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Here"s How Much You Would Have Made Owning Bruker Stock In The Last 5 Years

Bruker (NASDAQ:BRKR) has outperformed the market over the past 5 years by 13.05% on an annualized basis. Buying $1,000.00 In BRKR: 5 years ago, an investor could have purchased 44.82 shares of Bruker at the time with $1,000.00. This investment in BRKR would have produced an average annual ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaDec 4th, 2021

Nancy Pelosi — under pressure — directs House to consider bigger penalties for lawmakers and aides who break a federal conflict-of-interest law

Insider's "Conflicted Congress" investigation found that dozens of lawmakers and more than 182 senior staff violated a law meant to increase transparency and banish conflicts of interest. Speaker of the House Nancy Pelosi, a Democrat from California, takes questions from reporters at her weekly news conference on Capitol Hill on Thursday, Nov. 4, 2021.Kent Nishimura / Los Angeles Times via Getty Images A House panel will scrutinize congressional stock trades following Insider's 'Conflicted Congress' investigation. Lawmakers may face higher fines if they report their stock trades late.  The move comes after Insider revealed numerous violations and lawmakers are proposing stock bans.  Facing withering criticism from political friends and foes alike, House Speaker Nancy Pelosi is directing a panel to consider higher fines for lawmakers and top aides who violate a law on congressional stock trading meant to combat financial conflicts of interest. The Democratic leader asked the Committee on House Administration to investigate how many members have broken the reporting requirements of the the 2012 Stop Trading on Congressional Knowledge Act, also known as the STOCK Act.At least 54 members of Congress and 182 of their top aides have violated the STOCK Act's disclosure provisions, according to Insider's "Conflicted Congress" investigation, which published in December.Drew Hammill, Pelosi's deputy chief of staff, told Insider that the Speaker asked the panel to look into "the possibility of stiffening penalties," and confirmed it would extend to senior staff. "The speaker believes that sunlight is the best disinfectant and has asked Committee on House Administration Chair Zoe Lofgren to examine the issue of Members' unacceptable noncompliance with the reporting requirements in the STOCK Act," he said. The panel is responsible for setting rules on lawmakers and staff, including everything from human resources directions to ethical standards.Pelosi's actions contrast with most recent statements about members of Congress and their stock trades. Following publication of Insider's "Conflicted Congress" project, Pelosi told Insider that members of Congress should be allowed to buy and sell individual stocks. "We are a free-market economy. They should be able to participate in that," Pelosi said, adding that members of Congress should report their trades on time.But while the STOCK Act requires members of Congress to publicly report their stock transactions within 30 to 45 days, depending on when they learned about a trade, dozens of Democrats and Republicans alike have recently failed to do so. Some have broken federal disclosure deadlines by months with stock trades worth into the millions of dollars.Lawmakers who have violated the STOCK Act's disclosure provisions routinely invest in companies that vie for federal contracts and lobby the federal government, sometimes spending millions of dollars annually to do so."Conflicted Congress" also revealed numerous, recent examples of potential conflicts: House Armed Services Committee members trading defense contractor stocks, lawmakers responsible for health policy buying shares of COVID-19 vaccine manufacturers, environmentally minded congressional members investing in oil companies.Pelosi does not personally trade stocks, but her husband, Paul Pelosi, has millions of dollars worth of stock investments that the speaker must by law disclose. Insider also contacted Senate Majority Leader Chuck Schumer's office and the Senate Rules Committee to ask whether the Senate might undertake a similar review, but did not immediately receive a response. On Tuesday, Schumer dodged a question about whether he supported a stock trading ban for lawmakers, but told Insider "I don't own any stocks, and I think that's the right thing to do."Republican House Minority Leader Kevin McCarthy of California and Democratic Rep. Alexandria Ocasio-Cortez of New York are among a growing, bipartisan coalition of lawmakers who have expressed support for a ban on members of Congress trading individual stocks.Aaron P. Bernstein/Getty Images; J. Scott Applewhite/AP PhotoMinimal consequencesInsider's "Conflicted Congress" investigation found that few face consequences for violating the law, including cases in which they reported millions of dollars in trades months or even years late.Scofflaws are supposed to pay a late fee of $200 the first time they file a report about their stock trades late, and increasingly higher fines are supposed to follow if they continue to be late — potentially costing tens of thousands of dollars in extreme cases. But that rarely happens.Pelosi's latest actions come as lawmakers on both sides of the aisle have in recent days proposed a slew of similar bills to ban stock trading, including a pair of competing proposals unveiled on Wednesday by Sen. Jon Ossoff, a Democrat of Georgia, and Sen. Josh Hawley, a Republican of Missouri. House Minority Leader Kevin McCarthy of California, who is poised to become the new speaker if Republicans win back the House after the 2022 elections, told Punchbowl News this week he supports restrictions on members of Congress buying and selling individual stocks. Republican Rep. Chip Roy of Texas has sponsored a bill restricting members of Congress from trading stocks, and US Senate candidate Blake Masters of Arizona has made banning congressional stock trades a cornerstone campaign issue.Reps. Alexandria Ocasio-Cortez and Abigail Spanberger, and Democratic Sens. Elizabeth Warren of Massachusetts, Mark Kelly of Arizona, Jeff Merkley of Oregon, and Mark Warner of Virginia rank among Democrats who've said they want tough restrictions on lawmakers' stock trades.Pelosi's decision also arrives as the White House on Friday opened the door to a potential ban on members of Congress trading individual stocks. Meanwhile, Rep. Angie Craig, a two-term Democrat from Minnesota, is preparing to next week introduce a resolution banning members of the US House from owning "common stock of any individual public corporation."Unlike the several other bills lawmakers are introducing to squelch stock trade activity among members of Congress, Craig's resolution, if passed, wouldn't be a law. Instead, it'd be a House rule that only applied to House members and not subject to a vote in the US Senate or the signature of President Joe Biden.Why is Craig willing to defy Pelosi on this matter and potentially invite political blowback from the speaker?"I just fundamentally disagree with her on this topic … I wish the speaker had a different point of view," Craig told Insider on Friday. "If the American people can't believe that we're here just to serve them, not to pad our own portfolios, then how can they trust we're doing what's in our best interest?"I want to start the conversation about why my leadership wants to block this legislation," Craig said, adding that she will "working across the aisle to see what kind of support we can build."Craig recalled once participating in a House Subcommittee on Aviation hearing involving Boeing, the aviation and defense contracting giant."I literally sat there that one day and said to myself, 'My God, if I wanted to short Boeing today, and make a little money — this is the most ridiculous thing in the world that members of Congress can trade individual stocks," she said. "We often get information before the general public."Read the original article on Business Insider.....»»

Category: personnelSource: nytJan 14th, 2022

The Coming Retirement Crisis Will Affect Everyone

The Coming Retirement Crisis Will Affect Everyone Authored by Bruce Wilds via Advancing Time blog, We are on the cusp of a retirement crisis that will affect everyone. Far too many promises have been made and the demographics we face do not bode well for a bright future. The answer that some people tout is we should have more children or open the borders. This is based on the idea we need more workers and ignores many other factors feeding into this issue. There is simply no way "more children" or workers can ever pay enough into the system to fulfill the promises that have been made.  The competition for programs from the government to support the needs of different generations is about to explode as young and old Americans reach out for more help. Much of our problems stem from a slew of bad policies either driven by stupidity, corruption, or an unwillingness to accept the reality you can postpone a reckoning for only so long. Investors and the public at large suffer from a "recency bias of hope" that tends to blind them from unpleasant long-term realities. The coming together of surging investment risk, an interrupted business cycle, and demographics are coming together to form the perfect storm. To clarify, much of the wealth in America is held in the hands of the baby boomers that have just or are about to retire, and over the years, many have moved into risky investment in search of yield. It has been years since we have had a major recession so sooner or later, it is logical one will arrive. Last, but not least, we are now seeing demographics play a larger role in the economy as boomers downsize (sell assets) and cut spending. While we look upon a world of wealth, we also see a world of debt. Unfortunately, over the last few decades growing inequality has placed much of the wealth in the hands of a few and distributed the debt in places where it will come back to bite us. Below are a few ugly indicators highlighting some frightening imbalances. Facts Indicating Problems Ahead Demographics show older consumers tend to downsize (sell assets) while spending less The boom-bust business cycle has been largely interrupted by surging government spending Stock buybacks continue to set new records and drive stock markets higher   The top one-percenters own more than 90% of America's wealth. Specifically, the 1% collectively own $43.27 trillion, while the bottom 90% earn $40.28 trillion combined. Moody’s estimate of Illinois’ retirement debts, made up of pension and retiree health shortfalls at the state and local level, hits $530 billion in 2020 The example of the pension and retiree health shortfalls in Illinois is well documented. Sadly, many other states and local governments have the same problem. This is despite a massive multi-year stock market rally and huge tax hikes that went to pension funds. It is difficult to imagine how many of these pension plans can avoid default. This is already baked into the cake. The financial giants aided by media have created the myth that everyone is making money when they invest in a retirement plan. Financial companies often forget to tell investors that when they invest in a 401 plan, the risk falls directly onto the individual owning the plan. Adding injury to insult, looking deeper into these schemes you will find outlandishly high fees buried under a slew of different names. Often the magic of compounded returns is overwhelmed by the tyranny of compounded cost. A report by Robert Hiltonsmith claims these are a retirement savings drain. Hiltonsmith revealed a slew of pay-to-play and hidden kickbacks dwelling deep in the details of long difficult and boring documents. These tricks used to drain wealth from a customer's account helps to explain how financial companies pay for all those commercials and slick pamphlets constantly being thrown before us.  A big problem looms for those Americans that continue to believe disaster is something that hits other people but not them. Sadly, whether you have invested in a pension plan or a 401 account, prior economic crises show there is no guaranty that you will ever see your money again or if you do, that it will have retained its buying power. The risk is not only in stocks, but also lurks in bonds. Investors in bonds face a huge risk of default if they buy junk bonds and a good possibility of getting crushed if interest rates rise. This Did Not Work For Japan And Is Not Working For America Based on how Japan has fared over the last several decades it is difficult to see the green shoots of a global economic renaissance suddenly spring forth as the result of even lower interest rates. In fact, the next economic downturn will likely envelop the planet and may last forever and a day. This is because central bank intervention and manipulation often have negative unintended consequences. People often discount how lucky Japan has been following its economic bubble burst in 1992 to be located next to China. Because of China's years of booming growth, Japan was able to mitigate much of the pain it was forced to endure. The ramifications of a retirement crisis will affect everyone. When older people lose their savings or watch their wealth fall they have little time to earn more. They cut back or need help to survive. When these people sell their assets it could cause deflation but that is not a certainty. My feeling is inflation is strong enough it will only slow its rate as money flows to tangible assets and away from paper and promises. Regardless of how you view this, it is not a recipe for strong growth.  Tyler Durden Mon, 01/03/2022 - 08:44.....»»

