pricingpower

UNP had 24.3bn of revenues in fy24 while spending only 4.9bn on compensation, would have to imagine that improvements in automation will net help trucking competitors more than the rails. The natural advantage that rails have on fuel efficiency (metal wheels have much less rolling resistance than tires) probably also gets eroded as hybrid/battery trucks become the norm eventually, 50% superior rail energy efficiency on a smaller absolute cost is a smaller moat. Seems like most of the technology benefits will accrue to making trucking a hard competitor over the next generation although not strongly enough that rails get displaced the way the canal companies were before them. Maybe more toll roads popping up will maintain the competitive balance vs trucking which otherwise gets free publicly subsidized road use. One nice side effect from the debt fueled buybacks of the last decade is NSC economically now has $1.5bn less fair value of fixed rate debt with each 100bp rates increase, pretty meaningful functional bond short for a company that made 2.6bn last year.

Interactive Brokers has nice daily reporting, I find it kind of random what is lent out (generally 1-10% of account) and the rates (half of whatever IBKR lists as borrow fee). You can get burned on tax treatment if higher tax bracket though as the payment-in-leu dividend replacement gets treated as ordinary income instead of tax advantaged (like qualified or REIT dividends that have special rules). Also believe there is a regulatory requirement that all brokers can lend out your shares without paying you if you are on margin so you probably want to do that in different accounts. I'm averaging about $8/day of borrow income (5bp to 300bp by position) recently but pretty much gave all of 2023's back on a single dividend I'm still pretty made interactive brokers jammed me on by lending the day before a record date. It's interesting to see what someone out there is shorting. If you own ETF's the borrow fees pocketed by the manager are part of why an only ~3bp fee from you is enough to pay their bills.

Not an expert but essentially the renewables developer would often lock in economics to cover cost of project by doing a long term power purchase agreement selling some % of their expected generation they felt confident they could produce (maybe 80% of what they are rated for). As part of the agreements were that if they didn't operationally generate the minimum they promised the counterparty would buy power on the spot market to make up for it but that cost gets passed it through. The core problem was the spot market in Texas went to a $9000/mwh cap compared to a normal $25 so if you weren't producing for a short critical icy period you were running deeply cashflow negative in a thinly capitalized project with rigid debt and tax equity requirements.

Those look great. I tempered my excitement on spending time on the space quite a bit back when the Texas freeze hit a few years ago... unexpected capacity swap uncapped losses in like 24hrs were larger than the NPV of some projects, hopefully people structure these projects better now

Impressive range and depth to that piece thanks for sharing

"Safe Haven: Investing for Financial Storms" by Mark Spitznagel (Author), Nassim Nicholas Taleb (Foreword) might be a good book to check out. It's more about the premise that buying downside protection enables you to run your book leveraged and get an overall higher absolute return (not just about reducing "risk"). Optimal amounts of debt end up pretty nuanced based on an individual's tax situation I think as it is mostly shifting timing and type of gains and whether you itemize tax deductions etc. Personally I think scenario analysis is the best underused tool for calibrating what safe amounts of leverage are, to start if your portfolio couldn't withstand even the worst event in US markets living memory (~90% stock market drawdown during Great Depression) I'd want to be able to articulate why that's a good idea.

I was just thinking the other day how it's odd that forest fire liability risk has been likely massively growing for rails over the last decade but never gets talked about outside of a utilities context. One structural advantage trucking is going to grow is that no one will be able to extract a $50bn settlement for starting a forest fire while deep pocketed rails are probably increasingly exposed...

Engines That Move Markets: Technology Investing from Railroads to the Internet and Beyond - this one was written during first internet bubble and has some nice historical context particularly around times of tech change, neat parallels to today around tech displacement (new canals displaced by rail frenzy etc)

Anyone with a good understanding of whether $GYRO would generate UBTI / if one ends up getting double taxed in a US retirement account? From quick googling it seems like the paperwork burden around UBTI has gotten worse in recent years. I remember reading the VIC writeup on GYRO probably 5y ago where it was expected to liquidate in the next year as they were finalizing approvals.

Agree The Bank Investor Handbook is a nice starting point Some other books depending on direction you're going- The Zen of Thrift Conversions: How To Turn Hidden Bank Stocks Into Big Gains Too Big To Fail The Lost Bank: The Story of Washington Mutual - The Biggest Bank Failure in American History Trillion Dollar Triage Money Games Invested by Charles Schwab The Price of Time When Genius Failed JP Morgan's annual letters are the easiest read out of the big banks and do a nice job of discussing focus metrics There are a few posters on VIC that do a really nice job with small banks, a few days spent reading every post mentioning the word bank and seeing how they played out would be super high signal to noise.

Sounds neat, in for a copy, funny how thriftbooks has hardcover pre-orders priced below even the kindle edition on amazon

I thought the sections on FTX / AI were particularly interesting, it was written more like his personal impressions of the people than a particularly agenda'd piece (looking at Michael Lewis). I think what I mostly took away from the book was a kind of tribal world view of the numerate poker and tech people overlap but less engagement with the "money mind" finance crowd. Probably doesn't particularly make me a better investor but I do feel like a more informed citizen.

After about 5y in a similar situation I switched up to working out of a coworking space while kids are at school, was kind of surprised at how nice a change it was to be around other people even if not interacting much.

