The record low mortgage rates surely help and I think mortgage rates will likely go even lower because the margins to treasuries are fairly high right now. There seems to be a temporary supply/demand imbalance in some areas with little depth to the market and more motivated buyers than sellers. That dynamic will likely be short-lived. This could well be. COVID May be a larger deterrent for sellers to put a house on the market and moving somewhere else than for a buyer to tour a house and buy one. It’s hard to predict though. A lot of people predicted a steep drop in 2001/2002 and the dip was very shallow and short lived back then.

Holy shit! Everyone in the US needs to read and reflect deeply on what Mattis wrote. Mattis is a Republican, a professional soldier, a patriot and has intimate knowledge of who Donald Trump really is as a person and how he thinks and acts as President. This message is not from a partisan Democrat hack. Mattis’ is very clear in his assessment of the situation and the President. Donald Trump is clearly not fit for office (and it is not even close). How anyone with a working brain can continue to support this man completely boggles my mind. No, the alternative is NOT worse. That is a false choice. Read the underlined section below if you still do not understand why he must be defeated at the polls in November. “...Donald Trump is the first president in my lifetime who does not try to unite the American people—does not even pretend to try. Instead he tries to divide us. We are witnessing the consequences of three years of this deliberate effort. We are witnessing the consequences of three years without mature leadership. We can unite without him, drawing on the strengths inherent in our civil society. This will not be easy, as the past few days have shown, but we owe it to our fellow citizens; to past generations that bled to defend our promise; and to our children.“ Being divisive, creating chaos and then trying to benefit from it is Trump’s playbook. It’s pretty much how he works, he is a one trick pony in that respect. It has worked for him for a long time, but at some point, it will stop working. It better be sooner than later.

Well, the Russians were ripping the US and the rest of the world off, because they had no competition. The design of the Space shuttle was from the early 70’s, and the idea was that a ) partly) reusable spaceship would make space cheaper. That really never worked out, because the space shuttle was complex and the end, it cost about ~500M to launch. I guess it is a case of and project management , where every little of the many steps make sense and the end result doesn’t. The US should have pulled the plug on this in the 80’s after the first shuttle blew up,Knut I guess it was just from an institutional POV just easier to save face and soldier on. The real savings are when you look at what Russia was charging the US to ferry astronauts to the ISS. It was something like $80M per astronaut so $160M per launch with US astronauts. As an American I had heard/read very little about SpaceX's primary competitor Arianespace but the price war between the two is fascinating and it will be interesting to see what Arianespace comes up with. Just the ability for US companies to launch from the Cape as opposed to French Guiana has to translate into significant savings. https://en.wikipedia.org/wiki/Space_launch_market_competition

If you poke around Twitter, the sources indicate that buyers interest has recovered and inventory has tightened. The record low mortgage rates surely help and I think mortgage rates will likely go even lower because the margins to treasuries are fairly high right now.

Who exactly encourages the protests and the property damage (which was done by looters not protesters)? The protests are unfortunate, but they were not organized by any party and they are not Trump’s fault either. He just poured gasoline on them by sending the national guard and the tweeting stuff like “after looting comes the shooting”, which surely didn’t help.

Sold short a bit $RGA (Life reinsurer) at the open when reading about their stock offering at $81. I was surprised it opened as high as it did ($89) and then even briefly went higher. I first thought it was a potential long until I read the 424B offering filing. It appears that they loose about $400-500M for every 100k death in the US or 1.4M worldwide, so it is very levered to excess death (which is basically the risk they insure). I closed this out for a small gain later, but I really think this has a potential as a short as I think we could be a few hundred thousand dead in the US before this is over and potentially a million. In the latter case, RGA likely would be toast. Anyone has a clue how to get statutory filings. Pre- Corona, they had ~$700M in excess equity and COVID probably took $400-500M of this, so I assume their actuaries got nervous and that’s why their raised capital. It’s cheap and trades far below book, but every financial on its way to going broke looks cheap and below book. RGA suffers from a double whammy of excess death and low interest rates so it could be really in a bind right now. I know it’s kind of Macabre to bet on a demise of such a company, but hey what happens, happens whether we bet or not. If nothing else, it could be a way to insure against the tail risk of the virus getting worse again. I own some so insurance positions like TRV, ORI and BRK that I wouldn’t mind protecting.

That’s always the answer you get when you ask a barber if you need a haircut.

The problem with the Swedish approach is that it still takes a long time to get the herd immunity. Stockholm was at only 7-8% (if Remember correctly) with the rest of the country far behind. They also have no the problem they the rest of Europe or at least the part who have contained the Virus to very low levels may not allow free border movement from states like Sweden or the UK out of concern of importing cases. They probably need to way of testing everyone coming in. I posted already upstream that the Swedish economy is not doing any better than the rest of Europe anyways. I do think there is a large benefit fit of keeping the schools open and we have to find a way to do this too. Anyways, the Swedish way is sort of a success because they avoided total disaster like Italy, NYC or Spain and their citizens followed the guidelines from the government voluntarily. Their approach seems to be supported by their citizens, so who are we to judge. However, their path Forward seems to be as murky as anyone else’s with a huge economic tolls to pay.

The idea to reuse rockets For cost savings is very old, at least early 70’s. In a way, the Challenger was build around this concept. However it’s not easy to make it happen. For me, the most amazing part is to bring the booster rockets back on their feet on a drone ship.

The relative speed between the ISS and the dragon module decreases, as the dragon comes closer to the ISS Orbit. That’s why it takes the dragon so long to get to the ISS station.

A small step for mankind, a large step for capitalism.