Category: blogSource: zerohedgeJan 3rd, 2022

Macleod: Gold And Silver Prospects For 2022

Macleod: Gold And Silver Prospects For 2022 Authored by Alasdair Macleod via GoldMoney.com, It has been a disappointing year for profit-seeking precious metal investors, but for those few of us looking to accumulate gold and silver as the ultimate insurance against runaway inflation it has been an unexpected bonus. After reviewing the current year to gain a perspective for 2022, this article summarises the outlook for the dollar, the euro, and their financial systems. The key issue is the interest rate outlook, and how that will impact financial markets, which are wholly unprepared for the consequences of the massive expansions of currency and credit over the last two years. We look briefly at geopolitical factors and conclude that Presidents Putin and Xi have assessed President Biden and his administration to be fundamentally weak. Putin is now driving a wedge between the US and the UK on one side and the pusillanimous, disorganised EU nations on the other, using energy supplies and the massing of troops on the Ukrainian border as levers to apply pressure. Either the situation escalates to an invasion of Ukraine (unlikely) or America backs off under pressure from the EU. Meanwhile, China will continue to build its presence in the South China Sea and its global influence through its silk roads. Less appreciated is that China and Russia continue to accumulate gold and are ditching the dollar. And finally, we look at silver, which is set to become the star performer against fiat currencies, driven by a combination of poor liquidity, ESG-driven industrial demand and investor realisation that its price has much catching up to do compared with lithium, uranium, and copper. The potential for a fiat currency collapse is thrown in for nothing. 2021 — That was the year that was This year has been disappointing for precious metals investors. Figure 1 shows how gold and silver have performed since 31 December 2020. Having lost as much as 11.3%, gold is down 6.5%. And silver, which at one stage was down 19.3% is down 15%. Admittedly these returns followed strong gains in 2020, so 2021 could be described as a year of consolidation. But this outcome was counterintuitive, given the monetary background. Total assets of the five major central banks (Fed, ECB, BoJ, PBoC and BoE) rose from $20.4bn to $32.5bn between February 2020 and today, which works out at an average annualised increase of 32% for each of two years on the trot. Since 2006, total assets for these central banks have increased by 500%. Since February 2020, US M2 money supply has increased at an annualised rate of 20.2%, for nearly two successive years, and now stands at over 90% of GDP, having started the millennium at 44.4% of GDP. But as will be demonstrated later in this article, adjusted for the temporary withdrawal of liquidity through reverse repos, the true quantity of M2 money is practically 100% of GDP. Without doubt, there is a surfeit of dollars and similar excesses of all other major currencies in circulation, a global condition which has worsened considerably since March 2020. The rate of inflation of currency and credit has never been so high on a global basis, ever. Yet gold and silver hardly reflected it. Behind it all is the fatal but common mistake to fail to connect rising prices with currency debasement. No statements from any of the major central banks on monetary policy have mentioned the quantity of currency, only the consequences for prices and interest rates. And there is a broad consensus between central banks that rising interest rates are to be deployed only in the last resort. The right to issue as much currency as central banks desire will remain sacrosanct. That prices are rising above the common target level of 2% and will remain there must be denied. For now, ovine investors accept this narrative unquestioningly. Officialdom is also wrongly committed to inflationary policies to increase the GDP total. Policymakers, establishment economists, and investment strategists alike fail to understand that increases in GDP are not indicative of an improvement in economic conditions — progress is intangible and unquantifiable. GDP is only a reflection of the quantity of currency and credit in the economy. The remarkable recovery from the collapse in GDP in 2020 was not an economic recovery; it was simply a reflection of ramped-up unproductive government deficit spending. And the savings ratio which shot up was no more than a temporary reservoir of stimmy-inflated bank deposits. What should worry us all is that no one in charge of economic and monetary policy, let alone the wider public, appears to understand this basic error. It is not in their interest to do so, because take away GDP and the entire argument for state intervention collapses. For this reason, the commitment to monetary inflation must be total. We can conclude, to paraphrase Noël Coward, “Hurray-hurray-hurray, Inflation’s here to stay!” The antipathy to recognising this fundamental error is behind the confused market response to inflationary conditions — with the notable exception perhaps of cryptocurrency enthusiasts. But even for them, the inflation argument only goes so far as to recognise the difference between an open-ended facility to issue national currencies and the hard restrictions on the issue of bitcoin. No hodler has yet to come up with a convincing explanation of how bitcoin will replace failed fiat currencies as a widely accepted medium of exchange. It has been this confusion over what money truly is and the difference between money and fiat currency which in 2021 has suppressed a wider interest in physical gold and silver. To this confusion has been added structural changes in the banking system with the introduction of Basel 3’s net stable funding ratio. Most banks now must comply with the NSFR, with the notable exception of UK banks so far, until that is, the New Year. The intention is to ensure that bank liabilities are stable with respect to the funding of assets, thereby lessening the risk of financing instabilities and their systemic consequences. Under the new rules a bank that maintains principal positions in derivatives of all types must accept a financing penalty. And even if a bank finds that dealing in derivatives is so profitable that it is worth paying the penalty, its management is unlikely to freely embrace business lines that could adversely affect its reputation with the regulators. 2021 was therefore a year when banks attempted to moderate their positions in derivatives as the NSFR was introduced, actions that are likely to continue into 2022. Bullion banks will want to cut their liabilities to unallocated precious metals’ deposit accounts — that can be done simply by varying account terms. But taking the short side of regulated futures contracts cannot be negated by the stroke of a pen. They must be closed or the NSFR penalty tolerated. My guess is that bankers will initially restrict their derivative positions to regulated futures markets because they can more easily be defended from a reputational standpoint. Compared with London’s OTC forward and swaps, Comex’s regulated futures are by far the smaller market, approximately one eighth the size. And as banks reduce their derivative exposure, the withering of forward markets can be expected to unlock hidden physical demand. Physical commodities, including precious metals, are unregulated, but an unallocated bank account tied to a commodity price is. This might not trouble investors managing their own money, but any regulated investment manager holding unallocated gold deposits on behalf of clients will lose that facility. And if a manager wishes to retain price exposure, he will be forced to buy ETFs or persuade his compliance officer to sign off on an allocated physical investment instead. As London’s forwards market shrinks, the structure of Comex, whereby the Swaps category and banks operating within the Producer/Merchant/Processor/User category are classified as non-speculators, when they are in fact speculators and not genuine hedgers, should come under increased scrutiny. The trigger for such a debate is likely to be an overall loss of market liquidity as the London market diminishes, leading to greater price volatility and severe price backwardations as derivative supply dries up. And while we can point to the effects of Basel 3 on precious metals, we must not ignore the consequences for other commodities and energy contracts. Following the recent global fiat currency debasements, many commodity contracts have been in persistent backwardation. The reduction of derivative liquidity is sure to aggravate physical shortages for commodities generally and inflate their prices further. For policy planners in the central banks, these changes could hardly come at a worse time. Renewed rises in raw material and commodity prices will lead to a rational expectation of a far greater fall in state currencies’ purchasing power at the consumer level than has occurred so far. It appears therefore, that the fall in the purchasing power of the dollar and of other currencies has barely started. Inflation outlook for the US dollar First, we must define inflation: it is the increase in the quantity of money, currency, and credit, generally taken to be represented by total deposit liabilities in the banking system. It is not an increase in prices. Changes in the general price level is the consequence of a combination in changes of the quantity of deposit currency and changes in the level of the public’s retention of deposit currency relative to their possession of goods. We can record deposits statistically, but cannot quantify human behaviour. But even statistics cannot be taken at face value. Deposit liquidity is managed by central bank intervention using repurchase and reverse repurchase agreements (repos and RRPs respectively). By entering into a repo transaction, in return for collateral held as security a central bank injects liquidity into the financial system, increasing large deposits held at the banks. The liquidity crisis in September 2019 was dealt with in this way when the Fed’s overnight repos rocketed up to a record $80bn. By entering into RRPs, a central bank removes liquidity from the financial system. Both repos and RRPs are temporary in nature, mostly being overnight in duration. Being temporary, we must adjust M2 money supply by subtracting repos from it and adding in reverse repos for a truer picture. The outcome is illustrated in Figure 3. Repo balances had diminished to zero by July 2020, and RRPs only became significant last April. Together, these explain the deviation of the blue line from M2 (the red line) since December 2019. Taking the most recent RRP number of $1,748bn, the adjusted M2 level becomes approximately $23,100bn, an increase of 48.2%, or 24.1% annualised for two successive years. The excess liquidity currently hidden in RRPs is the consequence of unfunded government deficit spending. It is government spending which ends up as surplus deposits in the banking system without them being offset by public subscriptions for government debt. Quantitative easing contributes to the problem, giving deposit money to pension funds and insurance companies in return for securities that end up on the Fed’s balance sheet. The effect of this inflation on prices is still working through the US economy. It is important to appreciate that the inflation of bank deposits is the primary cause for the increase in raw material, production and consumer costs and prices, and not supply chain disruptions. Central bankers are being disingenuous when they insist that rising prices are a temporary phenomenon. The expansion of deposits and excess liquidity, particularly since last April, tells us that even without changes in the public’s level of retention of currency relative to goods, there is a considerable loss of the dollar’s purchasing power yet to come. And neo-Keynesian arguments that faltering demand will restore the balance between supply and demand for consumer goods are incorrect. We therefore enter 2022 with the prospect of further increases in the rates of production cost and consumer price increases. That interest rates will begin to rise significantly is guaraanteed. Already, with the US CPI recording an annual increase of 6.8%, establishment investors are accepting a negative real yield on the 10-year US Treasury of 5.4%. And for those who follow John Williams’ Shadowstats.com, which calculates consumer price rises “Consistent with the methodologies of pre-1980 headline CPI reporting” at 14.9%, the real yield on the 10-year bond is minus 13.5%! How far interest rates will rise in the coming months is not yet clear, but it is likely that they will rise substantially more and sooner than is currently discounted. Furthermore, the tapering of QE is planned to be accelerated, reducing in a roundabout way the support to government funding from the Fed. Without that support, markets will almost certainly demand lower negative real yields on Treasuries at the least, forcing nominal yields considerably higher. The shock of a move towards market reality could be immense and unexpected. Higher nominal yields on bonds mean significant investment losses for bond portfolios, and the basis for equity valuations will also be badly undermined. A substantial bear market in all financial assets is becoming more certain by the day. Furthermore, higher borrowing costs will threaten the zombie corporations unable to earn sufficient returns on their borrowings. It is a situation the Fed has tried to avoid, using QE to sustain low bond yields and high market values. Having decided to reduce the monthly QE stimulus, a bear market in financial assets has been made more certain. To counter the effect, the Fed will probably end up increasing QE again to support market prices, as they did in March 2020. But QE and a return to it is blatant currency printing which can only serve to undermine the dollar’s purchasing power even further and eventually require yet higher bond yield compensation: it is no more than a temporary sticking plaster on a suppurating wound. A developing slump in economic activity from higher nominal interest rates will also add to the Federal Government’s deficit by reducing tax income and increasing welfare spending. In any contemporary administration, particularly the Biden one, there is no mandate to address this problem and we must assume at this distance that it can only be resolved by further debt being issued at increasingly higher yields. The situation resembles that faced by an earlier proto-Keynesian, John Law in 1720. To sustain his Mississippi bubble, he supported the share price by freely issuing his livre currency to buy stock in the market, which he could do as controller of the currency. It was not long before the livre’s purchasing power was undermined entirely. As the current situation for the dollar unfolds, its purchasing power is set to decline similarly to the French livre of three centuries ago. But there is also an ugly systemic problem in the commercial banking network, for which to appreciate we must turn our attention to Europe. The looming collapse of the euro Like the Fed, the ECB is resisting interest rate increases despite producer and consumer prices soaring. Consumer price inflation across the Eurozone was most recently recorded at 4.9%, making the real yield on Germany’s 5-year bond minus 5.5%. But Germany’s producer prices for October rose 19.2% compared with a year ago. There can be no doubt that producer prices have yet to feed fully into consumer prices, and that rising consumer prices have much further to go, reflecting the acceleration of the ECB’s currency debasement in recent years. Therefore, in real terms, not only are negative rates already increasing, but they will go even further into record negative territory due to rising producer and consumer prices. Unless it abandons the euro to its fate on the foreign exchanges altogether, the ECB will be forced to permit its deposit rate to rise from its current —0.5% to offset the euro’s depreciation. And given the sheer scale of recent monetary expansion, euro interest rates will have to rise considerably to have any stabilising effect. The euro shares this problem with the dollar. But even if interest rates increased only into modestly positive territory, the ECB would have to quicken the pace of its monetary creation just to keep highly indebted Eurozone member governments afloat. The foreign exchanges are bound to recognise the developing situation, punishing the euro if the ECB fails to raise rates and punishing it if it does. The euro’s fall won’t be limited to exchange rates against other currencies, which to varying degrees face similar dilemmas, but it will be particularly acute measured against prices for commodities and essential products. Arguably, the euro’s derating on the foreign exchanges has already commenced. But there is an additional factor not generally appreciated, and that is the sheer size of the euro’s repo market and the danger to it that rising interest rates presents. Demand for collateral against which to obtain liquidity has led to significant monetary expansion, with the repo market acting not as a marginal liquidity management tool as is the case in other banking systems, but as an accumulating source of credit. This is illustrated in Figure 4, which is of an ICMA survey of 58 leading institutions in the euro system. The total for this form of short-term financing grew to €8.31 trillion in outstanding contracts by December 2019. The collateral includes everything from government bonds and bills to pre-packaged commercial bank debt. According to the ICMA survey, double counting, whereby repos are offset by reverse repos, is minimal. This is important when one considers that a reverse repo is the other side of a repo, so that with repos being additional to the reverse repos recorded, the sum of the two is a valid measure of the size of the repo market. The value of repos transacted with central banks as part of official monetary policy operations were not included in the survey and continue to be “very substantial”. But repos with central banks in the ordinary course of financing are included. Today, even excluding central bank repos connected with monetary policy operations, this figure almost certainly exceeds €10 trillion by a significant margin, given the accelerated monetary expansion since the ICMA survey, and when one allows for participants beyond the 58 dealers recorded. An important element of this market is interest rates, which with the ECB’s deposit rate sitting at minus 0.5% means Eurozone cash can be freely obtained by the banks at no cost. The zero cost of repo cash raises the question of the consequences if the ECB’s deposit rate is forced back into positive territory. The repo market will likely contract in size, which is tantamount to a decrease in outstanding bank credit. Banks would then be forced to liquidate balance sheet assets, which would drive all negative bond yields into positive territory, and higher, accelerating the contraction of bank credit even further as collateral values collapse. Moreover, the contraction of bank credit implied by the withdrawal of repo finance will almost certainly have the knock-on effect of rapidly triggering a liquidity crisis in a banking cohort with exceptionally high balance sheet gearing. There is a further issue to consider over collateral quality. While the US Fed only accepts very high-quality securities as repo collateral, with the Eurozone’s national banks and the ECB almost anything is accepted — it had to be when Greece and the other PIGS were bailed out. And the hidden bailouts of Italian banks by bundling dodgy loans into repo collateral was the way they were removed from national bank balance sheets and hidden in the TARGET2 system. The result is that the first repos not to be renewed by commercial counterparties are those whose collateral is bad or doubtful. We have no knowledge how much is involved. But given the incentive for national regulators in the PIGS to have deemed non-performing loans to be creditworthy so that they could act as repo collateral, the amounts will be considerable. Having accepted this bad collateral, national central banks will be unable to reject them for fear of triggering a banking crisis in their own jurisdictions. Furthermore, they are likely to be forced to accept additional repo collateral if it is rejected by commercial counterparties and bank failures are to be prevented. The numbers involved are larger than the ECB and national central banks’ combined balance sheets. The crisis from rising interest rates in the Eurozone will be different from that facing US dollar markets. With the Eurozone’s global systemically important banks (the G-SIBs) geared up to thirty times measured by assets to balance sheet equity, rising bond yields of little more than a few per cent will likely collapse the entire euro system, spreading systemic risk to Japan, where its G-SIBs are similarly geared, the UK and Switzerland and then the US and China which have the least operationally geared banking systems. It will require the major central banks to mount the largest banking system rescue ever seen, dwarfing the Lehman crisis. The required expansion of currency and credit by the central bank network is unimaginable and comes in addition to the massive monetary expansion of the last two years. The collapse in purchasing power of the entire fiat currency system is therefore in prospect, along with the values of everything that depends upon it. The only sure-fire escape for the ordinary person is to physically possess the money of history that cannot be corrupted, and to which when the state theory of money is disproved yet again, becomes the only acceptable medium of exchange. That is physical gold and silver. Geopolitical factors This millennium, Kipling’s “Great Game” moved from the Central Asia of the nineteenth century and the Middle East to become truly global, with America and its close five-eyes allies on one side, and a coalition of China and Russia on the other. It also happens that the two protagonists are on different sides in the matter of money and currencies, with China and Russia having seized control over the world’s physical gold while America insists gold has no role in modern currency systems. Elsewhere, I have reasoned that China has secretly accumulated enormous quantities of gold, likely to be at least 20,000 tonnes, possibly even more, and its citizens have also accumulated a further 17,000 tonnes. Briefly, the evidence is as follows. The Peoples’ Bank was mandated to acquire and manage the state’s gold and silver resources by regulation in 1983, an extension of its foreign exchange monopoly. Consequently, the PBOC had a clear run-in accumulating gold during the 1981-2002 bear market while China’s citizens were banned from owning both metals. In 2002, the Shanghai Gold Exchange was established and the ban on gold and silver ownership by the public was lifted. The Communist Party even advertised the benefits of owning precious gold, developing significant levels of public demand — hence public ownership estimated at 17,000 tonnes. At the same time the State invested heavily in mining and refining. Consequently, from virtually nowhere China became the largest gold mining nation by far and has maintained that position ever since. No gold was permitted to be exported, and the only Chinese refined bars ending up at the Swiss refineries have been very few and believed to have been smuggled. While we cannot be certain of the numbers, the evidence that the Communist Party has prioritised the accumulation of gold, and to a lesser extent perhaps silver, and now exercises a high degree of monopolistic control over Asian gold markets is irrefutable. Similarly, President Putin has also prioritised the accumulation of gold, though his reasoning was partly driven by American and IMF sanctions in the wake of Russia’s invasion of Ukraine in 2014. Russia’s strategic vulnerability is in the payment for her energy sales, which is overwhelmingly in dollars — the currency of her enemy. Furthermore, under the correspondent banking system, the US has source intelligence of every dollar that is held by Russia and of all her dollar transactions. Putin’s response has been to unload dollars acquired through energy and commodity exports in favour of gold and other currencies. Russia’s political strategy is to allay herself closely with China through the Shanghai Cooperation Organisation and other Asian political groupings, to jointly control the Eurasian landmass, and therefore the bulk of the world’s population. As the swing energy provider to Western Europe, Russia is driving a wedge between America and the UK on one side, and their NATO partners on the other. Currently, she is sabre-rattling on Ukraine’s eastern flank, but the intention is more likely to exploit the interests of EU member nations and remove the EU from the US’s sphere of influence. Similarly, China is rattling her sabres over Taiwan and the South China Sea. This is also designed to bring pressure to bear on America. The common factor is Russian and Chinese assessments of the Biden administration, which they appear to believe to be fundamentally weak. With respect to gold and silver, we can summarise the current geopolitical position as follows. Between them, Russia, China, and their Asian allies have gone a long way towards cornering the world’s physical gold markets. They are now testing the Biden administration, and Putin has a clear intention to isolate America from Western Europe. Meanwhile, the Fed is pursuing monetary policies which, unless reversed (for which there is no conceivable mandate) will inevitably hand economic power to China and Russia because of their gold-friendly policies. And if America and her allies cut up rough, through their joint domination of physical gold and its markets, China and Russia have the means to destroy the unbacked, fiat dollar. Silver Silver appears to be badly mispriced. There are several factors that can only lead to this conclusion. According to the Silver Institute, physical supply in 2021 increased over a depressed 2020 by 8% to 1,056 million ounces but remains below the output for 2014-2016. Meanwhile demand is up 15% this year at 1,033m oz leaving a marginal surplus of just 23m oz. The question obviously arises concerning demand patterns over the next few years at a time of accelerating investment in non-fossil fuel energy and electricity. For silver, increasing demand for electric vehicles and upgrading of mobile networks to 5G can be added to photovoltaic demand. Forecasting the balance of supply and demand is always difficult for silver because of substantial and unforeseen changes in usage (remember photography?), but it seems reasonable to assume that silver will be one of an elite group of beneficiaries from global environmental policies. The mining industry faces additional cost burdens in many countries as they adjust their operations to comply with environmental, social and governance (ESG) regulations and guidance. International miners will be hampered in fund raising if they don’t comply, even for their mines in countries which have yet to formulate their ESG policies to Western standards. Higher costs such as those imposed by ESG compliance can be expected to force mines to extract higher grades to maintain cash flow, so only higher prices rising faster than costs will impart any value to lower grade ores. The effect of ESG is therefore likely to downgrade longer term mine supply forecasts. Lithium Uranium and copper, three of the other beneficiaries of ESG, saw their prices rise in 2021. Lithium Carbonate prices are up 520% since January, Uranium rose 54%, while copper rose 25% on top of a strong post-March 2020 rise. In silver’s case, a swing factor is investment in ETFs which for the last decade has varied between 200-300m oz. By way of contrast with lithium uranium and copper, the silver price declined this year by 15%. But as a measure of total interest, physical silver demand is the tip of a far larger derivative iceberg. According to the Bank for International Settlements, outstanding forwards and swaps total roughly 3750m oz equivalent between bullion banks, and there are further liabilities between banks and their depositors with unallocated accounts. In addition, there are 715m paper ounces in the regulated Comex silver contract, which with other regulated exchanges suggests that there are at least 4,500m oz of added long positions in derivatives, which is 20 times estimated net physical investment demand for this year. And that ignores regulated and unregulated options. While it appears that industrial demand for silver is set to increase significantly, the pricing of silver in fiat currencies at one eightieth that of gold is also anomalous at a time of accelerating price inflation, more correctly understood as currency debasement. Mismanagement of monetary policies now virtually guarantees the death of fiat currencies, and the only salvation will be to replace or change them into credible gold substitutes, because most central banks have at least some gold in their reserves. That being so, physical silver will reacquire a monetary role as supporting coinage. Its abundance in the earth relative to gold is said to be less than ten times, and its historical relationship under bimetallic standards was approximately fifteen to one. The demise of fiat currencies is likely to guide the gold-silver ratio towards these ratios, so the current ratio of eighty times is a blatant anomaly. In the absence of an immediate crisis for the fiat currency regime, changes to the way banks treat derivatives for balance sheet purposes are likely to lead to a contraction of open positions. The introduction of the net stable funding ratio under Basel 3 regulations is designed to curtail derivative risk generally. The withdrawal over time of banks from trading activities because of the NSFR will reduce liquidity in both OTC and regulated derivatives, leading to greater price volatility. And the contraction of paper silver outstanding is likely to translate diminishing paper supply into increased physical demand. Anecdotal evidence is that order books for silver from the refiners currently run into the middle of 2022, with large industrial consumers scrambling to secure supplies. Any surge in monetary demand is therefore set to have a disproportionate effect on silver prices to the upside. Summary and outlook The year just ending has been a bad one for investors in precious metals, but stackers expecting the next financial crisis will be rejoicing at the unexpected windfall from bullion banks suppressing prices. Naïve investors, if they had a rudimentary understanding of monetary inflation, were directed into cryptocurrencies, leaving gold and silver to those seeking genuine protection from upcoming monetary and economic developments. Furthermore, policy planners and their epigones managing markets have demonstrated a reluctance to embrace the facts about inflation or alternatively are simply clueless. The establishment has provided a window of opportunity for ordinary folk to insure against the financial and economic events now so obviously ahead of them. Those who have a grasp of basic economics and deploy common sense understand that interest rates will now rise, and soon. And with extraordinarily high negative bond yields, financial markets are more mispriced for this eventuality than in any time in recorded history. There can be little doubt in dealing with the inevitable market shock ahead that central banks will continue to issue increasing quantities of their currencies in a vain attempt to stabilise their economies and to ensure government deficits are covered. And with the increasingly likely collapse of the Eurosystem and its commercial banks, we can expect a “whatever it takes” inflationary response from the ECB. As their world collapses around them, central bankers will act like bulls in a china shop, destroying their credibility and currencies even more as their panic increases. Against this background, buyers of physical gold and silver will do so not because they expect to profit from it, but to preserve something from the chaos in prospect, which will be triggered by rising, and then soaring interest rates as currency time preferences escalate and their purchasing power collapses. Tyler Durden Sun, 12/26/2021 - 10:30.....»»

Category: smallbizSource: nytDec 26th, 2021

As the pandemic raged, at least 75 lawmakers bought and sold stock in companies that make COVID-19 vaccines, treatments, and tests

At least 75 federal lawmakers held shares of the COVID-19 vaccine makers Moderna, Johnson & Johnson, or Pfizer in 2020, an Insider analysis found. Rebecca Zisser/InsiderAFP via Getty Images; Michael Brochstein/SOPA Images/LightRocket via Getty; Bill Clark/CQ Roll Call; Marie Bill Clark/CQ Roll Call; Skye Gould/Insider At least 75 federal lawmakers held shares of Moderna, Johnson & Johnson, or Pfizer in 2020. Lawmakers' holding stock in these companies has prompted ethical concerns. Several other lawmakers traded shares of companies with a direct stake in the pandemic. Dozens of Republican and Democratic lawmakers on Capitol Hill have invested in companies that have a direct stake in the nation's response to the COVID-19 pandemic, according to an Insider analysis of federal financial records. In 2020, at least 13 senators and 35 US representatives held shares of Johnson & Johnson, the medical behemoth that produced the single-shot COVID-19 vaccine that more than 15 million Americans have received.  At least 11 senators and 34 representatives also held shares in 2020 of another COVID-19 vaccine manufacturer, Pfizer. Two representatives or their spouses held shares of Moderna during the same year that the world went on lockdown in response to the pandemic.Lawmakers held these investments in COVID-19-minded companies as Congress was at the center of pandemic relief efforts. In 2020 and 2021, members of Congress voted on six relief bills together worth nearly $6 trillion. Congress also authorized more than $10 billion to help drug companies develop and distribute vaccines and forced health insurers to cover the cost of getting the shot. Policymakers especially viewed the coronavirus vaccines developed by Pfizer, Johnson & Johnson, and Moderna — which each spent substantial amounts of money lobbying the federal government in 2020 — as critical to helping countries around the planet overcome the grip of the pandemic. The tally of investments is part of the exhaustive Conflicted Congress project, in which Insider reviewed nearly 9,000 financial-disclosure reports for every sitting lawmaker and their top-ranking staffers.Rep. Marie Newman's spouse manages the family's finances.US House of RepresentativesLawmakers invest in big pandemic-era stocks The investors in vaccines included freshman Rep. Marie Newman, a Democrat of Illinois, whose husband, Jim Newman, has traded shares of both Johnson & Johnson and Moderna. The congresswoman's 2020 annual personal financial disclosure also listed the couple together holding shares in Moderna.Marie Newman's office previously told Insider that Jim Newman controlled these finances and that the accounts were for retirement, college savings for their children, and assistance for family healthcare costs. Mary Newman entered Congress in 2021, after it had passed all but one federal relief bill. Her husband continued trading after she was sworn in.  Rep. Josh Gottheimer, a Democrat of New Jersey, was the only other lawmaker who held Moderna stock. In May 2020, he sold up to $15,000 worth of his shares. In early January 2020, a share of Moderna traded below $20. As the pandemic took hold, the stock's value grew exponentially. Moderna peaked in September 2021 at more than $455 a share. After dropping steadily through the autumn, it began rising again in late November. By early December, a share of Moderna traded above $280.Rep. Mo Brooks previously made statements opposing the COVID-19 vaccine mandates.APEven some Republican lawmakers who vocally opposed COVID-19 vaccine mandates also invested in vaccine manufacturers.Vivien Scott, the wife of Rep. Austin Scott, a Republican of Georgia, traded up to $50,000 worth of Johnson & Johnson stock on two occasions this year. Austin Scott has bashed President Joe Biden's workplace vaccine mandates but stressed that he supports vaccines, particularly given that he had COVID-19 in 2020 and spent several days in the hospital on oxygen. "Congressman Scott and his wife own stocks like millions of American families do, and they follow all laws on trading," Scott's spokeswoman, Rachel Ledbetter, told Insider.Republican Rep. Mo Brooks of Alabama sold up to $50,000 worth of Pfizer stock in August 2021 and then was nearly a month late filing his disclosure. Brooks, an unabashedly pro-Trump lawmaker who is running for a US Senate seat, previously accused the pharmaceutical giant of playing politics with the timing of its announcement about vaccine-efficacy data.Martha Brooks, the congressman's wife, told Insider that she handled all the family's stock investments and used an investment broker to conduct these transactions. She acknowledged that she disclosed the stock transaction late. Rep. John Yarmuth is among the lawmakers who sold shares in 3M.US House of RepresentativesInvestments in 3M, Quest, Regeneron Democratic lawmakers also invested in COVID-19-sensitive companies, including through selling and buying stocks in vaccine manufacturers and other companies deeply involved with pandemic relief efforts. Rep. John Yarmuth, a Democrat of Kentucky who chairs the House Budget Committee, sold up to $15,000 worth of stock in 3M, which creates and distributes personal protective equipment such as N95 masks, at the end of March 2020. When asked about Yarmuth's stock investments, Yarmuth's spokesperson said the chairman "has an investment manager who handles these transactions and had no role in this stock transaction." But Yarmuth, like most members of Congress, has not placed his assets in what's known as a "qualified blind trust" — a formal arrangement, requiring congressional approval, in which a lawmaker transfers management of their assets to an independent trustee. Qualified blind trusts can be expensive and time-consuming to establish, but congressional guidance suggests they provide the "most comprehensive approach" to avoiding "potential conflicts of interest or the appearance of such conflicts."Archie Smith, the husband of Democratic Sen. Tina Smith of Minnesota, held up to $250,000 worth of 3M shares, according to her annual disclosure. Her office did not respond to a request for comment.Democratic Rep. Earl Blumenauer of Oregon reported that his wife, Margaret Kirkpatrick, bought up to $15,000 worth of stock in Quest Diagnostics, a leading COVID-19 test provider, in March 2020. Blumenauer did not respond to repeated requests for comment about his financial filings.Democratic Rep. Don Beyer of Virginia reported buying up to $15,000 worth of Regeneron Pharmaceuticals stock in May 2020 through a jointly held account. He sold up to $30,000 worth of the stock between July and August 2020 through a jointly held account. Regeneron makes a monoclonal antibody treatment for COVID-19 that doctors used last year to treat then-President Donald Trump."The congressman does not personally manage or direct any purchases or sales in his stock portfolio. They are managed by a bank brokerage," Beyer's spokesman, Aaron Fritschner, said of his boss' financial planning, adding, "The only direction they have from him is to avoid investments in a few areas like fossil fuels, private prisons, etc."  Democrats' mixed messaging Early in the pandemic, some lawmakers condemned people looking to make money off COVID-19-related treatments and defenses.Rep. Tom Malinowski, a Democrat of New Jersey, told MSNBC in April 2020, "This is not the time for anybody to be profiting off of selling ventilators, vaccines, drugs, treatments, PPE, anywhere in the world."But Malinowski was one of them: The lawmaker sold up to $15,000 worth of stock in Chembio Diagnostics, a company that offers COVID-19 testing kits and infectious-disease testing, in the early days of the pandemic.In 2020, he failed to disclose dozens of stock trades in violation of the federal Stop Trading on Congressional Knowledge Act of 2012 — which clarifies that it is illegal for members of Congress to engage in insider trading — acknowledging them only after Insider reported about his trading activities. Malinowski's office previously told Insider that the congressman employed a financial advisor to trade stocks on his behalf. Malinowski has since placed his stock assets in a qualified blind trust. But he remains under investigation by the House Committee on Ethics after the independent Office of Congressional Ethics said it found "substantial reason to believe" that Malinowski violated federal rules or laws designed to promote transparency and defend against conflicts of interest. The New Jersey lawmaker is one of 10 lawmakers who have taken the option to use a qualified blind trust, Insider found.Some Democrats have argued that their investments in these companies don't present a problem because they happened before the pandemic. Rep. David Price, a Democrat of North Carolina, reported owning up to $50,000 worth of shares in 3M. In a statement to Insider, the lawmaker said his investment "predates the pandemic by many years and was not influenced by current events.""I supported the STOCK Act because I firmly believe it should be illegal for Members of Congress to use nonpublic information to enrich themselves, an ethical standard that I live by," he said. Others said they did not directly manage their own investments. Gottheimer, the New Jersey Democrat whose portfolio includes Regeneron and Moderna, said through his spokeswoman, Alexandra Caffrey, that he did not personally make any decisions about the trades.Sen. Tommy Tuberville, a freshman Republican of Alabama, has invested in Johnson & Johnson, Regeneron Pharmaceuticals, and 3M. Tuberville's spokeswoman, Ryann DuRant, previously told Insider that her boss did not personally make his stock trades and has "long had financial advisors who actively manage his portfolio without his day-to-day involvement." But she has not said whether Tuberville gives any direction to his advisors about which stocks to avoid. When Insider followed up on December 3, DuRant said she didn't have anything new to add to her previous statement. Tuberville is a member of the Senate Committee on Health, Education, Labor and Pensions, which has routinely conducted hearings on COVID-19-related matters.In July 2020, Republican Rep. Carol Miller of West Virginia reported that her husband, Matt Miller, had bought up to $50,000 worth of shares of Abbott Laboratories, a COVID-19 testing company. Carol Miller did not respond to requests for comment about her financial filings. Pfizer and Moderna are among some of the biggest pandemic-era companies lawmakers invested it.Hazem Bader/AFP via Getty ImagesPharmaceutical contributions and conflictsLawmakers' trading stocks of companies that have been profiting from their response to the pandemic has raised concerns about ethics and conflicts of interest.  But Stanley Brand, who served as a general counsel to the US House of Representatives, told Insider that new regulation to bar lawmakers who sit on certain committees from trading stocks of companies in industries that the committees have jurisdiction over could create "a regulatory nightmare.""If you recuse these people, their constituents don't have a vote," he said. "You could literally disqualify half of a committee if you had that rule. I don't know, maybe you wouldn't even get a quorum, depending on what these people own."This issue doesn't seem to be going away anytime soon. Pharmaceutical companies at the center of the pandemic response have been bulking up their lobbying efforts and significantly contributing to political campaigns.Pfizer PACs and individuals who work for the pharmaceutical giant contributed more than $4 million to candidates and committees in the 2020 election cycle, while Johnson & Johnson PACs and employees contributed more than $2 million, according to OpenSecrets, a nonprofit, nonpartisan organization that tracks money in politics. Both Pfizer and Johnson & Johnson gave more to Democrats than to Republicans. Of the big three vaccine manufacturers, Pfizer leads with the most money spent lobbying members of Congress during the pandemic. According to OpenSecrets, Pfizer spent nearly $11 million lobbying the federal government, including Congress, in 2020. The nonpartisan research organization also reported that Johnson & Johnson spent $7.9 million on lobbying in 2020. Moderna, which started lobbying the federal government in 2019, has spent $420,000 on federal lobbying in 2021, an increase from $280,000 in 2020.Joshua Silver, the CEO of the anticorruption advocacy group RepresentUs, said the flow of money in and out of the US Capitol — be it campaign contributions to elected officials, or sitting lawmakers investing in industries they're supposed to oversee — underscored an erosion of ethical standards in Congress. "We've seen 50 years of a steady unraveling of government ethics at the hands of wealthy special interests and the politicians who serve them," Silver said.Self-correction is too much to ask of this or any other Congress, he added. "Both parties are conflicted and benefit from the status quo," he told Insider. "The best way for the country to get back on track is for voters to cut ties with self-serving opportunists — and they better do it fast. The situation is much more bleak than the American public realizes." Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 13th, 2021

