Dalal.Holdings Posted March 3, 2020 Posted March 3, 2020 I am shocked that people do not understand the absolute importance of doing everything possible to slow this virus in the very early stages. And every stage after that. Sounds like people still do not understand this virus and its potential to cause a severe human and economic tragedy. Black swans are frequently underestimated, esp early on. People don’t think about 2nd and 3rd order effects and are more reactive than proactive which is why fighting things like climate change are difficult. What’s surprising is how dismissive a supposedly intelligent group of investors is of this stuff, but then again you look at the politics section here and then it all makes sense.
Kaegi2011 Posted March 3, 2020 Posted March 3, 2020 I am shocked that people do not understand the absolute importance of doing everything possible to slow this virus in the very early stages. And every stage after that. Sounds like people still do not understand this virus and its potential to cause a severe human and economic tragedy. Black swans are frequently underestimated, esp early on. People don’t think about 2nd and 3rd order effects and are more reactive than proactive which is why fighting things like climate change are difficult. What’s surprising is how dismissive a supposedly intelligent group of investors is of this stuff, but then again you look at the politics section here and then it all makes sense. One does not need to wonder that far to understand.
Viking Posted March 3, 2020 Posted March 3, 2020 Calculated risk blog has some suggestions of what political leadership should be considering. Very thoughtful. - https://www.calculatedriskblog.com/2020/03/a-few-comments-on-covid-19-non-medical.html 1.) First, Let the experts brief the public, not politicians. 2.) Second, the government should take the advice of the experts at the CDC and elsewhere and increase funding immediately as required by the health professionals. 3.) Third, testing should be increased dramatically, and testing should be free for all in the US with any symptoms (or closely exposed to an infected person). It should be free for the uninsured, and for illegal immigrants (there should be no citizenship test). This is critical or people will not get the test. 4.) Fourth, for those that test positive (but don't need hospitalization), the experts should determine how to isolate them. If their employers will not pay for their time off, then the government should pay. We don't want people avoiding tests because of the costs or the fear of lost income. 5.) Fifth, the government should have a program of low interest rate (or no interest) loans for otherwise healthy companies impacted by the epidemic. “These are the kinds of programs that the government could put in place fairly quickly, in addition to what the healthcare experts suggest. In addition to the usual safety nets, these policies - well publicized - would lower the transmission rate and provide the proper stimulus to the economy (directed at exactly the right people).”
TwoCitiesCapital Posted March 3, 2020 Posted March 3, 2020 https://brooklyninvestor.blogspot.com/2020/03/who-cares-what-mr-market-thinks.html This is probably wrong thread for this, but anyways... I ran the BrooklynInvestor DCF on SP500 and the issue is not Covid, the issue is valuation. Starting with 133.53 SP500 earnings ( from here https://www.multpl.com/s-p-500-earnings/table/by-year , I did not double check ), 0% growth this year, 3% growth rate from here to year 10, 5% discount rate, terminal PE 15, SP500 value would be ~2700. Using 5% growth rate, SP500 value would be 3179. Now, this assumes 5% discount rate, which is basically expected return. If investor wanted more than 5% return, the numbers are way worse. (No, I don't think 25x terminal PE or 4% discount rate make sense. I don't think growth rates above 5% make sense either. Yes, I know that risk free rates are close to zero. I'm not gonna use risk free rates for DCF. But, yeah, that's likely why SP500 is where it is.) ::) That's what I've been saying to people. Coronavirus pricked the confidence of the markets, but the real problem was that we were at like 20x shrinking earnings BEFORE coronavirus was a thing. This is just making it obvious to people how overextended the market was. Everyone I know is still 'buying the dip'. If this is a true bear market, that type of behavior is going to have to be sufficiently punished before it's over.
Gregmal Posted March 3, 2020 Posted March 3, 2020 Calculated risk blog has some suggestions of what political leadership should be considering. Very thoughtful. - https://www.calculatedriskblog.com/2020/03/a-few-comments-on-covid-19-non-medical.html 1.) First, Let the experts brief the public, not politicians. 2.) Second, the government should take the advice of the experts at the CDC and elsewhere and increase funding immediately as required by the health professionals. 3.) Third, testing should be increased dramatically, and testing should be free for all in the US with any symptoms (or closely exposed to an infected person). 4.) Fourth, for those that test positive (but don't need hospitalization), the experts should determine how to isolate them. If their employers will not pay for their time off, then the government should pay. We don't want people avoiding tests because of the costs or the fear of lost income. 5.) Fifth, the government should have a program of low interest rate (or no interest) loans for otherwise healthy companies impacted by the epidemic. The bold items, #3 would have to be subsidized then by the government. Which means almost immediately lab testing would become a new favorite hobby of guys from Staten Island with a lot of vowels in their last names. #4 would also be nearly impossible because of abuses as well. If anything Ive thought maybe forcing the employer to pay it with the amounts ultimately eligible for a tax credit could be more efficient.
