Kuppy on Inflation

[rkbabang]

Like I said in another thread, Steve Jobs thought he could cure his cancer with veggie smoothies and it likely cost him an earlier death than he otherwise would have had, yet I love my iPhone and Mac, and his hand picked replacement to run Apple has turned out great.  We all have blindspots or beliefs that aren't true.  I know cancelling people for every minor thing you disagree with is the cultural norm these days, but if you are ignoring good actionable information because someone thinks something you consider wrong on an entirely different subject, you are hurting no one but yourself.  There is probably something that you could learn from almost everyone, and with someone like Kuppy there is probably a lot to learn.  I enjoy his blog and have for years, I haven't invested in his shipping ideas, because he never convinced me, but sometimes I get a great idea from him.  He's never struck me as an infectious disease expert, so I couldn't care less what he thinks about COVID19.  If he wrote up a stock idea based on his belief that COVID was just a cold, I'd ignore it.

 

Edited September 24, 2021 by rkbabang

[Spekulatius]

With Kuppy’s style, one thing to consider is that taxes are going to be high, as every trade is pretty much short term. This may work better in tax deferred account than a taxable account, Imo.

 

I did subscribe to his newsletter for a while (while it was free) but I didn’t like his particular style. Basically, Kuppy does thematic trades. This means things, like tanker trade, LooT trade, re-opening trades, uranium trader, NG trade etc. He comes up with a new thematic trade every one or two month, then recommend a few names, but very little research goes into analyzing those names or individual stocks. There isn’t much follow up onto the trade either, he just comes up with a new one and sometimes, but not always, recommends closing or exiting this and that.

 

Some of these trades work well, some not so much. If the bottom falls out of a thematic trade or individual name he often will post that he traded out just before the stock cratered. Hard to verify and I suspect that he watches just his charts very closely as well as any news and gets the hell out of there, if things look iffy. I have no idea whether subscribers in his service would be able to duplicate his near miss exits.

 

Anyhow, he creates a lot of ideas and if you are into thematic trades , then Kuppy newsletter may offer some value. I knew for sure, it wasn’t for me, but that doesn’t mean some of his ideas aren’t good. It is just that most of his stuff isn’t in my hit zone, but that’s just me.

[alpha asset strategies]

14 hours ago, Gregmal said:

Yea IDK because I'm not a big fan of following individual people and terrible and tracking the Twitterers. But in the past year of following some of his stiff he has:

-called the BTC rally from 9k to 60k

-then called the exact top

-in between nailed the SPAC bubble top intraday

 

His fund performance is pretty solid. Additionally he's accomplished quite a bit for a guy his age and on top of it is very down to earth and willing to engage with pretty much anyone. Overall I'd say, and please recommend others if you know of them, the single best person I know who can quickly size up a developing situation and spit out how you can make money from it....a far cry from most who just look at shit, slow as molasses, and then want to do fundamental analysis. So I dont know ones politics but I'd say its pretty irrelevant here. Personally, I have never had a problem generating actionable ideas, but if I did, his weekly idea generator newsletter is totally worth $3k annually. I dont subscribe because if it did I'd probably be like 6:1 levered which is just asking for trouble. 

 

I'd also add that anyone who bought the COVID hysteria got their shit pushed in and likely missed what may indeed have been the single greatest quick money opportunity they'll see in their lifetimes. Like you could have made 50-100% on shit like Google and Berkshire inside of a year if you weren't wrapped up in all the media nonsense. 

 

@Gregmal you mentioned that Kuppy's fund performance has been pretty solid.  Can you elaborate on his historical returns?  For the most part, I enjoy Kuppy's blog and interviews.  However, I have read that after a red hot start from like 2003 to 2008, he basically blew up his fund during the GFC.  I've always been curious about his performance since then.  He definitely seems to follow more of a high risk / high return type investment process.  Thanks!  

[JRM]

Anyone paying attention to natural gas prices lately?  Essentially a double year to date, and that's happened through the summer months.  Could be an interesting setup for the winter months.

 

Think about everything that uses natural gas.  Every industrial manufacturer you can think of is a natural gas user (if they have access to it).  Fertilizer, automobile, roofing, dairy, food processing...literally anybody who makes stuff. 

 

It doesn't take a rocket surgeon to see the stars beginning to align.

