Saluki
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Posts posted by Saluki
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Added a little NTDOY. Still a small position but building to a full position when I get cash.
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4 hours ago, Spekulatius said:
The impact of ESG is dwarfed by the impact of prices. Yes, the high prices last year have impacted production, but so have the low prices from 2019-2020.
Longer term, one thing that will be interesting to watch is China. China produces 26% of the carbon emissions right now, but there is little doubt that they have a massive effort ongoing to decarbonize. I think they might be getting there quicker than thought with the massive energy consuming construction sector faltering (steel and concrete need massive amount of energy - mostly coal to produce ) This won’t impact the the balances this year or next, but I think in 5 or 10 years it will make a massive difference.
https://www.eiu.com/n/china-road-to-net-zero-reshape-the-country-and-the-world/
I posted on the book thread about reading the John Neff on Investing. He killed the indexes when he ran his fund during the 70s and 80s, which had periods of very high inflation and energy prices. I wanted to see what strategy works best there and it turns out that, luckily for people here, what worked best for him was traditional Ben Graham value investing.
He learned value investing in college from someone who had studied under Graham in Columbia. With energy companies, the best time was after a long bear market in that sector (check) and he felt that you should be strict about your valuation. If you sell on the fundamentals, it may still keep going up but thereafter it's just speculation and it can correct quickly.
Oil has some supply constraints and unless we have a prolonged recession, I don't see it slowing down. Yes, China wants to decarbonize, so does everyone, but that takes time. Maersk just launched it's first green biofuel container ship. It's dual fuel because the factory that makes the green fuel that it needs is still being built so there literally isn't enough green energy to run it.
I don't have huge exposure to energy, but I have midsize positions in OXY, VTS and STNG, and I plan to hold until everyone is talking about oil stocks instead of AI stocks on the news, then it'll be time to move on.
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On 9/14/2023 at 11:45 AM, Value_Added said:
GLDD also has a ship under construction for rock installation in the offshore windmills base. Not sure what to think of the future of the offshore wind industry. Very political and subsidy reliant...worst case is all U.S contracts for offshore wind are cancelled and GLDD can sell the ship at cost or potentially better to wind companies outside of the U.S where the offshore wind market isn’t so new. Best case, they’re able to use it for their own benefit for years to come. Luckily offshore wind doesn’t factor into GLDD working out at these prices as the original thesis is playing out nicely.
I'm not sure how it will play out in the US vs the rest of the world. If NIMBYism or a lack of appetite for federal and state subsidies in offshore installation aren't around, then I don't know if anyone will be willing to build ships in the US, to comply with the Jones Act, which will be large enough to install the new generation of larger wind turbines. The larger wind turbines are more effecient, which makes them cost effective, but you need new bigger installation ships. If the ships aren't built, you are stuck with smaller installation ships, installing less efficient smaller turbines, which makes the project less attractive and less likely to be built. it's a chicken/egg problem.
ENETI, just got a big 2027 contract for a ship that won't hit the water until 2025. And I don't think this is because the people overseas are doing that much more projects. It's because there are bigger offshore turbines being built and the fleet order book hasn't kept up.
https://finance.yahoo.com/news/eneti-inc-signs-vessel-reservation-115400557.html
With mobilization commencing in the first quarter of 2027, the contract will be performed by one of the Company’s two NG16000X Wind Turbine Installation Vessels currently under construction at Hanwa Ocean in South Korea. Inclusive of mobilization and demobilization, the engagement is expected to be between 210 and 245 days and generate approximately USD 87 million to USD 100 million of gross revenue. Project costs are expected to be USD 15 million in aggregate.
Someone one here had a post pitching GLDD. It looked interesting but I couldn't get comfortable with a company that is reliant on relationships with state/local governments. I've since come to appreciate the moat in specialty ships like Ro-Ros or Shuttle Tankers, or Offshore Wind Installation, so maybe I'll take a look again.
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Well, my understanding is that the tax loss / wash sale rule applies if you are planning to buy/sell the same securities and try to declare a loss on it (not a gain). Assume you have, say a $10k loss on stock A, which you sold, and a $10k gain on Stock B, which you own. Why can't you sell Stock B and buy it back it back right away? You have the stock at a new higher basis.
If I sell, AMZN today (for a profit) and I buy it back after it goes up tomorrow (or down), I don't see anything weird in my brokerage account. My broker only does weird things to my basis when I sell for a loss and buy it back within 30 days.
I should add that I'm not a tax guy, so if I'm wrong about this, please let me know.
