Spekulatius

Guys, keep it topic. Oil up or down is the question. Iran has oil, but there is none in the Gaza Strip.

There is likely no large war between Iran and Israel. I can see some air strikes in Syria or Lebanon against the Hamas or Hezbollah proxys. That has happened before and Iran has a history to do nothing in those cases - they tend to leave their puppets hanging if they get into trouble. As for the Energy markets- if Iran oil get sanctioned beyond the current measures, there will likely be a spike towards much higher prices, but it won't last. I think Saudis will crank up the oil spigot in this case. I think even the Israel Saudi piece deal has a good chance to happen eventually. Likely after the dust settles after the Gaza is bombed to smithereens. The Saudi's don't care, it's just business for them.

@dealraker Xes, looking the big strategic picture as well as the current valuations, I like LHX and RTX in particular. Both have issues to work through that I think are going to be either gone or at least much smaller 2 years from now. The business itself will be around ages from now. I posted this in another thread , but I am reposting it here as I lifted an old annual report from Lockheed Aircraft corporation from 1958 (from Mergent archive lifted through my library access) reading this old annual reports. Interesting how they talk about the newly developed C-130 transporter and that airplane is still around today 65 years later. Other stuff like that circular space station never got off the ground. Lockheed 1958ß.pdf

There is no direct impact on defense contractors business - I don’t think Israel needs any US assistance either, assuming this does not escalate into a real war ( this more like a terrorist attack than a real war right now). I do think it highlights the risk we live with and the need to keep defense spending. We have seen now Ukraine and now this being another reminder that’s security is not a given. It seems at odds to me that some defense contractors were going to 52 weeks lows (presumably on the house speaker mess that lead to concerns about another government shutdown ) at odds with the performance of the business as well as with geopolitical security situation.

Bill Chen on Real Estate:

@thepupil I don’t expect PE to get destroyed as a business model, but a couple of bad vintages will filter through their income statement over time and typically stocks react to a couple of bad earnings years. In this case, the PE stocks have generally been bullish this year, do people already look beyond the cycle?

I am surprised private equity has held up that well. All except Brookfield entities and CG are close to their highs and up bigly this year. Makes no sense to me, the higher cost of capital ought to make their business much harder.

Strange that the defense contractor stocks just made 52 week lows again a couple days ago and now this… Some thing change and some don't

I have trouble finding older annual reports from GM as well. The Boston Public library has access to Mergent database which also has archived annual reports. Like Lockheed aircraft company from 1958. But no dice with GM. Perhaps there is an angle I am missing. I also love going through old annual reports. Lockheed 1958.pdf

The weakness of BN (or BAM) versus most peers has been quite surprising. BN has underperformed against all peers except CG by a huge margin. BN has issues with real estate , but so has BX. I think one factor has been that Brookfield is Canadian, but the other factors are complexity and probably more forward looking management in case of BX, APO. There has been a lot of dispersion in the group since the September low in 2022

Interesting to read this thread on reddit: https://www.reddit.com/r/Semaglutide/ What I gleaned, people eat less (they simply feel full and can’t digest large meals any more), drink less alcohol (can’t keep it down), go out less (restaurant food, drinking - see above ) exercise less because eating less calories makes them feel tired quickly and what’s the point anyways if you are losing weight without. Probably great for supplement producers, clothing (due to rapid body changes), cosmetic surgery (remove excess skin etc). I think the effects will be quite observable in many different business. Bigger than AI.

@rkbabang Cobalt prices have come down too. Maybe the children working the mines in Congo are working for less now or new mines elsewhere have started to produce. I remember an old illustrated Sci Fi book in 70’s that tried to I ageine what the future looked like 50 years from then, which would be about the current time. They were projecting a network of hundred of nuclear power complexes in shallow ocean water floating islands to supply power for the world, vertical agriculture (to save farmland space), a permanent and autonomous mar settlements, regrowing injured limbs with electric stimulation and hypersonic magnetically propelled trains (Maglev) crossing oceans in vacuum pumped pipeline tubes (to reduce friction ) to replace airplanes and many other things. It not all bad news, nobody predicted the internet or that everyone would have his own computer with a touchscreen in his pocket to scroll at other people pictures on something that would be called social media.

https://en.wikipedia.org/wiki/SICPA

Governments almost never pay down debt, it’s getting rolled over. If you follow the discussions here, - the government deficits are what creates money basically, so paying down debt would be very deflationary. It’s not going to happen. I do not understand the logic behind government debt being deflationary. Creating government debt is inflationary (if rate of change is faster than GDP) and reducing government debt is deflationary.