Members of Congress publicly blast Facebook but quietly invest their savings in the social-media giant

Lawmakers held stock in news companies, television networks, and social-media giants, an Insider investigation found Rebecca Zisser/InsiderJackie Speier, Nancy Pelosi, Mark Zuckerberg, Ron Wyden, and Ro Khanna.Bronte Wittpenn / The San Francisco Chronicle via Getty Images; Anthony Quintano/Getty; Justin Sullivan/Getty; Anna Moneymaker/Getty; Skye Gould/Insider Insider counted 31 lawmakers holding Facebook stock in 2020. Congressional Democrats investing in the social-media giant are among its public critics. At least 155 members of Congress held stocks in major news and social media companies. House Speaker Nancy Pelosi called Facebook shameful and irresponsible. Sen. Ron Wyden of Oregon suggested prison time for the tech giant's CEO, Mark Zuckerberg. Rep. Ro Khanna of California said Facebook should be broken up. But despite their tough talk toward the social-media behemoth, all three of those Democratic lawmakers or their spouses stood to gain financially from Facebook.They were among at least 31 lawmakers in the House and Senate — 18 Democrats and 13 Republicans — whose families held investments in the tech company during 2020, according to an Insider investigation of lawmakers' most recent financial disclosures.The House speaker is also one of at least 155 Capitol Hill lawmakers, their spouses, or their dependent children who in 2020 held stock in major news companies, television networks, or entertainment conglomerates with significant news holdings, Insider's investigation found. Some of those lawmakers — such as Pelosi — are influential enough to move markets with a stray comment at a press conference. Others sit on powerful committees tasked with overseeing the very companies from which they stand to profit.These investments also underscore an uncomfortable truth about Congress: While many lawmakers love to publicly bash news-media and social-media corporations, some quietly tie their personal wealth to such companies.The analysis of media investments is part of the exhaustive Conflicted Congress project, in which Insider reviewed nearly 9,000 financial-disclosure reports for every sitting lawmaker and their top-ranking staffers.Facebook and PelosiPelosi reported that her husband, the investor Paul Pelosi, exercised stock options and purchased 5,000 shares of Facebook on January 16, 2020, for a total value between $500,000 and $1 million. His stock options in the company were set to expire the next day. Paul Pelosi purchased 3,000 shares at a price of $140 and another 2,000 shares at a price of $150, a certified financial disclosure showed. He bought the shares, totaling $720,000, using stock options, which allow investors to purchase stocks at a fixed price below the market rate. Facebook's stock closed at $221.77 that day.The day of that purchase, Nancy Pelosi criticized Facebook during a press conference. She called the company "shameful" and accused it of "irresponsible" behavior as it was under scrutiny for the spread of misinformation of its platform. "The Facebook business model is strictly to make money," she told reporters. "They don't care about the impact on children. They don't care about truth. They don't care about where this is all coming from."Paul Pelosi later sold 5,000 shares of Facebook on May 8, 2020, when the company's stock was trading at a low of $210.85, which meant the sale was for over $1 million. He contributed another 5,000 shares of Facebook stock to The Paul & Nancy Pelosi Charitable Foundation in August 2020.Nancy Pelosi's office drew a distinction between Pelosi's own personal finances and those of her husband.The House speaker "does not own any stocks," her deputy chief of staff, Drew Hammill, told Insider. "As you can see from the required disclosures, with which the speaker fully cooperates, these transactions are marked 'SP' for spouse," he added. "The speaker has no prior knowledge or subsequent involvement in any transactions."Pelosi represents parts of San Francisco, where Facebook has offices.Federal law, bolstered by the Stop Trading on Congressional Knowledge Act of 2012, requires congressional lawmakers to disclose their financial trades, as well as those of their spouses and dependent children, because of the potential for conflicts of interest.But the law isn't adequate, some government-reform advocates say. "Members of the public don't always get the full picture of what members of Congress might have conflicts of interest related to until long after a hearing or after a bill passes," Delaney Marsco, the senior counsel for ethics at the Campaign Legal Center, said.Because the STOCK Act "is weakly enforced and does not have very punitive penalties … we often are not in real time given the information we might want to have about conflicts of interest," Marsco said. Facebook CEO Mark Zuckerberg testifies remotely during a hearing before the Senate Commerce Committee on Oct. 28, 2020.Michael Reynolds/Pool via APInvestors on influential committeesWyden, a senior Senate Democrat, suggested in 2019 that Zuckerberg face a prison term over Facebook's privacy lapses. Wyden's wife, the Strand Bookstore owner Nancy Wyden, owned between $100,000 and $250,000 in Facebook stock in 2020, according to the senator's disclosure."Senator Wyden and his wife keep their finances separate, so they do not discuss Mrs. Wyden's investments," Nicole L'Esperance, the senator's spokesperson, said in an email. Wyden "has proposed several bills on everything from taxes to consumer privacy that would cost Mark Zuckerberg and Facebook billions of dollars, and go directly at the company's business model," she added.Khanna, who represents Silicon Valley and serves on the House Oversight and Reform Committee, thinks Facebook should be forced to split with Instagram and WhatsApp to foster more competition, he told Bloomberg earlier this year. His wife, Ritu Khanna, owned between $100,000 and $200,000 in Facebook stock in 2020, records showed. "I do not trade in any stocks, and certainly not any tech stock," Khanna told Insider in a statement. He added that he was a cosponsor of legislation that would bar members of Congress from buying or selling individual stocks or other investments while in office. "My wife has assets prior to marriage which are legally not mine, and it's not my place to tell her what to do with her separate assets," he said.Khanna's wife purchased between $15,000 and $50,000 worth of stock in Meta Platforms — the newly established parent company of Facebook and Instagram — as recently as November 2, federal records indicated. Seven days later, on November 9, she sold $15,000 to $50,000 worth of Meta Platforms stock. (Lawmakers are required to report the values of such investments only in broad ranges.)Facebook has dozens of other investors serving in the US House.Rep. Jackie Speier, another California Democrat serving on the House Oversight and Reform Committee, told Vox in a 2020 interview that Facebook gave "license to persons that engage in misogynistic and hate speech." Speier reported owning between $15,000 and $50,000 in Facebook stock last year. Speier's San Francisco Bay area district includes Facebook's corporate headquarters in Menlo Park.  Prominent House Republicans also held Facebook stock in 2020, including Rep. Marjorie Taylor Greene of Georgia and Rep. James Comer of Oklahoma, the top Republican on the House Oversight and Reform Committee. Greene and her husband continued to trade Facebook and other stocks — including those of companies whose corporate social policies conflicted with Greene's political pronouncements — throughout 2021.Two senators who held Facebook stock in 2020 — Democrat John Hickenlooper of Colorado and Republican Jerry Moran of Kansas — are members of the Senate Commerce, Science, and Transportation Committee. Facebook whistleblower Frances Haugen appeared before that panel on October 4, 2021, accusing the company of knowingly harming children and advancing misinformation.The Colorado senator last year reported holding between $250,000 and $500,000 in Facebook stock. At the October hearing, Hickenlooper asked Haugen how it would affect Facebook's bottom line if the "algorithm was changed to promote safety and to change to save the lives of young women, rather than putting them at risk." He added, "Obviously, I think the Facebook business model — it poses risk to youth and to teens."On October 27, 2021, Hickenlooper sold all of his Facebook stock, which was worth up to $500,000, according to a federal financial disclosure he filed on December 10. It is unclear whether the senator made or lost money on his Facebook investment.Moran also questioned Haugen at the October hearing, asking her, "What regulations or legal actions by Congress or by administrative action do you think would have the most consequence or be feared most by Facebook, Instagram, or allied companies?"He held between $1,000 and $15,000 in Facebook stock last year, his disclosure showed. Sen. Sheldon Whitehouse, a Democrat from Rhode Island, was among the members of the Senate Judiciary Committee who questioned Zuckerberg during a November 2020 hearing, where Whitehouse urged the CEO to "make sure that real voices are what are heard on Facebook."Whitehouse owned between $15,000 and $50,000 in the company's stock last year. The Rhode Island senator "does not buy or sell stocks and is not informed by account advisers of trades made in family accounts," his spokesman Richard Davidson said in a statement. "Trades made in the senator's family accounts are conducted independently by a financial advisor without any input from the senator."Facebook is a lobbying juggernaut that spends heavily to influence how the federal government acts. Last year, the social-media firm spent nearly $20 million to lobby the federal government, according to data compiled by OpenSecrets, which made it one of the top lobbying spenders in the nation that year.Ethics advocates say the system of stock disclosures is broken."It's essentially the fox watching the hen house," Jordan Libowitz, the communications director for the watchdog group Citizens for Responsibility and Ethics in Washington, said. "How are members supposed to do their jobs if when they're doing what's best for America, it might hurt their bottom line? It would be great if everyone put their personal assets in blind trusts, but at the very least, members of Congress should be prohibited from buying or selling stocks while in Congress."Rep. Marjorie Taylor Greene is among the lawmakers who reported investments in former President Donald Trump's new social-media company.Kevin Dietsch/Getty ImagesTwitter — and TrumpTwitter — another social-media company that has drawn intense scrutiny on Capitol Hill in recent years — has a handful of investors in Congress, disclosures showed.Hickenlooper's wife, Robin Hickenlooper, owned between $15,000 and $50,000 in Twitter stock in 2020.Four other Democratic members of Congress or their spouses were also invested in the social-media company last year. Patricia Garamendi, the wife of Democratic Rep. John Garamendi of California, held between $1,000 and $15,000 in Twitter stock. Democratic Reps. Josh Gottheimer of New Jersey, Susie Lee of Nevada, and Dean Phillips of Minnesota also held Twitter stock in 2020. Phillips announced earlier this year that he was transferring millions of dollars of assets into a blind trust.Stock in the new social-media company led by former President Donald Trump has also recently attracted a couple of congressional investors, including Greene, who purchased up to $50,000 worth of shares in Digital World Acquisition Corp. on October 22, according to federal records.Three days later, on October 25, Rep. Larry Bucshon, a Republican from Indiana, purchased up to $15,000 worth of stock in Digital World Acquisition Corp., a special-purpose acquisition company that's teaming up with the Trump Media & Technology Group Corp. to fund Trump's yet-to-be-launched social-media platform, Truth Social.The deal is rife with political overtones.Sen. Elizabeth Warren, a Democrat from Massachusetts, in November asked the Securities and Exchange Commission to investigate whether Digital World Acquisition Corp. committed securities violations when the SPAC announced its plans to merge with Trump's company. The former president lashed out at regulators this month after the Securities and Exchange Commission and Financial Industry Regulatory Authority launched an investigation into the merger.And Rep. Devin Nunes, a Republican from California, announced in December that he was quitting Congress to become the CEO of Trump's media company.Rep. Peter Meijer disclosed owning stocks in the New York Times in 2020, the year before he was sworn into Congress.Tom Williams/CQ-Roll CallLawmakers invest in familiar media outlets Members of Congress also held stocks last year in newspapers and television networks that covered them.Republican Rep. Mo Brooks of Alabama owned between $1,000 and $15,000 in Lee Enterprises stock. The media company has a sizable newspaper portfolio that includes The Buffalo News in New York, the Tulsa World in Oklahoma, and the Richmond Times-Dispatch in Virginia. It also owns two local-news outlets in Alabama: the Dothan Eagle and Opelika-Auburn News. Both of those outlets regularly cover the Alabama congressman who's now running for the US Senate.Two first-term millennials serving in the US House — Democrat Sara Jacobs of California and Republican Peter Meijer of Michigan — were the only two lawmakers who reported investments in The New York Times Co. in 2020, the year before they were sworn in to Congress.Only one lawmakers — Republican Sen. Tommy Tuberville of Alabama — reported an investment in Fox Corp. the parent of Fox Broadcasting Co. Tuberville valued the holding at less than $1,001. Tuberville was elected to the Senate in 2020 and inaugurated in 2021.Khanna recently disclosed the August 2021 purchase of up to $15,000 in Fox stock for one of his dependent children. Republican Rep. Ashley Hinson of Iowa reported that her husband, Matthew Arenholz, owned between $1,000 and $15,000 of stock in the Atlanta television broadcasting company Gray Television. Hinson was a TV-news anchor for KCRG-TV in Cedar Rapids, Iowa, before her congressional election. Hinson in April told the Telegraph Herald in Dubuque, Iowa, that she and her husband would sell all of their publicly traded stocks. Republican Rep. John Rutherford of Florida owned between $1,000 and $15,000 worth of shares in the media company Thomson Reuters. Some of the most popular news-media-related stocks held by members of Congress are The Walt Disney Co., AT&T, and Comcast. Those megacompanies own — or owned at the time of the trade — influential news outlets, including ABC, CNN, and NBC, respectively.Pelosi's husband, Paul, held stocks in all three of them in 2020, the House speaker's disclosures showed. In December 2020, he purchased 100 Disney stock options — which allowed him to buy them at a previously fixed rate — with a total value between $500,000 and $1 million.At least 45 members of the House and Senate owned shares in Disney last year, Insider's investigation showed, which made it the most popular media stock among members of Congress. At least 31 owned stock in AT&T, and at least 26 held shares in Comcast.Read the original article on Business Insider.....»»

Category: topSource: businessinsiderDec 13th, 2021

Cathie Wood"s nightmarish 2021: Ark Innovation has plunged 24% as tech has crashed, with 6 out of 8 Ark funds in the red

Ark Invest boss Cathie Wood's year has gone from bad to worse in December, with the flagship ARKK ETF tumbling 10%. Superstar stock-picker Cathie Wood is having a bad 2021.Photo by PATRICK T. FALLON/AFP via Getty Images Cathie Wood's Ark Invest ETFs have taken a hammering in December as investors have avoided tech stocks. With the Fed set to raise interest rates, suddenly, other parts of the market are starting to look more attractive. Ark's Innovation ETF is now down 23.7% for the year, and six out of eight of Ark's ETFs are in the red. Cathie Wood's 2021 has gone from bad to worse in December, with her Ark Invest exchange-traded funds tumbling in highly volatile trading as investors ditch unprofitable tech stocks.Ark Invest's flagship Innovation ETF has dropped more than 10% in December and is now down a whopping 23.7% for the year – putting it in bear-market territory.Six out of eight of Wood's main ETFs are now in the red in 2021. Ark Genomic Revolution has crashed more than 30% and Ark Fintech Innovation is down around 15%.Wood, the founder and CEO of Ark invest, shot to investing stardom last year. Ark's selection of ETFs placed big bets on the technologies of the future – from fintechs to 3D printing – and made huge returns. Investors were flush with cash from government and central bank stimulus programs and they piled into flashy tech names. Ark's Innovation ETF returned around 150% in 2020.Yet many of those tech bets have begun to flop in recent months, as global central banks have started gearing up to turn off the stimulus taps in response to soaring inflation. Concerns about the Omicron variant are also affecting investors.Many tech companies – especially the ones Wood specializes in – are not expected to become properly profitable for many years. With central banks set to raise interest rates in the next year, the far-off returns these companies offer have started to look a lot less attractive compared to other parts of the market.Going into 2022, investors will be faced with less fiscal and monetary stimulus supporting the economy and markets, with the Fed removing liquidity by "tapering" bond purchases, Steen Jakobsen, chief investment officer at Saxo Bank, told Insider."And that means that high-growth stocks, which is built entirely on low rates and high top-line growth, of course is getting impacted massively," he said.Big Ark holdings such as Teladoc, Square and Coinbase have tumbled. Many of Wood's funds would be doing even worse were it not for her big bets on Tesla, which has jumped more than 40% this year.A sort of "inverse Ark Innovation ETF" that's betting against Wood's stock picks – ticker SARK – has soared more than 20% since launching last month, as many investors have spotted an opportunity.Read more: Veteran professor Erik Gordon outlines why he doesn't expect a stock-market crash, calls Cathie Wood a dot-com 'throwback' for her grand claims, and warns against owning meme stocksBut despite investors dumping Ark funds, Wood has remained upbeat. She told CNBC last week that it's the traditional S&P 500 stalwarts that are in a bubble, because they have a less bright future."We are not in a bubble. Our strategies would be flying if we were. I think we have not begun rewarding innovation for what's about to happen and so that's where our conviction comes from," she said.Wood has floated the idea of an "Ark on steroids" fund that would also bet against stocks. And this week Ark is launching its Transparency ETF, designed to track an index of "transparent" companies. Ark Invest did not respond to Insider's request for comment.Looked at from a broader angle, things don't look so bad. The average annualized total return for Ark funds is still around 30% over the last five years.Saxo's Jakobsen said he thinks Ark's funds have a bright future and that investors need to remember their premise."The premise of the Ark funds is not to give you an S&P or a Nasdaq performance. It is to buy into the concept that the future has technology embedded into it, and to be part of the future you need to buy a big number of lottery tickets."Ark's ETFs have been hit hard this year, with the majority of returns in the red.Bloomberg dataRead the original article on Business Insider.....»»

