Dalal.Holdings

The best part about Euro investments is looking at their performance in USD terms (provided you didn’t borrow Euros to buy them)

Other countries’ currencies are rising, dollar is not falling. Follow the party line as comrade Bessent says. GDP and stonk prices (measured in USD) go up, but USD goes down Those Euro stocks are looking better and better

Euro is up 9% YTD vs dollar. Enjoy your 5% yielding 20 year notes

Well, in the long run I hope you're right and I'm wrong

So all is good because we are largely continuing a level of spending that was implemented during a global pandemic which has long since concluded ? It would be like if WW2 spending continued after 1945... 7% of GDP is 7% of GDP and is largely unprecedented in peacetime with full employment Let's also wait until the Senate manhandles the bill and adds some more goodies to it

The catalyst is already here: for the current fiscal year which ends in about 9 days, they have been raising their forecasts since Denso, now forecasting op profit of 2.1B yen/1.6B net profit (so about 200 JPY per share or P/E of 6). Most recent report shows Op Profit for the 9 months in FY 25 up 23% Y/Y which I attribute to denso. They have taken on debt to fund Denso so it is a levered play. They are forecasting 3B yen in operating profit by FY 2027 (which starts in about 1 year) due to Denso and from what I've seen, they've undershot with guidance. They have JP auto industry exposure which I'm not crazy about, but the company has downside protection as it's a cheap net-net (below 75% of NCAV) that hasn't lost money in > 10 years (last brief loss in 2012) with significant cash on the B/S (over 3.6B Yen) albeit levered to fund Denso working capital. So, asymmetric with Denso creating room for large potential upside. It may not be an incredible business, but show me one trading this cheap that is. They just raised the dividend 20% which is another good sign (now yields over 5%).

We should clearly just assume that nothing can go wrong and continue on this unprecedented fiscal path (record peacetime + full employment deficits) because it makes so much sense since we are a reserve currency and preeminent power Let’s just put it all on black and see what happens, amirite ?

I own 3321. They just raised the divi and seem very cheap. Net-net with catalyst: https://generalsandworkouts.substack.com/p/japanese-net-net-trading-at-7x-pe

Man, it’s a good thing these “small government” Republicans are in charge now

I wouldn’t try to hand wave this crazy fact And the deficits will widen even further if the U.S. enters a downturn…absolutely ludicrous

https://www.wsj.com/finance/investing/the-deficit-is-unsettling-bond-traders-heres-what-that-means-for-the-economy-619614b3?st=JJaBU2&reflink=article_copyURL_share Great work, Scott They can try to blame their predecessors all they want, but with all the major economic moves they’ve made just a few months into their term, Trump and Bessent (and Rs in Congress) own this economy now as far as the electorate is concerned. No one will buy blaming Biden or Yellen now.

@Spekulatius What do you think of the stock award plan recently put in place from the 10-Q: Proxy: 80,000 shares (more than 10% of Shares OS) is $80M worth that vests over 1-4 years it sounds like and negates multiple years worth of buybacks. Stock based comp in Q1 was recorded as $2M and I see no SBC prior to this year in recent years so this stock issuance is a new thing they are doing it seems 30,818 restricted shares were granted just in Q1: The board does own a lot of stock which is nice but they also seem pretty richly compensated (even before the new 2025 Plan):

I'd imaging FMCB has some specialized knowledge in San Joaquin county given its strong presence & history there. It seems to be a solid bank, but my main concern is on the duration of the assets: especially the securities portfolio (AFS + HTM are largely long duration >10 yr MBS). The loans are mostly CRE (I'd guess based in San Joaquin though haven't looked deeper) followed by ~28% agricultural loans. About half the loans are due within 5 years which is good. And they have a large pile of cash as well which is reassuring. If you add up all the loans due < 5 yrs and the cash, it's actually not bad from a duration point of view (the securities are longer duration than the loans). The CRE book is one area to explore though Perhaps one other risk to consider is some kind of climate event that impacts farmers in the San Joaquin region, but that's more black swanish.

So on the long end rates blowing out...it's said that it's not yield curve inversions that cause recessions, but the re-steepening of the curve. I guess if this continues, we'll find out.

Don't forget -- they're getting tax cuts on their social security checks too! The rest of us will be lucky to get any social security at all !

Long dated Treasuries are now breaking out...if that continues, what does that do to the unrealized losses on long duration assets sitting on bank balance sheets ? Does interest rate risk come back in vogue like a few years ago ?

Why tho ? Is the extra 80 bp off short term T-bills worth it ?

There is a lot of fixation again on a single sample set -- the 2000-2008 period to draw wild conclusions about a topic as gargantuan as fiscal deficits. As to your simple equation: The US fiscal deficit = private sector surplus (savings) = domestic surplus + foreign surplus (ie, trade deficit) So one can shrink the trade deficit (via trade barriers), shrink the fiscal deficit, and still maintain the same domestic surplus (e.g. if x = y + z, z and x can both shrink and y can remain the same). We can go around saying the U.S. is the reserve currency and backed by the strongest military so it needs to generate large deficits until one day that changes--and if the U.S. shuts down its factories and can't make ships or planes anymore, that "strongest military" aspect will change The bond market doesn't seem to be playing along https://www.bloomberg.com/news/articles/2025-05-20/stock-market-today-dow-s-p-live-updates?srnd=phx-markets

The bank weathered 2008 well, but one thing I’m looking at is interest rate risk. Looks like they significantly increased MBS of > 10 year duration in their AFS securities portfolio. Also they have a lot of CRE loans. Their asset side seems duration heavy (though they do have a lot of cash & equiv on hand)

I'm puzzled by the people who say we "need" 7% deficits in order to sustain full employment and our "wonderful" 2-3% GDP growth we've been having. We are such a good economy after all with everyone working behind desks/trading stocks half the day, massive inequality, and incapable of building any ships or infrastructure or competitive cars. Let's just rely on our geopolitical rival to do all that for us... Makes you wonder how America did well all those years when we weren't going full tilt on spending...absolutely makes no sense to support this level of deficits, but sure, let's try this dangerous experiment and see what happens I guess. I mean at least my stonks and crypto are going up, amirite ??

Those trade barriers are being watered down by the day

It's a wonder we ever had full employment without 7% deficits to GDP... Like I said, the MMT folks have won... ...but the consequences of that may have yet to be revealed...

Live shot of nation running massive deficits in peacetime with more than full employment:

Current policies which are likely to change within 3.5 years are not going to meaningfully change the demographics of the U.S. They are certainly not going to turn the U.S. into Japan or South Korea demographics wise. Hence, comparing the U.S. to deflationary Japan is useless.

And if that strongest military power can no longer produce ships or process rare earths while its key rival can ? It's amusing to see all the hand waving in the face of massive (WW2 level) sustained peacetime deficits I guess the MMT folks won in the end and we're all going to have to deal with the consequences...