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@Fundmanagerthrwawy they came out with a reprint of the original. It's called Security Analysis The Classic 1934 Edition.
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I read most (but not all) of my first copy of Security Analysis (5th Edition). The formulas printed on the front and back inside covers are useful, but the book itself is just okay and it was a slog to read. I had a post it with the chapter numbers in the back and I would cross off each one as I read it. It was like a chore on my to do list. The writing is mediocre. Just as a camel is a horse designed by a committee, when something gets edited too many times, it's the book equivalent of a camel. I bought the 6th Edition of Security Analysis and I like the essays at the beginning of the chapters by the different value investors, but I still wouldn't put at the top of my list of recommended books to learn about investing.
I have a copy of the original 1934 edition, that was reprinted and has been sitting on my shelf for years, and I finally got around to reading it. I'm about 100 pages in, but I have to say that I like it a lot better than the modern editions. Graham is a good writer and his examples of the same stock at different points in time with wildly different values is so useful that people still use it today.
One of the things he's known for is having a basket of net-nets. People often asked if he could've gotten a better return by focusing on a select few which did well, instead of buying a large basket and not doing a lot of digging. It's not laziness that led him to the approach. He used a great analogy about a roulette wheel where the odds are 18/17 in favor of the house. If the odds temporarily tilt in your favor by the same amount, then what is the best strategy? The winning strategy is to bet on every number, and every round you will pay out $34 and get back $36. Any strategy that differs from that will lower your return. If you make a large bet on one number, you can lose everything if you guessed wrong. That analogy is remarkable useful for thinking about investing vs the SP500. Like a roulette wheel, the index has a small number of winners that had a huge payout (Google, AMZN, AAPL) compared to the rest of the market. The index is betting on every number in the roulette wheel. It's a huge advantage you would have to overcome to beat it. The outcome in roulette is chance and unknowable, which is why the index is your best bet. In Graham's time, it was hard to ferret out information about individual companies, so the returns would be the same as if they were random. Now we have an incredible amount of information available, but the advantage of knowing that you are betting on those 500 companies and you already own all the future big winners is something to think about.
A 90 year old book isn't on most people's reading list, but going to the original sources is a lot better than getting watered down retellings.
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Uranium is hard to understand. Apparently there are ways to change the way you refine it which can affect the available supply. People don't disclose how much they have so although he thinks there is a shortage coming, it's hard to tell. And there are non-economic reasons that people move away from Nuclear, like the Fukushima accident and ESG. Although nuclear doesn't produce greenhouse gasses, the greens in Germany shut down their relatively new nuclear reactors, and when they didn't have enough electricity, they turned back on their coal generators. They now have the dirtiest air in Europe except for Poland.
Putin has made a claim that Ukranians want to bomb their own nuclear plant to blame Russia (which is something that Russia usually does before they do it themselves and blame Ukraine). If, god forbid, there is a nuclear incident in Ukraine, which has more reactors than Chernobyl, you could easily see other shuttering their reactors due to public pressure.
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First Jones Act compliant offshore wind service vessel being built for Ostead profiled on CBS.
Video about an offshore wind farm on the East Coast US.
Marine Money video with two companies in the offshore wind space. Some of these videos on Marine Money or Capital Link with the largest operators in the shipping world have only a couple of hundred views, which is why I think a lot of these shipping companies still have room to run. Everyone hates shipping and no one is looking at it, they are throwing money at AI and other nonsense. I think Bruce Greenwald had a good point about looking at overlooked and unloved areas of the stock market.
I have a mid size position in STNG and NETI and a couple of very small positions in two other shipping companies that I'm studying.
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Sold a little ATEX and added to NTDOY on the dip.
I still think ATEX is undervalued, but when I bought it I decided to give it 3 years for the thesis to play out. So I'm selling the stuff I bought 3 years ago for the tax loss harvesting and hanging onto the rest that I bought later at lower cost. I may buy it back later if they get more business, but utilities (their customers) move very slowly.
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I'm about half way through this book and it's a really interesting read. It's a look at business development through the lens of biology /evolution instead of the standard mathematical/physics model. A lot has been written in the past 20 years about "behavioral economics" and how it doesn't fit with the classical "rational man" narrative in most economic models. This book was written in 1990, but he cites a study done in the 1980s where they analyzed the articles written for The American Economic Review and found that 1/2 of them contained no data at all, just mathematical models. Another 25% contained data that someone else gathered. Only 1% analyzed data that was gathered by the writer. While no biologist would publish books and articles without ever going into the woods to see what he was writing about, I don't know of any economists who have made field trips to a factory, an oil field, or a shipping port.