Category: smallbizSource: nytDec 7th, 2021

Leapfrogging Legacy Banking To A Bitcoin Standard

Leapfrogging Legacy Banking To A Bitcoin Standard Authored by Mitch Klee via BitcoinMagazine.com, How looking at the history of technological adoption can give us insights into where Bitcoin could be embraced the fastest... INTRO Throughout time, technology has proven to change our lives by leveraging efficiencies in energy. New ways in how we hunt have saved time and energy for innovation and to live more intentionally. Currently, Bitcoin presents an immense opportunity to change the lives of those who are burdened by old forms of manipulated money and preserve their time and energy. It is the first self-sovereign, programmable money that is proving to destroy expectations of every “expert” imaginable. At the intersection of money and technology, Bitcoin's network effect is spreading like a mind virus to all corners of the globe. This is not a coincidence but the manifestation of a zero to one moment; a radical new technology that will change nearly everything it touches. This article explores the idea that some regions and nations have a higher susceptibility to adoption in new monetary networks. Specifically, I will outline how the unbanked populations of emerging countries can leapfrog legacy systems, straight into a new monetary standard. But first, let's lay the groundwork for understanding how this can happen with some concepts. DEMOCRATIZATION OF TECHNOLOGY To understand leapfrogging, let’s first look into something that naturally happens when humans produce technology: the democratization of technology. As we make technology, the cost reduces, while the ease of production increases. Our tools get better, people’s skills improve, securing the material for production gets easier, logistics improve, and everything is less costly as humans continue increasing the output/yield over time. Simply put, cost goes down, while production goes up. Figure 1. A great example is the printing press. Before this innovation, each book had to be typed out or written one by one and distributed almost by osmosis. This means books were more expensive and were only in the hands of the few. After the printing press, people were able to automate a portion of the process by creating blueprints of the books. This cut down labor costs, and there was a huge explosion in printed material. This may have put people out of work; but it also introduced better dissemination of information to a wider group of people and new opportunities to produce more books for less cost and effort. Another example is photography. Historically, taking photos on film took hours to produce in a dark room. The film had to be brought to a local expert and it would take several days to get back the finished product. Smartphones and photoshop technology made this essentially free. It was then possible to download an app or use the built-in app on smartphones, take pictures, and immediately process them. Democratization of technology has been happening across every single aspect of human society since the beginning of time. Humans create tools to make it easier and cheaper to survive. Each tool becomes better, we then expand and evolve with less energy improving the quality of life. Fast-forward to the internet age. Emerging countries are just now tapping into the power of the internet. Although there are many factors underlying the reasons for expansion, one thing that is known is that technology builds on itself, making each successive technology easier to produce. Not only is there growth, but there is exponential growth. Certain times throughout history, technology has made such a large leap forward that it allows extremely poor countries to skip the legacy technology and quickly adopt the new one. This is called leapfrogging. LEAPFROGGING EXPLAINED Leapfrogging is when the cost to produce one technology is too great for a population, so when a new, drastically cheaper technology is created it’s quickly adopted and the old tech is skipped. This is the coexistence and benefit of separate populations within society. Let's look at the mobile phone revolution as a way to explain leapfrogging. Some societies did not have the wealth or infrastructure to adopt landlines and phone communication when it was brand new, but when the mobile phone was introduced, this gave mostly everyone around the world the ability to opt-in. Figure 2. Landlines in the U.S., 1900–2019. Figure 2 shows the number of landlines in the U.S. population from the 1900s to 2019. Throughout the entirety of the 20th century, the landline was being adopted in the U.S. Consequently it only took a decade to dethrone this old technology. The decline started when the benefit of cell phones outweighed the cost compared to landlines. This is where democratization hit the tipping point and we saw a huge jump from one technology to the next. Now it’s extremely cheap to use technology that is 100 times or even 1,000 times more advanced than the previous. Mobile phones usurped landlines because they were more affordable, easier to use and more mobile. Figure 2 shows how quickly a society can adopt a technology that has significantly more benefits than the previous, even in an advanced society. A similar thing is happening with television and the internet. Netflix came out and disrupted how people consume media on the television. As more platforms emerged, and people realized they could pay a fraction of the cost for a Netflix subscription rather than $100 for cable and a bunch of commercials, the switch was easy. Legacy systems were bogged down by all of the brick-and-mortar stores and overhead costs. They could not compete and pivot quickly enough, so they lost their seat at the table. Figure 3. Number of telephone subscriptions in the U.S. versus worldwide. When comparing fixed telephone subscriptions to other countries, the U.S. was way ahead of most. Many factors were contributing to this. Wealth played a huge part, but much of it was the production and first movers’ advantage. The U.S. was the first country to set up telephone lines from Boston to Somerville Massachusetts and expanded from there. Other countries did not have this opportunity, so they were laggards in the technology simply by default. It also made it easy to have a grid to run on top of, being a technologically advanced country with a power grid. Because it was so resource-heavy to set up this grid, this took over 30 years to build up the infrastructure. Figure 4. Landline subscriptions compared to GDP per capita, 2019. One of the main reasons why it was so hard to increase telephone subscriptions in other countries is because of the initial cost. You can’t just tap into a telephone line, there needs to be a large grid, infrastructure and companies/governments willing to build out this grid. Figure 4 shows that there is a rough line at a GDP per capita of $5,000 to get off zero and start communicating via landline. As the GDP per capita grows in a country, it is more likely they adopt fixed landlines. This is a huge barrier to entry as they try and compete to be a part of the 21st century. With telephones, it brings an easier flow of information across long distances quickly. These are important technologies that helped first-world countries advance quicker than their counterparts. This technology could mean the difference between surviving and thriving in the modern era. Figure 5. Mobile phone subscriptions versus GDP per capita, 2019. Things get much different when you start looking at mobile phones in Figure 5. To have a mobile phone is drastically cheaper than having a landline, all costs considered. Before, you needed the infrastructure and everything that came with installing a landline phone. But with mobile phones, even at a GDP per capita of less than $1,000, you get ~50% penetration of adoption within the population. All of the countries that were left out of communication with landlines, now have leapfrogged the old technology, right into a new standard of mobile phones. People benefit, businesses benefit and countries benefit immensely from these technologies. With mobile communication, people have higher leverage over their energy output. Businesses and life in general are more efficient, in turn creating a higher GDP for the country. It is a feedback loop that is good for all of humanity. When one group of people creates new technology, everyone benefits at one point or another. FROM LANDLINES TO MOBILE PHONES TO INTERNET-CONNECTED SMARTPHONES Not only are poorer countries leapfrogging into mobile phone communication, but they are, in turn, jumping right into the internet age. On top of that, (Android) smartphone costs are dropping significantly every year, with the average cost down by 50% from 2008 to 2016. With the growing ability to connect with the rest of the world comes more opportunities to learn and grow with the rest of the world. An incredible amount of information is available on the internet, and the benefit of being on the network is immeasurable. Figure 6. Mobile versus landline subscriptions, worldwide, 1960–2019. When comparing the numbers of mobile phone users to the numbers of landlines, you get a huge disparity in the pace at which they were adopted. Fixed landlines were around for almost 50 years before they started to see some real competition. Thinking back to our Figure 5, this makes sense, because the cost to build infrastructure is drastically higher than that of mobile phones. The opportunity a landline brought to civilization was immense, but the cost-effective mobility of cell phones transcends previous communication technology by a longshot. As of September 2021, the world’s population was ~7.89 billion people. Of that, there are 10.5 billion cell phones with network connections. That is 2.52 billion more activated phones than there are people. This becomes thought-provoking when adoption data starts to reveal where mobile phones are headed next. As people adopt mobile phones, smartphones are becoming cheaper and more abundant. The cost of production for smartphones is less and less each year, and soon there will be little reason to have a cell phone without internet connection because the cost difference will be so minuscule. Smartphone abundance is allowing people around the world to tap into the internet and it is estimated that “by 2025, 72% of all internet users will solely use smartphones to access the web.” Figure 7. Share of the population using the internet, 1990–2019. Currently, the world is in a transitionary period of communication. Not all of the world has access to the internet, only 65%, with an increasingly rapid pace of adoption. Because it is so inexpensive to get a mobile phone, and the benefits are immense, the world is being onboarded at an incredible rate. To answer the question “What is Leapfrogging?” we can look directly at mobile phones. But it’s not just one leapfrog, it’s more of a continuous onboarding to the digital revolution for the entire human population. Things are getting cheaper, and technology is moving exponentially forward, toward a more connected future. Soon, everyone will have access to the internet and will bring about new and exciting opportunities for the world to grow. With the high rate of adoption in communication technology, mobile phones swept across low-GDP countries allowing information to spread. Smartphones are a small hop away from mobile phones. With smartphones comes all sorts of opportunities not to mention the connection to the world's internet. In developing countries, the internet is starting to hit its hockey stick moment. Adoption continues to grow and as smartphones get cheaper, more people in the world have access to the internet, connecting them to their local and global economies and new innovations will come about in unforeseen ways. This begs the question, what monetary network will they use to transact in the digital age? It's taken years to get the legacy banking system up to speed. We’ve bootstrapped and “Frankensteined” many different ways to connect the internet to a centuries-old banking infrastructure, but these newly onboarded countries have the opportunity to skip that altogether. With no legacy banking infrastructure rooted within the nation, this leaves the door wide open for a new legacy. LEAPFROGGING ONTO A BITCOIN STANDARD It seems the stage is set for a paradigm shift. A perfect storm is brewing in populations that lack bank accounts and access to store their wealth. Coupling this with connection to the internet, and 21st-century e-commerce and monetary system, it is impossible for countries not to adopt it. Because bitcoin is a global asset with no intermediaries, its infrastructure is inherently global. Any improvements to the network, the entire world will benefit automatically without having to update the old tech. Unlike landlines, there is no infrastructure to build, and the barrier to entry is almost zero. You just opt in with a bit of hardware and an internet connection. As of 2017, according to the World Bank, there are 1.7 billion adults in the world without a basic transacting account. Most of these countries with higher rates of unbanked are poor, have high rates of inflation and lower currency stability, not to mention a disconnected state government ripe with problems. This is extremely common when looking at currencies in other low-GDP countries. So, what are some of the biggest factors in which people would want or need to adopt Bitcoin? If we can answer this question, then maybe we can quantify and pinpoint which countries have the biggest opportunity and most to gain from adopting a Bitcoin standard. Figure 8. World’s most unbanked countries (Source). Figure 8 shows the top-10 most unbanked countries as of February 2021. The Oxford dictionary defines “unbanked” as “not having access to the services of a bank or similar financial organization.” Much like building the infrastructure for landlines, it’s expensive to build banks and serve the local economy. Not to mention, many of the people living in these countries don't have the amount of money that would warrant the cost of owning a bank account. Some even share bank accounts with members of their families to save on costs. There is a huge opportunity to solve the problem of banking in low-GDP countries, but many of the digital banking companies around the world are constrained by regulation and geographical jurisdiction. It may be hard to grasp the importance of a bank account having never lived without one, but without a bank, citizens cannot secure funds safely. Without secure funds, the future is uncertain. This is where Bitcoin can solve some of the problems in these less developed and emerging countries. There are three specific ways in which these problems could be solved. 1. Bank the Unbanked Bitcoin gives everyone the ability to be their own bank with something as little as a cell phone. All that's needed is to be connected to the network and accept funds. The smartphone does all of this. It allows people to download a bitcoin wallet, connect to the internet and start transacting. There are many ways in which one can use this wallet. Coincidentally, the countries above who have low banking numbers within their population, also have mobile phones and high internet penetration. This is an open door from a technological standpoint, allowing people to opt into Bitcoin and secure their funds digitally. In addition to using the Bitcoin network to transact on your phone, you can also use it as a cold storage solution. Cold storage is similar to a savings account. This savings account or cold storage is disconnected from the internet, making it harder for people to steal your funds. With the old technology of banks, you would have to pay for this solution, but with Bitcoin, it's free, just download the software and/or buy a hardware wallet. There are some cold storage solutions where you can pay for a hardware device, but creating a phone wallet and securing your keys, gives the people an entry point and on-ramp to storing their wealth in a digital bank. 2. Securely Store Value Over Time The second opportunity is the store of value function. Many of the countries that have unbanked populations and poverty issues are a result of a currency problem. In my previous article, “Bitcoin As A Pressure Release Valve,” I wrote that certain countries have hyperinflated currencies with no option but to turn to the black market. Most of the time, these countries use the U.S. dollar to transact since it holds its value better relative to their currency. Strictly from a monetary standpoint, bitcoin is scarce. It is the most scarce form of money there is. There will only ever be 21 million bitcoin in existence and when the value rises, the production does not increase. This is called elasticity or the lack of elasticity in bitcoin’s case. Unlike fiat money, no government, central bank or agency can print more. And unlike gold, silver or any other commodity, when the demand rises, the amount that is mined stays the same. The first completely inelastic asset in existence is a result of preprogrammed architecture, with consensus in the network that’s default is to not change the protocol. People that live in countries where the money is known to be manipulated, understand Bitcoin almost immediately. When the idea of something that can't be manipulated is presented, the concept of scarcity and 21 million is understood. With the reality of incorruptible money, the current regime in power can't stuff their pockets without alienating the population through force. These people understand this idea because they have experienced it firsthand. When food prices rise faster than people can spend a weekly budget on groceries, it is immediately apparent the importance of a completely scarce, un-manipulatable asset. In developed countries with low levels of unbanked, people have ways of storing their wealth. They have a 401k and IRA, and most people own property. This is a way of storing value over time. It may not be completely efficient, but it is sufficient enough to escape some level of inflation. The alternative would be to keep your dollars in a savings account, and the real yield of that is negative and not a smart way to store money. These countries put money in financial devices, because it is the smart thing to do and it preserves time and energy. Unbanked countries have no way of storing long-term value. It is degraded and evaporated through manipulation and high levels of money printing. Emerging countries cannot store time and value into financial instruments. There is no Apple stock or S&P 500 to put money into. They are stuck with low levels of wealth that are stolen away on an ever-moving treadmill. There is no way of truly saving value or energy spent over time. For the first time, Bitcoin gives the world, particularly those in emerging countries, the ability to hold their value in a closed system that cannot be inflated. Much like the opportunity the mobile phone brought to change communication, bitcoin is the first “store of value'' that is available for low-GDP countries to buy and hold. It allows them to securely transfer their wealth over time, without fear of inflation or confiscation. Add on top of that, if they need to transfer wealth out of the country and flee an oppressive regime, bitcoin is the first asset that gives the ability to do so. Large amounts of gold cannot be taken on a plane or property and homes cannot be transferred to another country. Bitcoin gives people the freedom to do what they want with their earned value, without fear of a centralized power removing it. Bitcoin preserves the fundamental human right of property. 3. Connection to the Digital Economy The third problem Bitcoin solves is connecting and transacting digitally. Being a digitally native asset, bitcoin smooths the rails of commerce allowing low-GDP countries to join the 21st century of commerce. This is huge, and what cell phones did for communication, digital commerce will do the same. It immensely increases our ability to transact and exchange value. Bitcoin allows anyone, anywhere, to join a digital transacting network and exchange value natively over the internet, whether in person or without knowing them at all. Digital economies move at the speed of light, while old-school economies move at the speed of osmosis. This brings more time and efficiency for people on both ends of the transaction. Businesses spend less time on transactions, widen their addressable market, and start putting more time and effort into other things that can improve their work. It is the difference between transacting daily in cash and using a preprogrammed point of sales system. It is simply better. Not only does Bitcoin make things easier and frees up more time, but it is programmable money. Like the internet, Bitcoin can be built in layers. Each layer brings a new way to use it that widens the possibilities and use cases. What the internet did for communication, Bitcoin will do for money. Combining all three of these factors, you get a massive magnetic pull toward adoption of the new technology. It is hard to slow the movement of technological adoption and impossible to stop. Like throwing a match on a tinder-filled hillside, years of opportunity build up in countries that lack technology where innovation and adoption prepare to explode at the right moment. QUANTIFYING BITCOIN ADOPTION IN LOW-GDP COUNTRIES Figure 9. LocalBitcoins and Paxful Vietnamese dong (VND) combined volume in Vietnam (Source). Looking at every one of the top-10 countries from Figure 8, they all have meaningful adoption in Bitcoin and it is growing every week. Not only is Vietnam number two on the unbanked list, but it is also number one on the “Chainalysis 2021 Global Adoption Ranking.” In fact, looking at Figure 10 of adoption through LocalBitcoins and Paxful, USD volume shows that every one of the countries in the top-10 list of unbanked have meaningful adoption. Figure 10. LocalBitcoins and Paxful Vietnamese dong (VND) combined volume. What does this tell us about Bitcoin adoption in unbanked countries? It tells us that it's working. Continuing to see these trends improve will be good for Bitcoin adoption and not to mention the countries in which they are adopting it. All the ingredients are there. Most are unbanked with high internet access and an unreliable currency that isn't natively digital. All you need is time for the adoption to take hold. There are also some concerns that come up when thinking about Bitcoin adoption. Like, “How can they adopt bitcoin when it is so volatile?” Well, there are a few solutions to this problem. The first is that when a population has no choice, something as volatile as bitcoin could mean the difference between losing 30% or losing 90% over the span of one year. Keep in mind that bitcoin is already solving three of the major problems listed above, we are just remedying the problem of volatility. First, look at just bitcoin and its use cases today. For some countries, their currency is just as volatile if not more volatile than bitcoin. Not only that, but it is volatile to the downside, continuing to lose value as the government steals and prints away spent time and energy. If bitcoin were to be used, sure it might be volatile, but this volatility is either short lived, or it’s to the upside. Now look at bitcoin while using it for everyday transactions through Strike, as a more technical solution. This solution is currently available now in El Salvador as a test case and is starting to roll out to more and more countries. People use the Bitcoin and Lightning rails every single day but transact in USD, choosing to either save in bitcoin or not. This solution gives the best of both worlds. One, a population has the ability to transact short term in a currency that isn't volatile, like other emerging countries. Two, this gives access to the payment rails of Bitcoin and the ability to save in the most scarce asset in existence. Looking back historically, bitcoin has grown at a 200% compound annual growth rate and this has the opportunity to conserve and grow wealth immensely. For someone in a developing world, this is life changing. As this trend of adoption in underbanked countries continues, new and exciting ways where Bitcoin is used will emerge. For the first time in history, countries have the ability to store wealth in something that cannot be stolen. It gives the opportunity to transact freely without the permission of the state or government, and it allows people to break free from imposed serfdom. Bitcoin is here and it is only getting bigger. There is a change in the tides of time, and Bitcoin is a once-in-a-millennia technology that is pulling the shores. Tyler Durden Fri, 12/03/2021 - 18:20.....»»

