Just broke Venkat so I’ll do my own assignment.
1 like = 1 opinion on... investing, I guess.
Maybe a few per like if no one wants to play.
1 like = 1 opinion on... investing, I guess.
Maybe a few per like if no one wants to play.
https://twitter.com/vgr/status/1205977370483556352
24. Economic moats are cool but aren’t the only thing.
Commoditized businesses can be great investments despite low AVERAGE returns if the range of possible outcomes is wide enough.
Commoditized businesses can be great investments despite low AVERAGE returns if the range of possible outcomes is wide enough.
25. For example, industries with relatively low short term price elasticity of supply occasionally experience jackpot economics when the service they’re supplying is mission critical.
See: shipping.
See: shipping.
26. In highly reflexive businesses, short sellers are kind of like economic terrorists by reducing the range of possible intrinsic value outcomes.
27. The pink sheets are one of the last Wild West markets in, well, the West.
The SEC’s new proposed rule may make trading many of the stocks there much more difficult in the next few months.
Looking forward to major dislocations, if so. Do the homework now to be ready.
The SEC’s new proposed rule may make trading many of the stocks there much more difficult in the next few months.
Looking forward to major dislocations, if so. Do the homework now to be ready.
28. Businesses that don’t have economic moats yet but are developing them can be better investments than businesses that already do.
29. Social hierarchies come natural to humans, so entities that sell perceived access to higher tiers of those hierarchies will always be in demand.
Social signaling never dies and neither will lux goods and services.
Social signaling never dies and neither will lux goods and services.
30. The economy is creating more wealthy people and more poor people. The middle gets eaten by the economic meat grinder.
The same is true for businesses. Midline is usually the worst place to be. High end and low end are key to the American Carnage portfolio.
The same is true for businesses. Midline is usually the worst place to be. High end and low end are key to the American Carnage portfolio.
31. You can run your own John Malone home game.
Dividend stocks are for tax deferred accounts and geezers who want an extra $20 per month in income to supplement their SSI.
Compounders are for taxable, just gotta hold them til you die so your heirs get a cost basis step-up.
Dividend stocks are for tax deferred accounts and geezers who want an extra $20 per month in income to supplement their SSI.
Compounders are for taxable, just gotta hold them til you die so your heirs get a cost basis step-up.
32. LTV/CAC analysis can really screw you up if you don’t consider cohorts and scale of spend.
Often, your earliest adopters are your biggest fans.
If you don’t have an internal growth engine, there’s a good chance you’ll run into diseconomies of scale in customer acquisition.
Often, your earliest adopters are your biggest fans.
If you don’t have an internal growth engine, there’s a good chance you’ll run into diseconomies of scale in customer acquisition.
33. Real estate leases serve as a hedge against Wholesale Transfer Pricing.
Advertising may be the new rent, but the rent is month-to-month so if you don’t expect to get squeezed it’s your own fault.
Advertising may be the new rent, but the rent is month-to-month so if you don’t expect to get squeezed it’s your own fault.
34. Insurance tends to be an awful business, but a fun way to check the trend in reserving adequacy is converting calendar year loss development triangles into accident year ones.
Insurance has goofy accounting so sometimes you can gain insight from the granularity.
Insurance has goofy accounting so sometimes you can gain insight from the granularity.
35. Insurance float is one of the worst kinds of float because what you can do with it is heavily regulated.
If someone is starting an insurer for float, run away. There’s a good chance they’re either living decades in the past, planning a scheme, or lacking in creativity.
If someone is starting an insurer for float, run away. There’s a good chance they’re either living decades in the past, planning a scheme, or lacking in creativity.
36. Anti-prestige businesses are often not appreciated on the market.
There’s often value in companies that cater to non-coastal regions and rural communities.
There’s often value in companies that cater to non-coastal regions and rural communities.
37. Having a list of businesses that should do well in alternate economic environments can be useful to help you move quickly if things change.
$FMBL will make a killing if interest rates rise, for example, because of its huge base of non-interest bearing deposits.
$FMBL will make a killing if interest rates rise, for example, because of its huge base of non-interest bearing deposits.
38. Get on the mailing lists of the major investment newsletter publishers.
Sometimes they’ll pitch a small cap stock for months at a time in their advertising, if the return on ad spend is high enough.
