Tuesday, March 9, 2021

Tuesday Night Links

  • A year after the virus hit the U.S., Mr. Cuomo’s luster has faded, and Mr. DeSantis can claim vindication. The Sunshine State appears to have weathered the pandemic better than others like New York and California, which stayed locked down harder and longer. Mortality data bear out this conclusion. The Covid death risk increases enormously with each decade of age. More than 80% of Covid deaths in the U.S. have occurred among seniors over 65. They make up a larger share of Florida’s population than any other state except Maine. Based on demographics, Florida’s per-capita Covid death rate would be expected to be one of the highest in the country. Nope. Florida’s death rate is in the middle of the pack and only slightly higher than in California. [WSJ]
  • I was reminded of scenius while watching a documentary about rock climbers in Yosemite. The documentary Vertical Frontiers did not make my True Films list of best-ever docs, but it did reveal a new flavor of scenius I had not known before. The particulars of this scene are a fine example of what makes scenius work. Mountain climbers educated in the Alps discovered the vertical walls of granite in Yosemite in the 1930s and began to scale these monoliths. By 1941 climbers occupied a new permanent camp set up in the north side of Yosemite Valley, Camp 4. They would often camp there illegally for the entire summer. Most were climbing bums — young men with little money, lots of time, heedless of laws, and an overwhelming urge to climb in new ways. They hacked together amazingly innovative equipment, techniques, and ethics. Camp 4 became school, club, and summer home for many climbers, not a few who became well-known. Over the next 60 years this scenius would invent most of the modern techniques of rock climbing, and many innovations that would later spill into outdoor skills and gear in general. But the geography of this scenius is unremarkable. Camp 4 is a nondescript, bland, dusty campground. Building 20 at MIT, the home of fantastic engineering exploits like the improvement of radar, was likewise architecturally boring, almost dilapidated. Soho was blocks of unwanted industrial space. Like these other places, Camp 4 was a generic space with flexibility. However Camp 4 is also a walk-in camp. You need to haul everything on your back. That immediately filters out a lot of wannabes. The absence of cars also keeps everyone around. From the outside you would never guess there was anything special about the place. I think that is true of most scenius. [KK]
  • Last, energy technology. Batteries (88% cost decline in a decade) and renewables are well-told stories and the second-order effects will be important. (As we banish the internal combustion engine, for example, we'll reap a significant dividend as a result of the reduction in air pollution.) Electric aircraft will probably happen, at least for shorter distances. Solar electricity is asymptoting to near-free, which in turn unlocks other interesting possibilities. (Could we synthesize hydrocarbons via solar powered atmospheric CO2 concentration -- that is, make oil out of air -- and thereby render remaining fossil fuel use-cases carbon neutral?) There are a lot of good ideas for making nuclear energy safer and cheaper. France today gets three quarters of its electricity from nuclear power... getting other countries to follow suit would be transformatively helpful in averting climate change. [Patrick Collison]
  • We’re in a strange place because, long ago, truck manufacturers realized that they could domesticate what is really a piece of heavy equipment, pumping up the luxury and turning a basic tool into a daily driver. This hasn’t happened with other vehicles of that ilk. We’re not casually rolling around in fancy Isuzu box trucks 360 days per year because we might have some couches to move on the other five days. But with pickups, we’re conditioned to prize versatility even when it’s irrational. [Car and Driver
  • The good news is that all of our post-9/11 security fears have been resolved. I don’t remember hearing any announcements about “if you see something, say something”, leaving cars unattended at the curb, or calling the authorities after spotting unattended bags. The not-so-good news is that our security fears have been replaced by COVID-19 fears. The best news, though, as anyone in California or Spain can attest, is coronavirus can never succeed amongst masked humans, no matter how primitive the mask technology. Combining these two, the airport authorities and the airlines have cooperated to bombard passengers with literally hundreds of signs and announcements regarding masks: (1) wear them, (2) don’t wear them under your nose, (3) don’t worry about COVID-19 if you’re masked, etc. I stopped counting at 200 exposures (signs+audio) after less than 30 minutes in Logan airport. [Phil G]
  • Stratemeyer published a number of books under his own name, but the books published under pseudonyms sold better. Stratemeyer realized that "he could offer more books each year if he dealt with several publishers and had the books published under a number of pseudonyms which he controlled." Stratemeyer explained his strategy to a publisher, writing that "[a] book brought out under another name would, I feel satisfied, do better than another Stratemeyer book. If this was brought out under my own name, the trade on new Stratemeyer books would simply be cut into four parts instead of three." [link]
  • As noted by The Atlantic, the first wave of Hardy Boys books were incredibly and casually racist, with people of color typically referred to as "natives" and usually depicted as criminals. There weren't many Black characters in the stories, but when they did appear, they usually spoke in a stereotypical "pidgin." A representative quote: "Ah pays mah fare, an' Ah puts mah shoes where Ah please." More subtle was the anti-authoritarian aspects of the Hardy Boys. In the early books, the police are almost always depicted as incompetent and unreliable, at best. [link]
  • It doesn't matter what the market thinks your timberland is worth because the trees' little solar panels are capturing photovoltaic energy and turning it into product that gets more valuable the longer you wait to sell it. Wood is a Lindy miracle material that has been with us through all the Ages of stone, bronze, iron, and steel. Just as tobacco and even oil are Lindy. [CBS]
  • Lyall’s liquidity and redemption flywheel theory would mean that instead of a bubble making it so that you have to sit on your hands because everything is expensive, a bubble causes the tide to go out from investments that are “cold” and you should be looking for those. Based on the redemption flywheel theory, they would be things that had done poorly recently for whatever (possibly idiosyncratic) reasons. The value ideas that we have been looking at lately - resources/minerals, pipelines, banks - have had a bad run and have downward price momentum even though they have stable or improving profits. [CBS]
  • In the beginning, Packard was the one of the biggest selling luxury cars in the world.
    But the stock market crash of 1929 shut down a lot of the luxury car market. So Packard introduced cheaper cars, The trouble is, that market segment was packed with other brands that had been in that market segment for a long time, and knew how what to do. This fresh competition may have crushed Packard margins. This is like what is destined to happen to Tesla. Tesla has been working the electric car segment with not much competition. But now the electric car car market is being flooded with better built electric cars. [CBS]
  • Most people will tell you that Bowling Alone is about how Americans are "increasingly disconnected from one another and how social structures—whether they be PTA, church, or political parties—have disintegrated," but fail to repeat the key reason: television. As we know, broadcast television was an incredibly harmful invention and is used for evil purposes: state propaganda ("news"), sports watching (panem et circenses), pushing the police state (procedurals and "terrorism" shows); all programming and pacification of the dull masses. [CBS]

