Spekulatius

Defense spending as a % of GDP has slowly been going down over time, however it also has become more high tech. So less boots on the ground (salaries to pay) and more expensive toys. The last few years have been great for defense Companies. I expect that Russia and China which both are modernizing their military are keeping us on our toes. You can’t really keep a reserve currency without projecting power, imo. It’s a necessity for us to remain the strongest and most capable military power.

Sure I like to live within an hour drive of a city (I'm about an hour drive from Boston), but do you go to the theater or the hospital everyday? Cities are nice places to visit, but I wouldn't want to live (or work) there. MF had a pretty good podcast about 18 hour cities and suburbs as an investment thesis for real estate. This was pre COVID. Makes a lot of sense to me, you live in an area where you get most stuff and drive to a city when you want to do something special. This makes even more sense if you can get equivalent pay without a commute or paying an arm and a leg for a shoebox Appartement. But then there are folks who just can’t live without the hustle of a large city. So each it’s own.

I bow to your knowledge. I love Asterix - has been a long time but my in a couple of years my son will be the right age and I can't wait to revisit. What an underutilized franchise Asterix is. It’s very hard to get the spirit of the comic books right in films and none of the films I have seen quite gets it. Imagine to create a theme park more geared towards adults. There is one in France, but it’s just another one of the rollercoaster parks. You could do a real thing going back in time and drink the “Zaubertrank” and beat each other up in mock fights etc. Endless possibilities. The comic books are a great way to teach some Latin. For many, the phrases in the book there are all that stuck.

Probably shouldn’t trust a source that doesn’t know what “data” means. 0.4% is lower than the estimates I have seen (~0.75%), but it still would mean 800k death if we go all the way to herd immunity and get 200M Americans infected Ted. This would mean that we are about 1/8 through with this epidemic. Just saying. The numbers from Quebec vs. other Canadian provinces looks interesting, due to the huge difference in outcome compared to other provinces. It’s clear that relatively small differences in starting points lead to vastly different results in outcome. Perhaps not so surprising, considering the math behind epidemics and the nature of logistics function.

We talk about thr VOVID-19 in the US a lot, but what is going on in Canada? It seems they the quebecois have a high affinity to the virus or is this a NE thing? https://www.statista.com/statistics/1107066/covid19-confirmed-cases-by-province-territory-canada/

Why have cities always been desired? When travel and communication was more difficult and time consuming cities brought people and ideas together in one spot. Population density was a necessity for ideas to spread and serendipitous meetings to take place. Also it allowed an economy of scale for businesses. All of that still happens in cities, but, I don't know if that is still entirely necessary. People now meet and talk online just as easily as off, and with modern shipping the whole country is your marketplace. Very well said. Still impossible to replicate human interaction, but virtual is good enough for much of day-to-day life, and when compared against cost and livability of cities, will be very interesting to see future trends. Cities may become virtual cities. We know have online community where members can have strong bonds . That wasn’t possible historically.

Correlation does not mean causation. I do agree they in the long run, lower interest rates than the current low level is probably going to hurt growth more than it helps. The point about increasing future liabilities (retirement, pension ) is true as well leading to more saving. The deflationary aspect comes from companies offering services at it below cost. They can do this as long as market forces supply them with almost unlimited funding. Uber/Lyft Are examples of this, but also Amazon in a way.

Put option on the market (SP500) or short the market (SPY) is how it would do it if I worry about market risking stock specific risk. It is not a Perfect Hedge, but should work OK in a market meltdown scenario and is liquid. Since put options are still pricy ( high VIX) I would just short the market right now most likely.