Between a small float and a million Boomers, interesting things can happen.
Sometimes they’ll pitch a small cap stock for months at a time in their advertising, if the return on ad spend is high enough.
Between a small float and a million Boomers, interesting things can happen.
39. Alternatively, just check out Stock Gumshoe and avoid the spam.
There’s a guy there who analyzes the advertisements and outs the stocks they’re pitching.
Sometimes the momentum from a repeated pitch alone is enough to be worth a small wager.
stockgumshoe.com
There’s a guy there who analyzes the advertisements and outs the stocks they’re pitching.
Sometimes the momentum from a repeated pitch alone is enough to be worth a small wager.
stockgumshoe.com
40. Who knows how long it will last with the new proposed SEC rule, but there is an opportunity to create catalysts with Pink Sheet stocks that don’t post their financials publicly.
Using shareholder rights laws to get and share them, you can sometimes help market efficiency.
Using shareholder rights laws to get and share them, you can sometimes help market efficiency.
41. Structural subordination sounds like a BDSM theme but unfortunately it’s just a credit term mostly relevant in distress scenarios.
Well, I guess it’s not that different.
Well, I guess it’s not that different.
42. Jeff Bezos is a better capital allocator than Warren Buffett. $AMZN $BRK
43. Stock ownership doesn’t necessarily represent partial business ownership in any realistic sense.
He who has the gold makes the rules.
He who has the gold makes the rules.
44. Not every company is even trying to become more competitive over time.
Many exist only to provide sinecures to their agent operators.
There’s money to be made in companies that bother to care.
Many exist only to provide sinecures to their agent operators.
There’s money to be made in companies that bother to care.
45. Massive presentations about a new position are massive not because that much information is relevant, but because it looks more convincing and shows people you “did your homework”
Using research as marketing. Very smart.
Using research as marketing. Very smart.
46. The best players in bad industries are worth investigating.
If economics are so poor most companies can’t make money, you MAY not have to deal with new players boosting industry capacity.
Top dog’s scale can let it wring out profits surrounded by a moat of broken glass.
If economics are so poor most companies can’t make money, you MAY not have to deal with new players boosting industry capacity.
Top dog’s scale can let it wring out profits surrounded by a moat of broken glass.
47. Real estate has some unique advantages in terms of leverage and taxes, but also has unique problems.
If you don’t manage it yourself, you’re subject to an agency problem with expense pass throughs.
If you do manage it yourself, you’ve bought a part time job.
If you don’t manage it yourself, you’re subject to an agency problem with expense pass throughs.
If you do manage it yourself, you’ve bought a part time job.
48. The Greater Fool Theory is something to be cherished, not maligned.
Playing it opens up a whole new world of opportunities where psychology is a competitive advantage.
But if you never try, you’ll never get better.
Playing it opens up a whole new world of opportunities where psychology is a competitive advantage.
But if you never try, you’ll never get better.
49. $GOOG and $FB have faced a lot of criticism about their ads not working.
Not a new problem. Most ads either don’t work or are hard to measure and advertising agencies have been feasting on that opacity for decades.
Only when their lunch was eaten did they start crying foul.
Not a new problem. Most ads either don’t work or are hard to measure and advertising agencies have been feasting on that opacity for decades.
Only when their lunch was eaten did they start crying foul.
50. There is a misunderstanding that advertising returns could not be measured before big tech came along and provided a treasure trove of data.
This is false.
Keyed ads have been a thing in direct response advertising since before Silicon Valley was even an idea.
This is false.
Keyed ads have been a thing in direct response advertising since before Silicon Valley was even an idea.
Halfway there. Even fifty is hard without relying on basic bitch truisms!
Time for a lunch break!
Thanks to everyone who has enjoyed and shared my thread so far. 😄
Time for a lunch break!
Thanks to everyone who has enjoyed and shared my thread so far. 😄
@natstewart5 Fredrick is my spirit animal in so many ways.
51. Some of the best investment opportunities are found just by stumbling into them in your personal life and appreciating how cool the company is.
Peter Lynch was pretty much right about this and this is also a big reason why emotion and empathy can be advantageous.
Peter Lynch was pretty much right about this and this is also a big reason why emotion and empathy can be advantageous.