Gregmal Posted March 3, 2020 Posted March 3, 2020 Todays drop was actually because of the 22 tornadovirus deaths in Tennessee. Immediately moving the mortality rate into the upper echelons of virus folklore and making the coronavirus look like child's play.
John Hjorth Posted March 3, 2020 Posted March 3, 2020 Calculated risk blog has some suggestions of what political leadership should be considering. Very thoughtful. - https://www.calculatedriskblog.com/2020/03/a-few-comments-on-covid-19-non-medical.html 1.) First, Let the experts brief the public, not politicians. 2.) Second, the government should take the advice of the experts at the CDC and elsewhere and increase funding immediately as required by the health professionals. 3.) Third, testing should be increased dramatically, and testing should be free for all in the US with any symptoms (or closely exposed to an infected person). It should be free for the uninsured, and for illegal immigrants (there should be no citizenship test). This is critical or people will not get the test. 4.) Fourth, for those that test positive (but don't need hospitalization), the experts should determine how to isolate them. If their employers will not pay for their time off, then the government should pay. We don't want people avoiding tests because of the costs or the fear of lost income. 5.) Fifth, the government should have a program of low interest rate (or no interest) loans for otherwise healthy companies impacted by the epidemic. “These are the kinds of programs that the government could put in place fairly quickly, in addition to what the healthcare experts suggest. In addition to the usual safety nets, these policies - well publicized - would lower the transmission rate and provide the proper stimulus to the economy (directed at exactly the right people).” Viking, To me actually quite striking, that the playbook suggested by Mr. McBride is to a wide extent similar to the playbook of the Danish Health Authority and the Danish Government [, naturally with some modifications related to differences in societal systems the US compared to Denmark].
Viking Posted March 3, 2020 Posted March 3, 2020 Todays drop was actually because of the 22 tornadovirus deaths in Tennessee. Immediately moving the mortality rate into the upper echelons of virus folklore and making the coronavirus look like child's play. The US is not testing (in volume) yet for the virus. If you don’t test the numbers will not go up. Now i am sure that there are many people who are looking at the low numbers of reported cases and reported deaths and concluding that the virus is not an issue and that people are way over reacting. Pence met with Democrats today: “Senators Patty Murray and Maria Cantwell of Washington state, which has had the only U.S. deaths so far from the virus, led the questioning in the closed-door lunch, multiple senators said.” “They demanded to know when more test kits would become available. Murray said later that for now, many residents are simply being told to stay home if they feel unwell — an untenable approach for many. “Testing, testing, testing. Be honest with people. Everybody hit on it. Tell us when the tests are going to be available,” Cantwell told reporters after the lunch. “People are calling their doctors, and they’re not being able to get a test, so let’s get crisper and clearer about what the process is for people to get testing and when the availability of those tests will be there for them."
Viking Posted March 3, 2020 Posted March 3, 2020 Calculated risk blog has some suggestions of what political leadership should be considering. Very thoughtful. - https://www.calculatedriskblog.com/2020/03/a-few-comments-on-covid-19-non-medical.html 1.) First, Let the experts brief the public, not politicians. 2.) Second, the government should take the advice of the experts at the CDC and elsewhere and increase funding immediately as required by the health professionals. 3.) Third, testing should be increased dramatically, and testing should be free for all in the US with any symptoms (or closely exposed to an infected person). It should be free for the uninsured, and for illegal immigrants (there should be no citizenship test). This is critical or people will not get the test. 4.) Fourth, for those that test positive (but don't need hospitalization), the experts should determine how to isolate them. If their employers will not pay for their time off, then the government should pay. We don't want people avoiding tests because of the costs or the fear of lost income. 5.) Fifth, the government should have a program of low interest rate (or no interest) loans for otherwise healthy companies impacted by the epidemic. “These are the kinds of programs that the government could put in place fairly quickly, in addition to what the healthcare experts suggest. In addition to the usual safety nets, these policies - well publicized - would lower the transmission rate and provide the proper stimulus to the economy (directed at exactly the right people).” Viking, To me actually quite striking, that the playbook suggested by Mr. McBride is to a wide extent similar to the playbook of the [Danish Health Athority and the Danish Government [, naturally with some modifications related to differences in societal systems the US compared to Denmark]. John, it is becoming very clear that countries with public health systems are much better prepared to deal with this crisis. Nice to hear that Denmark is being proactive (not a surprise).
