Spekulatius

So ScottHall re-incarnated as LaforeverHall. Awesome tweet storm: https://twitter.com/laforeverhall/status/1205981236960714754?s=21

The data is for tracking RETAIL investor flows, and in general they are the worse investor of all classes. So, basically this chart means that retail investors made a big mistake, nothing else. What conclusions can we draw from this? It’s not clear to me that anything is relevant for investment decisions.

Hopefully the new CEO won’t do write downs, like many new CEOs like to do. Yeah, or set the future bar low, so he can easily jump over it. FWIW, I don’t like banks right now - potential for lower NIM and higher loan losses.

How can a market go up when money flows out? This does t make any. sense. Sure there are buybacks, mergers and equity swap for debt, but those are long term trends. It would posit that Markets can go up, if money flows in.

The best illustration of the failure of the US health care system I have seen: https://www.healthcostinstitute.org/blog/entry/international-comparisons-of-health-care-prices-2017-ifhp-survey

Also sold my small position in HHC today. I also reduced my CUERVO.MX by 15% after a good run.

Oddlots - “How online dating is reshaping the economy” is a fantastic episode, imo: https://podcasts.apple.com/us/podcast/odd-lots/id1056200096?i=1000459731481

I think more restaurants fail for inconsistent quality and service than for food quality itself, much less menu breadth. What DTE is trying to do (many different cuisines from one kitchen ) sounds very complex and would be highly skill dependent.

I would probably looking to join a local Real estate investment association and start networking. Another option would be a real estate crowdfunding platform. I am bit leery of the latter, because I am not sure hat would happen if any of those platforms would run into financial difficulties. This might be a good question for folks knowledgeable in real estate like BG2008, especially if they are local to you.

As follows 1br $1600-1700(towards the lower end you can take your pick of high quality tenants with 700+ credit scores), HOA $330-$350, taxes ~$4700, market value currently ~$160K per(pre 2008 sales where mid 200s) 2br $2200-2400(same as above wrt tenant quality) HOA $400 or so, taxes $6500, market value currently around $250-270k (pre 2008 300s) Here's the reason those numbers work though.. theres ZERO market for $3000 per month and up rentals here. So under $2500 and especially $2000 per month is super competitive. This is just a specific community I have multiple properties in, but by and large those numbers are in the ballpark for what I look for. Again I would reiterate that the way I am investing in the stock market, I need to be consumed by it and its heavily taxing mentally. So with these, Im not looking to have ridiculous returns, but simply have something simple that takes care of itself and does better than the passive 3-5% I'd get elsewhere putting in no effort. I also try to stay disciplined and avoid concentration risk. I'd like to get a few mil face value of properties; ie something that spits off a decent chunk of cashflow, but also something that is reasonable enough in size to offload to a local HNW investor if I ever wanted liquidity and found selling more attractive than the alternatives. Gregmal, thanks for sharing these numbers. Based on the high tax rate, it sounds like you are somewhere in NY burps, perhaps Westchester county or LI. Have you seen any impact of rent regulation on property values there? I had a holding which had some NYC properties which marks their properties at market and based on my calculation, their property valued were reduced by ~7% since rent regulation became effective. We have an acquaintance in our town in MA who rents real estate who lower end multi family units and claims he makes a double digit cash return on those. He does some handy work himself and services like snow removal and for others he has a guy (he has a full time job so this is just a side activity for him). This is an area that a bit distressed still and rents are low (<$1000), so the units are pretty cheap. He doesn’t get a whole lot of price appreciation so far, but a high cash return. Different strokes for different people I guess. CA was totally different - negative cash return (even when not counting in mortgage amortization and just mortgage interest) and any buy was a bet on price appreciation.

Going to the firm first is probably the right idea. I think official complaints can be filed with the Finra: https://www.finra.org/investors/have-problem/file-complaint I think in most cases, it is always a good idea to file a complaint with the regulating body if you want to make sure to get traction. No company can ignore these complaints, because it is easy for prospective customers to look them up (even though most wont do so).

I have casually followed distressed debt from the 2015/16 crop of E&P bankruptcies and the recovery rates were mostly awful. Gladly I just looked, but never played in that sandbox. I bought some midstream debt during the 2015 energy credit meltdown and it went very well (OKE debt was paying north of 9% back then and was BB+ rated and never even close to being distressed). There is nothing like this around right now, not even close.