52. Someone asked for elaboration on tweet #3.
You can count the present value of real estate operating leases as debt if you want, I suppose, but you should think about the lease rejection damages cap.
502(b)(6)
law.cornell.edu/uscode/text/11…
You can count the present value of real estate operating leases as debt if you want, I suppose, but you should think about the lease rejection damages cap.
502(b)(6)
law.cornell.edu/uscode/text/11…
53. Following up, it’s hard to perfectly transmit knowledge and sometimes the understanding of a subject becomes goofy because the knowledge has become a Xerox of a Xerox of a Xerox of itself.
Knowledge is viral and without close inspection, can rot and become antiknowledge.
Knowledge is viral and without close inspection, can rot and become antiknowledge.
54. This has happened with people considering real estate leases as a form of debt, but it has also happened generally.
If you copy a mentor or authority figure blindly, you will copy their defects as well.
Learning through osmosis is wonderful but also dangerous.
If you copy a mentor or authority figure blindly, you will copy their defects as well.
Learning through osmosis is wonderful but also dangerous.
55. In investing, as in life in general, do not be afraid to weaponize any (legal) advantage the world has granted you.
The world will certainly not be afraid to weaponize your disadvantages against you.
The world will certainly not be afraid to weaponize your disadvantages against you.
56. Capital allocation is just as much about anticipating and influencing the sequence of events as it is about allocating capital.
What’s optimal in one scenario isn’t in another. There’s more to it than choosing between dividends and stock buybacks.
What’s optimal in one scenario isn’t in another. There’s more to it than choosing between dividends and stock buybacks.
57. It’s easy to conform your capital allocation decisions to the opportunities presented to you.
It’s harder to make the opportunities presented to you conform to your ideal capital allocation policy.
But it is possible. Companies that learn how can create fortunes.
It’s harder to make the opportunities presented to you conform to your ideal capital allocation policy.
But it is possible. Companies that learn how can create fortunes.
58. Elaborating on earlier, consider Teledyne. Earnings fell in half from 1973 to 1974 because of problems at one of its subsidiaries, Argonaut, related to medical malpractice insurance.
Stock took a beating, and the co. took the opportunity to tender for huge chunks of shares.
Stock took a beating, and the co. took the opportunity to tender for huge chunks of shares.
59. According to a presentation by Leon Cooperman, Teledyne engaged in three separate tender offers from 1974 through 1975, repurchasing from between ~10% and ~20% of its outstanding shares in each of them
Amazing, considering Teledyne’s troubles at the time.
Amazing, considering Teledyne’s troubles at the time.
60. But just how bad off was Teledyne?
Although Argonaut shored up its malpractice reserves, some of the company’s losses in 1974 came from its investment portfolio.
There was more to the story than poor underwriting results, the seriousness of which MAY have been embellished.
Although Argonaut shored up its malpractice reserves, some of the company’s losses in 1974 came from its investment portfolio.
There was more to the story than poor underwriting results, the seriousness of which MAY have been embellished.
61. For example, when talking to Congress about its NY biz, the CEO of Argonaut admitted that of $69 million of malpractice reserves, Argonaut had only paid out about $24k on its policies.
An analysis by an outside firm estimated Argonaut was actually about 2.6x overreserved.
An analysis by an outside firm estimated Argonaut was actually about 2.6x overreserved.
62. Funny thing about increasing your loss reserves as an insurer.
Doing so lowers reported earnings, and can make a business look less profitable than it actually is.
Maybe it’s a coincidence that so many of Teledyne’s massive tender offers happened around this time.
Doing so lowers reported earnings, and can make a business look less profitable than it actually is.
Maybe it’s a coincidence that so many of Teledyne’s massive tender offers happened around this time.
63. Or maybe it wasn’t a coincidence, and Singleton knew what he was doing.
At the same time Teledyne was reporting losses from its insurance businesses, its other businesses continued to grow.
But it was able to buy in shares at a discount to what it paid a few years earlier.
At the same time Teledyne was reporting losses from its insurance businesses, its other businesses continued to grow.
But it was able to buy in shares at a discount to what it paid a few years earlier.
64. After insurance results turned in ‘75, the stock soared and became a multibagger from the tender offer prices.
With the Argonaut losses, Teledyne had time to do big tenders at low prices.
That’s why sequencing and narrative management are important to capital allocation.