[Spekulatius]

Well, of course there is also that failed Mongolian real estate adventure ( Mongolian Growth group) which was discussed here, but that was another blow up after the GFC.

https://seekingalpha.com/article/1987231-investing-in-mongolia-yes-mongolia

 

When you read his newsletter, or Twitter feed, he is always 100% convinced, despite doing minimal research. I recall one moment where he claimed that LDO.MI (Leonardo) was the cheapest defense stock in Europe and apparently had bought a poisition.

 

Well, it is sort of true, if you just look at the stock for 10 min based on very crude numbers (P/S) but if you look at bit deeper, there is all sorts of trouble and good reason why it’s cheap. They have a structural profitability issue in one of their largest business, but more importantly, at that time they had a CEO who basically had one foot in jail because of a fraud allegation:

https://www.defensenews.com/industry/2020/10/15/leonardo-ceo-found-guilty-of-fraud-in-previous-job/
 

Well, Kuppy didn’t know any of this, but to his credit, when I quickly pointed this out, I think he changed his mind and sold.

 

So yes, investing with him wouldn’t be my kupp of tea (pun) but as an idea generating, I think he is OK. Just be aware that you need to do your own due diligence before following him in his trades. I fully expect him to blow up again in the future at some point.

Edited September 25, 2021 by Spekulatius

[Gregmal]

2 hours ago, alpha asset strategies said:

 

@Gregmal you mentioned that Kuppy's fund performance has been pretty solid.  Can you elaborate on his historical returns?  For the most part, I enjoy Kuppy's blog and interviews.  However, I have read that after a red hot start from like 2003 to 2008, he basically blew up his fund during the GFC.  I've always been curious about his performance since then.  He definitely seems to follow more of a high risk / high return type investment process.  Thanks!  

 

https://www.valuewalk.com/praetorian-capital-fund-2q21-commentary/

 

Even if theres occasional blowups, few people can make money like he's been shown to. I'd say the same thing about folks like Bill Hwang too, or Ackman. Who cares if they blew up every now and again? I wanna see what those guys are up to because theyre generally in the right ballpark. And in Kuppys case, unlike most self consumed, entitled, "Im too important" type fund managers, he'll tell you exactly what he's doing as he'd doing it which gives you great insight to the process and the rationale. 

 

I've never liked shipping stocks, nor have I liked commodities. Surprised how everyone mentions shipping but doesn't also mention he's crushing the commodity trade this year, especially of late with Uranium. 

 

Ultimately investing is both an art and a science. Each individual has to figure out their own "user settings" and then refine their process. Part of this is always learning and being open to ideas and then evolving with the times. How many guys do you see out there buying the same stupid stocks that just dont work and haven't worked simply because its fits what the textbook tells them? Thats what you dont want to be like, rather than fearing the occasional miss or loss. Everyone loses money from time to time. Nothing to be embarrassed about or afraid of. In fact, I'd gander not being afraid of losing money is a huge advantage. 

[SharperDingaan]

3 hours ago, JRM said:

Anyone paying attention to natural gas prices lately?  Essentially a double year to date, and that's happened through the summer months.  Could be an interesting setup for the winter months.

 

Think about everything that uses natural gas.  Every industrial manufacturer you can think of is a natural gas user (if they have access to it).  Fertilizer, automobile, roofing, dairy, food processing...literally anybody who makes stuff. 

 

It doesn't take a rocket surgeon to see the stars beginning to align.

 

NG has indeed done very well  but you might want to temper expectations a bit.

Prices are already high ... Higher prices require both a colder winter, ongoing supply restrictions in Europe, ongoing diminishing wind, and growing fears of shortage as UK fuel rationing progressively broadens. However, global warming produces warmer winters, there is definately no shortage of deliverable NG in the ME, winds generally blow stronger in the winter, and UK fuel rationing is only temporary. This is a time when the smarter producers would hedge, and many are/have.

 

Lots of widely popularized UK gas supplier faIures, primarily because they sold at fixed rate, bought at spot, and refused to cap their maximum cost (costs $ to hedge). The good news is that the more failures, the more reinforcement that NG spot prices are going higher still, 'cause they already have  

 

Lot of enthusiasm around hydrogen fuel cells to power EV vehicles, but few realize that most of it comes from the breakdown of NG and that CO2 is the waste product. While the food industry is a major user of CO2, scaling is not really practical until there is widespread and reliable CO2 sequesture, and that is still some time  away.