What? Finance and law are probably some that for practical reasons are very hard to do remotely. For those that think it's easy, let me paint this scenario for you. Meet John. John is bight law associate working for Skadden Arps. John works from home under Skadden's new "Fuck the landlord" policy. John jumps on a zoom meeting for a live deal he's working on. 10 ft away in their 600 sqft NYC apartment is his roommate Andrew. Andrew is an ambitious 2nd year M&A associate at Morgan Stanley. He's working from home under MS's new "why should we pay rent policy". John and Andrew don't want to move to Toledo where they can each afford their own place cause in Toledo the chicks are fat and in NYC the chicks are keeping it tight. With a NYC salary in Toledo, John and Andrew each buy a new house and have their pick of the top 5% of chicks there. They don’t care that 80% of the chicks in Toledo are fat. Anyways, jokes aside, I think any shift might be more driven by the companies than the employees. If the companies get the idea they only need some trophy RE to show off and scuttle 60% of their footprint after their digitized and virtualized their company, they might go head and just do that. While they are st it, why not benefit from a much larger labor pool, much of it in low cost areas and get people to work for less, adjusting for the lower cost of living. And once there, why not hire employees from another country for much cheaper doing the same thing. All this could’ve done before, but once most business process are virtual, and location truly doesn’t matter, it’s a logical next step. Seems pretty bearish for white collar salaries to me. Some enterprising remote workers pay it back by having two remote jobs at once and their bosses never find out.

Here is another interesting paper. It’s basically showing evidence that COVID-19 progresses from an respiratory to a cardio disease in its severe case. this manifests itself in blood vessel inflammation and clogging up small blood vessels causing oxygen deprivation. Ventilators don’t help much in this case any more this is a cardiovascular diseases at this point sind I know docs are treating this differently now (blood Thinners like Heparin etc.). Hopefully this will lead to better outcomes. https://www.nejm.org/doi/full/10.1056/NEJMoa2015432 Now back to bashing Trump.

It can’t replicate by itself, it needs a host to replicate. On a different matter, outbreak in Church in Germany - 107 cases all at once! Ouch. All churches in the area have been closed again. https://www.spiegel.de/panorama/coronavirus-in-frankfurt-am-main-mehr-als-hundert-glaeubige-in-kirche-infiziert-a-a94cf16c-f765-4549-b49f-704f33568b00 (There is an escalation Rule in place that allows only 50 cases within 7 days /100k population that if exceeded lights to a re-tightening of distancing rules in the affected county area. This rule was triggered here in even more than one county) In another article it was mentioned that one of the main reason why mean processing plant workers are so susceptible to COVID-19 is because they are operating in relative crowded conditions, but also because the air temperature is typically low (4-7 Deg C) making the folks that stand there a long time more susceptible to respiratory infections. Dalal mentioned this - it applies to common cold, but COVID-19 likely as well. This might be one reason why southern states do relatively better but it also might mean a second wave isomorphic likely in fall/ early winter just like the Flu.

It can’t replicate by itself, it needs a host to replicate. On a different matter, outbreak in Church in Germany - 107 cases all at once! Ouch. All churches in the area have been closed again. https://www.spiegel.de/panorama/coronavirus-in-frankfurt-am-main-mehr-als-hundert-glaeubige-in-kirche-infiziert-a-a94cf16c-f765-4549-b49f-704f33568b00 (There is an escalation Rule in place that allows only 50 cases within 7 days /100k population that if exceeded lights to a re-tightening of distancing rules in the affected county area. This rule was triggered here in even more than one county)

Hasn’t gotten. Ich attention, but the Uk COVID-19 score card is now worse than Italy’s. Same death/pop number and since the UK is still adding new cases much more so than Italy, they are sure to overtake them. # Country death/1M population. 5 UK 542 6 Italy 542

Sounds like Trump considers himself eligible for the study and participates voluntary.

I think it scales if & when autonomous driving takes hold. You buy shares to pass on to your grandkids. edit: I meant re: Uber & Lyft. Why would Uber & Lyft want automated driving? If they have an automated driving fleet, they are going to have to buy automated cars. These cars are not going to be cheap. Then they are going to have to insure them. Then they are going to have to fuel them. Then they are going to to have to maintain them. Then they are going to have to replace them. This is going to cost billions of dollars, perhaps even tens of billions of dollars. Where is Uber going to get all that capital? They sure as $@#% going to do it out of retained earnings. That then leaves borrowing the money OR selling more stock. NOW, Uber's drivers do all of that for them. Uber's drivers are providing a LOT of capital by providing the vehicles. At current pricing, or anything near it, Uber's business model simply does not work. Well, if you believe in the “capital as a moat theory”, then the above is really a bull case and just requires to throw a few hundred billions at this problem. At the point in the future this occurs, we are likely used to these numbers.