With the Argonaut losses, Teledyne had time to do big tenders at low prices.
That’s why sequencing and narrative management are important to capital allocation.
65. A good CEO will try to position the company to perform optimally in the next part of the sequence OR alter the sequence to optimize current reality.
$TSLA would be dead now if Musk failed at this, which is why it’s wrong to chastise him for issuing shares at $243.
$TSLA would be dead now if Musk failed at this, which is why it’s wrong to chastise him for issuing shares at $243.
66. Because if he didn’t issue shares at $243, the stock would not be at $404 now. It would be at $0, or close to.
The future is not independent of the past. It is dependent on it.
By altering narrative, we alter the current “reality,” which in turn alters the future.
The future is not independent of the past. It is dependent on it.
By altering narrative, we alter the current “reality,” which in turn alters the future.
67. Singleton altering perceptions of Teledyne’s profitability to buy back shares on the cheap and Musk performing elaborate 🐚 games to issue equity at high prices are two sides of the same coin.
Both are legendary to me for seeing narrative & sequence as capital to allocate.
Both are legendary to me for seeing narrative & sequence as capital to allocate.
68. $L is ALLEGED to have used a similar trick on Boardwalk Pipeline, by deliberately tanking the units to exercise its call on them at lower prices.
Capital is not just cash and assets. It is perception, ideas, and time.
Alter those and the rational uses of cash also change.
Capital is not just cash and assets. It is perception, ideas, and time.
Alter those and the rational uses of cash also change.
69. Of course, I cannot prove any of this was done intentionally. I’m not suggesting it’s a matter of fact.
But from the info I have been able to piece together, and noting Singleton’s genius in using reflexivity to build Teledyne, it’s an idea that makes sense to me.
But from the info I have been able to piece together, and noting Singleton’s genius in using reflexivity to build Teledyne, it’s an idea that makes sense to me.
Sources for those who care:
https://t.co/bsATFR84O1
https://t.co/MfUn3QYUoH
https://t.co/OdTKevUvzi
https://t.co/hFcC9b5mMCvaluewalk.com/wp-content/upl…
nytimes.com/1975/06/17/arc…
nytimes.com/1975/06/08/arc…
milbank.org/wp-content/upl…
news.bloomberglaw.com/mergers-and-an…
https://t.co/bsATFR84O1
https://t.co/MfUn3QYUoH
https://t.co/OdTKevUvzi
https://t.co/hFcC9b5mMCvaluewalk.com/wp-content/upl…
nytimes.com/1975/06/17/arc…
nytimes.com/1975/06/08/arc…
milbank.org/wp-content/upl…
news.bloomberglaw.com/mergers-and-an…
70. Ken Fisher shouldn’t be shamed for discussing the use of LSD.
Investing is a creative field more than a scientific one, and certain drugs do boost creativity by helping you make unique connections.
I wish more investors would talk about how drugs influence their investing.
Investing is a creative field more than a scientific one, and certain drugs do boost creativity by helping you make unique connections.
I wish more investors would talk about how drugs influence their investing.
71. If you pay up to invest in moats you should be careful not to drown in them.
If a company’s moat begins to degrade, you can get a deadly combination of decreased earnings power and multiple compression.
All of a sudden the sure thing becomes a sure loser.
If a company’s moat begins to degrade, you can get a deadly combination of decreased earnings power and multiple compression.
All of a sudden the sure thing becomes a sure loser.
Screwed up my chaining. Thread continues here. https://t.co/6tnsN0lrjg
https://twitter.com/laforeverhall/status/1207885870843318272?s=21
https://twitter.com/Lizquidity/status/1207885870843318272
Thread continues here. https://t.co/wbAL7Oquvj
https://twitter.com/laforeverhall/status/1207377927966355456?s=21
https://twitter.com/Lizquidity/status/1207377927966355456
@wokecm It also owns substantial assets outside of the insurers that may give it more creative flexibility in the types of and size of risks they insure.
In that way, the whole may be worth more than the sum of the parts.
But that last part is mostly conjecture on my end.
In that way, the whole may be worth more than the sum of the parts.
But that last part is mostly conjecture on my end.
@markbrooks @Altimor In the first scenario you’re capturing that value. In the latter scenario the guy who sold it to you extracted the value.
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