Lyall Taylor Profile picture
Equity Portfolio Manager of a small self-seeded fund, and author of The LT3000 Blog (https://t.co/g917pGowkP)
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Sep 29 8 tweets 2 min read
Over the past week, UK has announced tax cuts coupled with spending increases/energy subsidies - i.e. fiscal stimulus at a time where the deficit is already 5% of GDP; while BOE has reverted to QE - i.e. deficit monetization - to control rising gilt yields when CPI is 10% y/y.🧵 This is a point of monumental importance. The trillion dollar (pound?) question is whether UK has a similar experience to Japan, where large deficits and BOJ printing/yield control have succeeded in controlling yields & haven't been inflationary, or more akin to EM/FM experiences
Sep 21 12 tweets 3 min read
Some interesting & fast developments in recent days:
*Russia passing various laws allowing for large scale mobilization/conscription/martial law etc. Prima facie plans for major escalation.
*Russia saying plans (sham) referendums in Donbass & Kherson etc to annex territories.🧵 However, there have also been recent reports Russia is coming under greater pressure from allies/quasi-allies to end the war, including China, India, and Turkey. Erdogan recently said Putin wants to end the war quickly and a "significant step" was coming.

bbc.com/news/world-eur…
Sep 21 6 tweets 2 min read
The below (from WSJ) is conventional wisdom, but it is false. Higher rates & tighter liquidity impact stock prices not by reducing investors *willingness* to pay more due to DCF models, but their *ability* to pay more. Asset prices are not simply a matter of opinion. Overall asset prices are determined by the interaction of aggregate demand and supply in the capital market as a whole. If you drain liquidity from the system, there is simply less system cash chasing the same assets as before, and hence the *ability* to pay more declines.
Sep 16 17 tweets 3 min read
Many investors seemingly struggle to understand that you can have a liquidity-induced bear market that is not accompanied by a consumer recession. Everyone keeps saying markets are falling due to recession fears, but there is no necessity of a recession for markets to fall. The reason people think that way is that all the prior downturns we have had over the past 20yrs were demand driven and associated with a recession. The present downturn is more akin to the 1970s. GDP (esp nominal) grew strongly during the 1970s but markets were a total disaster.
Aug 18 5 tweets 2 min read
Jumia (JMIA US) is trying to convince investors its gross profit is high and rising, rather than low and falling, by excluding fulfillment expenses from "gross profit".

Seems to have worked - the stock rose as much as 42% post results. That's a lot of accumulated losses. As a reward or their efforts, they have a amassed a biz that generates US$2.5m in quarterly gross profit at greater than *negative* 100% operating margins.

Not the sort of financial statements that gets me excited, but I guess I'm old hat.
Jun 26 6 tweets 2 min read
This is pretty good analysis IMO. The primary motivation for Russia's invasion of Ukrainian appears to be to secure a land bridge to Crimea - either through annexing Donbas or establishing "independent" pro-Ru republics that would allow overland transit.

*Sevastopol navel base is highly militarily strategic for Russia, allowing year-round ice-free & direct access to Mediterranean.
*Crimea was transferred to Uk as an admin convenience in USSR era & is mostly ethnically Russian, and not considered legitimately Ukrainian by Russia.
Jun 14 13 tweets 3 min read
Don't mean to single out Gavin, but it's a widely held perception that market moves are simply a matter of investor expectations; ie "pricing in" hikes. In fact, liquidity impacts market prices by changing the demand and supply balance of capital. Expectations are extraneous. Expectations are a microeconomic phenomenon that only affect the relative pricing of individual securities. Aggregate asset pricing is determined by the demand and supply of capital. As capital becomes more scarce and the carry cost of borrowing rises, asset prices will fall.
May 25 6 tweets 1 min read
I've argued in the past that the era of Western exceptionalism from an institutional standpoint is increasingly over. One of the consequences of this will be higher inflation, as economic outcomes also regress to the global mean alongside declining Western institutional quality. West has seen deterioration in central bank maturity/independence & fiscal responsibility; loss of respect for freedom of expression; increasing political disenfranchisement (elite capture of political & govt institutions); and increasingly ideological & populist policymaking.
May 25 6 tweets 1 min read
I notice that many DM investors are accustomed to quick and sharp bear markets followed by equally rapid recoveries. There is another variety - the grinding decade-long+ kind, a la 1968-82, and what a lot of EM experienced 2007-22. This one could easily prove to be the latter. Long term secular bear markets still have acute phases of sell off and recovery, as will this one. But a decade+ secular bear markets will occur if rates secularly rise as they did during 1970s. 1970s bear market ended with long govt bond yields having risen at circa 15pc.
May 25 5 tweets 1 min read
I don't like the standard definition of a bear market as a 20% decline in prices. A bear market is better seen as an extended period where multiples tend to fall (vice versa for bull markets). Don't ask me to define "extended period". You know it when you see/experience it. A rapid 20% decline in prices can constitute a bear market because multiples will naturally fall. But so can a period of 5-10yrs+ where prices go sideways despite earnings growing. It's declining multiples rather than prices that are the real hallmark of a bear market IMO.
May 25 7 tweets 2 min read
Ackman is not quite right about this IMO. If inflation is high enough for long enough, nominal stock prices will eventually rise, though multiples will fall into the single digits and the USD weaken. International experience in places like Turkey with hyper inflation show this. The reason markets are getting hit at the moment is that the Fed *is* starting to take action (too little, too late, yes, but more is in the pipelin), and tightening liquidity and raising rates enough to control inflation from here could lead to a brutal decline in asset prices.
May 14 8 tweets 2 min read
I got a lot of grief for tweeting a few months back that the biggest obstacle to a peace deal was "Ukrainian intransigence", but my assessment has proven 100% accurate.