4x isn't close**. It is a dangerous, BS narrative. CDC "best estimate" of Covid IFR-S = 0.4 CDC estimate of flu IFR-S last year (my calculations)* = 0.095 * 2018/2019 Estimated deaths / est. symptomatic illness = 34,000 / 35,000,000 = 0.095 Source: https://www.cdc.gov/flu/about/burden/past-seasons.html ** And the CDC estimate is low compared to other experts. For example, Dr. Fauci estimates 10x. Source: https://www.cnbc.com/2020/03/11/top-federal-health-official-says-coronavirus-outbreak-is-going-to-get-worse-in-the-us.html I do not know where the CDC’s IFR rate comes from, it I think it is possible to get the IFR rate to 0.4% (my current ballpark numbers are roughly 2x that). other countries have shown IFR rates of 0.4% and Less than that, it might be as simple as protecting the elderly better. Still, if you go herd immunity - 0.4% with 200M infections are 800k death. That needs to be seem relative to the 2.5M people dying in the US naturally, but even though. In addition to the just binary dead or alive after infection discussion, I have some concerns about those that survive severe episodes as far as quality of life and LT morbidity is concerned.

What would the numbers be for taking zinc by itself, or for the cocktail without adding the hydroxychloroquine? The study says patients treated with hydrochloroquine benefit from zinc, but perhaps a more important question is whether patients treated with zinc benefit from the potentially deadly hydrochloroquine? Eric, the study is between Zinc, HCQ +Azithromycin vs HCQ+Azithromycin. The authors believe that HCQ helps zinc absorb and Zinc has antiviral properties. https://www.sciencetimes.com/articles/25658/20200512/hydroxychloroquine-azithromycin-zinc-triple-combo-proved-effective-coronavirus-patients-study.htm In the study, half of 900 COVID-19 patients were given the triple-drug combo of hydroxychloroquine, zinc, and azithromycin. The other half were given only hydroxychloroquine and the antibiotic, azithromycin. I just take zinc and save myself the rest. Great benefit cost ratio. The rest I am not sure about.

Maybe time to visit this thread about Pharma in the middle of the epidemic? I am looking specifically at MRK right now. It’s a pretty understated drug company and what caught my eye is that they are very strong in vaccines. MRNA with their fancy tech and a couple of Phase 1 drugs is worth ~$28B and MRK with a bunch of vaccine (including one for Ebola) is worth $220B EV. Doesn’t seem right. Plus you get the whole drug company and pipeline with a monster like Keytruda with it. MRK also has a COVID-19 vaccine in the pipeline, but they don’t talk much about it. MRK generally only issues news about Phase 2 or higher drugs/vaccines. Trades at 15x reset Y2020 earnings which seems about fair. Bought a few for my wife’s coffee can portfolio today and thinking about going more in. So far I like what I see, it wouldn’t call myself an expert in drug pipeline matters.

Here is the most impotent question - when do we know when the gradual shifts to the suddenly? or in other words, when do we know when the gig is up? Back then in 2008 folks were suggesting a failed treasury auction, but I don’t think that would be it. Besides they I think I have seen it happening with Bunds and it actually wasn’t a big deal. I do think one of those things could happen: 1) short term interest rates shoot up 2) USD devalues suddenly against other currencies , most likely Euro or Chinese yuan There are probably other unpleasant things but I am not sure which one that might be. I also wonder if in the future the status of the USD as a reserve currency could be diminished , most likely due to the Chinese yuan picking up some market share. For that to happen, the Yuan would need to be freely convertible and also float against the USD (it is now pegged). That would also mean that the Chinese would mean to run their economy differently and give up their mercantilistic ways. At some point,the trade warnt why is going to fan up might force this issue anyways. In any case, the Chinese economy is op going to be the largest economy I the world and with 1.4B people, their current is destined to be a reserve currency. I don’t think they have a choice, the only way this is not going to happen is if the Chinese economy blows up.

You have to do something for your target customer really well or you are dead. The department stores are victims of their own mediocracy since they don’t do anything particularly well. I would even say most mall retailers fall into the same bucket. The Competition of most segmented retailers in a mall are not influencers with a website on the internet or online only retailers.