On another note- I am quite sure that Hamas attacked Israel, because the talks about a 3 way deal between Israel, the Saudis and the US (as a guarantor) are very threatening to Hamas. That piece deal has an Energy side deal attached, as many here know. https://apnews.com/article/israel-palestinians-gaza-hamas-rockets-airstrikes-tel-aviv-11fb98655c256d54ecb5329284fc37d2 I think this is very obvious what Hamas is trying to do here and my guess is that it will be seen as such and the deal goes through.

Sure, but to refinance into a confirming mortgage , you still need to have 20% equity with an appraisal. So if the value of your home goes down, you can’t refinance with lower interest rates into another conforming mortgage unless you inject more equity to reduce the balance. That’s something that happened to homeowners during and post the GFC.

I think consumer staples are selling off more due to higher LT interest rates than due to GPT-1 threats. The GPT-1 issue is just one more nail in the coffin and caused more selling pressure.

If you think the EV transition is going to take a long time, look at the Tesla sales prices. They are down by 33% this year. A Tesla car is already cheaper than a Camry, if you live in California or other states with subsidies for EV’s. Check out Lithium prices - they have collapsed since going up by 5x in 2022 and I think they are heading back to 2021 levels. We are starting to go into the steep S- curve part of EV adoption. I would not be surprised if 5 years from now 30%+ of the cars sold in the US are EV’s. It’s going to be higher in Europe and China for sure. Things start slowly, but once you hit the 5% threshold, the adoption typically happens very quickly. Of course ICE cars keep driving for more than a decade after the last one are sold. On the repair side, we are looking at less frequent but very expensive repaid. The Teslas are already known to be hideously expensive to repair. Same with Rivians according to some news blips I have seen. There is probably going to be a great aftermarket business for replacement batteries, sensors, more business for tires (high torque of EV’s causes more tire wear) and a few other things like sensors.

Depends on circumstances. I just saw a colleague (engineer) leave after being more than 30 years with the company. He got a huge pay bump - I think at least 35% based on what he indicated. For engineers the job market still looks strong. The job he is going to be doing is pretty much equivalent to his old job (his new employer is much smaller in size). You get the pay bumps by changing jobs not by hanging around. Almost everyone who is at his job for more than 5 years is very likely underpaid currently.

POAHY / Porsche Holding is a stock that has forgotten that it can go up.

No unfortunately their Capex exceeds depreciation. All these scientists need expensive labs and toys to do their thing. FCF is < earnings. There is also SBC based dilution creep. So, $CRL not super cheap, but I think the moat is there and likely fairly durable.

Yes, I got 2.75% on a low / no cost refinance. I am a serial refinancer - every 0.5% down I would refinance with a no cost (or low cost refinance). Missed the 2021 low as my last refinance was in late 2020 (before that was spring 2020). I am only about 40% LTV (maybe even less) though so in the end, the mortgage would not prevent me from moving if I decide to downsize. The problem really is that I could hardly afford my own house with an 8% mortgage, if I had to finance 80% LTV. So, I am not sure who is going to be a buyer of houses like mine will be, unless interest rates come down. I think newbuilds sell because builders can offer teaser rates which they roll into the purchase price. Those homes may be hard to resell too because they do seem priced above market, partly to pay for the discounted mortgage.

I am not sure how widespread this is, but talked to tech (in manufacturing) who quit his job with the company I am working for to take a higher paying job in a food joint. He was working swings (evening shift) and likes the new hours better do. Benefits are about equivalent. Hard to believe but manufacturing jobs were once considered the ones who get you in the (lower) middle class and now fast food joints pay more. LOL.

@Gmthebeau I agree, it will take a while to play out, but not a decade. I think it will be more evident over time that the 2009-2021 time frame was a huge historical outlier in terms of interest rates. The negative interest rates for sovereign debt may have been the biggest bubble ever

My first mortgage was 6 7/8% as well but my house was way cheaper relative to my salary and affordability was better. I suspect that was the case when you puchased your house as well. What I think will happen is that the existing pool of buyers get exhausted while sellers (due to life changes etc) will trickle back into the market over time because they have to. That will shift the balance towards a sellers market where prices will be more determined by affordability. This will only play out this way when mortgage rates remain high. If mortgage rates go down both sellers and buyers will get into the market and transaction volume will increase, but maybe not prices. In any case, the buyers at current prices have a very poor risk reward. They could get stuck with 8% mortgage and if home prices go down, they might not be able to refinance, if their mortgage goes underwater, even if interest rates go down a little.