Economics was born in the time of Newton, not Darwin, but the current mania with math and physics may be an attempt to give the field legitimacy. Taleb says that majors like "social science" and "culinary science" are BS, because you don't need to call a real major "Physics Science". It's a marketing thing. So maybe the emphasis on physics and math instead of biology isn't just marketing, but it's also wrong. The advancement of technology and the competition in business have more in common with biology and evolution than they do with physics. Concepts in biology like genetic drift (why Australia has so much strange wildlife) and Silicon Valley and it's culture are easier to form an explanation for than anything we can come up with in math. Niches in an environment that give one species an edge feel a lot like moats.
Looking forward to the rest of the book, but if you are looking for a book that is not usually talked about but has some interesting ideas, this is a good one.
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We are really enjoying a show called "The Diplomat". It's from the creator of Homeland. If you like shows like that or Occupied, you will probably like this one.
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thanks @LC and @Paarslaars
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I was looking at two public companies, amprius and enovix, which are both trying to make batteries with silicon anodes. They both using different fabrication techniques, but does one have an advantage over the other? Is the process something that can be protected with patents, or is it like current lithium batteries where efficiency is what matters bc everyone is working off the same formula and just trying to be better at it? Thanks @Paarslaars
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Anyone know of a good book or other resource for learning about batteries? I'm looking at a company (pre-revenue) that is publicly traded that has some Lithium Ion battery tech that is supposed to be better than the current generation because it uses silicon instead of carbon. I also see another company that is working on a solid state battery for energy storage and is also being hyped but isn't making any money either. I'm wondering if there is a way to get up to speed on this. Something that explains the stuff, but is not directed at people in the industry.
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1 hour ago, Fundmanagerthrwawy said:
I remember reading that and thinking it was genius. Yet to achieve those level of returns.
You can still find some gems, but it's more a scavenger hunt now. Some clues that I have found to be useful are 1) how much do insiders own in the spinoff entity, and 2) if a company is splitting, where is the CEO going?. An example of number 1, In Vitesse, besides the stock based compensation, the insiders bought a lot of stock with their own money. http://openinsider.com/search?q=vts An example of number 2 is Vista Outdoor. It's splitting into 2 companies of roughly the same size. I thought the RemainCo looked more interesting, but the CEO has announced that he is going to the Spinco, and he's leaving the RemainCo with a lot of the debt, which means I will have to take a closer look. Another example of number 2 is Bausch Health, formerly Valeant. If I recall the CEO left when the crown jewel (Bausch and Lomb) was spun off and left the debt laden RemainCo to fend for itself. The debt holders were threatening to sue the last time I checked.
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New Ackman interview. Didn't realize that he invested in Elon's Twitter fiasco.
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Since this is where tidbits go:
Spurious Correlations (tylervigen.com)
My favorite is the number of letters in the winning word in the National Spelling Bee vs the number of people killed by venomous spiders.
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I don't know whether that last strategy would fall under "spurious correlation" or the "sharpshooter fallacy".
The Bangladesh Butter Indicator Says Buy! (forbes.com)
In a world where datapoints are infinite and now available at your fingertips, you can find correlations that have no predictive value. With infinity, you can eventually find things that match up by chance, like butter production in Bangladesh and SP500 prices. And the reason that backtesting works flawlessly in theory is because if you shoot at a barn and draw circles around it, it looks like you hit bullseyes every time.
My favorite line from the article:
"Oh, and one more thing about Bangladeshi butter. Leinweber wrote in Forbes a few years ago that he still gets phone calls—20 years later—asking for current butter production figures."
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I sold most of my small tobacco basket at a small loss to free up some cash because I see a lot of bargains. Added some SWBI, NTDOY and FFXDF.
SWBI is down about 20% in the past couple of weeks and if the earnings release today is bad, it's already baked into the price. If there is any surprise on the upside, it will have been a bargain.
NTDOY I have been adding in dribs and drabs when I get some cash, to get it up to a full position.
FFXDF is trading at $13 and change, with a book value of $20 and growing. Even with the performance fee that they have to pay FFH this year, it will still be a good year for them.
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There are always new companies popping up. The tech companies are super large but that doesn't mean that they aren't subject to disruption. When Facebook bought Instagram, Insta had like 10 employees. And ChatGpt erased hundreds of billions from Google's value when it was released, but it wasn't something that required a lot of time and tens of billions of dollars to develop.