Brand power is not what it used to be. ::) Right when COVID-19 went live in America in March, the crappiest brands and items were sold out. The high end stuff generally was still available.

How did you go bankrupt? Two ways. Gradually, then suddenly. ( Ernest Hemingway)

Thanks for all the input. I agree that PGR looks impressive. They may be over-earning a bit, but they are also growing and the multiple isn't really rich either. It’s one I should buy and possibly add more at a opportunistic times as one is unlikely wrong about the business quality here. One thing ai noticed is that PGR has become a little bit of a “stay at home stock” lately and tend to be strong on weak days and weak on days the market is bullish. So there is probably a chance to get in at an opportunistic price just based on the markets short term volatility.

Throwing that one in again to get you guys' input. Could Fairfax insurance businesses face similar losses? As large as Lloyd's? I think you need to think about covid on a sub-by-sub basis. Prem assures us that the US subs (C&F) used the industry standard virus exclusions in their commercial contracts, which should protect them from business interruption claims. It seems like about half of the US states have enacted legislation to provide immunity to nursing homes for covid claims ( https://time.com/5835228/nursing-homes-legal-immunity-coronavirus/ ) so that too should help limit litigation. So far, I have not read about any litigation involving C&F, but there are definitely many cases already launched against other US primary insurers (KJP posted this in the P&C thread: https://www.law360.com/pennsylvania/articles/1273308 ). Given that Northbridge didn't take a covid provision, one presumes that they used some sort of exclusionary language for business interruption. What is more, nursing home litigation risk in Canada is less pronounced because getting a class certified is a bit more difficult, and you can usually only sue for actual economic damages in Canada -- punitive damages are very, very rare in Canada, and that would be the expensive part of the claim because the economic damage from the premature death of an 88 year-old is pretty minimal because most of them don't have a job or run a business (ie, when an senior citizen dies a year or two sooner than he should have, virtually no income is lost). Zenith is one of the subs that causes me consternation. Zenith has stated on its website that a covid related workers comp claim needs to demonstrate that the virus was caught in the workplace rather than in the community ( https://www.thezenith.com/wp-content/uploads/Zenith-Coronavirus-Update.pdf ). In most cases, that's a pretty hard thing to prove, but I do wonder whether there won't be some employers/employees who argue that the existence of a covid cluster in a workplace is adequate proof of virus provenance. In particular, nursing homes, public transit agencies and slaughter houses have all had a heavy incidence of covid, resulting in time off and sometimes death of employees. I question whether some of that might ultimately come back to Zenith if groups of employees convince a judge or jury that the existence of an employment related cluster is adequate proof that covid was actually a workplace injury. But, I don't recall seeing any covid provision for Zenith. Like every other reinsurer in the world, Odyssey is a bit of a concern because it's impossible for a shareholder to have any idea of what exactly is being reinsured. Odyssey took a $50m covid provision, so obviously there are at least a few policies that are a problem. But, is Odyssey reinsuring a primary company that was sloppy in the wording of its business interruption insurance? Hard to know, but it's a point of concern. The other sub that might be a problem is Brit. Brit does business in the UK and apparently some of the commercial policies written by UK insurers did not have a virus exclusion, so that might be the driver behind Lloyds' large estimate of indemnities. Brit did take a covid provision in Q1, but who knows the extent of their problem? Did they write many commercial policies with business interruption? What reinsurance have they taken out on their commercial book? At this point, we don't have many options other than to take Prem at his word and assume that the covid claims will not be very large. We don't have many options other than to accept that the $84m provision in Q1 is a fair estimate of the ultimate covid liability. But, I certainly don't blame you for being concerned about how this might evolve. SJ It is important to note that any provision taken for Q1 represents the status as determined on 3/31 , but most likely earlier than that to determine losses. I think we will see much larger losses in Q2 and Q3, but they doesn’t just apply to FFH subs, it applies to all Insurers. On 3/31, the epidemic was just ~4 weeks old and insurance losses will take time to play it.

I think this (Capital and ability to spent) is pretty important and Masa was probably the main proponent of this. It’s a brain dead strategy similar to scorched earth in away and unlikely leads to great returns. I think it is important to recognize the startups that are using this and basically just avoid them.