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Tiho Brkan

@TihoBrkan

Feb 15

What is risky?

Few simplistic tweets: risk means different things to different investors.

A widely overused and subjective term: something can be risky to group A, but not to group B.

Perception of risk (foresight) vs realized risk (hindsight). These are not the same thing.

Institutions look at risk as volatility. We don't.

And Wall Street throws uncertainty with risk into the same bucket. Once again, we don't.

When an American, Brit, or Aussie tells us Emerging Markets are very risky, we partly agree but partly smile at the Home Country bias.

We believe when something has fallen in price due to uncertainty — but not due to quality and its fundamental prospects in the future — there is an opportunity at hand.

"We want to buy them when they're on the operating table," said Warren Buffett famously.

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Tiho Brkan

@TihoBrkan

Feb 12

@MikeBoyd

In Feb 2021 I returned back to @MikeBoyd's podcast with the plan to discuss mezzanine finance in the RE sector.

However, before discussing moving parts of mezz debt, due diligence & monitoring process, Mike asked my opinion on the state of stocks markets?

Valuable thread. 👇

Firstly, those interested, you can listen to the podcast here: businessoffamily.net/tiho-brkan-2

There was a lot covered in hindsight, but those who follow financial markets would have probably found the first part of the podcast either very interesting or too contrarian for their liking.

Here are two key quotes from the podcast, as I was taken in awe of the speculation frenzy in the tech & growth sectors:

"While it's easy to make money today and everything seems to be working, the question for very smart investors is to anticipate what's around the corner?"

Read 18 tweets

Tiho Brkan

@TihoBrkan

Feb 7

Wisdom is often invisible in life and investing because we want to remove or subtract undesired outcomes.

“I have used all my life a wonderfully simple heuristic: charlatans are recognizable in that they will give you positive advice, and only positive advice.” — Nassim Taleb

I don't tweet often about wonderful ideas we will throw our hard-earned capital into because the majority of the opportunities are not wonderful.

Instead, we try to subtract actions that we are more certain are wrong or undesired, instead of adding actions we think are right.

To paraphrase Einstein, geniuses attempt to solve complicated problems, while the wise avoid them.

Let's face it: there is nothing more complicated than predicting the future in the world of investment.

Charlatans have all of the answers: what to buy & where to invest.

Read 6 tweets

Tiho Brkan

@TihoBrkan

Feb 1

Netflix’s -50% crash lured me to do a deep dive, which on the surface doesn’t look great. Classic valuations also too high (for me).

However, after I got past some fancy accounting, Netflix seems to have more FCF & NI than it reports (tax optimisation & reinvestment like $AMZN).

Some DM questions, so I'll add additional points. My view is:

• they are probably claiming a lot more in content expenses to reduce their tax bill than originally noticed at first glance

• cashflow statement shows "other operating activity" running at 17.3 billion

• filings show 8.9 billion was predetermined liabilities they had to spend under contract (pay actors & the sets in their own production)

• there is content spending that is needed to maintain the current business, then there is spending which drives future growth

Read 4 tweets

Tiho Brkan

@TihoBrkan

Jan 22

It has become quite clear that the growth stock bubble witnessed over the last 12-18 months, with an orgy of speculation has now popped and results are and might continue to be extremely painful.

$PLTR $FSLY $TDOC $PINS

$SHOP $SQ $MELI $SE

$NFLX $BABA $PYPL $ZM

Read 13 tweets

Tiho Brkan

@TihoBrkan

Jan 22

What do you get when you mix academia of economics, perverse incentives, and the illusion of sophistication (overconfidence)?

You get a crisis with far-reaching consequences (2008) because central bankers don't think in second & third order effects.

What will happen this time?

It is truly astonishing to think just how much worse the fragility could be?

We have a situation patched up by years of artifical monetary policy.

The hidden risk could be multiples of that witnessed in 2008 because the excesses are multiples of those witnessed prior to 2008.

Expect it to get a little worse next time.

"When we bailed out banks that had created their own misfortune [in 2008], we called it a 'moral hazard,' because the bailout absolved the bank's bad acts & created an incentive for it to make the same bad loans again." — Eliot Spitzer

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