1. Many seem to believe "the great reopening" is going to lead to accelerating job creation and economic activity. Bad news folks, the reopening already happened. It started in May 2020 and now is largely complete. The remaining business activity restricted by COVID is minimal
2. There has been permanent demand destruction and economic scarring. What's left to come (int'l tourism, white collar workers returning to office, full school reopening) are the final dregs, not the main show. The diminishing marginal gains have been clear since summer 2020.
3. Strong job numbers in March were merely a rebound from the Winter wave dip, not the beginning of a new positive trend.
4. Stimulus checks are in the rearview, UB is running out; disposable incomes are shrinking significantly as we speak with waning fiscal support. Eviction moratoriums and debt forbearances are expiring.
5. Perhaps UB expirations will lead to a bump in new hires, but that still represents a net loss in income if the reason they have remained unemployed is because their UB was higher than their wages.
6. Fiscal and monetary policy is boxed in a corner - inflation pressure is too real to ignore, interest rates cannot be lowered, and helicopter money is an increasingly unpopular and ineffective solution.
7. The hope of life "after COVID" has allowed us to ignore the objective present in favor of a hopeful future, as limitless as our imagination allows. Collectively, this suspension of disbelief will be awakened, perhaps forcefully, by the bleak reality.

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More from @TheLastBearSta1

25 Jun
1. In light of the Mr. Carwash IPO ( $MCW ), here's a case study I did a couple years ago pitching a carwash roll-up strategy: 35% IRR / 4.4x MOIC as modeled assuming a modest 10x EBITDA exit. Was always partial to the idea (didn't get the job) so figured I'd share with you all! Image
2. There's a couple different kinds of car wash. Express (conveyor belt) carwashes are the best and growing segment. Image
3. Underlying trends are good -> growing fleet of cars, more people using professional carwashes vs washing at home, and conveyor express carwashes taking share from older carwash styles Image
Read 11 tweets
22 Jun
1. My thesis on the market is pretty simple. The market thinks this we are in September 2011 - early recovery stage with inflation concerns. In reality we are in September 2008. The first shoe has dropped but the second will be the knockout punch.
2. Recall that the housing market peaked in 2006, stocks peaked in 2007, and the market crises didn't occur until 2008.
3. The post GFC "conventional wisdom" was that the Fed could have avoided the crises by acting earlier and stronger, including a Lehman bailout. Powell followed this wisdom as COVID began to crater markets by unleashing unprecedented accommodation together with fiscal stimulus
Read 19 tweets
15 Jun
1. 🚨🚨Another $MSTR thread because its too amazing not to - this time from the beginning 👇👇:
2. $MSTR is a no-growth software business that generally makes decent cash flow. The company had been totally unlevered as accumulated significant cash balances. Historically, the market implied asset value of the business has been $0.7 - $1.5bn, on average ~15x EBITDA
3. Having built up over $600M cash balance by mid-2020, $MSTR decides to invest $250M in BTC at $11k and offer a $250M tender offer on its common with a cap price of $140/sh. $MSTR runs to $140 in a day, capping the tender offer at ~$60m shares
Read 17 tweets
8 Jun
TLDR: MSTR offering today is a lesson in getting PRIMED. Once the 2025 converts go out of the money (which they will), the notes will drop from 135 now to ~70 as they will be forced to price as a zero coupon with a ~7% rate. This is the easiest short in the world.
Math: Current MSTR share price implies $53k BTC price. The conversion on the 2025s implies a $48k BTC price. If the conversion is not in the money, those notes will price as an (almost) zero coupon bond with a ~5% yield. That is 40% down from its current price.
*Not investment advice* (most of us can't short converts anyway)

For a neutral trade, you could short / buy puts on $MSTR paired with long BTC to squeeze the arbitrage.

For directional exposure deep OTM puts could print on further BTC breakdown
Read 4 tweets
8 Jun
1/ Explaining the MSTR BTC bonds thread 👇👇:
2/ In December MSTR issues $650M 2025 convertible unsecured notes with a $400/sh conversion price. MSTR is unlevered, and makes ~$80M in EBITDA. So the notes are basically a loan for BTC with shared upside, and collateralized by both BTC and the MSTR biz at ~50% LTV. Nice trade!
3/ BTC and MSTR promptly rip higher, putting the conversion deep in the money and the converts which sold for $100 in Dec trade up to $320 by February - everyone looks like genius
Read 9 tweets
1 Jun
1. The biggest tail risk to equities IMO is contagion in the Chinese credit market. Here's a quick summary thread:
2. Since the GFC China has seen massive credit expansion, with the majority at the local government (LGFV) or state owned enterprise (SOE) level. This credit expansion is mostly related to property and infrastructure development and is critical to reaching top-down GDP targets
3. This investment is not necessarily productive, particularly in lower tier cities. This massive debt is often short term and so huge quantum's constantly needs to be refi'd.
Read 20 tweets

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