neil9327
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Posts posted by neil9327
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I dont really think that's something most need to be concerned with. I've never seen one go below $10 on a deal announcement, including ones only a couple months away from expiration. The subject you are referring to is largely meant to prevent a more recent phenomenon where you get people kind of colluding together at the last minute trying to get better terms, more warrants, etc. Even in these instances, by the time it gets to this type of situation, you've already had plenty of time to cash out in public markets.
ok this makes sense. Thanks for the information - very useful.
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It really depends on what your portfolio strategy is. If you are someone that would never utilise margin unless on SPACs, then yes.
This is the case for me, yes. i.e. I will only use margin if I can be sure that the price won't drop significantly causing a margin call.
Now the thing that should provide a floor to the price ($10), is the redemption promise.
Doing some due diligence, there is one thing that concerns me:
https://en.wikipedia.org/wiki/Special-purpose_acquisition_company
says:
"Recent SPACs incorporated provisions that prevent public shareholders, acting alone or in concert, from exercising redemption rights in excess of 20% shareholding"
Looking at one example recent IPO (Duddell Street Acquisition Corp):
https://www.sec.gov/Archives/edgar/data/1823466/000095010320021018/dp139545_424b4.htm
says:
"our ... articles of association provide that a public shareholder, together with ... any other person with whom such shareholder is acting as a “group” (as defined under Section 13 of the Exchange Act), will be restricted from redeeming its shares with respect to more than an aggregate of 20% of the shares sold in this offering"
Isn't this a risk? Because let's say the company announces its merger, but the market doesn't like it and the share price fails to rise very much or at all, then could the company try to claim that you are in a "group", refuse the redemption, resulting in the price dropping well below $10?
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Yes, Greg is right. The beauty of SPACs is not just in the reward but in the risk/reward. In a market where almost every junk stock is going up, SPACs offer you similar mania return but without any of the downside.
If you really want me to point something bad about SPACs, I would say it's the opportunity cost, which is a real cost in normal market condition but I don't think you are losing much in opportunities these days.
Yea, theres two ways to do it. The first is the least risky. Buy the pre announcement spac. You can get them very close to $10 buying right after they IPO. Your max duration is typically 18-24 months.
I guess one way to get around the opportunity cost, is to buy these $10 spacs on margin. Using cash raised against your existing equity investments by putting the latter on margin perhaps.
Are there any risks with doing this? I guess the key question would be: if there is a major market crash, will the price of these spacs drop significantly below $10? (thereby possibly creating a margin call forcing you to sell at a loss). In theory they should not because they are redeemable at $10 in all cases = risk free immediate arbitrage opportunity. But I don't know for sure.
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Both bills are still on the ground. I would think atleast about 30-40 people must have passed by.
What would have been interesting, is if there were four bills on the ground upon your return.
It could have been the start of a novel pyramid scheme ;)
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But even if it bought 100% of all the US Treasury debt outstanding that it didn't already own (19.3t - 4.0t = $15.2t), the only impact would be to increase the size of reserves held by the banking sector.
...
The reality is that the Fed isn't the major factor in money creation since it can only lend via swapping assets for bank reserves. It is the US treasury and its deficit spending that is the major money creator. All of the attention on the Federal Reserve is misdirected.
wabuffo
The reserves will end up on the balance sheets of the large banks only after they have been spent by the government (the initial recipients of that money). This is the "deficit spending", and in the short term it does create broad money.
The problem, however, is that this process is inflationary, and tends to make investors (and indeed those banks) less willing to lend of their own accord, meaning that there is less cash available for investment - causing destruction of broad money in the longer term.
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I'm kind of in the same situation. Last year I earned more from the dividends on the stocks I own (mainly FTSE100 index ETF's) than I spent in normal life, for the first time. However being 100% long equities is not without risk of course. So for the next few years at least I'm minded to work 6 months a year as a contractor, just to keep my work skills current - to be a kind of insurance policy so that I can work if required without having to spend capital at a potential low point in the market.
To answer your question, I tell people that I'm half Scottish (true) so like to save money - so I have enough to last me for quite a while. Scottish people have a reputation for being tight with money :)
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I'm now really curious on how the mid-cap closed-end fund will do - it's still early days, and hard to know how good the manager is.
That's the Smithson investment trust I think you're referring to?
https://www.hl.co.uk/shares/shares-search-results/s/smithson-investment-trust-ord-gbp0.01
I did consider investing in it. But a number of its holdings have very high P/E levels, which in my opinion make it too risky. For example I looked at 10 stocks out of the 30 or so in the fund at the moment, and four of them have P/E levels above 45:
CDK Global: 91
Domino's Pizza Group: 107
MSCI: 47
Fisher & Paykel Healthcare: 70
The other six had lower P/E levels, but they also had lower ROCE values, and gave out half their profits as dividends, preventing them from being fully used to grow the business according to his stated high-ROCE methodology.
