Friday Links

• Q: Sometimes we liken small banks trading below TBV to closed end funds trading at discounts. Except you'd probably never see a fixed income closed end fund with non-defaulted debt trading at half of NAV. Is this an apt comparison? You wonder why Bulldog Investors / Special Opportunities Fund doesn't trade out of their discounted CEFs and into banks at a bigger discount? A: Banks are closed end microcap bond funds but with a special funding stream added on. To the degree banks can continue to lower expenses by closing branches but holding onto customers, they will become more like these funds. Many could then reduce their discount assuming proper underwriting. In meantime, any fund or bank can grow per share NAV by using excess capital to buy those shares in. It’s valuable information in the near and long-term to see who chooses this route. [Oddball Stocks]
• Of this set of recent share repurchasers, you will notice that the larger banks are in the high ROE, higher P/TBV bucket. They may interest you if you think you are able to handicap the businesses and judge that those fat profits will continue. But as Oddball investors, we are always more interested in the non-public, small companies at huge discounts to liquidation value. Sometimes traits like profitability exhibit momentum, but almost everything eventually reverts to the mean, which means that it may be smarter to buy shares in a cheap company with a fixable problem than pay a premium for a company where things have been going perfectly. In the upcoming Issue of the Oddball Stocks Newsletter (Issue 32 in November), we will be surveying the dirt cheap small banks. [Oddball Stocks] 
• Historically, banks have tried to do two incompatible jobs: safely store the medium of exchange, and also make long-term investments in productive enterprise. Because of the incompatibility, they have done both imperfectly, with “imperfectly” meaning manias followed by panics and human misery. Past attempts to solve this have consisted of deposit insurance, with attendant moral hazard, or regulation, which tends to force everyone to make the same mistake at once, like treating a no-interest long-term government bond as completely risk-less.  A real solution to this would be to separate those two incompatible functions. Where society's long-term investments were being financed by loans, these would be originated and assembled into something akin to closed end funds. The investments would not be redeemable on demand but there would be a secondary market for the portfolios of loans. There would not be maturity transformation “alchemy” that makes promises it can't keep, which has historically required bailouts and government subsidized deposit insurance. [Oddball Stocks]
• Unless someone is prepared to be an activist, I think the best strategy is to buy stocks that don’t drive you nuts when you look at them on the screen every day. By that I mean quality franchises in good markets with excellent management teams—the type of stock that should deliver excellent returns over time, whether through capital return or stock price appreciation. Those might not be the cheapest stocks right now, but they will probably let you sleep better at night. [Oddball Stocks]
  
