While B&M retailers are reporting strong if not record earnings in a booming consumer environment, e-com players are seeing declines and are racking up huge losses. Even putative king-disruptor AMZN's e-com biz lost money in 3Q21.

Who is disrupting who?
The unquestioned assumption of investors for many years has been that e-com has a lower cost structure to traditional retail. However, it's always been hard - and still is - to find evidence of that in company financial statements; indeed, they attest to the contrary.
Home delivery is expensive & labour intensive. B&M outlets are efficient distribution points for large amounts of goods; benefit from "free" customer picking & packing; and can service multiple markets at same time (in store shopping; returns & service; e-com delivery points).
Financial statements are to stock market narratives/hypotheses what data is to scientific theories. They are analogous to the scientific method - it's the way you test narratives to see if the data actually support widespread assumptions. For the most part the data does not.
That might change in the future. However, as things currently stand, there is scant evidence that e-com has a lower cost structure to traditional retail. This is why growth has required large losses. Those additional costs cannot be embedded in prices in a competitive market.

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More from @LT3000Lyall

23 Nov
Digital payments has long been ripe for disruption. The "new" fintech payment players have made the problem worse by charging even more outrageous fees.

I've long thought the price of digital payments should/will go to approximately zero long term. Perhaps this will be catalyst?
Two things need to happen:
*Free/close to free digital payments options. CB/govt backed free digital payments, as well as bank-intermediated solutions (paying with phone numbers not acct numbers), would suffice.
*Transparency on fees which push payment cost onto consumers.
It is, frankly, ridiculous how much companies like PayPal charge for digital transactions - often 3% plus an Fx burn. BNPL platforms are even worse, often 4%+. This is an obscene tax on the global/digital economy which is completely unnecessary and needs to be disrupted.
Read 4 tweets
19 Nov
WSJ Headline "Turkey's Rate Debacle Is a Warning for EM Investors".

Turkey is actually a warning for developed markets. If you overstimulate your economy beyond what supply can accommodate, & erode CB independence, inflation can imbed itself and become *very* difficult to stop.
Turkey is actually the only major EM suffering from incurable inflation, and it's one of the most developed. Turkey's probs have nothing to do with it being emerging, and everything to do w excessive demand stimulation & unwillingness to use Volker-esque sledge hammer to stop it.
Emerging and developed markets do not exist in parallel universes, but on the same spectrum, and importantly, are subject to the same laws of economics. There is no rule that says DM economies cannot endure the same fate from excess demand created by fiscal & monetary excess.
Read 4 tweets
19 Nov
How dare people build successful entrepreneurial businesses that improve customers’ lives and drive societal progress, and then have the gall to spend some of the bounty advancing humanity’s horizons.

Put people like this in charge and they will burn everything to the ground.
More than anything else, I believe lefty antics are driven by a toxic, suffocating envy. They want to be at the top of the social pecking order and can’t stand other people being more influential than them. So they want to rip them down to advance their own relative status.
Every hard core lefty i have met and debated with seems to exhibit this underlying tendency. They have a very dark, unpleasant tinge to their personality; are often unhappy; and seem to wish harm upon those more successful than them, no matter how large their social contribution.
Read 4 tweets
18 Nov

*Slowing revenue growth/maturing e-com pen; rising competition and falling market share.
*40% decline in core profitability in 3Q21.
*Run-rate core P/E probably about 40x post SBC with further significant declines possible.
*Regulatory risks/headwinds.
*Still over-owned.
I've been arguing for a while now people have been using inappropriately low forward P/E multiples for BABA, often arguing it's on <20x 2021, excluding substantial SBC and failing to account the earnings risks & reasons why the stock has been going down in the first place.
Not saying I'm an uber bear or anything. But I've looked at and passed on the stock many times on the way down, as it still looked fairly expensive and esp too risky to me. Like Seth Klarman once said, we don't buy because it's down; we buy because it's cheap.
Read 8 tweets
16 Nov
What is going to break the current tech/growth bubble? Demand and supply:
*The Fed is on track to stop printing by mid 2022.
*The supply of stock keeps rising; prices are rising; stock based comp is large; the IPO market is frenetic; and secondary offerings increasing. (1/n).
Prices keep rising because the Fed is manufacturing new liquidity faster than it can be absorbed by financial markets. US$130bn of IPO & secondary issuance is needed every month to absorb it. That's very difficult.
Prices is financial markets are ultimately set by the interaction of demand and supply. The money supply determines the aggregate demand for financial assets; and the supply of listed product the supply. If demand > supply prices will rise, and vice versa.
Read 7 tweets
10 Nov
Great (and impressive) video by NYT on liberal hypocrisy and how it is contributing to worsening inequality (and other social problems) in blue states.

I mostly agree with it, although I think the way tax rates are presented is misleading/false. I would also argue it's not so much a case of liberals not "living their values" as it is not living their *declared* values. As the old saying goes, actions speak louder than words.
Humans are all fundamentally selfish with respect to themselves and their kin and there is no getting around that. Red states have less of these issues as conservatives are more realistic/honest about human nature & gear their policies accordingly.
Read 8 tweets

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