Terry Smith claims he is still effectively managing this fund, from his home in the Caribbean, and is -only- outsourcing the day to day stuff to the manager.
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The strategy is simple - 25-30 blue-chips, with about one purchase and one sale (if that) a year. The geography is about 60% US / 40% Europe. At the start there were more Consumer Staples/Bond Proxies (e.g. Nestle, Unilever, Colgate), but has picked up a bit some tech and industrials along the way. He also really likes healthcare, and I was very impressed how he swooped in on Novo Nordisk when it bottomed in late '16.
To add to that, the core of his strategy is to invest in "high quality" companies, at a reasonable price.
He defines high quality specifically in a value of ROCE (Return On Capital Employed), which is (almost) net profits divided by total assets. This shows the return the company is generating on capital employed (not taking into account long term debt) - i.e. how valuable will the company become if it is not saddled with any debt.
He chooses companies with ROCE around 25% or higher. Assuming a company reinvests its profits internally, then he argues that its intrinsic value also increases by 25% each year.
Two points he does not answer in his presentations that I have seen, are the effect of debt servicing on this process, and why doesn't the efficient market theory discount this effect (by making the shares correspondingly expensive at the outset). The implicit answers to these two questions are that compounding by 25% per year will deal with the debt problem over the longer term, and that other investors don't understand the long term uplift of this kind of compounding, leading them to value the business in aggregate higher than, but not sufficiently higher enough, than other businesses with a lower ROCE.
Edit: Just to say that in the video of the 2020 meeting posted tonight, he explains this strategy at time 16:48
Smith also has a London-listed closed-end fund invested in EM and Frontier markets. This launched in mid-2014 and to date has NOT been a success.
FEET has about 50 holdings, and the Portfolio Turnover has been a lot higher than the main fund. It has a lot of Consumer Staple subsidiaries, and also healthcare as he sees that as a big EM growth area.
I can't say exactly why it hasn't worked - my hunch is:
a) he and his team don't have the on-the-ground expertise and focus they should have, compared with, say, Arisaig, whose portfolio is very similar, but they have so many years of on-site engagement and insight with their companies.
b) the EM consumer stocks have been eye-wateringly expensive for a number of years. He professes to be unbothered by this, and appears to have a Nifty-Fifty view i.e. they have phenomenal metrics and so will grow into their valuations. But it hasn't worked so far.
I've been looking into this tonight.
Watching the two annual shareholder meetings for FEET (Fundsmith Emerging Equities Trust), for 2017 and 2019, he says that the fund underperformance of net asset value was caused by outflows of money from far east actively managed funds, into far east index funds (ETFs), resulting from general investor sentiment in favour of passive investing, and regional investing. He says that the sectors of the companies he is invested in are under-represented in the main indexes, hence demand for his companies dropped in aggregate, along with the price). It sounds plausible, but might be an excuse of course.
time: 50:50
time: 20:00
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Total deaths in the US - And probably everywhere - is down because of the coronavirus lockdown... Apparently life kills, so when people are holed up at home they don't die as often...
Agreed. A friend of mine is a paramedic, and he says while workload is up due to Covid, work from other non-Covid is down.
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An interesting thread. One thing I notice is that the AI algorithms discussed don't appear to try to understand the behaviour of the markets in terms of the trading strategies of the market participants. Instead they try to predict future prices based purely on past price information. In my mind this is surely putting the cart before the horse, in the sense that in the markets, price and price changes are what result FROM the actions of market participants, not the other way round. Yes it is true that the actions of market participants are often driven by price, but it is always historical price information that is taken into consideration, even if it is a few milliseconds ago - the current market price is never precisely known until the order is placed and the trade confirmed.
The price at any moment in time is always the price at which buy and sell volume are exactly matched - if it is not, the price moves up and down in an instant (thanks to high-frequency traders) until it is exactly matched.
So if you could model the behaviour of market participants in terms of what volume they would each add (if they buy) or subtract (if they sell), then you could model the future of price changes.
Now of course this is very difficult because peoples' trading strategies are often complicated, chaotic, and subject to emotional influence, but it occurs to me that many new traders in particular are likely to be using simple trading strategies based on popular technical analysis methods, and similar. If we wanted to model this behaviour using AI we could potentially do this. And if this model was able to do this successfully then we would be in a better position to use AI to go on to model the prices that are more likely to occur as a result of this behaviour.
Opinion on Lending out Shares to Schwab at 8.5%?
in General Discussion
Posted
I looked into this with IB - Interactive Brokers - it is their:
Stock Yield Enhancement Program
They talk about providing you with cash collateral up to the value of the stock - but I wonder what happens if the stock suddenly rises in value by a lot. This is the time when the person who has borrowed it is most at risk of defaulting on returning it, and it is not clear whether the brokerage has the obligation to obtain replacement stock for you, or whether the collateral alone satisfies the broker's obligation to you (i.e. you would lose access to the gain in the stock price).