22 comments:

Anonymous said...

Hi CBS, Enjoy your tobacco coverage.

If you ever come across an analysis of Imperial Brands you deem noteworthy, please post,I like the tobacco space too and nobody seems interested in IMBBY.

All the best!

Stagflationary Mark said...

Based on demographics, Florida’s per-capita Covid death rate would be expected to be one of the highest in the country. Nope. Florida’s death rate is in the middle of the pack and only slightly higher than in California.

https://www.cdc.gov/nchs/pressroom/sosmap/flu_pneumonia_mortality/flu_pneumonia.htm

Check out the interactive age-adjusted death rates for influenza/pneumonia chart for states in every year that’s listed (2005, 2014, 2015, 2016, 2017, 2018, and 2019). Florida stands out in a class by itself as appearing to be one of the safest places to consistently resist the flu and/or pneumonia.

Perhaps the sunshine in the “sunshine state” has something to do with it? Or maybe it’s something else? Hawaii hasn’t done so well, but perhaps that’s because it is a global tourist destination? So many variables and correlations, some of which might even be useful.

In any event, it would seem unwise to make national assumptions about viruses based on what happens in Florida.

CP said...

Tesla CEO Elon Musk has been promising FSD (Full Self Driving) software for years. For owners, opting for the chance to have their Tesla drive them to work and back mostly on its own has set them back to the tune of up to $10,000. But according to a letter that Tesla sent to the California DMV about FSD’s capability, acquired by PlainSite via a public records request, the dream of a self-driving car from the automaker this year might be just that, a dream.