Safe Haven: Investing for Financial Storms is a good exploration of the topic by someone who has lived and breathed this style of strategy successfully (Spitznagel), particularly around the logic for choosing hedges (long dated rates payers? rates receivers? s&p puts? gold forwards? etc). https://www.goodreads.com/book/show/35541721-safe-haven Your hedge sizing math is a bit odd (your example is hedging for a full 620k payout before premium cost if the nasdaq goes to 0?). If you are trying to protect for losses after a 30% drawdown your max payoff should be 30% lower than your current portfolio size for example. Option Volatility and Pricing by Natenberg is the classic book on options, personally I wouldn't trade options without knowing that book cold first and only do options trades when you also have a view on volatility pricing. Buffett has long said that not selling is more a lifestyle choice for him than trying to maximize returns (see his partnership letters), it's Munger who was more arguing for holding compounders without respect to price. In options Buffett has also done basically the opposite of your trade, he wrote large notionals of long dated out of the money puts on the indices when he thought volatility was mispriced.

The right to lend out your collateral shares if you utilize margin borrowing is a regulatory requirement if I recall, some brokers are much better about trying to recall your shares on dividend dates or at least truing you up if you are given a worse tax treatment when lending. IBKR also doesn't even seem to have any concept that REITs get a special dividend treatment since 2017, it's baffling. I think poor management of this as basically a hidden cost on IBKR's margining rate. I ended up shifting my margin borrowing to Fidelity after IBKR jammed me on this a few times, Fidelity matched IBKR's margin rate and seems much more conscious around the issue. https://www.fidelity.com/tax-information/tax-topics/annual-credit-for-substitute-payments

You have to consider tax impact to make a fair comparison, for a high income person that "0 risk" treasury is actually locking yourself into a loss when you consider your marginal post-tax real return in a 3% inflation world treasuries at 4.5% * (100% - 37% ordinary income federal tax - 3.8% investment surtax) = +2.66% gross return - 3% inflation = a -0.34% annual loss in purchasing power your 6.1% steady state return from stocks benefits from a lower cap gains / qualified dividends tax rate (and a real life huge advantage of mostly being tax deferred) and gets hit less hard if inflation goes higher in the future (either taxes/inflation/government spending presumably have to rebalance eventually) stocks at 6.1% * (100% - 20% - 3.8%) = +4.65% gross return - 3% inflation = +1.65% real return expected

The John Brooks book covering that era "The Go-Go Years: The Drama and Crashing Finale of Wall Street's Bullish 60s" is great although was clearly written in a different era.

eBoys still holds up really well and reads as if it it could be contemporary, great book, think I got more out of it after reading The Power Law first, made me appreciate that the VC industry is about much more than check writing.

Are corporates able to see through to beneficial owners for street name shares? I don't think they have any visibility outside of 13G/13D filers. Running through the math only aggregating at the registered shares level a 31% buyback does seem high but is plausible, anything look off? They have 3.6mm shares outstanding across 510 registered holders on 25Mar24 (per 2023 10K) Top 5 holders are like 1.6mm shares so 2mm are spread across remaining 505 registered accounts. That's average of 3.2k shares per account if they were evenly spread (they won't be as some of those accounts are brokers though) A 31% reduction means they expect to buy back 1mm shares which is ~2k shares per registered account. To de-list they'd need to fully take out a minimum of 210 accounts to get below the 300 record holder threshold that retains governance protections. Seems like it's in zone of possible

One aspect I'm not clear on is if shares need to be moved out of street name to be sure to get the cash out treatment... seems like will need to register them pre the record date for the reverse split / subsequent split. Anyone looked into whether the transfer agent has any unexpected fees? Googling a bit seems most brokers are 0-$100 for using the direct registration system but transfer agents also sometimes have additional fees. I feel for the middle office guy somewhere who's about to get a tsunami of 9,999 share registration requests.

Not who I would have guessed would have the "SSD" ticker ha

CVET was main one during covid (a spin-off profitable vet distribution business that reverse morris trust'd with an unprofitable software company) but it got taken private already. LEGH and EWBC I added more recently. Spent a lot of time on some names only to not pull the trigger (Netflix at almost the exact recent lows!) which is the frustrating downside to a concentrated approach. My largest positions are Progressive and Berkshire which I view as semi-permanent.

I listened to it via Audible which was a bit odd in a couple sections as they had a male narrator for the female author, a physical copy of the book would have worked better I think. I came away feeling the entire power space is getting less investable given how deeply mismanaged the regulation is (in New England at least). I think she made a pretty persuasive case that structuring the "policy grid" to run with nobody actually viewing themselves as responsible is going to eventually cause serious problems.

If you're young and doing this on the side Buffett's advise has usually been to mainly focus on your career. I like targeting only making one excellent investment per year's savings that you've deeply researched (read all SEC filings, transcripts, media coverage and know all competitors deeply) and intend to never sell. A high standard is about 500 hours on an investment, at 1-2hrs a day and not investing in everything you look at it's hard to have a know-what-you-own approach and buy more than 1 a year... but as knowledge compounds so does your bandwidth over future years. It's puzzling people look at investing in stocks (large businesses) so massively different than they would approach buying a small business. If you look at Buffett as an example he's probably spent about a quarter million hours at the investment game (=70hr weeks sustained for 70 years?) against maybe <1000 cumulative buy decisions?

If you're not following 13F SEC filings closely would absolutely do that first by picking some small cap growth funds that run a concentrated low turnover book and just looking at what they bought each quarter. Dataroma has some nice curated suggestions. My suspicion is the growth of quant funds has probably made screeners work less well as a filter over recent years. Places that the accounting doesn't reflect reality well are probably the most interesting (a tech company that fully expenses R&D instead of capitalizing, a retailer that is growing stores which shows an earnings loss while creating value, a manufactured housing co with a lending book etc). The End of Accounting is a good book on the topic of how the rise of intangibles since the 70s have made GAAP accounting steadily less predictive of returns (although not going to give much actionable investing advice).