 

SD

[Spekulatius]

Each it’s own, for me blowups are unacceptable, because I am not in my thirties any more. Blowup risk is actually a pretty substantial risk, imo, especially with newer investment  managers that try to create a track record. There were some that bet it all on back in March 2020 and that might have blown up in if the path would have been different. There is a huge incentive to make or break it, when you are starting out.

 

If can‘t afford blowups, invest with level headed guys @Packer16 ( Bonhoeffer fund ) or  @oddballstocks ( Alluvial ) and your risk of a devastating loss should be very low, compared to the gunslingers in the business. All imo, and worth what you are paying for.

Edited September 25, 2021 by Spekulatius

[Spekulatius]

Gunslingers are going to shoot:

No opinion on this trade, but zerohedge isn’t exactly solid research material.

[Gregmal]

He s gonna be right about it, although I dont think it plays out nearly as fast as it seems he's anticipating. Its funny, Kuppy says it, and its controversial. Whereas quietly, back in the spring, Tepper said the same exact shit. What the ESG nonsense is doing to top energy producers, coupled with government regulation, is a recipe for disaster. Like Joes administration is refusing to allow new production and harassing existing production and then in response to high prices begging OPEC and Saudis to pump more LOL. Like WTF. And its not like big Oil needed another excuse to allocate capital irrationally. Its like telling big tobacco to shift towards pot and ecig and then be surprised when you get a Juul or Cronos. 

 

Which again shifts back to inflation....in the real world, gas is at multi year highs, cars and houses are expensive as fuck, grocery prices have skyrocketed...but like with covid they lie and manipulate the narrative to "transitory" for their benefit but everyone can see whats going on because its hitting their bank account. 

[JRM]

1 hour ago, SharperDingaan said:

Lot of enthusiasm around hydrogen fuel cells to power EV vehicles, but few realize that most of it comes from the breakdown of NG and that CO2 is the waste product. While the food industry is a major user of CO2, scaling is not really practical until there is widespread and reliable CO2 sequesture, and that is still some time  away.

 

My understanding is there are numerous methods for creating hydrogen (or extracting it from reserves in the ground).  I thought the method which uses methane (methane pyrolysis) has solid carbon as a byproduct which is easier to sequester than CO2.  

[SharperDingaan]

31 minutes ago, JRM said:

My understanding is there are numerous methods for creating hydrogen (or extracting it from reserves in the ground).  I thought the method which uses methane (methane pyrolysis) has solid carbon as a byproduct which is easier to sequester than CO2.  

 

Agreed there are lots of ways, but what gets done where - will depend primarily upon the cost of feedstock less the recovery from by-product (CO2) sales. It will also take a mminimum 2-3 years to build the required plant and distribution facilities.

 

SD

[Spekulatius]

2 hours ago, SharperDingaan said:

 

NG has indeed done very well  but you might want to temper expectations a bit.

Prices are already high ... Higher prices require both a colder winter, ongoing supply restrictions in Europe, ongoing diminishing wind, and growing fears of shortage as UK fuel rationing progressively broadens. However, global warming produces warmer winters, there is definately no shortage of deliverable NG in the ME, winds generally blow stronger in the winter, and UK fuel rationing is only temporary. This is a time when the smarter producers would hedge, and many are/have.

 

Lots of widely popularized UK gas supplier faIures, primarily because they sold at fixed rate, bought at spot, and refused to cap their maximum cost (costs $ to hedge). The good news is that the more failures, the more reinforcement that NG spot prices are going higher still, 'cause they already have  

 

Lot of enthusiasm around hydrogen fuel cells to power EV vehicles, but few realize that most of it comes from the breakdown of NG and that CO2 is the waste product. While the food industry is a major user of CO2, scaling is not really practical until there is widespread and reliable CO2 sequesture, and that is still some time  away.

 

SD

The German car manufacturers have tinkered with  hydrogen (fuel cells) forever and it didn’t really go any where. same with Ballard Power. I think it is simply losing out to batteries which have shown steady progress on terms cost and energy density.

Hydrogen is a dangerous gas, as it is odorless, leaks easily (small molecules) has a low vapor point and is highly explosive. The hurdle to make it safe is substantial.