Cigar but, interesting that you bring up that kids (and probably young people) are not very good spreaders of COVID-19. I’d have looked a fair amount and couldn’t come up with an example where a kid (through school or otherwise) was identified as a superspreader. In Germany, the schools have reopened again a couple of weeks ago, but the superspreader events that did occur were in churches and restaurants involving older people. The absence of evidence is not proof ,but somewhat telling. In any case, the main risk with opening schools is not that the kids get infected, it’s them serving as a vector for transmission to more vulnerable people (teachers, parents ). If that risk is low, than opening the schools starting with smaller kids (who likely have younger parents and teachers ! ) should be strongly considered now. I am likely biased as well, since I have a teenage son at home and we noticed ( despite seemingly taking the quarantine well) a noticeable degradation in academic performance as well as some psychological issues at home. Not sure what to make of it sample size =1), but our small School district is now trying to hire “emotional coordinator” and based on some hints from other parents, they have similar issues as well. In any case,I believe they if we close the schools for another semester and try to continue online only, we are likely creating a disaster here for the kids. As a parent, I would rather take my (fairly good) chances with the Virus, based on what I know.

First time I hear the term infodemic but it rings very true. Jut went though a pretty good article (in German) about Sweden. Some folks in twitter seem to believe that Sweden is the model for how to deal with en epidemic and it is true - Sweden so far has avoided shutdowns and hasn’t really descended into a disaster like Italy or NYC. However, looking at what actually is happening there, it is obvious that the Swedes did show restraint that is on par what happened in other countries in Europe simply based on recommendation from the government. While this is great, it is not clear to me that the same would have worked anywhere else in Europe, much less on the US. Second, economy (Based on forecasts) is actually not doing better than in other countries in Europe. Actually, if you accept the above, then it’s not really a surprise either. Below charts show two different graphics - GDP forecast for 2020 and google cell data for presence at work. Basically the data for both for Swedes is middle of the pack, which means that the Swedes have done what others European countries did just based on their government recommendations. https://www.spiegel.de/politik/ausland/corona-krise-schwedens-sonderweg-eine-zwischenbilanz-in-zahlen-a-c7b3cea2-63be-4072-8df9-afdb765afb54 As to whether the same nudging has a chance of working in the US, we can draw our own conclusion.

Pretty good summary of COVID-19 from a medical POV. https://www.bbc.com/news/52760992

This is an interesting problem for clothing retailers, or anyone else that sells seasonal goods. How far in advance does the typical clothing retailer acquire inventory, e.g., by mid-march I assume most winter clothing is already gone. Is the mid-march inventory primarily spring or summer clothes? Either way, it seems like there is going to be alot of out-of-season clothing around. Would off-price discounters benefit from that? Also, someone's going to have to eat most of that. Will brands take some of it back? Maybe off-price can buy tons of stuff cheap, but who wants Easter stuff after the holiday? How many people just don't need new swimsuits at any price if they are cancelling their trip to Hawaii? Plus, we were at all time high consumer sentiment in February....how's consumer sentiment now? All of my friends are delaying or cancelling vehicle/house purchases, and sticking to the necessities, even if they have money. Who is going "shopping" even if stores re-open? And to what extent was BURL's target market (women with incomes $25k-100k) affected financially? Well, they showed a huge loss as predicted, but BURL stock is up ~20% since this post. It’s strange, the balance sheet is in much worse shape, but yet the stock and in particular the EV is higher now than pre-COVID, despite far worse fundamentals. I know they mentioned higher sales in the stores they are open, but still, that’s a lot to pay for some green shoots in a scorched yard, imo.

Yes, thanks for taking the time to explain the Repo issue (again). This does make sense. It seems sort of surprising that Dimon doesn’t exactly know the red line in terms of reserves. One would think that the rule for clearing payments and the reserves are crystal clear, if that is the most important function of the Fed. Perhaps the Fed bureaucracy likes to keep things a bit muddies to keep everyone on their toes and make sure the Branka never cut ti too close. Seems to have backfired in that incidence. FWIW, we see the correlation of private sector saving and public deficit in this quarter when We saw the headline that the Private savings Rate went to 33%. I guess that happens when you throw of bundles of helicopter money to masses with many of them having no opportunity to spent it. And of course we have the public deficit to match the private savings.

^ Interesting. The repo issue also caused a mini hiccup in the equity markets in Sept 2019 that quickly reversed after the Fed stepped in. It seems like following what the Fed does is key to market movements rather than look at fundamentals (valuations ) or even macro economic indicators. The stock market performance during this crisis has shown this more than anything else. The problem seems to be that we need more and more of these sugar rushes to prevent meltdowns. Seems like treating a toddler prone to meltdowns with candy and Ice cream each time when a tantrum is due. I am not an economist, but I know that at least with kids, this method doesn’t really work in the long run and I think many have tried.

It’s cool to watch, but I watched Apollo launches as a small kid in front of a black and white TV. I really thought that at this point almost 50 years later, we would be cruising with ion drive powered space ships around Jupiter. Some where along the way, we dropped the ball on space exploration.

That’s going to show China. Soon they will be running the outfit. The US saves $550M or roughly $1.3 per head. Nature abhors a vacuum. That's what we learned the last time we tried isolationism. It doesn't seem to be going very well this time either. Isolation doesn’t real work with pandemics. It is one thing where an ounce of prevention saves you a pound of cure quite literally. The WHO and China needs to be held accountable and China’s influence on this organization needs to be diminished, such that we can minimize the risk of a repeat. The WHO has done great work and helped contain Ebola and SARS and perhaps other diseases. Saving $550M while we are spending 5 Trillion right now to help cope with the existing situation makes no sense if you think about risk rewards ratios.

That’s going to show China. Soon they will be running the outfit. The US saves $550M or roughly $1.3 per head.