Spekulatius

Interesting thread from reddit about conditions in Italy. Looks pretty dire. It also seems that they are not as incompetent as some here believe, as they clearly prepared a week ahead for an avalanche to patients that they new was coming. Italians may not have the strongest government, but are masters in improvisation at a local level. https://www.reddit.com/r/medicine/comments/ff8hns/testimony_of_a_surgeon_working_in_bergamo_in_the/ I can vouch that this is real of course, pulled it from twitter. Make of it what you want. If the hospitals prepared at a local level 1 week ahead, they are better then the hospital my wife is covering which seems to have done nothing (no protocols for COVID-19 patients in place, no N95 mask etc.). I hope it never hits as hard as it hits Italy because quite frankly, I don’t think we will look better.

Yes, that was a pretty good press conference. No sugar coating, stating what is known and admit was it not. Simply factual and forward looking. Compare this to Trump’s press conference yesterday. It was a clown show with a bit of campaigning and boasting thrown in.

Who doesn't love a roller coaster. Wheeee! I think we get more bumps, These roller coaster always have straight stretches.

Thank you for your well reasoned post. I also read the news from Italy from German sources and it seem clear that their health care system is breaking down under the onslaught of patients and possibly some panic too. I don’t think we should dismiss Italy and in particular Northern Italy just as a badly managed country. The reason why Italy got hit too hard is because they got hit first (besides China) and didn’t have time to prepare (as German disease experts point out). Other countries, including the US don’t have that excuse. Germany is at risk too with several outbreak clusters, and at least they have clear escalation protocols in place that I believe are going to be used as necessary. Italy didn’t have they in place and that’s why they are paying the price.

Bought some Tosnet Corp 4754.T. Security service provider. Found it using Kenkyo Investing Magic formula screen. Very cheap and growing. Substantial net cash and FCF.

IBM, GE and GM are much more likely to get into trouble than the big banks, due to the size of their total pension liabilities relative e to their earnings power and market cap. Then the defense companies gave huge pension funds, but those are more or less indirectly funded fed by tax payers.

Italy is now entirely locked down. I hope we can avoid this, but it may happen here too. I think it will happen in more European countries. https://www.cnn.com/2020/03/09/europe/coronavirus-italy-lockdown-intl/index.html How long needs a lockdown last in order to be effective? I guess longer than the incubation period which would be 20 days that Taleb has mentioned. If we lose 20 days, that would 20/260 work days or 7.6%. Even with a 2% base growth rate they would be an almost 6% negative GNP print this year. Ouch! I was a buyer today. So I hope we can avoid this, but I am not sure. I don’t think that -6% GNP is priced in.

Unfortunately when there is a lot of blood in the streets almost everyone is dead. I frame it that way - politics determines the price here, so it makes sense if things don’t make sense. I had a costly mistake in this sector(now almost a decade ago) that stays with me to this day. You can get 99/100 things right with these and still just get blasted. Way to many moving parts and things out of the control of management/company. The toll collectors sounded like a solid idea as well, but often the capital structures just made them too much of a pain. I fuckin hate energy. Drill, baby, drill, should be explained to the shareholder as kill, baby, kill. Cuz thats what happens with your capital. That, and the cyclical nature of many, almost guarantee repurchases or dividends are done peak cycle...not appealing. I have been investing (if you wan to cal, it that ) in midstream since 2008. The issue is capital structure as you mentioned which makes the sector vulnerable to stress in credit markets (seen in 2008 and 2016j, but it is wrong or right correlated with energy prices. For the most part, it doesn’t really make sense, because the midstream are toll keepers, but to some extend they are tied to the mast , so to speak. If shale really goes to hell, a lot (but not all) midstream will go to hell with it, because E&P bankruptcies will impact the midstream as well. WMB has two sides of the coin - the Transco/Northwest piper , which is basically and utility and demand driven, but they also own G&P assets (which tie into Transco and Northwest pipes). If the producers will go bankrupt, one can see that the economic of the G&P asserts will be impacted to some extend. While it is correct, that the G&P contract is third to the land, not the E&P entity it could still occur that the next owner drills much less and hence pays much less for G&P toll fees. What we are seeing now is most likely an overreaction in midstream, but I think we are seeing looking at an extremely unfavorable newsflow with some economic impact on the midstream said too. Maybe it is priced in, but in my experience those things are nice priced in before they actually happen. For example, CHK looks quite distressed and they own many NG producing asset that feed into WMB pipes in the Northwest (WMB actually bought them from CHK a couple of years ago). What will happen when CHK inevitably raises the white flag and declares bankruptcy? There is no way they can survive with the current capital structure.