 

 

[alpha asset strategies]

8 hours ago, Gregmal said:

 

https://www.valuewalk.com/praetorian-capital-fund-2q21-commentary/

 

Even if theres occasional blowups, few people can make money like he's been shown to. I'd say the same thing about folks like Bill Hwang too, or Ackman. Who cares if they blew up every now and again? I wanna see what those guys are up to because theyre generally in the right ballpark. And in Kuppys case, unlike most self consumed, entitled, "Im too important" type fund managers, he'll tell you exactly what he's doing as he'd doing it which gives you great insight to the process and the rationale. 

 

I've never liked shipping stocks, nor have I liked commodities. Surprised how everyone mentions shipping but doesn't also mention he's crushing the commodity trade this year, especially of late with Uranium. 

 

Ultimately investing is both an art and a science. Each individual has to figure out their own "user settings" and then refine their process. Part of this is always learning and being open to ideas and then evolving with the times. How many guys do you see out there buying the same stupid stocks that just dont work and haven't worked simply because its fits what the textbook tells them? Thats what you dont want to be like, rather than fearing the occasional miss or loss. Everyone loses money from time to time. Nothing to be embarrassed about or afraid of. In fact, I'd gander not being afraid of losing money is a huge advantage. 

 

Thanks for the link @Gregmal .  Kuppy definitely has an impressive track record over the past few years.  According to his letter, it looks like his current fund's inception date was 2019.  I'm just curious about what happened to his previous fund(s) from like 2010 through 2018.

 

I agree that one can definitely get some "home run" ideas from Kuppy - and some ideas with major downside risk.  As always, I guess the key is to size positions appropriately.

[Gregmal]

16 hours ago, alpha asset strategies said:

 

Thanks for the link @Gregmal .  Kuppy definitely has an impressive track record over the past few years.  According to his letter, it looks like his current fund's inception date was 2019.  I'm just curious about what happened to his previous fund(s) from like 2010 through 2018.

 

I agree that one can definitely get some "home run" ideas from Kuppy - and some ideas with major downside risk.  As always, I guess the key is to size positions appropriately.

 

 

Exactly. Position sizing is the single most important facet of investing. If you don't know what you're doing, invest in small size, diversify. If you anticipate a high degree of risk, size it small. If its a slow pitch down the middle, swing for the fences. Its actually quite simple. Figuring out how to optimally structure your trades and investments(aka manage your risks) is way more important than all the numbers and crap folks waste so much time fussing over. Fundamentals dont mean shit if you're wrong about others aspects of the equation. 

[thepupil]

i like kuppy because he wrote a promotional piece on JOE that jived with me, bought calls, made 600 or so bps from 100 and moved on. followed JOE forever but he highlighted how the perception would change and catalyzed the move up.

 

would i trust all his numbers or details or risk big money on one of his themes? No, absolutely not. 

[RVP]

4 hours ago, Gregmal said:

 

 

Exactly. Position sizing is the single most important facet of investing. If you don't know what you're doing, invest in small size, diversify. If you anticipate a high degree of risk, size it small. If its a slow pitch down the middle, swing for the fences. Its actually quite simple. Figuring out how to optimally structure your trades and investments(aka manage your risks) is way more important than all the numbers and crap folks waste so much time fussing over. Fundamentals dont mean shit if you're wrong about others aspects of the equation. 

 

Agree with this framework of thinking in regards to managing risk, but disagree with the notion that it's quite simple.

 

"It ain't what you don't know that gets you into trouble. It's what you know for sure that just ain't so." - Mark Twain

[Gregmal]

I'll quote the guy who's style I randomly end up finding a good comp to some of my own. Everyone likes to talk about how he blew up even though he never really blew up and they like to make a big deal about his names that didnt work like JCP, HLF, VRX but losses are just part of the game and he's once again the top dog in the biz...

 

"Its my job to be right. If I'm wrong I deserve to be held accountable"

 

“We size things based on how much we think we can make versus how much we think we can lose. We’ll probably be willing to lose 5-6% of our capital in any one investment.”

 

-Bill Ackman

 

I mean I know so many people who are terrified of losing money and cap their positions at like 2-3% and its just a head scratcher. If you cant withstand losing 5-10% I mean why even bother with stocks? If you have a real home run on your hands and its a 2% position? Who gives a fuck. Maybe it turns into 5% lol. What a waste.