Category: blogSource: zerohedgeDec 3rd, 2021

GreenWood Investors 3Q21 Commentary: Defense, Offense & Conviction

GreenWood Investors commentary for the third quarter ended September 2021, titled, “Defense, Offense & Conviction.” Q3 2021 hedge fund letters, conferences and more When Defense Misfires “Offense wins games. Defense wins championships.” This past quarter, much of my curiosity has been focused on the differences between offense and defense. Given I’ve spent little time watching […] GreenWood Investors commentary for the third quarter ended September 2021, titled, “Defense, Offense & Conviction.” if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more When Defense Misfires “Offense wins games. Defense wins championships.” This past quarter, much of my curiosity has been focused on the differences between offense and defense. Given I’ve spent little time watching team sports, it’s been an interesting exploration. As my mind was occupied by defining an offensive playbook for our two coinvestments, we took our eyes off the ball of our protective, defense-oriented portfolio activities. The performance in the quarter was impacted by a 4% headwind generated by one particular short, which was the primary reason our fund underperformed indices in the quarter. While it was a painful lesson, we immediately evolved our short process in order to prevent our defensive measures from ever hurting our performance to such an extent going forward. Cutting to the chase, the performance in the quarter for the Global Micro Fund was -7.7% net (+30.5% YTD), and this compares to our benchmark MSCI ACWI index returning -1.1% in the quarter (+11.5% YTD). Without any FX headwinds, euro-denominated Luxembourg fund returned -3.3% net (+39.4% YTD). Separate account composites had similar returns, as Global Micro strategy returned -8.1% net (+15.0% YTD) and our longest-running and long-only Traditional accounts returned -6.8% net (16.5% YTD). The Builders Fund I returned -5.2% net in the quarter (+84.5% YTD) driven partially by foreign exchange. Builders Fund II, which was launched in the quarter, returned +3.0% net (+3.0% YTD). Aside from the one short mentioned, our returns were also impacted by corrections at Superdry PLC (LON:SDRY) and Peloton Interactive Inc (NASDAQ:PTON), each taking away roughly 2% from our performance in the quarter. They are both experiencing very different situations right now in the aftermath of Covid, but both are pressing their offense strategies with increased vigor. We remain undeterred with Superdry despite popular skepticism on the brand’s turnaround. Such perspectives look mismatched with a reinvigorated influencer strategy targeting a whole new generation, which have just driven same-store-sales to positive territory on a two-year stack. This is ahead of a pivotal autumn-winter season, when its jackets, coats and sweaters have traditionally shined. Having missed last winter due to Covid, we are excited to see the new product resonate with an entirely new base of consumers. We recently followed the Chairman and CEO’s insider buys, and purchased more shares on weakness. We continue to be encouraged by the progress made; and for a slightly longer discussion on where our thoughts are on Superdry, click here to see a tweet thread. Peloton has experienced a round trip of home workout demand back to pre-covid levels. Thus, while it is launching new products and new geographies, and retains an industry-leading engaged base of 6.2 million exercisers with low monthly subscription churn, this position will have to return to old fashioned marketing to continue on its path towards its incredibly ambitious goal of impacting 100 million users’s fitness routines every month.. With its customer satisfaction, as measured by the Net Promotor Score, remaining one of the highest, if not the highest, in the world, we would not bet against this heavily engaged cult of growing endorphin-filled users. We believe the company still has a very significant market opportunity to both attack and define. Revisiting The Defense Playbook “Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.” Warren Buffett Stretching the offense and defense analogies over to investing, this past year has rewarded risk-taking (offensive) strategies, particularly those that are furthest out on the risk curve. But over the long-term, value-oriented investing wins the championship. That means taking a conservative underwriting approach to investment opportunities and maintaining a defensive posture when everyone else is doing the opposite. In our opinion, that also means running a short book, which allow us to remain opportunistic in periods of greater stress. It is not a good time to be reducing a defensive posture, in our opinion. Over the first 11 years of GreenWood’s existence, we have almost never been idea-constrained. Rather, we have been only constrained by the capacity we have to analyze the large opportunity set. That has typically meant, aside from the earliest years, we have had minimal cash left over. Given we have gravitated towards misunderstood assets and areas neglected by robotic index funds, not only does this portfolio tend to not carry a large cash balance, but it has exhibited more volatility than an index. Accordingly, carrying a short book is essential for us to be able to remain opportunistic in periods of stress. And quite frankly, our defense track record could use some improvement. While this defensive posture paid off in 2008, 2011, and 2018, we had few opportunistic shorts going into 2016 and 2020, right when we needed them. I’m personally committed to improving on that 3-2 market defense track record. I’m also committed to lowering any significant portfolio tilt towards specific factors, as our fundamental research capabilities are not able to be matched on a macroeconomic scale. There are too many factors and estimates to know anything on a large scale with any degree of certainty. For us, conviction is the most important function of an asset manager. It was with that intention we have been carrying a full short book ever since late 2020. And that short book largely paid off over the first half of this year, as the current environment has proved to be fertile in finding over-valued, value-less businesses. In fact, most of these shorts underperformed the market so quickly and so dramatically, that short book turnover caused Chris and I to run on a faster and faster treadmill throughout this year. When we found the short that ended up causing us so much pain in the quarter, it sounded too good to be true. It was a perfect offset to some of our chunkier portfolio factor exposures, but even more, it became clear this was not only a terrible business model, but it was likely a fraud. As Chris and I dug further into the business, there was a never-ending string of yarn that we kept pulling, and the more we pulled, the more damning the evidence was on the founder, company and target markets. In that excited process, we failed to appreciate the risk posed by the meme-trading phenomenon, in the assumption that an Italian company was unlikely to get caught up in the retail trading frenzy that has generated so many distortions elsewhere. Bypassing that debate proved to be our mistake, as the less liquid nature of the stock meant that it was more easily manipulated higher for a few months. As it was getting squeezed, I took action to eliminate that portfolio risk, even knowing that the stock would eventually go to zero. And in the wake of that experience, we also exited other shorts that had largely run their course, but that posed some possible retail trading risk. In our post-mortems, that are published on our investors-only research area, we identified one of the problems we were trying to solve for was the treadmill we found ourselves on. Because each piece of incremental evidence made it more and more compelling, we actually didn’t pause to have a proper bull-bear debate, which is what we have done for every other position. We had put too much pressure on ourselves to maintain a timely short book, and in many ways that papered over the obvious truth that the borrow was hard to obtain and liquidity was not accommodative. We revised our ranking framework to ensure there is a significantly higher bar for less liquid shorts in the future. Furthermore, we decided that any “gaps” in needed short exposure would more easily be filled immediately with index funds that could directly help offset some of the chunkier factor risks to our portfolio, namely European value stocks. We don’t intend to hold these index hedges forever, but believe it will help take pressure off of us to prematurely add new shorts to the portfolio. We have a lot of candidates in the backlog, but we are determined to ensure that we get the timing right as opposed to just the company thesis and factor exposure. At their core, our defensive moves should first do no harm. This analogy mirrors perhaps the most quoted Buffett lesson about rule number one, noted above. In that vein, our current short portfolio is comprised of large, liquid index constituents with very low short interests, cheap borrows, and are largely well-loved. Similar to most of our short positions in the past, they also have mounting liabilities as decades of unconscious behaviors or corruption have eroded the core values of the businesses. We recently published our research on two newer positions on our investor-only research site. These shorts have multiple catalysts over the next few quarters, that we believe, will cause both a material impact to their financials while also possibly downgrading the market’s behavioral narrative. More Conscious Than ESG “Sustainability is built into our business model. If we are focused on the long term, there is no conflict between profitability and the interests of stakeholders. If you are focused on the short term, there is. It’s that simple!” Sir Martin Sorrell Most importantly, these two businesses that we are short have some deeply unconscious features. While each case is different, this means that we’ve found evidence of corruption or deliberate sales of defective or toxic products for decades prior to being discontinued. All of these behaviors are only now catching up to these companies and present material downside risks to these businesses that have historically been run for short-term profit maximization as opposed to long-term value creation or innovation. These are the kinds of companies that are causing the ESG movement to gain major traction around the world. But while we applaud action being taken on protecting the environment, the ESG movement is not solving the root of the problem. The movement is addressing the symptoms rather than the causes. In a white paper that I can’t wait to publish, we’ll show evidence that the fundamental issue facing business today is one of unaccountable agents seeking immediate gratification. There’s a lack of ownership and accountability in a market that continues to outsource much of the “ratings” to agents. Large funds managed by agents with no skin in the game are relying on ratings agencies, also with no skin in the game, to dictate qualitative criteria that often don’t tie to value creation, but rather liability minimization. And that is important, but not sufficient on its own. It is defense without the offense. Or sometimes, it’s all marketing covering up flimsy foundations. Owners or founders exhibit more long-term, conscious capitalist behavior. They generally don’t give quarterly profit guidance, and instead prefer to focus on their customer satisfaction and employee morale. They invest more in their own businesses rather than paying that capital out to shareholders or to acquisition targets. Great shareholder returns are the result of a highly conscious business model, not the goal in and of itself. Exhibit 1: Builders Have Happier Customers & More Engaged Employees Source: GreenWood Investors, OO = owner operators, DC = dual share class structures, S&P = S&P 1200 Global Index But what does it mean actually to be conscious? That’s the subject that Anil Seth seeks to answer in his latest work, Being You. In seeking to demystify the mystery of consciousness, he discusses the most robust model that has been put forward for understanding and measuring how conscious an organism is. Integration information theory (IIT) postulates that consciousness is measured by the degree to which information is integrated into a system or action. Seth explains, “This underpins the main claim of the theory, which is that a system is conscious to the extent that its whole generates more information than its parts.” This concept struck me, as it has many direct parallels to well-worn concepts in investing. Of course it makes sense that the more conscious an organization is, the better it is at integrating information into action. But what really struck me here is that using this IIT framework- an organization is only conscious if the whole is greater than the sum of its parts. To me this infers that if the parts of a business don’t come together to produce something more powerful or valuable than the sum of those individual units, segments or components, the business is not a conscious business. Seth later explained how conscious perceptions are largely built from best guesses and confidence. A key insight of Bayesian inference is that perception is largely a function of updating beliefs about the world based on the precision and reliability of new information. Our minds seek to eliminate prediction errors everywhere and all the time, and we do so by converging our beliefs to the level of conviction we have in the information. In this age of ubiquitous and free information, we differentiate ourselves by the level of conviction we have in the quality and reliability of the insights we have. Conviction is the key. And as Seth later demonstrated, such insights are virtually worthless if not paired with action. This echoes the sentiment that Warren Buffett expressed in talking about getting fat pitches in one’s career, and that one must “swing big,” as they don’t happen very often. This is indeed why we are “swinging big” with Coinvestment II, as this is one of the fattest pitches we’ve ever been thrown. Moving From Defense to Offense “High expectations are the key to everything.” -Sam Walton As my mind was more occupied with offensive capital allocation strategies in the quarter, this pairing of action with insight particularly spoke to me, highly conscious offense playbook strategies are rare. Instead the norm is that most offensive actions are typically made from a defensive motive, and are not based on novel insights. As I wrote in last year’s fourth quarter letter, we endeavor to only get involved in turnaround situations where we either have a board presence, or where a founder or owner operates the business. In our view, these managers have been more resilient in defending their businesses from adversity. Simply put, they cannot just give up and move on. As Covid ripped through the world and economies, far too many managers decided to give up. In the depths of the Covid crisis, at the Presidential inauguration ceremony, National Youth Poet Laureate Amanda Gorman articulated rather eloquently that, “Your optimism will never be as powerful as it is in that exact moment when you want to give it up.” Founders are inherently optimistic, and they don’t give up. In exploring the differences between defense and offense, I’ve come to realize that it is even more important to have an owner-oriented management culture when moving from defense to offense. Defense is inherently reactive, reacting to “known knowns” or “known unknowns.” Reactions are easier than proaction. Traditional boards are typically very good at liability minimization. But as important as liability reduction is, these actions do not create value. New business and invention is inherently venturing into the unknown, seeing what others don’t, and pursuing the path untravelled. It comes naturally to a founder or owner, whose authorship imbues the business with the optimistic, entrepreneurial impulse that often started it in the first place. As my friend Bill Carey has articulated, most managers compensated via stock options act more like stock brokers as opposed to owners. Similar to brokers, their time horizons have shrunk considerably. They are simply rent-seeking for a short period of time. And as my friend Chris Mayer likes to say, “no one washes a rental.” Our research on the differences in the behaviors of owner operators and these renters, shows these renters are not very good at offense strategies either. They are very good at competitive reactions, cost cutting and margin optimization. These are important, just as any defense strategy is, but they typically fail to create any lasting value. The value that is captured from these tools generally only lasts as long as the brief period in which the manager’s stock options vest. Given 70-90% of mergers and acquisitions fail, and stock repurchases have taken a notably pro-cyclical, buy-high, sell-low, history, these renters have a typically poor track record in value-creating initiatives and capital deployment. This short-term rental behavior often results in mediocre outcomes. As the late great Sergio Marchionne regularly reminded, “mediocrity is not worth the trip.” Marchionne acted like an owner even before he was one. And he created so much value that his net worth neared $1 billion when he shuffled off this mortal coil. While much of that was indeed generated by options that he exercised, such options were struck at twice and three times the level at which he came in to rescue Fiat in 2004. His package inspired the design of CTT’s options package for top and first level managers. Sergio was very good at seeing things others didn’t. He and his venerable team of managers, to whom he dedicated so much of his energy, were very good at transforming ignored products and assets into gold. Of particular note, Jeep grew from just over 2%of the market in the US to just under 6% when he passed- and it became a truly global brand. He invented Ferrari’s Icona series, which made the irregular limited edition profits part of the regular P&L of the brand without diluting the exclusivity of such models. He and parent holding company Exor have continued to provide much of the inspiration behind our activities with both coinvestments. We endeavor to replicate their divide & conquer strategy, which allowed the Fiat Group to become stronger as stand-alone Fiat-Chrysler (now Stellantis), Ferrari, CNH, and soon to be Iveco Group. Just as Sergio advised the few believers throughout his career, investors will be “owning multiple pieces of paper” as the journey unfolds. In hindsight, we can all agree on the value creation prowess of him and his team. But we easily forget that for most of his career, he was faced mostly by skeptics and doubters. He was not afraid to look dumb. In his own words, “A lot of what I do is challenge assumptions . . . which often looks like you are asking stupid questions.” Being entrepreneurial, by definition, means taking the path untraveled, and heading into the unknown with daring boldness. Offense playbooks, by design, must take competition by surprise. Coming from a humble place with brands and companies that were ridiculed by competitors, when Sergio put medium-term plans out to the market, they were not timid. He would always aim higher than anyone, especially his competitors, believed he and his team could reach. And while not every target was always achieved, the formidable results speak for themselves. This past earnings season, as Twitter was the only social media company to deliver on guidance while also confirming the quarter ahead to be at least as good, the stock sold off materially as its monetizable daily active user (MDAU) targets in the medium-term were called into question. While founder Jack Dorsey is clearly unafraid to look foolish to the public, or even in front of congress, he also manages multiple businesses at the same time. Competitors openly make fun of him. But his team is exceptionally loyal to him, and they have set out very ambitious targets for themselves over the next few years. The recent sell-off in Twitter shares was like deja vu all over again, as I reminisced about the Fiat capital markets day in 2014, fittingly on Twitter in this tweet thread. With its product and revenue servers rebuilt, it can now innovate and launch new ad formats faster than ever before. We look forward to the Twitter team pressing its offense strategy as a major peer loses focus on its core business. Into The Unknown “Action is inseparable from perception. Perception and action are so tightly coupled that they determined and define each other. Every action alters perception by changing the incoming sensory data, and every perception is the way it is in order to help guide action. There is simply no point to perception in the absence of action.” Anil Seth, Being You What does it mean to move into offense? One thing very clear to us, is that it has to be a dynamic and reflexive approach. It cannot be built into a three or five year plan and remain fixed over that duration. As Anil Seth’s work on consciousness explains, a highly conscious being is constantly ingesting and integrating information, evolving actions based on reliability, precision and conviction. As capital-markets focused investors, we believe one of the highest values we can provide to our companies is information that can be integrated into their offense and defense playbooks. Thanks to our collaborative approach, we get nearly daily recommendations and thoughts from our investors with new information, new case studies, and new suggestions on how to continue iterating. One of the biggest differentiations between good and great investments, that is often overlooked, is the value added by good capital allocation- be it with a very well-done merger, opportunistic buyback or even more, venture-style investments that are almost in no one’s “model” or perception. Small acquisitions that bring new tools and managers can often upgrade the business model. As Clayton Christensen suggested in The Big Idea: The New M&A Playbook, these are often the most overlooked investments. But during the quarter, when posed with the question of how to best allocate capital over the long term, I found myself tongue tied. For it’s a dynamic and reflexive question to ask. It’s easy to see what to do right now, and where to build in the next few years. But sound capital allocation is a function of the opportunities that present themselves. It is also about creating new possibilities, particular ones that competitors don’t see. At CTT, with defensive, problem-solving actions becoming less of a focus, attention can now turn to offense. What that looks like in the near term, at least to me, should be continued progress and convergence on the strategy to become the Shopify of Iberia. With Portugal e-commerce order frequency at very small fractions of neighboring Spain, we believe it is CTT’s responsibility to make itself the most convenient and most cost effective way of conducting commerce. Through more parcel lockers, better digital tools, while maintaining or improving on best-in-class quality of service, we believe much of the responsibility to make online the most convenient commerce channel in Portugal will fall on CTT’s shoulders. Going further with online shop enabling, more cost effective payments tools, and an integrated fulfillment offer, that continues through to returns and customer service, it has every tool it needs to enable this digital transition. This convergence is happening at the same time EU recovery stimulus dollars will be directed towards digitalizing the economy. Case studies like Kaspi, which started as a bank, evolved into a payments company, then launched an e-commerce marketplace and then further expanded into logistics, provide more inspiration than any company in the logistics industry. This reminds me of Google’s earliest days, when its managers encouraged their teams to ignore the traditional competitors and instead go where other competitors hadn’t dared to venture- into the unknown. We believe CTT has greater competitive advantages than some “new economy” companies playing throughout the same e-commerce value chain, often trading at significantly higher valuation multiples. Whether we’re talking about fulfillment services, parcel lockers, or alternative purchase financing, it’s the customer relationship that differentiates and builds competitive advantages. That is why one of the first priorities of the new management was to improve customer satisfaction. And while some analysts that cover the company still use traditional methods to frame the opportunity, the shareholder base has largely transitioned away from income-oriented investors. More like-minded shareholders, aligned with management, can enable the team to build something truly great. Building Great Companies “The urgency of doing. Knowing is not enough; we must apply. Being willing is not enough; we must do.” DaVinci What started for us as an approach to separate the bank from the industrial company, and achieve a sum of parts valuation, has been upgraded to that of building a great compound machine. As Exor articulated in 2019, its purpose to “build great companies,” is an aspirational philosophy for us. While we certainly aren’t doing the building here, perhaps through setting the right strategic priorities, incentives, and providing timely and right information, we can assist in the build underway. Exor has provided an exemplary model of how to enable its teams to build greater value by dividing, conquering, and then often later combining with more synergistic peers. Just like Anil Seth described, the whole must be greater than the sum of the parts in a highly conscious organization. When a company’s sum of the parts is greater than the total, the organization is not conscious, and therefor not capable of adding material value. Just as Exor has executed masterfully in its portfolio companies over the past decade, the path forward is one of both dividing and one of conquering. Extending the business and commerce services that CTT provides is a natural offense-oriented positioning that further reinforces the strength of the whole. But there are other parts of this organization that aren’t adding as much to the sum total- those can, and should be separated to pursue their own offense playbooks in a more focused and agile manner. Such an approach goes well beyond ESG, and it goes well beyond most other broker-oriented management teams. It is a highly conscious capitalist approach, aligned with long term value creation and sustainability. And that process should result in considerable returns as an effect, not as a goal. As owner operators’ short, medium, and long term benchmark outperformance demonstrates, this strong alignment between management and ownership is a championship-winning combination. Exhibit 2: Owner Operators’ Stock Index Outperformance Source: GreenWood Investors In the months ahead, we anticipate thoroughly engaging with the management and board of the target at the Builders Fund II. This company is mirroring CTT’s current posture, in that it is in the process of finishing nearly a decade of defense-oriented actions. After years of strategic actions focused on fixing problematic areas, contracts or business dynamics, most of these reactive or defensive actions are increasingly passing into the rearview mirror. It is entering a new phase of life in a position to also divide and conquer, and it has exceptional assets. With both coinvestments representing a substantial portion of our net exposure, we move forward with conviction. While this quarter was a lesson that we, nor our companies, can lose sight of a strong defense strategy, we are increasingly looking forward to our portfolio pressing offense strategies moving forward. Committed to deliver, Steven Wood, CFA GreenWood Investors Updated on Nov 24, 2021, 4:37 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 24th, 2021