The key correspondence comes from December 28, 2020, between Tesla’s associate general counsel Eric C. Williams and California DMV’s chief of the autonomous vehicles branch, Miguel D. Acosta. A letter details the capabilities of both Autopilot and FSD: “Currently neither Autopilot nor FSD Capability is an autonomous system, and currently no comprising feature, whether singularly or collectively, is autonomous or makes our vehicles autonomous,” Williams states.


https://www.caranddriver.com/news/a35785277/tesla-fsd-california-self-driving/

CP said...

Not the greatest collection of brands at Imperial:

https://www.imperialbrandsplc.com/about-us/brand-portfolio.html

Imperial's operating profit in its tobacco segments were negative y/o/y last year versus the year earlier.

That would be my signal to consider getting out if it happened at PM/MO/BTI.

CP said...

Sunshine / vitamin D as partial explanation makes sense.

Shame on leftist states for keeping people indoors away from the sun.

Stagflationary Mark said...

I live in Washington. We’re doing relatively well as a leftist state, so I’m not complaining. (I’m also very thankful that Trump is no longer our president.)

I wonder how much the temperature is involved. In the summer, our garage was hot. Viruses don’t last long on surfaces. In the winter, viruses can survive a long time on surfaces, in theory. I factor that in, just in case. They now say to not worry about surfaces, but to keep washing our hands. Hands ARE surfaces! So, no need to press our luck. We still quarantine incoming packages for a week or so (in a warm guest bedroom instead of a cold garage).

Not much sun in the Seattle area during the winter. Only 1 day in 5, typically. Like you, I value vitamin D. I take 2000 IU per day and have been doing so since my doctor told me I was deficient. (I specifically asked to be tested and was very deficient.)

Stagflationary Mark said...

As a former lead software engineer, the complexity of a completely bug-free self-driving car is and has been completely at odds with Murphy’s Laws.

A system is only as good as its weakest link.

https://www.cnn.com/2021/02/03/business/elon-musk-tesla-quality-problems/index.html

In the interview Musk also admitted that it might not be a good idea to buy a Tesla during a new model's ramp-up period.

Why would I expect the self-driving software to be any different?

Anonymous said...

Thank you CP for your IMBBY thoughts.

You are right, I'm just not happy with management at BTI and lukewarm on MO and PM.

Anonymous said...

Hello Stagflationary Mark,

Thanks for sharing your medical history with us and judging by your hatred of Trump, your Zero Hedge like investment advice and your choice of movies and books along with your employment in the gaming industry, it might be time grow up.



CP said...

You are right, I'm just not happy with management at BTI and lukewarm on MO and PM.

What are your thoughts on the managements?

I can see how most people are unhappy with MO's acquisitions.

CP said...

Just FYI to all, we don't "moderate" CBS comments (except to delete spam comments from India).

In other words, we don't censor. We just pick up trash.

But we still like to see the comments section collegial.

It has been nice seeing comments more active with increased posting volume.

Stagflationary Mark said...

Thank you for always being collegial.

CP said...

Can't promise that I won't be screaming in abject terror at some point in the future though, especially if I am wrong about the future of ZIRP, inflation, and/or long-term interest rates.
http://illusionofprosperity.blogspot.com/2021/03/thoughts-on-cpi-and-food.html

Do you view the utilities as short inflation?

CP said...

$1.9 trillion is like loose change found in the couch
http://illusionofprosperity.blogspot.com/2021/03/the-road-to-nirp-is-paved-with-zirp.html

I dunno... this is the first time they have tried giving this much money to individual deadbeats instead of making equally gigantic but much more abstruse trades - like trading 0%, never maturing "Federal Reserve Notes" for 1%, 10 year, "United States Notes".

I hypothesize that lots of money will get spent on low time preference goods, including cigarettes, hotel rooms, and hydrocarbons for low MPG cars.

I like how Altria, Dorchester Minerals, Suncor, and Magellan Midstream have something of a tariff (or even a literal royalty, percentage of the gross) on this activity.

