Spekulatius

II mentioned this before - my wife is working as an RN (contractor) on specialty care in several hospitals. I have talked to her and so far zip safety precautions, no COVID-19 testing (apparently no test kits) and not even N95 masks for personal. Can‘t believe it. Now a neighboring hospital has a confirmed case and they have a suspected case, but no way of knowing yet. They will start safety training this week and get N95 mask this week supposedly, probably test kids too. The patients my wife deals with have high mortality to begin with, so if they get infected, they are most likely gone. I don’t know who is to blame here, the hospital admin, the state bureaucracy , CDC or federal government institutions, my guess it’s all the above. There will be lots of blaming and law suits when this is over.

The way DAL is trading ( static share price around $46) while other airline stocks are falling, Warren‘s bid put a floor under its price for the tone being. I bet he buys a ton of DAL as I type this.

FOX, RHM.DE and LDO.MI ( the latter two are plays on my European defense theme)

Energy. It’s already down on the ground and now it gets a swing with a baseball bat to the head.

I haven’t lived in NY state too long, but that’s exactly how you eat Pizza in NYC. Use a fork and they will use a pitchfork and chase you out.

Valuation multiples really don’t matter. We heard already in another thread that with a 1% discount rate , a 2.7% FCF yield is a great bargain. Now if interest rates go to 0.1% even a 0.27% FCF yield is a great deal too. That’s a 10x upside right there, no growth needed. Europe and Japan are ahead of us and it has worked great for them.

I just refinanced and see me doing it again in a couple of month. Sounds like our banking system is going the way of Europe and Japan. I guess we can buy them for 1/2 tangible book in a couple of years, when they earn 2% NIM.

A lot of commodity business ( energy, mining, steel etc) and their suppliers may succumb to lower prices/ demand and possibly tighter credit. E&P‘s had structural issues before and weaker prices may make the situation far worse ( if that’s possible). Same with steel.

I think the best similar case is that we can expect a mild form of 9/11. I expect travel and related industries to take a hit. Travel is responsible for about 10% of the global GNP, so if you haircut this by 10-20%, it’s going to be a 1-2% hit to global growth. Then there are trickle down effects on restaurants, malls, sport events, conventions and possibly business travel, aerospace (especially aftermarket parts) Best case scenario , this blows over in a few weeks and it’s just a minor speed bump with a bad quarter in GNP growth. Worst case, this leads to lockdowns to slow down the epidemics and then it comes back next winter and cause more lingering effects. Some countries like Greece, Spain, Thailand etc skid in recession and need a bailout. https://knoema.com/atlas/topics/Tourism/Travel-and-Tourism-Total-Contribution-to-GDP/Contribution-of-travel-and-tourism-to-GDP-percent-of-GDP

Do you think a lockdown in the US is priced in? I don’t think so. A couple weeks of lockdown would do considerable damage to the economy, considering how large a percentage of US lives paycheck to paycheck. US is most likely underreported because so few people have been tested. The hospitals my wife works (nurse in dialysis) in here still don’t have any protocol for this or tests done on as far as she is aware of. Europe is getting worse though and markets continue to drop. Italy may be past containment with so many new cases and most likely this is going to jump to other countries in the same area.

If one dead is only worth 200k, the 3000 killed in 9/11 would be worth a mere 600M. out in the value the asbestos contaminated WTC ($500M) and the goal cost would not have been more than $1.1B. Yet we spent more than 1000x that much to wage a war against terrorists and protect us against a second one. I think you are forgetting about 2 things and both are related. 1) reflexivity - it does matter what actually happens, it matter what people think what may happen 2) tail risk - with a new thing like this, nobody knows exactly what it going to happen. So preparing for the worst and hoping for the best actually makes a lot of sense. We know already that there is going to be an economic slowdown which probably kills profit growth this year if not worse. Otherwise we might have seen a 5% if not higher profit growth, so a 5% hit is entirely rational. If you assume a worse scenario, the current 10%+ correction from the top, bringing us merely back to last October’s Levels not irrational. So while there is some irrationality about the selloff, there was quite some irrationality about the rise before that, so it’s not clear to me that the market is overly pessimistic or too optimistic. The only thing I am sure about is they the volatility is going to go down. If I had to guess, there are going to be nasty surprises in I’d individual stocks that miss their forecast by a mile in the next round of earning releases, which makes it hard to handicap what to buy in affected sectors or those that are economically sensitive.

By far the most level headed logical approach to this situation. Castanza, "Level headed" ? - Please look at the "/6" and read it again. Basically all countermeasures to contain this thing are now enabled. It's BS. Level headed as in not inducing panic. The facts we have are the facts we have. Speculation to the extreme doesn’t solve anything. I’m not saying this guy is 100% correct in his analysis. One thing I have learned in financial markets is that you want to panic before everyone else does. ???

If America finds a cure faster than other countries then perhaps the fattening of the pharmaceutical companies has been worthwhile. Do you think another country (socialized medicine or otherwise) has a better chance? Well during the last Ebola outbreak it was a lab in Winnipeg that developed the vaccine. And a lab in Saskatoon that was created to deal with exactly these types of viruses and has tons of experience with corona viruses (including developing vaccines for them) has a already been working on this for a while. So we'll see... Vaccines are cheap. Not that much money to be made bd a minefield for lawsuits. It’s one of the best return on investment for public health, but not for Pharma or biotech companies. It’s one field where public funding is needed.