Yes, this seems to make sense and I think the author is correct and overall mortality rate will come down. The mortality rate varies a lot from country to country. Korea’s mortality rate is fairly low while Italy’s is surprisingly high. I guess age distribution and the detection/testing rate account for the difference.

Today is my fastening day, but that doesn’t mean I can’t drink. The Cali Syrah essence goes straight where it’s most needed.

Tickling match? I’m OK with the drop if that’s what it takes to get rid of this douchenozzle. ____________________________________ | | | Biden 2020 | | It's Time For A New Douchenozzle | | | |____________________________________| Pretty much, yep. He's definitely not my 1st choice but at least it won't be Sanders or Warren. I don’t know, socialism looks better by the day. How about “Free testing for all !”as campaign slogan?

Unfortunately when there is a lot of blood in the streets almost everyone is dead. I frame it that way - politics determines the price here, so it makes sense if things don’t make sense.

Bought back some of my BRKB and GOOGL shares , more BWEL, FOX, PINS, starter back into DD as well as several other positions (industrials, real estate - VNO) and even some MA (AH) I stay clear of banks and energy related despite what looks like tremendous bargains. I hate everything where politics determines the price.

Why not open a fine bottle of red and have a glass? Tis the way of the warrior. Exactly. Think about this - you can tell your kids about it in a couple of years. Every generation should have their black Monday.

Between Trump, hacksaw MBS, and “dick” Putin, comrade Maduro they should be able hammer away a nice deal . Maybe invite the Ayatollah to the table and call it the “chosen five”.

Tickling match? I’m OK with the drop if that’s what it takes to get rid of this douchenozzle. That’s happens when you let Republicans run the economy. . Bush Sr -1991 Bush Jr 2001& 2008 Trump 2020 Then look at his favorite industries : Coal, oil and steel. Must be bad luck. I wonder if Obama is still claiming credit to this economy? Perhaps we will see a tweet taking that back? For the record I think it's dumb for any president to make claims to economic conditions. Totally agree, but that was Trump‘s platform. I think some GNP prints will look like the Great Recession.

Tickling match? I’m OK with the drop if that’s what it takes to get rid of this douchenozzle. That’s happens when you let Republicans run the economy. . Bush Sr -1991 Bush Jr 2001& 2008 Trump 2020 Then look at his favorite industries : Coal, oil and steel. Must be bad luck.

Agreed. Bunch of wussies.

Circuit breakers dripped. 9/11 repeat. Have fun and enjoy the ride.

Lysol.

Futures got the flu and are limit down -5%. Fun fun. Put in your stinker bids.

If he protects the energy industry with higher prices, he will destroy related industries like chemicals, refineries, as they become uncompetitive. So I don’t think the energy industry can be saved via higher prices in the US only. It is also not fair to let the consumer bear the costs. Tough to know how long it lasts. In 1998, crude went to <$10/brl for a short time. Also note that the OPEC is basically a cartel and has tried to fix prices for a long time. So maybe what we are seeing now are true market prices, if such a thing even exists with the energy markets. I think the sector just needs to dramatically shrink. The interesting question is what happened to NG, which still is more or less landlocked, except form LNG export capacity. It could benefit from less NG being produced as a byproduct. That on the other hand creates a problem for the US chemical industries since they have benefited for a long time from cheap NG compared to crude input. With that advantage gone, This industry could get squeezed. Glad to be watching this from the sidelines for now.