zippy1 Posted March 3, 2020 Posted March 3, 2020 Just to give a glimpse of what it looks like from East Asia(Taiwan), 1. International travels for tourism are down. Airports are rather empty. Many flights are cancelled 2. Companies restrict overseas travels. 3. Employees are asked to taken body temperature daily when report to work. Anyone with a fever is asked to stay home. 4. Riders of subway/Metro are having their body temperature taken before being admitted. 5. Companies are planning a "Blue-team and Red-team system." Some sorts of system to either separate these teams by time or by space are being worked out. For critical infrastructure companies, I have heard that half of employees are asked to go to another site that is 30 miles away as the back up. 6. There are daily broadcast on TV to ask everyone to wash hands often, avoid talking in elevator and avoid large crowds. 7. The government invested funds to ramp up medical mask production. It was 1.8 million per week in January. The projection is by end of the March, it will become 9.2 million per week. Additional funds are being provided to reach 13.5 million per week. 8. School opening for the spring semester was postponed by 2 weeks. masks are being provided to kids and teachers focus on teaching "washing hands and not touching faces and so and so forth." 9. My wife is a professor. All courses are asked to have a contingency plan to "go online." She has been busy taping her classes. 10. Large scale religious activities are curtailed voluntarily. I am a church deacon. We continuously discuss whether to go online or not. The catholic church in my city stopped weekly Mass last week. 11. Most of my physician friends are very concerned/worried about the overwhelming number of patients this virus can bring and the resulting breakdown of the medical system. This has not yet materialized yet. However, the feeling is the worst is yet to come. Anyway, hopefully, we will get out of this ok.
Gregmal Posted March 3, 2020 Posted March 3, 2020 BOSTON, March 3 (Reuters) - Billionaire hedge fund investor William Ackman on Tuesday said he has moved to protect the firm's $6.6 billion portfolio, which includes restaurant chain and hotel stocks, as the spread of the coronavirus has sparked prolonged panic selling in markets. Ackman said he expects the outbreak, which has been detected in roughly 80 countries, to weigh on growth in the United States and abroad and affect both stock and credit markets. Over the last 10 days, "we have taken steps to protect the portfolio from downward market volatility," wrote Ackman, who oversees Pershing Square Capital Management. He declined to say exactly what steps he took. Ackman spoke out on the same day that the Federal Reserve announced an emergency interest rate cut. Ackman's statement, an unusual move for someone who seldom discusses portfolio movements publicly, underscores investors' fears that the coronavirus will have serious implications for economic growth. "We believe that efforts to contain the coronavirus are likely to have a substantial negative impact on the U.S. and global economies, and on equity and credit markets," the statement said. Ackman said hedging was preferable to selling off his portfolio of companies whose businesses are otherwise strong and include Chipotle Mexican Grill (CMG), Hilton Worldwide (HLT) , home improvement chain Lowe's (LOW), Burger King operator Restaurant Brands International and Berkshire Hathaway (BRK/A), among others. The hedge fund sold out of its position in Starbucks (SBUX) earlier in the year. In the first two months of the year, the firm's Pershing Square Holdings portfolio fell 7.1%, after having gained 58.1% last year, which made it one of the industry's best-performing hedge funds. The market drop has taken a bite out of the size of Ackman's funds, according to a report which put assets under management at $6.6 billion at the end of February compared with $7.5 billion at the end of December. 12% one month decline in AUM there for Billy Boy
Viking Posted March 3, 2020 Posted March 3, 2020 Just to give a glimpse of what it looks like from East Asia(Taiwan), 1. International travels for tourism are down. Airports are rather empty. Many flights are cancelled 2. Companies restrict overseas travels. 3. Employees are asked to taken body temperature daily when report to work. Anyone with a fever is asked to stay home. 4. Riders of subway/Metro are having their body temperature taken before being admitted. 5. Companies are planning a "Blue-team and Red-team system." Some sorts of system to either separate these teams by time or by space are being worked out. For critical infrastructure companies, I have heard that half of employees are asked to go to another site that is 30 miles away as the back up. 6. There are daily broadcast on TV to ask everyone to wash hands often, avoid talking in elevator and avoid large crowds. 7. The government invested funds to ramp up medical mask production. It was 1.8 million per week in January. The projection is by end of the March, it will become 9.2 million per week. Additional funds are being provided to reach 13.5 million per week. 8. School opening for the spring semester was postponed by 2 weeks. masks are being provided to kids and teachers focus on teaching "washing hands and not touching faces and so and so forth." 9. My wife is a professor. All courses are asked to have a contingency plan to "go online." She has been busy taping her classes. 10. Large scale religious activities are curtailed voluntarily. I am a church deacon. We continuously discuss whether to go online or not. The catholic church in my city stopped weekly Mass last week. 11. Most of my physician friends are very concerned/worried about the overwhelming number of patients this virus can bring and the resulting breakdown of the medical system. This has not yet materialized yet. However, the feeling is the worst is yet to come. Anyway, hopefully, we will get out of this ok. Zippy, thank you for posting. I think i have a much better understanding of why Taiwan only has 42 cases being so close to the epicentre of this hurricane. I was wondering why the virus is hitting some countries so hard and other countries much less so. So it sounds like countries that have a well thought out plan and strong execution can manage their way through this with minimal loss of life and economic damage.