Whether you believe that intransigence to be justified or not is a separate issue.

nationalreview.com/corner/zelensk… In order for their to be a peace deal, Ukraine has to be willing to offer at least some concessions, and currently it is not. Zelensky's position is maximalist. He has said a condition for peace negotiations or cease fire is complete withdrawal of Russia from Ukrainian territory.
May 13 4 tweets 1 min read
The shoe hasn't even started to drop yet on the entire levered-asset complex - real estate, private equity and various alt vehicles/strats that cropped up to provide "structured" (i.e. levered) yield alternatives to risk-averse investors seeking yield in era of v low rates. It's still too early as rates haven't risen much yet, but as they do, we are going to see all kinds of carnage emerge in these spaces as well. And these are *very* big spaces.
May 13 8 tweets 2 min read
It is noteworthy that BNPL growthcos are increasingly reporting a blow up in their books while traditional consumer financing companies - often that trade at just 5x earnings and buy back tonnes of stock - are reporting some of the most pristine credit quality in their history. We have extremely strong employment markets/income growth at the moment, coupled with the tail of the benefits of covid stimulus payments & associated debt paydown. The environment for consumer credit quality is about as good as it will ever be - unsustainably so.
May 12 6 tweets 1 min read
A possible pathway to a (potentially nuclear) WW3 has opened up:
*Russia has said it will not tolerate any further eastward expansion of NATO and has made it clear in Ukraine its stance is not a hollow bluff.
*Finland is saying it is going to join NATO.
1/n
*UK is said it is going to sign a joint defense agreement with Finland.
*If Finland tried to join NATO Russia may invade it.
*If it does UK will declare war on Russia, and it is possible the US or EU/NATO joins them.
*Russia will lose a conventional war against NATO.
May 12 22 tweets 4 min read
I think we are only in about the 3rd innings for this downturn in tech/growth, maybe entering the 4th. Long way to go yet. Earnings will drop a lot/operating losses deepen. Top line growth disappear. Bankruptcies will be pervasive. Never goes down in a straight line of course. People have tried to call the bottom all the way down on short term bounces. The issues driving this downturn are more structural, serious and self-perpetuating than that IMO. How far down this rabbit hole is likely to go is still being widely underestimated IMO.
May 11 7 tweets 2 min read
I'm not necessarily bearish GOOGL - it's a great company and the price is reasonable, though not cheap. But people tend to forget that in a major bust, earnings go down a lot as there are many second-order effects. It was only 2-3yrs ago that GOOGL was making less than $50/share. If you think it is inconceivable/impossible GOOGL's earnings could fall to 2019 levels in a major tech/economic bust, you are deluding yourself. And when an unravelling & its self-sustaining effects click into gear, multiples can also fall to levels unimaginable during good times
Apr 22 4 tweets 1 min read
As I argued late last year:
1. Fed wants to tighten faster, but is afraid of the market/econ impact.
2. Fed will incrementally talk up tightening, & gauge market reaction. If it is not v negative, they will talk up tightening incrementally more, etc.
3. Hard for markets to rise. It's not a question of sentiment/what is priced in/what's expected. If the money supply shrinks on QT and/or the cost of carry (e.g. margin loans) rises, there is simply less money available to compete for/chase the same stock of assets. Market prices will of necessity fall.
Apr 4 5 tweets 2 min read
The six-minute first-hand interview here with one of the women pictured in the maternity hospital bombings, makes it fairly clear it was indeed a Ukranian propaganda operation. Western audiences will nevertheless continue to insist they know better than the victims themselves. *Ukraine military was on site & using premises as it had solar panels.
*Ukrainian military stole food being cooked for preg women.
*Media was already on site & instantly capturing footage after incident.
*Witnesses insistent there was no airstrike. Removed from reportage.
Mar 29 7 tweets 2 min read
Though West hates to acknowledge it, the reality is that a combined Russia-China produces far more of what the West needs than the West produces of what Russia-China (combined) need. For this reason, the West would ultimately lose an economic sanctions war against China-Ru bloc. Really the only thing that the West has that China-Russia lack is cutting-edge semiconductors - China is still about 10 years behind the West. That would be painful, but for most applications not a huge deal. China will catch up as fast as they can.
Mar 28 4 tweets 1 min read
Zelensky just said (1.45) that Ukraine was ready to go for neutrality with security guarantees, and "that's the most important point - it was the main point for Russia - - that's why they started the war".

Funny how few people in the West believe this.

Subsequent DW journalist commentary indicates a lack of awareness of what security guarantees have already been discussed, and though they were from Russia. What's been discussed is NATO-esque guarantees from third party states in exchange for Ukr removing offensive capabilities.