Aesop’s Marathon

Dear fellow investors, Q3 2021 hedge fund letters, conferences and more Aesop: The Originator Of Investment Logic Warren Buffett and Charlie Munger always refer to Aesop as the originator of investment logic. His first dictum was “a bird in the hand is worth two in the bush.” His second dictum was the fable of the […] Dear fellow investors, if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Icahn eBook! Get our entire 10-part series on Carl Icahn and other famous investors in PDF for free! Save it to your desktop, read it on your tablet or print it! Sign up below. NO SPAM EVER (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Aesop: The Originator Of Investment Logic Warren Buffett and Charlie Munger always refer to Aesop as the originator of investment logic. His first dictum was “a bird in the hand is worth two in the bush.” His second dictum was the fable of the “Tortoise and the Hare.” We have been getting many questions about the strength of our results and the strength of the stock market in general. We want to remind everyone that investing is a marathon, and in our case, Aesop’s marathon. In a world of microscopic interest rates, the market participants are dramatically more interested in the “two in the bush” than they are in the “bird in the hand.” Fast revenue growth, from “innovative” companies sporting very high price-to-sales (P/S) and price-to-earnings (P/E) ratios, is all the rage. We have heard everyone from John Malone, Bill Ackman and Jeremy Grantham warn investors recently about this financial euphoria. They have joined us as looking like “the boy(s) who cried wolf!” As Buffett so clearly stated in May at the virtual annual meeting of Berkshire Hathaway, interest rates serve as a gravitational pull to P/E ratios. High rates begat low P/E ratios and low rates begat high ratios. To state the obvious, we have the lowest interest rates of my 63 years. Therefore, it appears to us at Smead Capital Management that the “two in the bush” will stay levitated until those rates move higher. We have told people for years that you shouldn’t hold your breath until the interest rates start going up in a sustainable way. The “bird in the hand” goes back to what Buffett says about owning a stock. He says, “Buy it as if the stock market is closed for five years.” His point is, would you be happy to be the owner of this business if you owned the whole thing as a private company? Would the free cash flow and after-tax profits reward you “in the hand?” How many investors would be willing to be the sole owner of the “innovation” stocks which are all the rage, if there were no “bigger fools” coming in behind them? The tortoise was slow and consistent, while the hare was a sprinter. The hare got way ahead in the race and had a seemingly insurmountable lead. However, the chart below shows the history of the hare’s performance over long stretches of time. What it proves is that when the hare gets tired, the abuse stockholders endure is much more powerful than the declines in the tortoise stocks: Looking For A Needle In A Haystack You see, Buffett pointed out that “innovation” investing is like looking for a needle in a haystack. Out of 2000 auto companies over 120 years in the U.S. from 1900 to 2020, there were few who survived. Everyone loves Amazon, while we’re one of the few lovers of eBay, but almost nobody else made it out of the Dotcom Bubble profitably alive. Do all those Beyond Meat and Peloton shareholders out there, who are getting crucified lately, understand this? Do Rivian and Lucid bidders think that the bloom won’t come off their rose? The chart below shows us where the “bird in the hand” has come from, as well as where it might come from in the future: As for us, we will stick with companies which are providing the “bird in the hand” via free cash flow and expect good things from the reversion to the mean in commodity prices versus stock prices. Look no further than the oil and gas industry (CLR, OXY and COP). We believe Berkshire Hathaway’s market inactivity is tied directly to the fact that wise investors run in Aesop’s marathon! We thank our investors for their patience as we help them fear stock market failure. Warm regards, William Smead The information contained in this missive represents Smead Capital Management’s opinions, and should not be construed as personalized or individualized investment advice and are subject to change. Past performance is no guarantee of future results. Bill Smead, CIO, wrote this article. It should not be assumed that investing in any securities mentioned above will or will not be profitable. Portfolio composition is subject to change at any time and references to specific securities, industries and sectors in this letter are not recommendations to purchase or sell any particular security. Current and future portfolio holdings are subject to risk. In preparing this document, SCM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. A list of all recommendations made by Smead Capital Management within the past twelve-month period is available upon request. ©2021 Smead Capital Management, Inc. All rights reserved. This Missive and others are available at www.smeadcap.com. Updated on Nov 23, 2021, 1:36 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 23rd, 2021

The Russell 2000 is a small-cap US stock index that is widely regarded as a bellwether for the economy

The Russell 2000 is a small-cap stock market index that's often used as a barometer for the US economy. The Russell 2000 is one the most closely followed small-cap equity gauges.LiudmylaSupynska/Getty The Russell 2000 is a stock market index made up of 2,000 small-cap US companies. It is a widely used performance benchmark for funds that invest in small-cap equities. The broad cross section of US-focused companies in the Russell 2000 also makes it a barometer for the economy. Visit Insider's Investing Reference library for more stories. The Russell 2000 is a stock index that tracks the performance of 2,000 small-capitalization companies and often serves as a measure of the underlying health of the US economy. It comprises the smallest companies included in the broader Russell 3000 Index, and is one of the most widely used benchmarks for funds that invest in small-cap stocks.The Russell 2000 accounts for 10% of the market capitalization of the Russell 3000, which represents around 97% of the investable US equity market. Both are operated by FTSE Russell.How does the Russell 2000 Index work? As with the Russell 3000 and many other equity indexes, the Russell 2000 is weighted by market-capitalization. This means that stocks with greater market value have a proportionally larger impact on the index's overall level.To be included in the index, companies must first be part of the Russell 3000, which comprises the 3,000 largest US-traded equities. FTSE Russell then picks the 2,000 smallest stocks from this index, removing such multibillion-dollar corporations as Microsoft, Apple, and Alphabet, leaving the companies that make up what could be considered the 'core' of the US economy. "The Russell US indexes were created over 40 years ago and have been a key barometer of the US economy," says Edward Moya, a senior market analyst at New York-based foreign-exchange broker OANDA. "Depending on which stage an economy is in, its expansion cycle might determine whether an investor wants to buy large-cap or small cap-stocks.Note: According to FTSE Russell, the average market cap of companies in the Russell 2000 was $3.594 billion, as of Oct. 31, 2021.Some of the largest firms in the index include AMC, Asana, Crocs, and Macys, with market values in the $10 billion-$20 billion range as of November 2021. Conversely, some of the smallest members include biotechnology pharmaceutical companies such as Forte Biosciences and Hookipa Pharma, which had market values of less than $1 billion.Russell 2000 members ranked by market value (November 2021)Largest Russell 2000 companiesSmallest Russell 2000 companiesAsana — $24.9 billionForte Biosciences — $47 millionAMC Entertainment — $21.9 billionTeam Inc.  — $51 millionAvis Budget Group — $15.9 billionSpruce Biosciences — $72 millionDigitalOcean Holdings — $14.2 billionMedavail Holdings — $74.5 millionLattice Semiconductor — $11.6 billionAcutus Medical — $102 millionCrocs — $10.6 billionHookipa Pharma — $114 millionHow is the Russell 2000 different from other major indexes? Given that it covers a larger number and broader range of companies than the Dow Jones Industrial Average or the S&P 500, the Russell 2000 exhibits slightly different behavior from these and other major market gauges."Small-capitalization stocks tend to be more economically-sensitive and cyclical than large-capitalization stocks," says Ari Wald, a technical analyst at Oppenheimer. "That is, they both rise and fall by a greater magnitude through the ups-and-downs of an economic cycle."Quick tip: While they may have better upside potential, Russell 2000 stocks also can be more volatile and risky, with their performance during the COVID-19 pandemic in particular showing how they can be hit harder than large-cap stocks.Another thing to keep in mind is that the Russell 2000 is composed according to different rules than other indexes, including some such as the S&P 600 that track small-cap stocks as well."The S&P 600 has a financial viability requirement for companies, whereas the Russell 2000 does not," says Ross Mayfield, an investment strategy analyst at Baird Wealth. "This can result in a higher percentage of unprofitable companies being included."On the flipside, there can be a greater potential for growth, given the smaller size of the average Russell 2000 company. It also tends to be more diverse and broader than other popular small-cap indexes, something that arguably makes it more representative of the 'real' economy.How to invest in the Russell 2000 IndexFor investors, the Russell 2000 has a number of interrelated uses."Individual investors can gain exposure to the Russell 2000 by mutual funds and exchange-traded funds (ETFs) that attempt to replicate the performance of the index, though it is not possible to invest directly in an index," says Wald.While mutual funds tracking the Russell 2000 are available, ETFs are more common. These are some of the largest:BlackRock iShares Russell 2000 ETF (IWM)Vanguard Russell 2000 ETF (VTWO)ProShares UltraPro Russell2000 (URTY)Wald also highlights the benefit of using the Russell 2000 as part of a balanced asset allocation process, since owning both small- and large-capitalization stocks can help diversify a portfolio. This especially comes into play at different stages of the economic cycle, with small-cap companies often promising better-than-average returns during upswings, largely because their revenues are concentrated domestically."If the US economic outlook is strong, historically the Russell 2000 Index should perform nicely," Moya says.Mayfield points out that the Russell 2000 can be used simply as a benchmark or frame of reference for investors looking to narrow their focus onto more specific areas."It can be used to benchmark performance for active managers, as the underlying index for a passive investment (e.g. exchange-traded fund), or simply as a reference point for an investor who wants a broad gauge of how small cap stocks are doing," he says "Both institutional and retail investors can use the index. Since it is one of the most commonly referenced in the world, nearly everyone who invests in the small cap space might use it or come across it."The financial takeawayThe Russell 2000 serves as a benchmark for small-cap funds and a barometer for the overall health of the US economy. Investors, mostly through exchange-traded funds, can use it to gain exposure to the cyclical swings of the US economy, although this carries risks during downturns and recessions.As such, investing in the Russell 2000 through an ETF requires a researched understanding of the state of the US economy, and it works well as part of a diversified approach that sees small-cap stocks or funds being balanced out with investment in large-cap alternatives.Read the original article on Business Insider.....»»

Category: dealsSource: nytNov 19th, 2021

Energy Bandwagon And Bankers

Dear fellow investors, Q3 2021 hedge fund letters, conferences and more The Energy Bandwagon In 2014, famed UK stock picker Terry Smith wrote a piece, titled Shale: Miracle, Revolution or Bandwagon?, in most ways mocking investors excitement in the oil and gas business in the United States of America. In his writing, Monsieur Smith highlights […] Dear fellow investors, if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more The Energy Bandwagon In 2014, famed UK stock picker Terry Smith wrote a piece, titled Shale: Miracle, Revolution or Bandwagon?, in most ways mocking investors excitement in the oil and gas business in the United States of America. In his writing, Monsieur Smith highlights some of the negatives of the oil and gas business like the amount of energy needed to extract the energy, depletion of reserves in wells, and lastly, investor returns. We love his writing because for that time period, he was right. The most sensitive issue an investor should have been focusing on then was the last point: investor returns. To Smith’s first two points, using energy to produce energy is just physics. There is no way around it. It’s just like sending electricity across lines. You’ll lose 15% of the electricity in long-range transportation. This certainly shouldn’t stop you from wanting to transmit electricity over long distances. These transmission lines provide a dynamic, deep market for consumers and businesses. When it comes to his other point on depletion, this is yet again a natural process for oil and gas. We have become smarter in pad drilling and fracking to get after more oil and gas in particular geographies. The issue then wasn’t the natural depletion. It was the cash flow that would come in the years ahead with that depletion. This points back to Smith’s later point of investor returns. We were in complete agreement with Smith at that time. Smith finished his piece in the Financial Times saying, “As the late Jimmy Goldsmith was fond of saying: ‘If you see a bandwagon, it’s too late.’ The shale bandwagon may have already passed.” To his point on investor returns, they weren’t there and weren’t going to be there for a while. The cash flows were being pushed at more marginal wells, not the cash cows. As Buffett has said a multitude of times, “price is what you pay, value is what you get.” In 2014, you didn’t get much value at those prices as the bandwagon was long and very noticeable. Fast forward to 2021, the bandwagon of other energy forms is very noticeable. There are practically religious orders being built up in other forms of energy like solar and other renewables. Are these other forms of energy subject to the laws of economics? Yes. They may end up with the same victim mentality that energy investors in 2014 did. We are by nature very skeptical of Wall Street and the ideas it peddles. This is because you should always be skeptical of someone selling something that has an incentive attached, particularly when you don’t have similar incentives. Physicist Mark Mills pushed back strongly in his 2019 piece titled The “New Energy Economy”: An Exercise in Magical Thinking. Mills stated in 2019, when speaking about shale versus wind, “The fundamental differences between these energy resources can also be illustrated in terms of individual equipment. For the cost to drill a single shale well, one can build two 500-foot-high, 2-megawatt (MW) wind turbines. Those two wind turbines produce a combined output averaging over the years to the energy equivalent of 0.7 barrels of oil per hour. The same money spent on a single shale rig produces 10 barrels of oil, per hour, or its energy equivalent in natural gas, averaged over the decades.” Mills is pointing out some of the pure physics of this discussion. As George Gilder points out, “time is money.” These resources have vastly different costs in time, thus price. Isn’t it odd this doesn’t stop the bankers from creating a magical story for the bandwagon? Spot Oil Prices vs Occidental Petroleum Why would so many people not be aware of the time limitations or why would many investors not care that per pound (mass) hydrocarbons are the most efficient, acceptable (non-nuclear) energy source in the world? It’s because the bandwagon is out there on renewable energy, just as it was in 2014 with shale. In Newton’s third law, for every action there is an equal and opposite reaction. The equal reaction to today’s renewable revolution is that people have immense confidence in its future and that reflects in price. The opposite reaction is that hydrocarbons are left for dead and the price is very low. Below is a chart comparing spot oil prices to Occidental Petroleum Corporation (NYSE:OXY), since 2014. Investors used to pay $60-$80 per share for Occidental Petroleum at today’s spot WTI price and this was prior to them owning Anadarko Petroleum. This acquisition gave them 30% more production. Our minds spin at the thought of this. While the bandwagon comes and goes in renewables (non-hydrocarbons), we will wait for our investors’ day in the sun with Occidental Petroleum (OXY US), Continental Resources, Inc. (NYSE:CLR), ConocoPhillips (NYSE:COP) and Chevron Corporation (NYSE:CVX). The bandwagon being nowhere near us today makes us very excited for the value we get at today’s prices. To bring it back to Terry Smith, he was right in 2014. Our investors owned zero in energy stocks then, like Terry. Now, he should be elated that the bandwagon is not in the oil and gas business. However, he isn’t buying energy stocks because his discipline doesn’t allow him to own these types of businesses. Between investors unwilling to own these companies (the bandwagon) and the magical banking that these investors have been sold, we are thankful for our investors. Newton’s third law and George Gilder’s principles just reinforce the truth. Fear stock market failure, Cole Smead, CFA The information contained in this missive represents Smead Capital Management's opinions, and should not be construed as personalized or individualized investment advice and are subject to change. Past performance is no guarantee of future results. Cole Smead, CFA, President and Portfolio Manager, wrote this article. It should not be assumed that investing in any securities mentioned above will or will not be profitable. Portfolio composition is subject to change at any time and references to specific securities, industries and sectors in this letter are not recommendations to purchase or sell any particular security. Current and future portfolio holdings are subject to risk. In preparing this document, SCM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. A list of all recommendations made by Smead Capital Management within the past twelve-month period is available upon request. ©2021 Smead Capital Management, Inc. All rights reserved. This Missive and others are available at www.smeadcap.com. Updated on Nov 16, 2021, 12:49 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 16th, 2021

SCOTT GALLOWAY: Here are the companies I predict will get acquired - and by whom - in 2022

Tech giants are buying up smaller media firms left and right because of one very valuable asset: their audiences. Peloton is one of the companies Galloway predicts could be acquired next year. Ezra Shaw/Getty Images Scott Galloway is a bestselling author and professor of marketing at NYU Stern. The following is a recent blog post, republished with permission, that originally ran on his blog, "No Mercy / No Malice." In it, Galloway talks about which media and content companies he predicts will get acquired. Three weeks ago, "someone" floated the idea of PayPal buying Pinterest. PYPL plunged 5% the next day (shedding the value of Under Armour) and the company then denied the rumors. Our thesis: PayPal's management leaked the story as a trial balloon, and let it float away when the market threw up on the notion of PinPal (couldn't resist).PayPal should have had the courage of its convictions. Pinterest is a great product with a shitty business model, as evidenced by what feels like a desperate attempt to monetize with ads that pollute the platform. The asset here is not the business model or cash flow, but the 444 million people (nearly the population of the US and Russia combined) who log on to Pinterest every month. The fat lady likely hasn't sung: The asset is now 10% cheaper than it was pre-balloon. Scott Galloway In an attention economy, scaling users solves most economic problems. And problems are solved faster when you have a business model than can monetize each user at a healthy rate. Fintech is good/great at this, and the market cap per user of these two firms reflects this. Scott Galloway The lesson here is that advertising is a shitty business. It's (much) less shitty for companies that have the populations of the Western hemisphere and can construct a digital corpus based on data they capture. But they still don't command the premium of fintech. Social platforms must find more products to spray across their user base, while fintech companies need more users.This is the reason we'll see a flurry of acquisitions of media/content firms whose audiences can be better monetized across a payment platform. Amazon Prime Video and AppleTV+ are validation that media is worth more as part of a non-media company than it is as a standalone business. In sum, media has become featurized.Eyeball acquisitionFirms in every sector are realizing that the best way to reduce their CAC (customer acquisition cost) is to produce proprietary content that keeps customers engaged and increases word of mouth. Media companies cultivate engaged communities that take years, if not decades, to build. While a Gulfstream 500, at $45 million, seems impossible to rationalize economically, it can be justified if you have more money than time (i.e., if you're an old rich person). Fintech firms are about to embark on the mother of all midlife crises and pay huge sums for private jets posing as media firms.It's already started. Hubspot acquired The Hustle, a media company that produces a newsletter and a podcast. JPMorgan acquired The Infatuation, a publisher that provides restaurant recommendations and produces live food events. Square acquired Tidal, a music streaming service. Robinhood acquired MarketSnacks, a financial news company that offers bite-size business updates. Many others are purchasing audiences instead of products.But not all eyeballs are equal. Eyeball value is a function of several factors:AffluenceEngagementLoyaltyThe eyeball market is hierarchical. Big Tech floats atop the food chain. Legacy media whales swim just below. Crawling on the seabed are thousands of microcommunities - newsletters, messaging channels, recommendation sites, influencer followings - that present unique monetization opportunities for the predators above. Scott Galloway Match gameIf you're not buying eyeballs/audiences, you're buying features/products. Big Tech has been bolting on capabilities this way for decades. The iPhone is a Frankenstein of acquired tech, from the touchscreen (FingerWorks, 2005), to the SoC (P.A. Semi, 2008), to Siri (Siri, 2010). Amazon bought robotics (Kiva, 2012), grocery stores (Whole Foods, 2017), and smart doorbells (Ring, 2018). Microsoft launched its empire on a product acquisition (DOS, which it bought way back in 1981).Then there's the unlikely peanut-butter-and-chocolate idea, somewhat out there, best considered when shareholders are under the influence of an edible or a frothy market. In 2005 the founders of a small mobile startup were pitching VCs for financing when they took a meeting with two guys named Larry and Sergey who owned a search company. They wanted to buy the mobile startup, they said, and give the product away for free. Google's decision to acquire Android is obvious in hindsight, but was strategic genius at the time.The hard truth is that most high-profile acquisitions don't pay off. But the ones that do pay off bigly. These are some of the largest bets on the table. An exercise I often do when asked to speak to boards of directors: Imagine it's three years from now and your market cap has trebled. What likely happened to get you there? I find that framing gives board members, who spend a lot of their time being skeptical, worrying about downside, license to think big. And typically, some of the ideas this exercise generates are acquisitions that seem crazy at the time but may prove to be crazy genius.Let's go crazyTesla could buy truck stop company Pilot Flying J. Tesla's been building superchargers at the company's locations for several years, but bringing the entire operation in house would let it upgrade the user experience and extend Tesla's brand and value proposition - think Apple Store. Vertical integration is in Tesla's DNA - it makes more of its own components than traditional auto manufacturers do, and Elon has said that "building the machine that makes the machine" is a critical success factor. The company owns its own sales and service network already.An integrated Tesla experience at the charging station would make its passenger cars more valuable today and a true long-haul variant of the Tesla Semi more viable tomorrow. It might look like a step backward for the EV king to start selling gasoline, but what better way to put itself in front of potential electric vehicle customers? Many long haul truckers own their own rigs. Elon will have to pry Pilot Flying J away from Warren Buffett, but a few billion in Tesla stock should break it loose. Maybe a Twitter poll?Another valuable acquisition target is NFT marketplace OpenSea, which lets users trade tokenized digital assets - usually art - on the blockchain. With a 97% market share, it's already made a name for itself as the premier operating system for NFT trading. Last week it crossed $10 billion in all-time sales volumes. Payment processors including PayPal should be drooling over this firm. It provides immediate entry to a herd of young, highly engaged crypto enthusiasts and could help modernize PayPal's retail footprint. PayPal can alternatively build up its own crypto-trading platform - it's working on this with Venmo - but there's a big difference here between jumping on the bandwagon and owning it. If PayPal had processed the more than $5 billion worth of sales on OpenSea in the last two months, it would have raked in almost $200 million at current rates.But the low-hanging fintech-media buy is for Dorsey's taking. Square has established a strong foothold in payments and acquired a number of other interesting features in the process, such as Tidal (music streaming), Caviar (food delivery), and Afterpay (lending). The most obvious, the purchase that could identify Square as the overnight leader in the race to SuperApp, is social. Fortunately for Square, its cousin twice-removed is a social media giant. Dorsey could unite Square and Twitter and initiate its march toward becoming the next WeChat. He'd also have the luxury of running two mega corporations from the same office.2022My annual predictions are coming up in a few weeks. Some likely M&A-related predictions for 2022:The regulatory big chill around big tech and acquisitions thaws: either the DOJ proves flaccid, or it breaks up companies and oxygenates the marketplace. Both outcomes give clarity, and these companies will begin acquiring again.2022 is the biggest year in M&A in recent history, as the "Race to the SuperApp" inspires leviathans to couple with other leviathans.Fintech and legacy banks go shopping for media and content.Twitter cleans up the fake accounts suppressing its revenue, the stock drops below $40, and Jack unites his sister-wives (Square acquires Twitter).Peloton gets bought. Its likely acquirers? Nike or Apple.An NYU professor acquires the Rangers International Football Club, PLC.Re: the last one, the best way to predict the future is to create it.Life is so rich,ScottRead the original article on Business Insider.....»»