Spekulatius Posted March 3, 2020 Posted March 3, 2020 Valuation multiples really don’t matter. We heard already in another thread that with a 1% discount rate , a 2.7% FCF yield is a great bargain. Now if interest rates go to 0.1% even a 0.27% FCF yield is a great deal too. That’s a 10x upside right there, no growth needed. Europe and Japan are ahead of us and it has worked great for them.
spartansaver Posted March 3, 2020 Author Posted March 3, 2020 New Howard Corona memo https://www.oaktreecapital.com/insights/howard-marks-memos
Gregmal Posted March 3, 2020 Posted March 3, 2020 New Howard Corona memo https://www.oaktreecapital.com/insights/howard-marks-memos Pretty sound stuff there.
rranjan Posted March 4, 2020 Posted March 4, 2020 New Howard Corona memo https://www.oaktreecapital.com/insights/howard-marks-memos Pretty much any time an investor will look at difference between value and price. Not sure if there is any other way to invest. Some people can do well as speculator, but I am not good at it. I simply stick to estimating normalized earnings and buying at a big discount. Discount can appear due to various reasons. If it's due to Corona virus then so be it. I can only focus on what I can control. Buy some if you find something cheap and keep some cash to buy more if things become cheaper.
John Hjorth Posted March 4, 2020 Posted March 4, 2020 New Howard Corona memo https://www.oaktreecapital.com/insights/howard-marks-memos Pretty sound stuff there. I think the pre ample in the letter will go over in history, as a measurement & gauge for the future of how the actual sentiment has been changing recently. - - - o 0 o - - - I pretty much agree with rranjan. The applicability of the memo appears limited. We simply need to continue to do, what we all individually already do, at our individually very best.
Viking Posted March 4, 2020 Posted March 4, 2020 New Howard Corona memo https://www.oaktreecapital.com/insights/howard-marks-memos Great read; well articulated. Below is the key paragraph for me. Most people feel the virus is just a seasonal flu (and we all know a seasonal flu is no big deal for most of us). My guess is people in China, Italy, South Korea and Iran would not agree that what they are experiencing right now is the same as getting the flu (something they all have a lot of experience with as well). Big, big difference. How a country deals with this virus is hugely important in determining its impact. We should learn a lot in the next 4 weeks. “I want to acknowledge up front that ascertaining intrinsic value is never a simple, cut-and-dried thing. Now – given the possibility that the virus will cause the world of the future to be very different from the world we knew – is value too unascertainable to be relied upon? In short, I don’t think so. What I think we do know is that the coronavirus is not a rerun of the Spanish flu pandemic of 1918, “which infected an estimated 500 million people worldwide – about one-third of the planet's population – and killed an estimated 20 million to 50 million victims, including some 675,000 Americans.” (history.com) Rather, it’s one more seasonal disease like the flu, something we’ve had for years, have developed vaccines for, and have learned to deal with. The flu kills about 30,000-60,000 Americans each year, and that’s terrible, but it’s very different from an unmanageable scourge.”
Gregmal Posted March 4, 2020 Posted March 4, 2020 And folks say Trump is unfit to handle dealing with the virus! So unsanitary! How many hands do you think he shakes? https://twitter.com/realDonaldTrump/status/1234998841822216192?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1234998841822216192&ref_url=https%3A%2F%2Fnypost.com%2F2020%2F03%2F03%2Ftrump-rips-dirty-bloomberg-for-manhandling-pizza-licking-fingers-in-viral-video-gross-out%2F
Spekulatius Posted March 4, 2020 Posted March 4, 2020 And folks say Trump is unfit to handle dealing with the virus! So unsanitary! How many hands do you think he shakes? https://twitter.com/realDonaldTrump/status/1234998841822216192?ref_src=twsrc%5Etfw%7Ctwcamp%5Etweetembed%7Ctwterm%5E1234998841822216192&ref_url=https%3A%2F%2Fnypost.com%2F2020%2F03%2F03%2Ftrump-rips-dirty-bloomberg-for-manhandling-pizza-licking-fingers-in-viral-video-gross-out%2F I haven’t lived in NY state too long, but that’s exactly how you eat Pizza in NYC. Use a fork and they will use a pitchfork and chase you out.