[LC]

or to paraphrase charlie munger, if you cant stomach seeing your investments drop 50% then you have no business investing in common stocks and you deserve your mediocre returns.

[Gregmal]

8 hours ago, LC said:

or to paraphrase charlie munger, if you cant stomach seeing your investments drop 50% then you have no business investing in common stocks and you deserve your mediocre returns.

Yea IDK. Its shocking to me how scared most people are of "losing money", which in todays day and age is basically defined as "suffering" a paper loss or dealing with volatility. I dont take new investors anymore but when I did, part of the process was avoiding folks seemed too preoccupied with the idea that the stock market is dangerous and risky. As I said earlier, its a HUGE advantage going into an investment not being scared. I cant help but think this is a byproduct of the Feds grand experiment where they've more or less snuffed out volatility. Now every time we get a 2-3% decline everyone thinks "the big one is coming!"...

[Gregmal]

https://www.cnbc.com/2021/09/27/fed-chair-powell-to-warn-congress-that-inflation-pressures-could-last-longer-than-expected.html

 

Guess its just gonna be this game where we say its temporary until it stops. Shits gonna get real whacky when even the dumb dumbs who believe the politicians and media realize the transitory narrative is bullshit. 

[Spekulatius]

21 hours ago, Gregmal said:

Yea IDK. Its shocking to me how scared most people are of "losing money", which in todays day and age is basically defined as "suffering" a paper loss or dealing with volatility. I dont take new investors anymore but when I did, part of the process was avoiding folks seemed too preoccupied with the idea that the stock market is dangerous and risky. As I said earlier, its a HUGE advantage going into an investment not being scared. I cant help but think this is a byproduct of the Feds grand experiment where they've more or less snuffed out volatility. Now every time we get a 2-3% decline everyone thinks "the big one is coming!"...

It doesn‘t look like fear of losing money is the prevalent theme currently. If anything, the boom in collectibles from baseball cards , to vintage cars, NFT or crypto, booming real estate and expanding equity valuation as well as cheap credit (basically record low yield spreads) seems to indicate Ehe complete opposite. So in my opinion, the inflation trade is already in full swing. If you enter now, you are by no means early here.

 

Thats doesn’t mean it can’t keep going.

Edited September 28, 2021 by Spekulatius

[Gregmal]

17 minutes ago, Spekulatius said:

It doesn‘t look like fear of losing money is the prevalent theme currently. If anything, the boom in collectibles from baseball cards , to vintage cars, NFT or crypto, booming real estate and expanding equity valuation as well as cheap credit (baseboard record low yield spreads) seems to indicate Ehe complete opposite. So in my opinion, the inflation trade is already in full swing. If you enter now, you are by no means early here.

 

Thats doesn’t mean it can’t keep going.

I think its still very early. You have something like the Child Tax Credit which is putting almost $1000 a month into the pockets of a lot of folks. Some more. With the FHA loan cap something like $700k on a 30 year fixed you basically have the government covering 30-40% of a $500-600k property's monthly carry. Thats just one program and lending standards are fairly tight right now. Long way to go. Theres a reason the average home price is almost $400k now. The rest of the stuff is merely validation that inflation is here. Some might call parts of it a bubble and I wouldnt argue, but as Kuppy said, you're better off buying toasters than holding dollars. Not everyone knows how to invest LOL. 

[Gregmal]

In the face of a $600-$900 monthly subsidy, $2000 monthly rents for anything in the country near a major market all of a sudden looks quite cheap. Look at the real recovery story in NYC, IE, its NOT happening. Jobs still haven't come back. Offices are empty. But housing/rental prices? Wayyyy up. Its already a free for all and a large part of the country is totally in denial about it. Just wait til they come around.

[Spekulatius]

No argument here that it can go on much longer. But here id a contrarian point, at least for equity markets: The Fed pretty much said that they are going to stop tapering toward the end of this year and in the past, this has let to temporary hiccups.

I actually think that what the Fed does (specially tapering) is not as important than what the treasury does, but I think many differ and those panicking may be all it takes to get things moving downstairs, at least for a while.

 

Now, there is a question if the Fed does what they said they are going to do. I think they will. Anyways, for a longer term investor, that’s noise regardless which way it goes.

Edited September 28, 2021 by Spekulatius