Stagflationary Mark said...

Do you view the utilities as short inflation?

It’s more of an interest rate view than an inflation view. I would prefer to remain inflation agnostic, which is why I preferred TIPS. Unfortunately, that trade became too crowded for my liking. It was definitely hard to be upbeat about a negative real yield on the 30-year TIPS, but that situation has improved lately. Much more improvement and I might be lured back in.

I dunno... this is the first time they have tried giving this much money to individual deadbeats instead of making equally gigantic but much more abstruse trades - like trading 0%, never maturing "Federal Reserve Notes" for 1%, 10 year, "United States Notes".

You make a good point. It might even be considered an act of desperation to force some inflation. That does not provide me with comfort. That said, should help individual deadbeats pay their utility bills.

I hypothesize that lots of money will get spent on low time preference goods, including cigarettes, hotel rooms, and hydrocarbons for low MPG cars.

I think that’s a good hypothesis. Add lottery tickets to the list. Recent headline:

“Will New York's Instant Lottery Ticket App Hurt Convenience Stores?”

We’re heading further into uncharted territory. I don’t think the next 20+ years will be known for their stability, not that the last 20 years were either.

CP said...

Mark:

Allowed ROE’s for electric and gas utilities have trended downwards for years with declining interest rates. At YE20, allowed ROE’s nationally are roughly 9.4%, although there are large variations from state to state. Importantly, there is larger than average gap between allowed ROE’s and the 10YR UST (8.46% as of YE20) compared to the historical average of 6%.
https://enlightened-capital.com/blog/44-utilities-primer

Stagflationary Mark said...

CP,

Thanks for the link. I really appreciate it. It’s a good summary of what I’ve been reading elsewhere, plus a bit more.

One particularly bleak article, matching my own opinion on where we might be headed, made it clear that regulators need to do a better job negotiating return on equity. It’s not fair for monopolistic utilities to earn higher relative returns.

It’s one reason why my expectations are set low. Another was the negative real yield on the 30-year TIPS, although that situation has somewhat improved.

CP said...

Thread:

https://twitter.com/Cultivatewealth/status/1367906706185990144

CP said...

TSLA/VPU whipsaw

https://stockcharts.com/h-sc/ui?s=TSLA%3AVPU&p=D&yr=2&mn=0&dy=0&id=p79747773136

CP said...

The factor swings that started after the vaccination data came out in November haven’t stopped in 2021. It has been breathtaking. There are three segments of the market. There are the cyclical value stocks that benefit from the reopening and rising rates. Then there are the high growth secular companies that benefited from the lockdowns and low rates. The new 3rd part of the market is the meme stocks retail investors love. This is different from cult story stocks that have beloved brands and high valuations. Some investors on social media revel about how little fundamental research they have done.

As you can see from the chart below, the spike in retail trading in 2020 and 2021 means retail volumes are almost as large as mutual funds and hedge funds combined. Retail investors aren’t bothered by the 10 year yield rising. The biggest fundamental shift in their activity should come when the economy reopens. We think they will spend their stimulus money on real economic activities instead of investing it in the stock market.


https://upfina.com/inflation-is-coming-but-will-it-be-transitory/

Stagflationary Mark said...

The meme stocks have taken over some of the value indexes making them useless.

Isn’t that the truth.

Although most of VPU is made up of value stocks, roughly 16% of the fund is just one stock: NextEra Energy. Although I am mostly comfortable holding NextEra, it’s definitely priced for growth.

I follow the top holdings of the fund as a source of utility news. Here’s a recent gem from the news feed at my broker.

“The largest company in terms of market cap to set a new 52-week low was NextEra Energy (NYSE:NEE).“ - March 5, 2021

Wasn’t true. Not even close to a 52-week low. Perhaps I should just stick to reading utility news from the comments of your blog. Ha! :)

CP said...

The M2 money supply is growing exponentially. The 10-year Treasury yield has been decaying exponentially. Ignoring volatility, the end result has pretty much been a constant for 40 years.
http://illusionofprosperity.blogspot.com/2021/03/m2-and-interest-rates.html