Category: topSource: businessinsiderNov 12th, 2021

3 Growth Stocks with a Zacks Rank #1

3 Growth Stocks with a Zacks Rank #1 What an amazing start to November! A ‘goldilocks’ jobs report, a taper announcement and passage of a $1.2 Trillion infrastructure package. And amid all this, investors enjoyed a solid earnings season that reassured nervous investors at a time of soaring inflation and severe global supply chain issues.Oh, and the major indices started the month with a solid week of new highs. There may never be a better time to take a look at the Zacks #1 Rank Growth Stocks screen.In addition to a Strong Buy ranking, this strategy also looks for stocks with a minimum 20% historical growth EPS rate and a 20% or more projected growth rate. We’re looking for big growth in the past and the present that will lead to big growth in the future.Below are three names that recently passed the test for this screen:Crocs CROXCrocs (CROX) fell victim to the globe’s severe supply chain issues just like most other retailers, but this popular footwear brand proved to be as durable and flexible as its iconic clogs and sandals. Despite the challenges, CROX continues to beat earnings estimates and also raised its revenue growth forecast for fiscal 2021.If you don’t own a pair of Crocs yourself, then you certainly know someone who does. Its one of the leading footwear brands in the world and is famous for its clog material dubbed Croslite. The wide variety of footwear products include sandals, wedges, flips and more that cater to people of all ages. As part of the textile – apparel space, CROX is in the top 20% of the Zacks Industry Rank. Shares are up more than 180% so far this year.The third quarter saw earnings per share of $2.47, which beat the Zacks Consensus Estimate by 30%. In addition to being the sixth straight positive surprise, the result also marks the 14th outperformance in the past 15 quarters. (You can probably guess why it had a rare miss in April of 2020.)Revenue of $625.9 million was a record, and also increased 73% year over year while topping the Zacks Consensus Estimate by 1.7%. Business was strong in all regions.Its Vietnamese factory felt the pinch from severe global supply chain issues, which led to closures and disruptions in the global supply chain. However, CROX confronted the problem and made moves to weather this storm, including shifting production to other areas, improving its factory throughput, leveraging air freight and strategically allocating units. These actions appear to be successful, as evidenced by the short and long-term goals.In fact, the company has been so agile in unprecedented circumstances that it now sees revenue growth between 62% and 65% this year, compared to an earlier forecast of 60% to 65%. Furthermore, adjusted operating margin is now expected around 28%, instead of the prior outlook of 25% and fiscal 2020’s 18.9%.Analysts are impressed with CROX and its successful efforts to combat current challenges. The Zacks Consensus Estimate for this year is up 11.9% over the past 60 days to $7.59, while next year climbed nearly 20% in that time to $9.38. Most impressively though, analysts currently expect year-over-year improvement of 23.6%.Image Source: Zacks Investment ResearchTri Pointe Homes TPHNo growth screen would be complete without knocking on the door of the homebuilders. This space enjoyed an enviable combination of surging demand (due to historically-low rates and millennial interest) along with a glut in supply (due to that pandemic). The building products – home builders space is still in the top 30% of the Zacks Industry Rank.And one of the few companies from that space with Zacks Rank #1 (Strong Buy) status is Tri Pointe Homes (TPH), which builds premium homes and communities in 10 states. Shares are up 45% so far in 2021 with ten straight quarters of positive earnings surprises. Strong revenue growth and margin expansion led to a solid third-quarter report late last month.Earnings per share of $1.17 topped the Zacks Consensus Estimate by more than 31% and brought the four-quarter average surprise to nearly 32%. Home sales revenue of over $1 billion improved 25% from last year and also beat our expectations. Even with the supply chain issues, TPH managed to increase deliveries by an impressive 25%.Even with the pandemic losing its grip and people getting ready to resume normal lives, the future looks pretty good for TPH. The company still enjoys a robust backlog, healthy demand outlook and a strong balance sheet. These demand drivers should continue even as we leave Covid behind, as millennials have discovered the benefits of owning a home.As a result, deliveries for the full year are expected between 6,000 and 6300 with an average sales price of $635K to $640K.Analysts have boosted their forecasts for this year... and for next. The Zacks Consensus Estimate for 2021 is now $3.91, which is up 8% in 30 days. The 2022 estimate is now up to $4.29, marking a rise of 8.6% since the report and suggesting year-over-year improvement of nearly 10%.Image Source: Zacks Investment ResearchTractor Supply Company TSCOIt seems fitting that Tractor Supply Company (TSCO) would be in a growth screen like this one. Not only does the company sell products to farmers and ranchers, but the raised forecast for 2021 also shows plenty of growth in the future.TSCO is the largest retail farm and ranch store in the country, operating more than 1900 Tractor Supply stores across 49 states (as of Sep 25, 2021). The company focuses on recreational farmers and ranchers, as well as tradespeople and small businesses. It offers a wide array of merchandise such as livestock, pet and animal products, maintenance products for agricultural and rural use, hardware and tools, lawn and garden power equipment, truck and towing products, and work apparel.Shares are up approximately 60% so far this year after seven straight quarters of positive surprises. The company decided to raise its outlook for the full year despite “unprecedented pressures across our supply chain”. The “Life Out Here” strategy, detailed in late October 2020, appears to be bearing fruit. This plan to drive sustainable growth focuses on the five pillars of customers, digitization, execution, team members and total shareholder return.TSCO reported third-quarter earnings per share of $1.95, which beat the Zacks Consensus Estimate by more than 18%. The four-quarter average beat is now up to 22.8%. Net sales of $3.02 billion jumped 15.8% from last year and eclipsed our expectation by over 5%. Comparable store sales grew by 13.1%, marking six straight quarters of double-digits for this metric.The company says business has “never been stronger” and that growth continues to be “robust”. This optimism was underscored when expectations for 2021 were raised. TSCO now expects net sales of $12.6 billion, instead of $12.1 billion to $12.3 billion. Furthermore, earnings per share are now seen between $8.40 and $8.50, rather than $7.70 to $8.Analysts responded by boosting their own expectations. The Zacks Consensus Estimate for this year is now $8.51, which is up 8% over the past 60 days. The forecast for next year is $8.55, marking a 6% gain in that time and a slight improvement over the previous year with plenty of time to rise further.Image Source: Zacks Investment Research Tech IPOs With Massive Profit Potential: Last years top IPOs surged as much as 299% within the first two months. With record amounts of cash flooding into IPOs and a record-setting stock market, this year could be even more lucrative. See Zacks’ Hottest Tech IPOs Now >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Tractor Supply Company (TSCO): Free Stock Analysis Report Crocs, Inc. (CROX): Free Stock Analysis Report Tri Pointe Homes Inc. (TPH): Free Stock Analysis Report To read this article on Zacks.com click here. Zacks Investment Research.....»»

Category: topSource: zacksNov 11th, 2021

Blithe Stock Market Spirits

Dear fellow investors, At Smead Capital Management, we practice our discipline of picking and owning stocks which meet our eight criteria in both favorable and unfavorable environments. The current “blithe spirits” were brought to mind in a movie of the same name. The main character, a novel writer, is visited by his dead ex-wife, played […] Dear fellow investors, At Smead Capital Management, we practice our discipline of picking and owning stocks which meet our eight criteria in both favorable and unfavorable environments. The current “blithe spirits” were brought to mind in a movie of the same name. The main character, a novel writer, is visited by his dead ex-wife, played brilliantly by actress, Leslie Mann. At first, she charms her widowed and re-married husband, but then she haunts him and his new wife, leading to their ultimate death. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Series in PDF Get the entire 10-part series on Charlie Munger in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues. (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more This is exactly how bull markets work. They start out inexpensive and fundamentally advantageous, then they charm investors with attractive and many times spectacular returns. However, in the process, they lead investors down a rabbit trail which ends up taking them off a cliff. Ironically, that is how the writer’s second wife dies. Her husband’s deceased wife sabotages the gas pedal and she plunges off a cliff on the coast of England. The Prior Episodes Of Financial Euphoria The three prior episodes of financial euphoria, which hold characteristics in common with today’s blithe spirits, were the 1920s, the 1960s and the late 1990s. See the charts below: These are so well known as euphoria episodes that they got names in the aftermath: the Roaring 1920s, the Go-Go 1960s and the late 1990s DotCom bubble. What did they have in common and what did their blithe spirits look like? They all included innovation, meteoric returns, stretched valuations and participation by investors who don’t normally participate. The 1920s had the adoption of the automobile, the airplane and the radio by the masses. In 1900, 4,000 new autos were sold in the U.S. By 1925, that number reached 3.5 million (From Horse Power to Horsepower by Eric Morris). Radio news, music and entertainment shows dominated popular culture. In the 1960s, we walked on the moon and saw mass adoption of IBM (NYSE:IBM), Sperry Rand and Burroughs super computers. In the 1990s, we unleashed public use of home computers with software from Apple Inc (NASDAQ:AAPL) and Microsoft Corporation (NASDAQ:MSFT) for “dummies” like me. Prior to that software, you had to write code to accomplish anything with a computer. If you had to have the patience to tell the computer how to do what you wanted it to do, yours truly would have never used one. We also unleashed the web browser in the 1990s, which allowed unmeasurable amounts of information to be available on the internet. This laid the groundwork for Amazon.com, Inc. (NASDAQ:AMZN), Google (NASDAQ:GOOGL) and Facebook (NASDAQ:FB) to conquer the world in the last ten years, along with other companies which have gained the benefit of the “network effect.” The “network effect” comes from learning more and more about your network participants and growing bigger and more profitable as your network’s size crowds out any meaningful competition. As you can see the returns have been meteoric in the latest euphoria episode: Here is how some of today’s glam tech stocks have done during the same time period: Blithe Stock Market Spirits If you market-cap weight the price-to-earnings ratio of the S&P 500 Index today, you get a number similar to the end of the previous blithe spirit stock markets of the prior 100 years! And we don’t have to wonder if public participation matches extremes of the last 100 years. Today’s motley fools have their own chat rooms with names like Reddit, their own brokerages like Robinhood, and their own new forms of insanity like Special Purpose Acquisition Companies (SPACs) and meme trades. Meme trades are where motley and other sorts of fools go to gang up on short sellers and temporarily drive up low quality stocks with big short positions through the roof. Lastly, look at these last two charts of common stocks as a percent of total U.S. household assets and the U.S. stock market versus U.S. Gross Domestic Product (GDP). The GDP measurement is used by Warren Buffett to determine when it makes sense to be a broad buyer of common stocks during the late stages of bear markets, which follow these financial euphoria episodes. He likes to buy stocks when they make up 75-80% of GDP. What would it take to get the stock market there? It would need to go off a cliff. Joe Kennedy made a fortune in the 1920s and decided to sell out when the shoeshine boy was giving him stock tips. Peter Lynch knew the end of the bull market was near when people he met in social situations were giving him tips on what to buy. We have had that happen so many times this year that its depressing. Unless something bad happens to our very defensive list of relatively unpopular value-oriented names in the next two months, we could have the best year of the nearly 14 years of our strategy. Unfortunately for them, many investors would rather tell us what to buy, and that tells us that they will go off the cliff in the not very distant future. This means that we believe most investors will suffer stock market failure and dismal returns over the next decade. We don’t plan on being one of them. Warm regards, William Smead The information contained in this missive represents Smead Capital Management's opinions and should not be construed as personalized or individualized investment advice and are subject to change. Past performance is no guarantee of future results. Bill Smead, CIO wrote this article. It should not be assumed that investing in any securities mentioned above will or will not be profitable. Portfolio composition is subject to change at any time and references to specific securities, industries and sectors in this letter are not recommendations to purchase or sell any particular security. Current and future portfolio holdings are subject to risk. In preparing this document, SCM has relied upon and assumed, without independent verification, the accuracy and completeness of all information available from public sources. A list of all recommendations made by Smead Capital Management within the past twelve-month period is available upon request. ©2021 Smead Capital Management, Inc. All rights reserved. This Missive and others are available at www.smeadcap.com. Updated on Nov 9, 2021, 12:51 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 9th, 2021

Answered: The Most Confusing Question In Crypto

When you buy a crypto… Q3 2021 hedge fund letters, conferences and more What are you really investing in? In today’s special edition of the RiskHedge Report, we’ll set aside the gains cryptos have been handing out of 6,000%, 8,000%, and 12,000%… To answer this basic but crucial question. *** The Most Confusing Question In Crypto Chris Reilly: Stephen, […] When you buy a crypto… if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get Our Icahn eBook! Get our entire 10-part series on Carl Icahn and other famous investors in PDF for free! Save it to your desktop, read it on your tablet or print it! Sign up below. NO SPAM EVER (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more What are you really investing in? In today’s special edition of the RiskHedge Report, we’ll set aside the gains cryptos have been handing out of 6,000%, 8,000%, and 12,000%… To answer this basic but crucial question. *** The Most Confusing Question In Crypto Chris Reilly: Stephen, a RiskHedge reader, asks a great question: I do not understand how owning cryptos like Helium (HNT) or Ethereum (ETH) gives you ownership in the companies behind them. Isn’t it more like buying jewelry from Tiffany’s? You own the jewelry which has value and could appreciate. But you do not own Tiffany’s stock. You cannot vote for directors or officers of the company. And you cannot buy enough HNT or ETH to control either company. Can you explain? Stephen McBride: For over 100 years, there have been two main ways to invest in a business. You can buy equity in a company—its stock. Or you can buy the company’s debt—its bonds. Crypto is a third new way to invest in businesses—tokens. In many cases, tokens are the ONLY way to buy into rapidly growing crypto projects. For example, there’s no Ethereum “stock.” Ethereum doesn’t issue bonds. Instead, you buy its token, ETH, which represents ownership in the Ethereum network. Owning ETH Chris: I think that’s what’s confusing people. How is owning ETH like “owning” Ethereum? Stephen: Think about what it means to own a stock. When you become a shareholder in Apple (AAPL), you own a piece of its business. If you own 100 Apple shares, you own roughly 0.000001% of Apple Inc. An ownership stake in Apple entitles you to three main things. One, you profit from appreciation in the company’s share price. Two, you can vote on key corporate matters, such as naming a board of directors. Three, you’ll get any dividend Apple pays. Chris: I see how point #1 is a direct parallel in crypto. When you own ETH, you profit from appreciation in its price. In the last year, Ethereum has risen from $370 to about $4,500. ETH owners enjoyed those 950%+ profits. Stephen: On point two, owning ETH entitles you to vote on key decisions. Just like owning AAPL gives you a vote in Apple’s decisions. Now, most crypto investors don’t exercise these rights. And that’s okay… most Apple investors aren’t voting at Apple’s meetings, either. And, as the reader question mentioned, it’s next-to-impossible for an average investor to accumulate enough of a token to influence management decisions. But that is the case with publicly traded companies as well. In fact, in many cases, owning a crypto gives the average investor much more say over the direction of the business than a stock does. For example, token holders of the decentralized exchange Uniswap can vote on how its $7 billion Treasury is spent. Chris: What about dividends? Ethereum doesn’t pay one. Stephen: No, like almost all fast-growing tech companies, ETH doesn’t pay a dividend. It retains its earnings to pay developers and fund growth. But plenty of cryptos do pay dividends. Like SushiSwap. Sushi is an online exchange that allows you to buy and sell thousands of different cryptos. Over $15 billion worth of trades happened on its platform in the past month. How Sushi Makes Money Chris: How does Sushi make money? Stephen: It charges a 0.3% fee on each trade. Investors who own one of SushiSwap’s tokens, called xSUSHI, get 0.05% of this fee. In the past month, Sushi has paid out $400,000 to token holders. Chris: How is the dividend paid out? Stephen: The company takes some of the cash generated from transaction fees and uses it to buy Sushi tokens in the open market. Then it gives these tokens to the holders. So the dividend isn’t paid in cash; it’s paid in Sushi tokens. And the dividend is paid daily. When you own xSUSHI, your balance will rise every day. It’s important to understand that all cryptos are different. They don’t all function like equity in a business. And some accrue value back to token holders in different ways. For example, Maker (MKR) rewards token holders by buying MKR tokens off the market and “burning” them. In other words, they get deleted from existence. Chris: Sounds similar to buybacks in the stock market… Stephen: Exactly. By “buying back” tokens, the supply is reduced, and the remaining tokens increase in value. Chris: You also mentioned during your Phase 2 Crypto Summit that cryptos allow you to invest in the technology and protocols that underpin crypto. How is that possible? Stephen. Right. Cryptos give investors a whole new way to make money from technology. Ever hear of Tim Berners-Lee? He invented the World Wide Web. He literally wrote the code that the modern internet runs on. Berners-Lee was named one of the 20th Century’s most important figures by Time magazine… honored at the Olympics… and knighted by the Queen of England. You’d expect the man who invented the internet to be extremely rich, right? His code is behind every transaction we make on the internet today. Amazon.com, Inc. (NASDAQ:AMZN), Alphabet Inc (NASDAQ:GOOG), and Meta Platforms Inc (NASDAQ:FB) couldn’t exist without it. But Berners-Lee never directly profited off his world-changing invention. He didn’t make a dime from the web. Chris: Why? Stephen: He gave the source code to the World Wide Web away for free. So no one owns the internet. There was no way to invest directly in the tech that made the internet possible. That’s what’s different about cryptos. We can invest directly in the underlying technology. In fact, crypto gave Tim Berners-Lee a way to finally profit off the Web. He recently sold the original source code for the world wide web as a non-fungible token (NFT) for $5.4 million at a Sotheby’s auction house. As I’ve explained, an NFT is a certificate of ownership stored on a blockchain. That’s the same technology behind Phase 2 Cryptos. The bottom line is, after 30 years, crypto finally gave Berners-Lee a way to make money off of his invention. This is important for crypto investors because this breakthrough allows us to invest in the tech behind rapidly growing Phase 2 Cryptos. Think of it like owning shares in the internet. The Great Disruptors: 3 Breakthrough Stocks Set to Double Your Money" Get our latest report where we reveal our three favorite stocks that will hand you 100% gains as they disrupt whole industries. Get your free copy here. Article By Chris Reilly - Executive Editor, RiskHedge - Mauldin Economics Updated on Nov 8, 2021, 4:50 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 9th, 2021