• Whether to go for high ROE, reasonable P/TBV or to "dumpster dive" for the biggest P/TBV discounts is just another instance of the value vs quality debate. We have plenty of friends on both sides, and each side can learn from the approaches of the other side. [Oddball Stocks]
• [F]requent regular sun exposure acts to cause cancers that have a 0.3% death rate with 2,000 U.S. fatalities per year and acts to prevent cancers that have death rates from 20–65% with 138,000 U.S. fatalities per year; (f) there is support in the medical literature to suggest that the 17% increase in breast cancer incidence during the 1991–1992 year may be the result of the past decade of pervasive anti-sun advisories from respected authorities, coinciding with effective sunscreen availability; and (g) trends in the epidemiological literature suggest that approximately 30,000 U.S. cancer deaths yearly would be averted by the widespread public adoption of regular, moderate sunning. [Preventive Medicine]
• Here, we identified that ketogenic diet (KD) increases β-hydroxybutyrate (BHB) and alleviates urate crystal-induced gout without impairing immune defense against bacterial infection. [Cell Reports]
• The multivariate relative risk of gout according to increasing fifths of fructose intake were 1.00, 1.29, 1.41, 1.84, and 2.02 (1.49 to 2.75; P for trend <0.001). Other major contributors to fructose intake such as total fruit juice or fructose rich fruits (apples and oranges) were also associated with a higher risk of gout (P values for trend <0.05). [BMJ]
• Weller’s doubts began around 2010, when he was researching nitric oxide, a molecule produced in the body that dilates blood vessels and lowers blood pressure. He discovered a previously unknown biological pathway by which the skin uses sunlight to make nitric oxide. [Outside]
• Britain’s islands vary in size and population. Flat Holm, for example, a speck of land that includes the southernmost place in Wales, has just two full-time residents and is a third of a mile wide — but has its own pub. Lundy, on the other hand, has a staggeringly large population — by small island standards, anyway — of 28. (It also has its own pub.) [NY Times]
• For tight calf muscles, everyone’s first thought is “stretch.” Stretching is fine if you hold the stretch for at least 1 minute but 2-3 minutes is more effective to mechanically lengthen these tissues. And you would have to do it daily for at least a month to get much change. It can be more effective to perform soft tissue work with a foam roller, massage stick, tennis or lacrosse ball, massage therapist, or manual therapy from a Physical Therapist. [link]
• Mainstream nutrition pseudo-science has popularized the idea that olive oil is the healthiest fat, and that it forms an essential part of the healthy diet of the Mediterranean. The reality is that olive oil is decidedly the inferior option to animal fats everywhere in the Mediterranean, before modern nutrition pseudo-science scammed modern Mediterraneans into taking pride in the food their ancestors thought of as the poor man’s alternative to animal fats. In Lebanon, a famous expression to signify how some people are better than others is that good people are likened to ghee whereas bad people are likened to oil. The most damning indictment of olive oil is just how easy it is to mix it with poisonous hydrogenated poison oils, and how hard it is to detect the mixing, even with complicated lab equipment. [saifedean]
• Lying comatose in bed with what appears to be a crack cocaine pipe hanging out of his mouth, the shocking new photo of Hunter Biden isn’t exactly what Democrat image-shapers will have had in mind as they considered how to introduce Americans to the family they hope will soon be moving into the White House. [link]
• Narrowing breadth is a mania concentrated in fewer and fewer speculative vehicles. It's created by momentum investors with stop loss rules who consolidate into their winning positions. [CBS]
• Porsche’s best car is now its entry-level one. All of Porsche’s kinesthetic achieve­ments, all the decades of road and race engineering that have sustained the brand are now distilled in its Boxster and Boxster S, and you are free to share this information with anyone who denigrates your baby Porsche. [Car and Driver]
• You go on Twitter, you read someone’s tweet on a subject you know something about, and see that the author has no understanding of the facts. So you keep scrolling and read their tweets about cancel culture, space exploration and criminal justice reform, totally forgetting how wrong they were before. In this sense, every tweet is an option with asymmetric returns. If you’re right, you cash out; if you’re wrong, everyone forgets and you lose nothing. The incentive is to ramp up variance, make bold claims in a variety of areas, and hope you’re right some of the time. [link]
• From what I’ve seen, most Trumpers in 2016 are still Trumpers. His loss in white support is actually just continuing a decade long trend, of educated urban whites completely abandoning conservatism and the Republicans. The white managerial class is now firmly Democrat. Upper middle class white people are totally detached from reality and becoming more leftist and insane. perhaps as a survival strategy (so they think). My guess: the official national polls are nonsense. If Biden were really up by 16% nationally, he wouldn’t be campaigning in Nevada and Ohio. He would be in Texas, Montana, South Carolina, Indiana, and Missouri. Trump has NC, FL, AZ, OH, ME-2, and IA. He needs one rust belt – MI, MN, PA, or WI. I believe internal polling shows these states are a toss up. The election will be won in court. Can the Republicans prevent the mail-in voting dates from being extended? The Dems will not have enough time to manufacture ballots if they don’t, imo. [anepigone]
  
• The writing was on the wall about where this was all going with Big Tech years ago. They had the plan to institute a Chinese-style lock down even before 2016. It was supposed to happen under Hillary’s administration: a “public-private partnership” to “fight online extremism and disinformation” so that someone like Trump would never happen again. The plan went off the rails when Trump won. Unfortunately, Trump spent the next 4 years on whatever petty beef he was consumed with any particular week on Twitter, rather than regulating it. And congressional Republicans, with only a handful of heroic exceptions, were more interested in doing their usual thing of being business agents for big business than regulating it either. So the narrow window to do anything about this was lost. [Sailer]
• Facebook and Twitter are doing what pieces of a regime do. They are not neutral platforms. They are not objective players in the information game. They have been granted their position, provided their seed money and been protected from competition as well as allowed to swallow up competition all with a deal in mind. This is the part of the deal they must hold up. Suppress anything damaging. Twitter was unusable for many yesterday. They had to take a test run of the potential shutdown on Election Night or the following day. The flow of information must be controlled. The proper narrative must be cemented. Biden is up by 10. [The American Sun]