LC Posted March 4, 2020 Posted March 4, 2020 Yea that’s proper technique. You’ve gotta pull the finger-lick maneuver to remove excess grease particularly if you’re given a fixed amount of napkins and can’t afford to saturate the napkin’s full absorption potential on the first slice. And don’t go claiming jersey- ignorance, Jon Stewart knew it: http://www.cc.com/video-clips/0ect4f/the-daily-show-with-jon-stewart-me-lover-s-pizza-with-crazy-broad
BG2008 Posted March 4, 2020 Posted March 4, 2020 A lot of people talk about fatality rates and ease of transmission. Here is a very tangible quote form Marriott. The problem is that even if this is only for 1-2 months, it trickles down. From WSJ: Marriott International Inc. said during an earnings call last week that revenue per available room for Greater China, which represents about 9% of the company’s total room count, plunged nearly 90% in February compared with a year earlier. I remember trying to sell a Tier 4 hotel in 2008 and the GM was telling me that the cheerleaders cancelling their bookings threw a big monkey wrench into their revenue projections.
Guest cherzeca Posted March 4, 2020 Posted March 4, 2020 Yea that’s proper technique. You’ve gotta pull the finger-lick maneuver to remove excess grease particularly if you’re given a fixed amount of napkins and can’t afford to saturate the napkin’s full absorption potential on the first slice. And don’t go claiming jersey- ignorance, Jon Stewart knew it: http://www.cc.com/video-clips/0ect4f/the-daily-show-with-jon-stewart-me-lover-s-pizza-with-crazy-broad awful technique. a true newyawker will grab a proper slice, fold it slightly in hand and eat it like a true gentleman, not like bloomie, all furtive with a torn shred and leaving the remaining bit of the slice all mangled and infected. one bite, everybody knows the rules...
Gregmal Posted March 4, 2020 Posted March 4, 2020 A lot of people talk about fatality rates and ease of transmission. Here is a very tangible quote form Marriott. The problem is that even if this is only for 1-2 months, it trickles down. From WSJ: Marriott International Inc. said during an earnings call last week that revenue per available room for Greater China, which represents about 9% of the company’s total room count, plunged nearly 90% in February compared with a year earlier. I remember trying to sell a Tier 4 hotel in 2008 and the GM was telling me that the cheerleaders cancelling their bookings threw a big monkey wrench into their revenue projections. I think thats misguided though because you can avoid going against the current and go with it. Why rent(booking a night or two) a Marriot when you can buy a home at 3% down with a 3% mortgage on a GRBK lot? Or LGI? A lot of the one offs will be bridged by assistance programs and easing, or so I imagine. But the rate cuts(predictable) and subsequent supply/demand distortions will dictate the winners. As always, there are high risk areas, moderate risk and low risk. But with this they seem more pronounced. You can take the weak and put a bullet in their head while also going long the strong. I would almost guarantee a short WLL(or CHK)/PRTY/CBL long GRBK/PCYO/GRIF trade crushes it from here. Theres probably a bunch of other great pairs but those are the ones I follow. This narrative in the market has made it virtually impossible for certain themes not to play out. With these type of setups on the table why even fuck around with hotels, restaurants and airlines?
Gregmal Posted March 4, 2020 Posted March 4, 2020 Yea that’s proper technique. You’ve gotta pull the finger-lick maneuver to remove excess grease particularly if you’re given a fixed amount of napkins and can’t afford to saturate the napkin’s full absorption potential on the first slice. And don’t go claiming jersey- ignorance, Jon Stewart knew it: http://www.cc.com/video-clips/0ect4f/the-daily-show-with-jon-stewart-me-lover-s-pizza-with-crazy-broad awful technique. a true newyawker will grab a proper slice, fold it slightly in hand and eat it like a true gentleman, not like bloomie, all furtive with a torn shred and leaving the remaining bit of the slice all mangled and infected. one bite, everybody knows the rules... Yea, come on. You fold it in half and bite it. You dont use a fork and a knife and you dont perform faux felatio on your fingers afterwords either. These billionaires are so out of touch!
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