Air travel will rebound much faster than cruises, which are often planned many month ahead. Also, a cruise is just a form of vacation for which there are substitutes, but there aren’t really good substitute for air travel.

We will find out in the coming months how individual countries are handling the outbreak. My focus on the US is i am coming at this from an investing perspective. If things get ugly in the US then financial markets are going to tumble. The word on the German stock exchange used to be “ if Wall Street gets the flu, Frankfurt gets pneumonia”. In fact, German markets are down more than US markets.

Interesting to note that Hk stocks have held up reasonably well. I am watching CK Holdings and other stocks and they are down maybe a fe % with no panic selling at all. Of course they have gotten whacked already due to protests, so maybe they are at a point where the bleeding stops regardless of newsflow, which generally is a very positive sign. Also, the numbers of new cases is down a lot in the Wuhan epicenter? Maybe the needs is all fake, or the containment efforts of the Chinese are actually working.

Usual suspects - everything that is not good for you: Guns (perhaps defense), booze, cigarettes, crappy food (Domino’s pizza) and perhaps add social networks to that list (FB). perhaps AMZN as people avoid stores and buy online. And yes people will watch more TV. NFLX stock is up, but the rest is down, might be an opportunity. CMCSA has some exposure in their theme park business and if Olympics get cancelled (NBC has the rights). I bought more this Friday regardless. The bulk of their cash flow (broadband, TV) should be fine, especially TV in an election year.

Fascinating story about the 1918 flu epidemic. It finally explains many details, - the fact that this flu was first mild, and the a second second wave much more severe killed many more people, why it is called ‘Spanish Flue’ (nothing to do with its origin) and how it may have shaped history. It’s an awesome piece of journalism: https://www.smithsonianmag.com/history/journal-plague-year-180965222/

I'd be interested to hear what long term compounders are trading cheaper than last March and at substantial discount to IV. 8) I guess EXPE is but it was cheaper in November and without virus overhang for near term business. Me too. Even summer 2019 was cheaper and Dec 2018 was much cheaper. In Addition, we now have a Real problem with the economy that we didn’t have last year. A selloff always offers some bargain, thats true, but it was way more true in Dec 2018. Linamar! Auto parts, yada yada, cyclical, yada yada, but their growth is real. And you get in at an almost 50 pct discount to BV while their capital allocation is to go for plus 20 pct returns. Obviously, their ends markets are pretty bad, but even then you get a fat yield and 5-6xPE. And they tend to come out stronger through a downturn. Hasn't traded here since 2013 and has reinvested almost every penny in the business or bought back shares (talking my book, 18 pct position). I agree on Linamar. Obviously a well run company, in a very tough industry with a bad near term outlook. Timing is key in these situations. It is not a buy and hold compounder in a sense that very likely, the bulk of the return owning this will be made in a short period of time, I think. That’s the Problem, value to the shareholder accrues very unevenly. There are lot of stocks like this currently on sale. The basic problem is that even if these stocks are cheap, they will go down with the Market (if the Market falls) and probably go down even faster. If we get to the point where they stop going down and bad news, then it’s time to buy. Generally, such a moment never comes because value stocks never get cheap enough, relative to market. The only time I remember is in 2000. I vaguely remember buying Allstate insurance in February 2000. I looked at it and told my coworker that it’s darn cheap, Gradeinteilung at way below book, low PE and buying back their own stock like crazy. He was laughing at me, everyone was in tech stocks back then. The Company stocks I was working for was up 500%, while Allstate stock went down. Then I recall a big kahuna moment in March 2000, when tech stocks started to get destroyed. Allstate also missed earnings that month, but the stock ended up positive on earnings day. Every tech stock on my watch list was bloody red. I don’t think we are at this point yet with value stocks. Perhaps we will never get back to this point any more with ETF and passive investment driving the bus. End of rant, I am running out of juice. At some point I will own Linamar, I think. Thanks for posting about it.

The problem aren’t really the death rates or number of new cases, the problem is that the only way to stop this is to essentially shut down large parts of the economy. (Travel, Social Events, Public Transport, Restaurants etc.). This could easily become a 2008 recession. With some luck, it will blow lever at home and we have just have the disputation of the supply chains from China, international demand and most likely a recession in Europe. Overall, we are just back to the prices from October 2019, oh the horror...

I'd be interested to hear what long term compounders are trading cheaper than last March and at substantial discount to IV. 8) I guess EXPE is but it was cheaper in November and without virus overhang for near term business. Me too. Even summer 2019 was cheaper and Dec 2018 was much cheaper. In Addition, we now have a Real problem with the economy that we didn’t have last year. A selloff always offers some bargain, thats true, but it was way more true in Dec 2018.

GD (starter), a bit of TRV, adds to ORI, CMCSA

I don’t get why people like Lagavulin. I had one bottle. My friend said it tastes like old socks. Lol I have never tasted old socks, so I wouldn’t know what to expect. I am sticking to California wine (Sonoma county, because I lived there for a long time).

Reminds me of TARP in 2008. We really are in trouble.

Anyone has any idea ( other than the 3:45PM ramp) why the index ended positive for the day, let me know.