I don’t really have a clue as far as the bond market is concerned, the reaction in bond yield is way larger than what I would have expected. It’s is a huge market, so it’s. It just a few players panicking, it’s a lot of players basically predicting deflation. Even if it is an overreaction, think the political pressure to reduce interest rates is immense and I suspect we will see more cuts before the election. As far as comparing this to 9/11, it is the closest analogy I can come up with in recent times, but of course it isn’t perfect. I don’t agree that 9/11 was a bigger event. In a way, it was a singular event that occurred within a few hours and then was basically over, as it turned out. What wasn’t over was of course the change in mind set, the security protocols and the reluctance of people to fly. This event is more protracted and most likely will play out over many month. So the reaction is less direct and it is more like a slow motion version of 9/11. Then of course there is the event itself an the reaction to it, which are two different things. It’s difficult to know how people will react, but again, I can see this occurring on the same scale than 9/11. As far as Ray Dahlio, no I am not really a macro guy, but I think these folks had a pretty sad decade and may have more opportunities to outperform in the next few years than in the last. I can also see they index investors are going to see pretty lousy performance while active investors have more opportunities to shine.

I disagree that it has to do with the relatives. It looks like he wants to punish Russia for not going along with the cut. The biggest discount is for NW Europe - Russia's market. The question is if MBS can actually do it. It didn't work very well the first time he tried it. NA producers have proven to be very resilient. Who would have thought back in 2015 when he tried to pull this sort of crap that it was going to be the Saudis that are going to back off and not crappy producers from Oklahoma? I certainly didn't. So I don't think that we can have a protracted period of 20 and 30 dollar oil. As you say the whole system just doesn't work at that level. So the system re balances itself either through an OPEC+ cut, or bankruptcies in NA or both. My guess is that it's gonna be OPEC+ cuts because it seems that they have less of a stomach for those kind of prices than NA producers. But I think at the end of all of it you're gonna have hydrocarbons coming out from exactly the same basins that are coming out of today. I think the issue with killing shale is that it’s like trying to kill weed. You can kill it temporarily, but once you stop weeding, it grows back very quickly. It is different thank Killing offshore oil, if you kill of an deep water oil project, it may take up to 10 years to get it up and running again. Shale will probably be back in 12 month or so. However all the above does not prevent equity to be wiped out in shale E&P’s. Where I could be wrong is NG. NG is partly depressed because Ng is produced as a byproduct of oil production, depressing prices. if oil production goes away, the associated NG production will as well and that may actually boost gas prices. Then on the other hand we have LNG which competes with oil and Russian pipeline gas. It may become roadkill too, especially if NG in NA rises and oil prices world wide fall, thr spread will be reu Ed and many will become uneconomic. Interesting times. I will stay away from E&P’s, but I am rebuy WMB and possibly buy EPD for the first time. I have no idea who this plays out other than it will be messy and most likely a bloodbath for shale E&P equity There could be interesting opportunities in midstream credit. I was able to buy some 10% bonds in 2015 (OKE, BB+ rating and they were money good), I look forward to similar opportunities. I don’t think I will mess with E&P credit, the FCF to service debt just isn’t there, because of the decline rates.