I am sure there will be trade deal with both the EU and the US, but it won’t be free trade. The UK is going to protect their farmers (which I think voted for the Tories), so that going to make a deal more difficult in particular with the US. I thought SD’s comments about Scotland splitting away were a joke, but apparently Scotland voted very differently from the rest of the UK for their own nationalist SNP party, who wants to remain the the EU and split from the UK: https://www.bbc.com/news/election-2019-50779402 It is conceivable that they push for another vote to either remain or split from England. The U.K. could look like Yugoslavia when it’s all said and done. Maybe not that likely but who knows.

The election has removed much of the uncertainty and the prospect of a very left tilted or hung parliament, that’s why the GBP us up. Even the Eurozone likes the outcome since the Euro is up against the USD and stocks are up as well.

A bond guy will always tell you that equities suck. Nothing new here.

BRKR would be hard to replicate. They are the leaders in many specialized analytical fields where it takes decades to build up competence. They do have competitors in most, but those tend to be smaller. Also, my understanding is that Bruker is mostly a rollup, starting from analytical solutions like Nuclear magnetic resonance. They have been acquiring niche companies for a long time. Similar companies are A (Agilent) and PKR (Perkin Elmer), but they are more in life sciences. All those companies have a high margin service business as well. I would think that all those would be very hard to replicate, as there are many different niche products that each require specialized know how to build in addition to having a customer base that used these products for a long time and isn’t likely to switch. I personally use Agilent and to a lesser degree Perkin Elmer products. I have used Bruker products a few years ago. Users tend to stick with a product family for a long time, often spanning decades.

So revenue run rate in Q3 is $168.7 M or roughly $676M/ year. I guess it would be interfering for me at < 10x EV/EBITDA or ~$7B Market cap. Now WORK’s revenue is growing quickly so if the shares stagnate or fall and revenue continue to rise, it could get here pretty quickly one way or another. I also wonder what the moat is. Communication within the company isn’t really a moat. A moat with SAAS begins when a product is going to be integrated in business processes (tie in with ERP etc). It would be really cool and powerful, if one could use Slack as a hub to do all sorts of things with an DRP system, but due to the diversity and complexity of these systems, that wouldn’t be easy to do. Just being a better replacement for email won’t cut it, imo. I haven’t used Slack and my trailing edge company (in terms of IT) probably won’t use it either. We have got skype, but it’s doesn’t have the same sort of functionality. Slack seems more like Discord which is mostly used within gaming communities.

Just out of curiously , since you apparently work in IT, which SAAS companies do you think have a moaty product offerings? I thought this applies to NOW and WDAY, since they are somewhat integrated in ERP system and those thing are harder to detangle, once they are used for business processes.

Added some CMCSA.

Facebook has already a corporate Facebook version. Work looks more like Discord to me. I actually heard that some upstarts use Discord.

That is correct, but does the WACC ( more precisely the debt component cost) adequately reflect the risk? I would argue no, because bond markets itself are in a bubble ( due to record low risk free rates and record low risk spreads ) Still , this is a highly useful way of thinking and proves again that ROIC is the one metric to rule them all.

I felt the signaling from Trump that deal may have to wait until after the election is a clear indication that nothing appears to be forthcoming short term. I believe that a new round of chaos is going to be forthcoming after the holidays.

Yes, I believe that low interest rates favor hard assets, especially those where cash flows keep increasing with inflation (real estate) or those that tend to their buying power (gold). For real estate, low interest rates atemlos, because you can lever them up cheaper and generate FCF. For gold, the opportunity cost to forgo interest payments on financial assets is lower. Assets similar to real estate with stable cash flow like utility stocks, airports, pipelines . These arenas business that borrow a lot, should benefit twice with lower borrowing cost and increased multiples.

Pretty good article about Boris Johnson: http://nymag.com/intelligencer/2019/12/boris-johnson-brexit.html

10% on $100M invested capital is only better than 1% on $1B in invested capital if you can reinvest the earnings and increase the invested capital at hopefully the same return. If you can’t grow your invested capital, I would argue that 1% on $1B in invested capital is equal or better than 10% on 100MBIT, because there is a chance that you can liquidate $1B for face value or even a bit less and come out way ahead.