Saturday, May 29, 2021

Long Weekend Links

  • We estimate the recaptured savings in the extreme case of full repatriation, and use public data to pencil out the impact on share price. We show (using relatively conservative assumptions!) that across 50 of the top public software companies currently utilizing cloud infrastructure, an estimated $100B of market value is being lost among them due to cloud impact on margins — relative to running the infrastructure themselves. And while we focus on software companies in our analysis, the impact of the cloud is by no means limited to software. Extending this analysis to the broader universe of scale public companies that stands to benefit from related savings, we estimate that the total impact is potentially greater than $500B. [a16z]
  • Almost by definition, the biggest mispricing will involve a glaring, hideous defect that popular opinion thinks cannot be overcome. That's when your lonely, preferably well-researched conclusion that it can either be resolved, or isn't so bad, will be rewarded. In principle, we would always buy understandable, well-run, durable franchises at bargain prices, but in practivs the market must think that some element is missing. On average, you are paid for being a nerd and sorting out the true situation. Even more, you are rewarded for the courage to act on an unpopular opinion that made you look like an idiot, provided it turns out to be correct. Before then, there's endless pain and worry that, indeed, the crowd is right. [Joel Tillinghast]
  • Tether Ltd. also says one Tether is worth exactly one US dollar. Can they do that? Well they say they can, because they hold $1 worth of assets for each Tether. But are those assets actual dollars? No, they are not. So what if the assets go down in value? Don’t worry; they will not. Okay, but can we at least see the assets? No, you may not. [Crypto Anonymous]
  • One question you have to ask is why were these independent Texas oilmen able to discover - and end up controlling - huge oil fields during the 1930s? After all, this was sixty years after Standard Oil was formed and twenty years after it was broken up in to the Seven Sisters. How could these thinly capitalized independents have had an edge over big oil companies? (And they were thinly capitalized, often spending their last dollar on drilling and then paying their workers in groceries.) The answer is that the Great Depression caused the major oil companies to slash their budget for capital expenditures like exploration, and this retreat left a vacuum for the hungry Texas wildcatters to fill. [CBS]
  • We’re simply not drilling enough, or anywhere near what we should be once we recover our full 100M bpd addiction. We can’t have rig counts (i.e., the machines and crews drilling for oil) ~30% lower for 80% of the world’s production and not have that impact us shortly, particularly as our appetite for oil returns fully. The supply/demand shortages that we’ve seen in minerals, lumber, agriculture, will now reveal themselves in energy as we recover.  We’ve recovered too fast, and equally as pertinent, we’ve invested too little. As we shift from “buying things” to “doing things”, the chronic underinvestment in the energy sector will be exposed. Addicts take note, energy is about to join the commodity party, and our drug of choice is about to get a whole lot more expensive. [openinsights]
  • The Nakajima Aircraft Company was a prominent Japanese aircraft manufacturer and aviation engine manufacturer throughout World War II. It continues to the present day as the car and aircraft manufacturer Subaru. [wiki]
  • He had been droning along about “value,” comparing the Marxist theory with the orthodox “use” theory. Mr. Dubois had said, “Of course, the Marxian definition of value is ridiculous. All the work one cares to add will not turn a mud pie into an apple tart; it remains a mud pie, value zero. By corollary, unskillful work can easily subtract value; an untalented cook can turn wholesome dough and fresh green apples, valuable already, into an inedible mess, value zero. Conversely, a great chef can fashion of those same materials a confection of greater value than a commonplace apple tart, with no more effort than an ordinary cook uses to prepare an ordinary sweet. “These kitchen illustrations demolish the Marxian theory of value — the fallacy from which the entire magnificent fraud of communism derives — and to illustrate the truth of the common-sense definition as measured in terms of use.” [Isegoria]
  • The automobile, like the all-important domestic fa├žade, is another mechanism for outdoor class display. Or class lack of display we'd have to say, if we focus on the usages of the upper class, who, on the principle of archaism, affect to regard the automobile as very nouveau and underplay it consistently. Class understatement describes the technique: if your money and freedom and carelessness of censure allow you to buy any kind of car, you provide yourself with the meanest and most common to indicate that you're not taking seriously so easily purchasable and thus vulgar a class totem. You have a Chevy, Ford, Plymouth, or Dodge, and in the least interesting style and color. It may be clean, although slightly dirty is best. But it should be boring. The next best thing is to have a "good" car, like a Jaguar or BMW, but to be sure it's old and beat-up. You may not have a Rolls, a Cadillac, or a Mercedes. Especially a Mercedes, a car, Joseph Epstein reports in The American Scholar (Winter 1981-82), which the intelligent young in West Germany regard, quite correctly, as "a sign of vulgarity, a car of the kind owned by Beverly Hills dentists or African cabinet ministers. [Class]
  • Sedans, even ones that look as good as this, just aren't as trendy as crossovers, and manufacturers price them accordingly. This large, quick, well-equipped Accord Sport 2.0T costs $1720 less than a front-drive CR-V Touring with 62 fewer horsepower, a continuously variable automatic transmission, and nearly identical passenger volume. Yeah, that particular CR-V is of a fancier trim level, but how badly do you need leather and a subwoofer? The Accord even has a deceptively huge trunk that easily swallows a 54-quart cooler without any Tetris-like arranging. Unless you're towing a trailer or really need all-wheel drive, the Accord seems like a glaringly obvious choice over a compact crossover. [Car and Driver]
  • The end of 2018, you may recall, was a big market crash. And how did FHLB insiders respond? Why, they gave themselves options to acquire 8.1% of the bank at 80 percent of tangible book value, and less than 70 percent of the IPO price a dozen years earlier. Something else brutal about management is that FHLB has never bought back stock when it was cheap. The share count now is higher than it was a decade ago, even though the bank has excess capital and even though the stock had traded at big discounts to tangible book. After having been in business for a decade and a half under the same management, you get a pretty clear view that management doesn't allocate capital well (which should worry us about the branch acquisitions) and is opportunistic about transferring value to themselves (with the 2018 options grants). [Oddball Stocks]
  • To pathological gamblers, near misses looked like wins. Their brains reacted almost the same way. But to a nonpathological gambler, a near miss was like a loss. People without a gambling problem were better at recognizing that a near miss means you still lose. [Isegoria]

1 comment:

Anonymous said...

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