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Blending single stock, macro and thematic research into differentiated bull and bear cases | 15y Corporate Finance & Equity Research | CFA
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Apr 28, 2023 7 tweets 4 min read
Call me crazy, but $KRE is a long for me here. You’ll find my deep dive on the forbidden website. This is the elevator pitch version.🧵

Sentiment
As of Feb, investors were overweight banks vs. historical levels. Now, they are considerably underweight. ImageImage As a professional money manager, it's now a career risk to own regional bank stocks. Their super slow motion car crash is one of the most widely covered crises. Only a question of time until the next blow up. Do you really want to explain to your boss why you are part that? Image
Feb 27, 2023 25 tweets 7 min read
$TSLA's FSD program is probably one of the most controversial ventures ever. Some see trillions of $$$ via robotaxis around the corner. For others, it's criminal vaporware.

But is it really that binary? Is there a way to value it w/o Cathie-style fantasies?

Let's find out. 🧵 I've been thinking about the invention of the airplane a lot in this regard.

On Dec 17, 1903, Orville Wright got into the Wright Flyer & launched. He landed 12s and 120ft later.

It was the first controlled, sustained flight of a powered, heavier-than-air aircraft. A sensation.
Feb 15, 2023 25 tweets 7 min read
THE GREAT PANDEMIC ERA OPTION BUBBLE

Here is how it pumped stocks, how it crashed stocks, and why it is over now.

This angle on the last 3y might be new for you and implications are IMO profound.🧵

Check out the chart below, $SPX P/E vs. $VIX. Raises 3 questions: 1) Why is the relationship negative?

2) What changed after January 2020?

3) What does that mean going forward?

Let's start with 1). Per CAPM, investors only price systematic risk (= volatility). They are risk/volatility averse. So, they want higher returns to bear higher vola.
Feb 11, 2023 18 tweets 8 min read
On Friday, the $SPX closed at 4,090. Can it run to 5,000 by Christmas?

If I was a Wall Street Strategist, this call would put me in the top spot by miles, even higher than @fundstrat!

Here is my case based on earnings, multiples and sentiment. 🧵

Let's start with earnings.

Inflation is bad for profits, right? Input prices put pressure on margins. Cost increases can't be fully passed on to customers, at least not instantly.

But earnings generally correlate positively with inflation in the long run.
Feb 9, 2023 4 tweets 2 min read
Want to have your mind blown? What if high interest rates will become stimulus this year?

Goes like this: 15y of obsessive money printing has created a colossal aggregate bank deposit balance of $18tn in the US... Image Then the @federalreserve hiked like crazy. But deposit rates operate with a lag because banks take advantage of lazy customers. Look at your bank. Have they raised your interest rate yet?

But eventually deposit rates catch up with FFR. Image
Feb 5, 2023 21 tweets 6 min read
THE NATURAL CEILING OF INTEREST RATES 🧵

The economy consists of all goods, services & infrastructure we make. Our wealth as a civilization collectively.

This means we're all baking and eating a giant economic pie every day. Everyone contributes to & benefits from this pie: Basic mechanism: we produce goods, services & infrastructure (together economic goods), which we offer to others & receive those economic goods in return that we need. To keep this economic process going, a fraction of the fruits of our labor must be retained for future periods.
Jan 31, 2023 11 tweets 4 min read
TESLA FINANCE, a multi billion dollar business about to awaken? 🧵

Last year I came across this fantastic thread from @madmanx89 that suggested $TSLA can make a lot of money financing their cars.

Zach said the plumbing is in place. How big can this be?

Automotive consumer financing is a highly profitable business for legacy auto companies and sometimes it makes the difference between a profitable and an unprofitable year.

There are two main reasons why Tesla has not done anything to unlock this value:
Jan 16, 2023 7 tweets 2 min read
1/The PEG ratio normalizes the PE ratio by mid-term growth.

It is often assumed that a PEG of 1 is a natural neutral level that distinguishes between cheap and expensive.

But there is not really a theoretical foundation for that.

Let's take a look at some numbers. 🧵 Image 2/Plotting PE ratios of the largest US stocks against consensus 3y EPS growth reveals a strong statistical relationship.

The regression equation above can be interpreted as: Every stock gets a baseline multiple of 13.8x and that multiple expands by 0.8x for every 1% growth.
Jan 9, 2023 17 tweets 6 min read
$TSLA's 2023 EPS, what is it? 🧵

In the article below, I argued that the stock will trade on 50-60x P/E once the carnage ends. In this thread I am going to build an EPS bridge from LTM (4Q21-3Q22) to 2023. I will do this based on 6 parameters.

fallacyalarm.substack.com/p/what-is-a-fa… 2023 Consensus EPS has risen sharply over the past three years from $1 to >$5. But analysts have revised their estimates down recently, presumably driven by uncertainty relating to demand, raising doubt on the company’s ability to grow production as planned and defend margins.
Jan 6, 2023 9 tweets 4 min read
1/Just wanted to share some initial thoughts.

It's a bit scary to think about $TSLA's reaction tmo given it'll fuel EPS concerns. But I think there's a chance the stock will like it.

Theelow is VERY high level. Quick and dirty, just how I like it.

2/Will refine it with time.

Profits are a function of prices. There is a sweet spot, a price that maximizes profits. $TSLA is currently figuring out where that is.