The number of publicly traded companies is fewer than it was in the 1980s, there are more investors with better access to information, and the Nasdaq 2000 has about 40% of it's companies with no profit. So fewer places to fish, more fishermen, and less good fish is a tough row to hoe.
Still, if you think of old companies, there can still be some bargains. Coke has been around for 150+ years, so it's not likely to go away soon, but you can find others that are likely to be around for a long time because they have already been around for a long time (an idea that Nassim Taleb likes to promote). I own Smith and Wesson, and it's also 150 years old, and it's less $500mm (and an industry that people hate) so it's a good place to find a bargain. I had a big win with Vitesse. The company is new but oil isn't and it isn't going to be disrupted by an app anytime.
Also, part of the reason that there are fewer companies is a lot of them have merged. So think about consolidating industries. Asbury and Lithia are auto dealers and are the biggest players, but combined they are less than 10% of the industry. Energy companies and certain sectors of shipping are consolidating too. Railroads did too, and now they are more profitable than ever.
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If offshore wind is to become viable in the long term, it has to overcome some challenges that are political, like this NIMBYism:
Another problem is that the same inflation and supply chain disruption that affected other industries also affect offshore wind, and when it does, who should pay for it?
It's pretty easy to say that a contract is a contract, but several new projects have not gotten multiple bids and the willingness to take on these type of projects will be greatly diminished if they can't make money on it.
It could be that rising energy prices will fix this problem because renewables become more attractive relative to fossil fuels as the price of fossil fuels goes up. "The cure for higher prices is higher prices." But I don't think that the industry has been around long enough that some of the new entrants are willing to endure a long winter of unprofitability.
Also, if you have an interest in this industry, the website linked above will send you daily articles to your inbox so you can keep track of what's going on.
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Small adds to JOE and TV on the dip yesterday. If I was sitting on cash it would've been a good day to go buying yesterday since almost everything in my brokerage account was flashing red. But alas, I had no war chest
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Well, it's not just a Florida problem. The National Flood Insurance program charges way less to insure those Outer Bank mansions in North and South Carolina than they should. I saw an interview with the director of that program a few years ago on TV and he said something so stupid that it could only come from a bureaucrat. He said that they were raising the premiums a little bit each year and hoped to eventually get to market rates one day. In the meantime, people whose mansions were destroyed in hurricanes, just rebuilt them in the exact same spot using the cheap insurance they bought. When asked why they didn't raise the rates to market rate if they knew what they should be charging to make up for the losses, he said that if they raised it too high all at once then people might not buy the insurance and they wouldn't have any coverage.
OR they might use common sense and not rebuild in the same area. Or they might build a small summer cottage instead of a McMansion. Or they might take remediation measures (hurricane tie downs on the rafters, sump pumps in the basement, hurricane shutters, build with cinder block instead of sticks). Or they could pay what it costs and not have low and middle income tax payers subsidizing your beach mansion.
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I thought until recently that tech is going to make living in cities less desirable. If I can Zoom into meetings, why not have a bigger house further out, than live in a cramped apartment? Why pay for a lot of office space, when you can pay for a smaller space and have "hotelling" when people need to come in for a meeting?
My thinking has gotten more nuanced on it. I was reading "The Logic of Life" by Tim Harford (it's a book like Freakonomics) and he was pulling up data about how tech makes living in cities more attractive. Clusters of specialized people (chip design in California, pharmaceuticals in New Jersey, Finance in NYC, biotech in Boston) lead to quicker advancements in industries. And tech like railroads, internet, food preservation, let's larger numbers of people in cities be viable with finished goods and food shipped from further away. Although we have email and facetime, you don't suddenly start engaging with people around the world. You use those tools to engage with people near you. You call your friends and email them, to arrange to do social things in your city, not have random interactions with people in a different city (COBF is the exception).
I no longer think big cities are dying (despite the efforts of places like San Francisco to kill them), and there will probably be a need for office space that is somewhere between pre-pandemic levels and where it is now, which is the low point. But I don't know where that point is. It's going to take rational discussions about why we need people in the office and when rather than saying "we need them in here because we are paying for rent on this builiding". You are paying the rent whether people are there or not.
I'm more productive at home because I don't have the distractions of people knocking on my door and saying "do you have a minute". But for people in a creative field or people who work better in groups, they may get a benefit from being in the office that I don't.
what are you selling today?
in General Discussion
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Sold the NETI in my retirement account. Still have the shares in my taxable account. Bought a little NTDOY with the proceeds and the rest is sitting in cash.