Did you even read what he wrote? Where does it say anything about spending money? Taxpayer money? Isn’t it assumed? Maybe I read it wrong, but isn’t he saying govt SHOULD take precaution? I mean govt effort or lack of efforts seems to be the core theme in this thread. I meant nothing in this post about government at all, and I don't believe that this thread is or should be about politics. Nor do I believe that arguing about domestic politics has that been the motivation of most people here. Personally, I was thinking of Taleb's comments with respect to reducing health risk for individuals and with respect to portfolio management. If there are those who would like to argue about the government response, and argue in a non-productive way as we have seen before on CoB&F, I would suggest this topic has become large enough to create a separate thread within the Politics section and potentially another thread within investment strategies to discuss portfolio management in the context of COVID-19. Ultimately we are all here as investors, but let's not forget that some of us have already lost friends or family to this epidemic and more certainly will. I have many close friends on this board who I value immensely. Many of them are older and some are older with health issues that could put them right in the cross hairs of this virus. I worry for them and selfishly I fear for my loss were there something to happen to them. I just found the original context of Nassim's comments, and I have to admit I don't fully understand the context, especially the disagreement: I especially don't understand his spat with Tetlock: Taleb's deragotory comments addressed at Tetlock seem unnecessary and I think engaging with a variety of viewpoints would be valuable in this situation. I think this board would similarly benefit from a variety of viewpoints and we could all be more welcoming by focusing on the ideas and not attacking individuals, but focusing on the specifics of an argument and responding with an argument that is even more well reasoned. From watching the interactions of several others on this board in the past couple of days I think the discussions would have been better if everyone could have refrained from the use of "you" and tried to refrain from making assumptions or at least questioned their assumptions about other people's motivations. @Read the footnotes - thank you for the well reasoned post. While I think this developing epidemic will become a political issue during the election, I think it is a good idea to stay clear of political bias in his thread. I am merely trying to get to the investing ramification of this epidemic and I think the closest we had in the past is a demand shock similar to 9/11. Similar to the current situation, it hit travel related industries too, but we also had a similar setup in terms of a richly valued market and perhaps a Venture capital and tech bubble. To push this analogy even further, I think we have reoccurrence of lax accounting ( a recent MF industry focus podcast is a good background on this). https://podcasts.apple.com/us/podcast/industry-focus/id717428711?i=1000467575729 As some of this unraveled, we had major accounting frauds discovered in Global Crossing, Worldcom, Enron, as well as a lot independence power producers l as well as rampaged stock option compensation (today’s SAAS companies may take notice). I don’t think we are quite in same situation, but we certainly have some ingredients for this (rampant use of Non GAAP metrics, increased debt levels etc). So I think that’s another risk factor that I don’t think is adequately acknowledged. If we keep with the 9/11 analogy, while travel was hit hard, the economy and the stock market really didn’t find a bottom until mid 2002 (almost 9 month after the incident) and then scraped along the bottom for almost another year until 2003. Similarly, this epidemic plays out, I don’t think the effects will be over very quickly either and we I don’t think we get and V- shaped recovery. on another train of though, I was listening to an interview from a fellow from the Robert Koch institute in Germany (leading virology Institute in Germany) who also think the government should do everything possible to slow down the disease, and if indeed the disease dies down during spring/ summer we would need to batten down the hatches during summer to prepare for a renewed onset during fall (the next flu season) as to prevent a disaster like during the Spanish flu epidemic in 1918/19 (it was a second wave that was the killer back then). What this means is that this epidemic is most likely a prolonged affair, both in terms of epidemical outcome but even more so in terms of economic consequences. Another somewhat related issue thwt hasn’t gotten much attention is what appears to be a significant meltdown in the energy markets. Not only has the epidemic hit the demand quite substantially, but now it seems that both Russia and Saudi Arabia go on an all out war for market share, prices be damned. What this means is hard to predict, but it seems to me that energy prices stay lower for longer and it pretty much makes any shale player or even deep water development economical and will inflict substantial pain on shale, oil sands and even the oil majors and related industries (LNG infrastructure,refineries ). Anyways, the above are just thought pieces that may or may not fit together. I don’t claim to know the future. Much less predict the stock market reaction to it, but I think we are likely in for an extended slowdown and quite possibly a recession. I would not be too surprised to see the late 2018 Lows either. I do think thwt the much lower interest rates will spur demand for real estate, in particular residential real estate, as 30 mortgage rates drop possibly as low as the low 2%. That is unless we see a substantial increase in unemployment, which I think can be avoided, because companies will be very reluctant to lay off people (especially skilled labor) because there is very little slack. I would probably stay clear of banking and long tail insurance (as I have noted before) and certainly of energy and consider even midstream as very vulnerable (I sold off my midstream as well a few weeks ago). BRK/Buffet will probably have opportunities to deploy is ~$125B in short order in very favorable terms in distressed industry’s (his preferred stock/ warrant ploy) or outright equity purchase or buying entire businesses, when private equity competition diminishes. I also think they the FANG stocks like FB and GOOG will be money good. There will be great opportunities in Europe to buy stocks really cheap as well. As always, it is important to keep an open mind, as nothing is guaranteed, but I expect for sure to there will be many opportunities will present themselves that weren’t considered likely before.