Entire business case is to grow production, decrease unit costs, decrease prices, unlock bigger TAMs, repeat. Image
Dec 15, 2022 10 tweets 3 min read
Here are a bunch of recent @elonmusk tweets relating to global macro. He is selling bc he fears another GFC, not because of Twitter. Twitter's deal closed. Funding is in place. It has cut costs and is growing users. No reason to sell bc of Twitter.

Dec 14, 2022 13 tweets 4 min read
Dec 13, 2022 might become a significant day in $TSLA history. Total trading volume equated to 6% of its mkt cap. This is more than twice the average level this year and the highest level since November 2021.

Historically, vol spikes often came with trend reversals. For example: 1. Kick-off of huge 20/21 rally in Oct’19 after 3Q19 earnings

2. Pre-Covid high in Feb’20

3. The first top of the 2020/21 Covid-era mania in Jul’20

4. Dec’20 spike didn't indicate a trend reversal bc that related to S&P inclusion. However significant top followed weeks later.
Dec 8, 2022 4 tweets 2 min read
1/The @bankofcanada is completely nuts. 50bps rate hike when yield curve is already inverted by 160bps top to bottom.

2/The craziest thing is that there is not even excessive inflation. Annualized CPI change since July is 1.8%.

They are fighting a phantom.

tradingeconomics.com/canada/consume…
Nov 17, 2022 16 tweets 6 min read
1/I'm sure you have heard about the #InflationReductionAct. But have you ever visualized how massive its financial implications are? It provides huge investment incentives. The beneficiaries will be the shareholders of those companies at the right place at the right time. 🧵 2/Originally part of @JoeBiden's BBB plan, the IRA was revived as a smaller package in the summer of 2022. Markets liked it. $SPY appreciated 10% in the 3 weeks following its announcement on Jul 27.

It's supposed to reduce inflation by lowering the deficit by $238bn over 10y.
Nov 1, 2022 6 tweets 2 min read
1/In normal times, inflation expectations embedded in TIPS are higher than what inflation actually comes in at. The reason is that TIPS are effectively an insurance product. And an insurance premium typically exceeds the expected value of the payout to compensate the underwriter. 2/This excess premium typically correlates with the degree of uncertainty. The more you fear your house might burn down in a forest fire, the more likely will you demand insurance and the higher the risk that the pricing mechanism overshoots a rational level.
Oct 31, 2022 21 tweets 7 min read
1/At the end of last year, I wrote a deep dive on $META (🧵👇). Since then it has been nothing but a super slow motion car crash. 3Q22 is a great opportunity to revisit my investment case.

Is there hope for the most hated stock on Wall St? 🧵

2/In my investment case above I have hypothesized that the biggest value creation in digitization happens when a new paradigm in the human machine interface (HMI) is established.

1st $MSFT / $INTC with the PC. Then $AAPL with mobile computing and $AMZN with cloud computing.
Oct 29, 2022 5 tweets 3 min read
1/Few macro thoughts I had today: 🧵

$MOVE, the implied vola in treasuries, reminds me a little bit of $VIX 2007-2008. Slowly but surely grinding higher to levels that are very concerning, but not causing panic (yet). ImageImage 2/Fed owns 20% of Treasuries. Their not buying anymore. In fact net sellers at maturities.
Foreign investors hold 30%. Their buying power depletes as their currencies crash. $DXY is up 15% this year. Image
Oct 28, 2022 7 tweets 3 min read
1/ 90% of the US economy is firmly in recession territory. And the remainder is propped up by 🇪🇺 tax payers via energy bailout programs, increases in government spending and windfalls associated with a sharply rising $. Join me in deconstructing the 2.6% Q3 GDP growth rate. 🧵 Image 2/Private domestic consumption and investment accounts for 90% of the US economy (the top 4 rows in the table above). In aggregate this domestic cyclical component of GDP contributed -0.6%-points to GDP growth after -1.5%-points in the prior quarter.
Oct 25, 2022 16 tweets 6 min read
1/Remember the article below? I argued that demographics will return us to anemic growth & low interest rates/inflation?

What if I'm wrong? Could our collective ageing actually reignite inflation with structurally higher inflation?

$SPY $QQQ $TLT

fallacyalarm.substack.com/p/the-demograp… 2/Reputable sources suggest so. Goodhart/Pradhan make the case that a toxic cocktail of structural labor shortages, ageing and the debt trap will drive inflation up as the only way out.

🙏@concodanomics for bringing this video to my attention.

Oct 14, 2022 15 tweets 4 min read
1/Solar and Wind are cheap because they are worthless.

And 🇪🇺 energy market regulation harms RE transition by disincentivizing much needed investment into 🔋.

This might sound like a shocking statement to you. Please allow me to explain. 🧵

$TSLA $ENPH $BYDDF $GE $GM 2/A simple definition of garbage: Having to pay to get rid of it.

Look at how often electricity prices go subzero in 🇩🇪.

Will define 2 two key terms here:

Smart Energy:⚡️ available on demand.
Dumb Energy:⚡️ with erratic availability profile. Image
Oct 10, 2022 16 tweets 7 min read
10 reasons why $AMRS = $TSLA:

1. Both ramped a promising new technology singlehandedly

Giga Nevada doubled global 🔋 production vs 2013 levels. Barra Bonita will ramp Global Precision Fermentation by ~30%.

Resulting scars gave them leads over competitors with less courage. Image 2. Both are riding down exponential cost curves

Obvious strategic choice is to start with high value/price products at low quantities. Learnings in the production of those will then over time unlock more commercial applications with rising quantities at lower costs. ImageImage