Monday, June 7, 2021

Monday Night Links

  • Being short the ARKs hedges you against a lot of different things that I currently think make sense to be hedged against. Short super high multiple, covid pumped tech. Short semi concentrated, illiquid positions. Short things that will get clocked if rates rise. Short things with excessive SBC. Short their "scale" problem. Short retail euphoria. I think with ARKG you've got all of that, plus some. Its an "exciting" idea/concept, but whereas a year or two ago no one(but maybe me) gave two hoots about most of these genetic themed investments, now everyone and their mother have bid them up and the companies are in ATM mode. A few years back when I started the CRISPR thread, you could have bought CRSP, EDIT, NTLA combined for under $5B. The EV was maybe half that. You could've added BEAM for just another $1B. Didnt make sense. So theres a lot of that kind of stuff in there. When I short/hedge I try to look for things that give me as many different ways to win as possible and these check so many different boxes. [CoBF]
  • All things considered, the data suggests the NFT bubble lasted just four months — and it popped about this time in May. [link]
  • After a busy start to the week here in Talkeetna, we have taken some time to reflect upon some troubling trends that we have seen both from 2021 incidents and after speaking with climbers in the range. It has been two years since we’ve had large numbers of climbers in the range and on the West Buttress, and while we are just as excited as our fellow climbers to have a somewhat normal season, there are a few things we’d like visitors to keep in mind. We have seen a disturbing amount of overconfidence paired with inexperience in the Alaska Range. While climbers may have a good deal of experience at elevations up to 14,000 feet in the Lower 48, the remoteness and extreme weather we get in the Alaska Range make the experience here more challenging and dangerous. Please do not underestimate conditions, take the time to acclimatize and do not ascend too quickly. We have already had several SAR events related to HAPE this year. [NPS]
  • So here are the new hunting grounds: Financials: Many banks remain off 30%-50% from levels that weren’t that expensive to begin with. Yes, financials were “ground zero” in the last crisis (2009), but it’s hard to fathom a world where the economy (read: software companies) does well and financials do extremely poorly. Yield curve flattening is certainly an issue, but it’s not like it was a great rate environment even before this crisis and banks were earning decent ROEs. Industrials: This industry is a mess due to weakness in adjacent businesses (oil and aerospace). Historically, industrials are full of small niche businesses (as detailed in this book about “hidden champions”), which makes for a good sector to deploy a small/microcap strategy. High upside/downside plays: There exist bonds, preferreds, and other less vanilla securities where the prices don’t make much sense relative to equities. Bond prices should not trade like equities for the most part, unless the borrower is in severe distress. Most of the juiciest bits are related to travel, although I’m reverting to looking for asset protection or defensive cash flows in these areas. Energy: I distinctly remember sitting in an Ivy League classroom back in 2011 listening to a guest speaker talk about how we’ve reached peak oil. I wonder where the poor soul is today. Probably giving lectures in classrooms of other Ivy League institutions telling students how we’ll never see oil prices go up again. [lightbluevalue]
  • The emperor Augustus once caught sight of some wealthy foreigners in Rome, who were carrying about young monkeys and puppies in their arms and caressing them with a great show of affection. We are told that he then asked whether the women in those countries did not bear children, thus rebuking in truly imperial fashion those who squander upon animals that capacity for love and affection which in the natural order of things should be reserved for our fellow men.
  • I don’t ever want to see Donald Trump again. He had these people’s number, in a way, but he did little or nothing effective to stop them. I want to vote for a presidential candidate who will move against these dirtbags and their institutions without mercy. Enough is enough. I’m not sure what can be done, but if we keep tolerating this, there is going to be violence, one way or another.  I am not willing to sit here and listen to these aristocrats like Dr. Khilanani, and malignant institutions like Yale, turn people against me, my children, and my neighbors, because we are white. [TAC]
  • We have an entire category of Credit Bubble Stocks posts about the principal agent problem at companies. One major principal-agent problem that occurs is when managements decide to grow through acquisitions. The problem is that managers of larger enterprises get paid more - in fact, management pay is in some sense a function of asset size or of equity size. (Also, status is a function of size.) So, management can buy themselves a larger company by making an acquisition. Unless the managers are significant shareholders, the increased compensation they can expect will outweigh any effects on them from overpaying for another company. [CBS]
  • Embark on a journey to France with a visit to Domaine Drouhin, another renowned Willamette Valley winery that took inspiration from The Eyrie Vineyards. The Oregon estate was established in the late 1980s but the Drouhin family’s winemaking roots were planted in Burgundy a century earlier, when Joseph Drouhin moved from Chablis to Beaune and in 1880, founded Maison Joseph Drouhin. In 1957, third-generation winemaker Robert Drouhin first visited Oregon in 1961 and tasted Oregon wines in Paris and Burgundy in 1979 and 1980. It was then that he recognized that Oregon had the soil and climate to unlock the complexities and potential of pinot noir and Chardonnay in the United States. Today, the winery operates under the motto “French soul, Oregon soil” as they are employing methods to create a darker and earthier style of pinot noir than you will find elsewhere in the state. In fact, Domaine Drouhin is considered the closest you can get to French wine in Oregon! [link]
  • Owners of $100 options—now the most widely owned WTI call contracts on the New York Mercantile Exchange—are making a leveraged bet that oil prices will hurtle higher after already surging more than 40% this year. The roaring rally, goosed by thawing coronavirus restrictions, has lifted WTI prices to their highest level since 2018 at almost $70 a barrel and average U.S. gasoline prices above $3 a gallon, according to GasBuddy. The popularity of $100 options is another example of traders converging on seemingly outlandish wagers they consider to be almost guaranteed ways of making money. [WSJ]
  • In a remarkable lawsuit filed on Memorial Day, West Virginia Gov. Jim Justice — the former coal-mining billionaire — has accused his family’s longtime lender Carter Bank & Trust of orchestrating a “tortious scheme” that has thrown the solvency and future of his business empire into jeopardy. What does Justice, his family, and companies allege? That Carter Bank, over nearly 20 years, loaned them more than $700 million, then had the gall to expect to be paid back on time. According to Justice’s complaint, bank executives acting in bad faith purposefully “induced” his companies to default on loans (rather than continue to extend-and-pretend). In what’s potentially the most dramatic development, Justice accuses Carter Bank of attempting to “scuttle” his attempts at renegotiating terms on millions of dollars of loans owed by his Greenbrier Hotel, which came due June 1. That’s just one day after he filed the lawsuit. Unless Justice managed to line up emergency funding on Memorial Day, it’s plausible that the Greenbrier — once West Virginia’s grandest resort, with more than 500 rooms — could now be in default to Carter Bank. All told, Justice says in his complaint that he still owes Carter Bank $368 million. [Forbes]

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