Charting The Stock Market "Melt Up" & The Fed"s Naïveté

Charting The Stock Market "Melt Up" & The Fed's Naïveté Authored by Lance Roberts via RealInvestmentAdvice.com, Charting the stock market “melt-up” in prices, and the Fed’s naivety of the laws of physics may be of benefit to younger investors. After more than a decade of rising prices, accelerating markets seem entirely normal, detached from underlying fundamentals. As a result, new acronyms like “TINA” and “BTFD” get developed to rationalize surging prices. However, a more extended look at price history suggests the current market environment is anything but typical. More importantly, the “moral hazard” created by the Federal Reserve’s continuous bailouts have put individual investors at significant risk. A Long History Of Poor Outcomes In the short term, like above, charting stock market prices may not seem extraordinarily stretched. However, this is because the chart lacks context from a historical perspective. Once we look at the market from 1900 to the present, a different picture emerges compared to its exponential long-term growth trend. Usually, when charting long-term stock market prices, I would use a log-scale to minimize the impact of large numbers on the whole. However, in this instance, such is not appropriate as we examine the historical deviations from the underlying growth trend. What you should take away from the chart above is apparent. Investing capital when prices are exceedingly above the underlying growth trend repeatedly had poor outcomes. Investing money at peak deviations led to very long periods of ZERO returns on capital. (Interestingly, as the Fed became active in the markets, the periods of zero returns got cut in half.) Timing Is Everything Investors are remiss to dismiss the importance of the long periods of zero returns. More often than not, the consistently bullish advisory and media crowd present long-term studies to support investing in markets. Generally, these studies get presented without context to coerce you into buying their products or using their services. I recently showed an example of such a study: Equity total return = DY + earnings growth + delta in P/E. Over the last 100 years, DY has been 3-4% + earnings growth 5-6% on avg. Lower real yields support P/E. Not owning stocks long-term is like betting black for life at a roulette where most numbers are red. pic.twitter.com/xmVsQumHqS — Alf (@MacroAlf) August 5, 2021 While well-meaning, there are several critical points with such analysis. Let’s review the long-term chart above. When charting stock market prices or returns, cherry-picked start dates can provide any result you want. For example, 100-years ago was 1920. That was the beginning of a significant bull market cycle that lasted until 1929. However, back up 20-years to 1900, an investor had to wait until the 1950s to break even. Starting 25-years ago was 1995. While the run from 1995-2000 was solid, investors spent the next 13-years going nowhere. Given that we don’t live forever and have a finite time frame to save for retirement, “when” you start your investing journey is critically important. As the old saying goes, “timing is everything.” Newton’s Law Of Gravity Sir Issac Newton discovered the relationship between the motion of the moon and the motion of a body falling freely on Earth. His dynamical and gravitational theories established the modern quantitative science of gravitation. Moreover, Newton realized that this force could be, at long range, the same as the force with which Earth pulls objects on its surface downward. Notably, there is a clear “gravitational pull” of prices to the exponential growth trend line. Thus, without fail, when prices have deviated well above the trend line, there was an eventual reversion below the trend. Since the Federal Reserve became active with “monetary interventions” in 2009, the current deviation from the long-term trend is the highest in history. Of course, as one would expect, valuation excesses accompany such deviations. In all cases, the subsequent returns to investors from such excesses in price and valuation have never been kind. Ignoring The Laws Of Physics Interestingly, in the July FOMC minutes, the Fed made mention of market valuations. However, while they may acknowledge that valuations have become elevated, they fail to understand the laws of physics. As noted, extreme deviations above the long-term growth trend will eventually revert to the mean. In the 60s and 70s, it took nearly 15-years of rolling tops and bear markets to complete the reversion. It took almost 9-years to complete the reversion at the turn of the century. The problem facing the Fed is the diminishing impact of QE on the financial markets. As noted previously, it requires ever greater levels of monetary intervention to lift asset prices. As a result, when the reversion to mean ultimately begins, the Fed may not be able to arrest the decline as quickly as they did in 2020. There is more than adequate evidence a “bubble” exists in markets once again. ‘I have no idea whether the stock market is actually forming a bubble that’s about to break. But I do know that many bulls are fooling themselves when they think a bubble can’t happen when there is such widespread concern. In fact, one of the distinguishing characteristics of a bubble is just that. “It’s important for all of us to be aware of this bubble psychology, but especially if you’re a retiree or a near-retiree. That’s because, in that case, your investment horizon is far shorter than for those who are younger. Therefore, you are less able to recover from the deflation of a market bubble.” – Mark Hulbert Read that statement again.  Millennials are quick to dismiss the “Boomers” in the financial markets today for “not getting it.”  No, we get it. We have just been around long enough to know how these things eventually end. When The Money Runs Out Historically, all market crashes have been the result of things unrelated to valuation levels. Instead, issues such as liquidity, government actions, monetary policy mistakes, recessions, or inflationary spikes are the culprits that trigger the “reversion in sentiment.” Notably, the “bubbles” and “busts” are never the same.   I previously quoted Bob Bronson on this point: “It can be most reasonably assumed that markets are efficient enough that every bubble is significantly different than the previous one. A new bubble will always be different from the previous one(s). Such is since investors will only bid prices to extreme overvaluation levels if they are sure it is not repeating what led to the previous bubbles. Comparing the current extreme overvaluation to the dotcom is intellectually silly. I would argue that when comparisons to previous bubbles become most popular, it’s a reliable timing marker of the top in a current bubble. As an analogy, no matter how thoroughly a fatal car crash is studied, there will still be other fatal car crashes. Such is true even if we avoid all previous accident-causing mistakes.” Comparing the current market to any previous period in the market is rather pointless. The current market is not like 1995, 1999, or 2007? Valuations, economics, drivers, etc., are all different from one cycle to the next. Most importantly, however, the financial markets constantly adapt to the cause of the previous “fatal crash.” Unfortunately, that adaptation won’t prevent the next one. Yes, this time is different. “Like all bubbles, it ends when the money runs out.” – Andy Kessler Tyler Durden Mon, 11/08/2021 - 09:46.....»»

Category: personnelSource: nytNov 8th, 2021

Conviction

One of my favorite quotes states that you can borrow someone’s ideas, but not their conviction. Q3 2021 hedge fund letters, conferences and more It is a great quote, because it deals with a problem that many investors face. Some of us may be taking tips from others, and may be investing money in companies, […] One of my favorite quotes states that you can borrow someone’s ideas, but not their conviction. if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Warren Buffett Series in PDF Get the entire 10-part series on Warren Buffett in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more It is a great quote, because it deals with a problem that many investors face. Some of us may be taking tips from others, and may be investing money in companies, without really doing much research. This is a dangerous position to be in, because you are outsourcing everything to another person. You need to get to a point where you have an adequate investment plan for action. Thus, when things change, you would know whether to hold or to fold. I tend to spend time looking for ideas, either through screening, reviewing my investable universe, reading and interacting with other investors. However, I always try to put each idea and filter it in a way that makes sense for me. That way, I can take personal responsibility for my actions, and take the next step of learning and growing as an investor from there. I have been investing in Dividend Growth Stocks for about 15 years now, and have learned to try and devise my own set of guidelines that would do the heavy lifting for me. One such guideline has been to review my own investments that I have made. I believe that the ability to review historical transactions is very beneficial for investors, because it can help identify gaps, and improvement opportunities. Flexibility And Adaptability Vs Conviction In my analysis of my own investments, I have noticed that I cannot really tell in advance which specific company would be the best performer in terms of total returns, or future dividend growth over a set period of time like ten years for example.  I have looked at some ideas I posted about in 2008, and then the list of aristocrats from 2011. I did not know that one of the best companies would be Lowe’s for examples. But, by owning a diverse portfolio of companies, I had a fair share of winners that compensated for the losers. I did ok, even if I made some mistakes along the way, such as selling perfectly good companies and replacing them with cheaper value traps. Of course, I do try to pick many quality companies, and hold on to them for as long as possible which helps. Hence, I am a fan of diversification, and dislike concentration. I do not know what my top 10 ideas would be, though I presume they would be in my diversified portfolio of 50 – 100 quality securities. Based on my experience, my best performing ideas turned out to be outside my top 10 or 20 convictions. Analyzing past actions is a very humbling experience, because it shows me that we can have all the information in the world, but that doesn’t mean that we would be right all the time. Hence, I do not believe in having conviction in investing, because it may potentially lead me to overconfidence, stubbornness and inflexibility. I believe that apart from having a few principles, conviction can be dangerous for most investors. It is good to have conviction to hold through the hard times assuming that they do turn, but you also need to know when the situation has changed and you need to move on. I believe that flexibility and adaptability are more important than conviction. That’s because if I am convinced of something, I risk ignoring contradictory information, so I may end up just being plain stubborn and lose money. That’s the risk I am trying to avoid of course. In general, I assume that my investing universe would likely have a group of outstanding companies that would deliver outstanding returns. I just have to ensure I include them, and then hold on to them. I just don’t know which specific company would be the best, and which would be the worst. The goal is to just follow my strategy, letting winners ride, and keeping losses relatively limited. This means I should not invest based on my opinions, but follow my strategy into long term trends. It also means that I don't micromanage businesses, or create narratives. I should simply follow the performance of the business, not my opinion of it. In my case, it is as simple as just sticking around for as long as the dividend is growing, and not being cut. On average, this has been a winning strategy in the past. You won't be right on every investing decision, you may be whipsawed, but as long as you keep losses small and maximize winners, you stand a chance to make a profit. This goes along with my favorite quote from Buffett: Rule No.1: Never lose money. Rule No.2: Never forget rule No.1.  Minimizing Losses Actually, I believe that to succeed in investing, one should start with the mindset of risk management and try to look for ways to minimize losses, rather than shoot for the stars. In other words, I believe that the upside would take care of itself, but it is my job as a portfolio manager to manage downside risks. The first way that I manage risks is refusing to risk more than a certain percentage of total portfolio value on a given position. I believe in diversification, which means not putting all my eggs in one basket. I also do not believe in concentrating my portfolio in my best ideas, because I do not know which of my ideas today would turn out to be best ideas in 2031. I have a rough estimate, but I also want to assume that I may make mistakes, that the world is uncertain and more difficult to understand than previously believed. This is how I come up with a list of 30 – 50 companies at the very minimum. This means that I shouldn’t really have more than 2% - 3% allocated in a given company. If a stock goes to zero, the most I would lose is 2% - 3% of portfolio value. However, I am still in the game, and I hopefully have the other positions to carry their weight, and overcompensate for losses suffered with their gains. I often hear the rebuttal that Buffett liked to concentrate their portfolios, and succeeded. Of course, I am not Buffett, and I would argue that you are not either. Today, Berkshire Hathaway is very well diversified, with a stock portfolio consisting of 44 individual holdings, as well as an operating business that consists of more individual businesses. I would much rather have slightly lower returns, but compound capital and income for decades, than earn more but at a higher risk of losing a large chunk of my portfolio on a concentrated bet. It’s insane to risk what you have for something you don’t need. While Buffett may have been more concentrated during the 1950s and 1960s, he still held at least 20 - 30 investments. Most importantly however, he diversified into several investing strategies such as generals (undervalued stocks), workouts (M&A, spin-offs, liquidations) and control situations (activist investing). (source) Following Long-Term Trends The second way that I manage risks is by following long-term trends, and exiting when they end. As a Dividend Growth Investor, I buy companies that have a certain track record of annual dividend increases. My idea is that a body in motion would stay in motion until something changes. I buy a stock, believing that certain business conditions exist for the business ( moat, competitive advantages, you name it), and the rising dividend is an indication of it. I then hold on to these companies for as long as possible, through thick or thin. I follow the companies, but would keep holding for as long as the dividend is not cut. I would consider adding to a position that is below my 2% - 3% cost threshold, for as long as it is still raising dividends, and those dividends are supported by strong fundamentals. But, if that company freezes dividends, I would not add to such position. This is basically a yellow light, a warning sign that things may not be going as well as what my initial thesis told me. It means I need to research further what is going on, but not take any action yet. Once a company cuts dividends, that shows me that my original thesis was violated. I bought a company, expecting that the good times that generated its track record of annual dividend increases would continue. When the music stops and the dividends are cut, it is a good wake up call that things have changed. Perhaps this is a short term situation that would be resolved, or perhaps this is the beginning of the end. I sell and put the money elsewhere, because conditions have changed. It is very likely that I am selling at a short-term bottom, and the stock would double or triple from there. That doesn’t matter. I make my money on businesses that grow and keep delivering. I make my money on businesses that I do not need to micromanage. I don’t make my money on guessing whether the stock price would go up or down in the short run.  In a given portfolio, most of the gains would come from a small portion of companies. That’s why it makes sense to identify strong companies, and then to hold them, through thick or thin. A rising dividend payment means that things are going ok in general. I will keep holding, through dividend rises. My goal is to follow long-term secular trends, that may last many years and hopefully many decades. The goal is to get on the elevator, and just stay on it, not second guess it on every move. Investors generally have a hard time holding on to winners for various reasons; could be because the stock looks “expensive”, they are told it is a bubble, some other company may look cheaper, some temporary weakness is blown out of proportion, the stock price may not go anywhere for a few years, etc etc The mental model of just sticking to a position while the dividend is still growing is very powerful. With this mentality, I can afford to focus on the evidence of growing dividends, and keep holding. While some companies may end up cutting dividends and I will end up selling them, a portion of them would end up in the portfolio for decades. These will be the winners that would cover for mistakes and losses, and hopefully result in a profit. Oh, and selling those companies early for no good reason would be the difference between making money and not making any money. Focus On Fundamentals Third, I focus on fundamentals when I buy companies. In general, I tend to look for several factors, playing together. Rising earnings per share over a period of 5 – 10 years Dividend increases that outpace inflation Dividend payout ratio that is sustainable and mostly in a range If a company can grow earnings per share, it can afford to pay rising dividends down the road. If it doesn’t, then it is likely that the business may not be a good fit for my portfolio for the time being. I tend to also look at valuation. However, I do not have a formula for it. I look for P/E and dividend growth, and I compare existing opportunities in my opportunity set. I also look at the stability of earnings, cyclicality and dependability. I believe that even if I may overpay a little for a good company, rising earnings per share would ultimately bail me out. On the other hand, if I buy a company with declining earnings, even at a low P/E it may turn into a value trap. Building Positions Slowly Last, I tend to build my positions slowly. I tend to buy a starter position, then add back a little later. I have done this, because built my net worth slowly and over time. I saved a portion from each paycheck I ever earned, and invested it. The downside of this approach is that in a raging bull market, I would usually end up paying higher and higher prices. This shouldn’t be a problem, if the business also grows over time. The upside of this approach is that I have time to react to changes or to information that shows me that my original analysis may have been wrong. Today, I discussed a few simple ideas on how to survive and thrive in the investing game. I believe in a few principles, that are helpful: Diversification Not risking more than a certain percentage of portfolio value on a given company Managing risks by following long-term trends Focus on fundamentals when reviewing a business Building positions over time Being adaptable and flexible Relevant Articles: How to improve your investing over time Adaptability How to find companies for my dividend portfolio Concentrated versus Diversified Dividend Investing Article by Dividend Growth Investor Updated on Nov 4, 2021, 5:25 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 4th, 2021

American Finance Trust Announces Third Quarter 2021 Results

NEW YORK, Nov. 3, 2021 /PRNewswire/ -- American Finance Trust, Inc. (NASDAQ:AFIN) ("AFIN" or the "Company"), a real estate investment trust focused on acquiring and managing a diversified portfolio of primarily service-oriented and traditional retail and distribution related commercial real estate properties in the U.S., announced today its financial and operating results for the third quarter ended September 30, 2021. Third Quarter 2021 Highlights         Revenue grew 17.1% to $91.9 million from $78.5 million for the third quarter 2020, inclusive of a $10.4 million lease buyout fee for 12 leases with Truist Bank Net loss attributable to common stockholders was $6.4 million as compared to $7.1 million for the third quarter 2020 Cash net operating income ("NOI") grew 37.9% to $75.7 million from $54.9 million for the third quarter 2020 Funds from Operations ("FFO") of $30.3 million, or $0.25 per diluted share increased from $25.6 million, or $0.24 per diluted share, for the third quarter 2020 Adjusted Funds from Operations ("AFFO") grew 41.4% to $36.0 million1 from $25.5 million, or 30.4% to $0.30 per share from $0.23 per diluted share, in the prior year third quarter Dividends of $25.2 million or $0.21 per share Improved Net Debt to adjusted earnings before interest, taxes, depreciation and amortization ("Adjusted EBITDA") to 6.8x 2 Enhanced balance sheet, with weighted average interest rate of 3.6%, compared to 3.8% and 89.7% of debt fixed-rate versus 83.4% a year ago Collected approximately 100% of original cash rent in third quarter 2021, including 100% in single tenant portfolio, 100% in the multi-tenant portfolio, and 100% among the top 20 tenants3,4 Multi-tenant Executed Occupancy5 and Leasing Pipeline6 are expected to add $2.1 million of annualized straight-line rent and 141,000 square feet to the portfolio over time as executed leases commence Completed $86.5 million7 of acquisitions with a cash capitalization rate8 of 8.58% and a weighted average capitalization rate9 of 8.79% Completed 25 multi-tenant lease renewals with a weighted-average new lease term of 5 years High quality portfolio with 58% of tenants in single-tenant portfolio10 and 66% of the top 20 tenants portfolio-wide rated as investment grade or implied investment grade11 Annual rent escalators12 with a weighted-average of 1.2% per year provide contractually embedded rent growth "Our third quarter results reflect the ongoing success of the last year, as we continue to execute on our initiatives to grow earnings and optimize our balance sheet," said Michael Weil, CEO of AFIN. "We grew quarterly AFFO more than 30% year-over-year to $0.30 per share and continued lowering our ratio of Net Debt to Adjusted EBITDA, which is now 6.8x down from 8.1x last year. Subsequent to quarter end we also completed a $500 million unsecured corporate notes offering with favorable pricing, along with a recast and upsizing of our corporate credit facility. All of this progress provides additional flexibility to support future growth. During the quarter, we closed on over $86 million in acquisitions and we expect to end the year with over $200 million in acquisitions based on our forward pipeline. Since the fourth quarter of last year, we have increased revenue by 19%, grown cash NOI by 29% and increased AFFO per share while successfully navigating the pandemic, increasing occupancy in our multi-tenant portfolio, and enhancing both our team and our world-class portfolio." Financial Results                Three Months Ended September 30, (In thousands, except per share data) 2021 2020 Revenue from tenants $ 91,915 $ 78,489 Net loss attributable to common stockholders $ (6,406) $ (7,091) Net loss per common share (a) $ (0.06) $ (0.07) FFO attributable to common stockholders $ 30,282 $ 25,631 FFO per common share (a) $ 0.25 $ 0.24 AFFO attributable to common stockholders $ 36,005 $ 25,465 AFFO per common share (a) $ 0.30 $ 0.23 (a) All per share data based on 118,862,852 and 108,429,315 diluted weighted-average shares outstanding for the three months ended September 30, 2021 and 2020, respectively. Real Estate Portfolio The Company's portfolio consisted of 968 net lease properties located in 47 states and the District of Columbia and comprised 20.1 million rentable square feet as of September 30, 2021. Portfolio metrics include: 93.2% leased, with 8.7 years remaining weighted-average lease term13 77.5% of leases have weighted-average contractual rent increases of 1.2% based on annualized straight-line rent 58% of single-tenant portfolio and 31% of multi-tenant anchor tenants annualized straight-line rent derived from investment grade or implied investment grade tenants 82% retail properties, 11% distribution properties and 7% office properties (based on an annualized straight-line rent) 71% of the retail portfolio focused on either service14 or experiential retail15 giving the Company strong alignment with "e-commerce resistant" real estate Property Acquisitions During the three months ended September 30, 2021, the Company acquired 32 properties for an aggregate contract purchase price of $86.5 million at a weighted average capitalization rate of 8.79%. Property Dispositions During the three months ended September 30, 2021, the Company disposed of three properties, for an aggregate contract price of $3.0 million. Further, as of October 31, 2021, the Company has executed eight PSAs to sell an additional eight properties for an aggregate contract price of $16.0 million and three LOIs to dispose of three properties for $2.2 million. Capital Structure and Liquidity Resources As of September 30, 2021 the Company had a total borrowing capacity under the credit facility of $494.1 million based on the value of the borrowing base under the credit facility, and, of this amount, $186.2 million was outstanding under the credit facility as of September 30, 2021 and $307.9 million remained available for future borrowings. As of September 30, 2021, the Company had $99.0 million of cash and cash equivalents. The Company's net debt16 to gross asset value17 was 38.9%, with net debt of $1.7 billion. The Company's percentage of fixed rate debt was 89.7% as of September 30, 2021. The Company's total combined debt had a weighted-average interest rate cost of 3.6%18, resulting in an interest coverage ratio of 3.6 times19. Rent Collection Update Third Quarter of 2021 For the third quarter of 2021, AFIN collected approximately 100% of the original cash rents that were due across the portfolio, including 100% of the original cash rent payable from the top 20 tenants in the portfolio (based on the total of third quarter original cash rent due across our portfolio) and 100% of the original cash rent payable in the single tenant portfolio and 100% of the original cash rent payable in the multi-tenant portfolio. Cash rent collected includes both contractual rents and deferred rents paid during the period4. Footnotes/Definitions 1 Inclusive of a $10.4 million lease buyout fee recorded during the quarter even though cash was received after the end of the quarter 2 Represents ratio of net debt as of a particular date, to the Company's calculation of its Adjusted EBITDA multiplied by four for the three months ended on that date. Annualized results include termination fee income of $10.4 million which was recorded in the third quarter of 2021. For the third quarter 2021, net debt represents total debt of $1.8 billion less cash and cash equivalents of $99.0 million as of September 30, 2021. 3 We calculate "original cash rent collections" by comparing original cash rent due under our lease agreements to the total amount of rent collected during the period, which includes both original cash rent due and payments of amounts deferred from prior periods. Eliminating the impact of deferred rent paid, we collected 99% of original cash rent due in the single-tenant portfolio, 97% of original cash rent due in the multi-tenant portfolio, 99% of original cash rent due in the total portfolio. Top 20 tenants based on third quarter 2021 original cash rent due. This information may not be indicative of future periods.     4 The impact of the COVID-19 pandemic on the Company's future results of operations and liquidity will depend on the overall length and severity of the COVID-19 pandemic, which management is unable to predict. 5 Includes occupancy, measured by the percentage of square footage of which the tenant has taken possession of divided by the respective total rentable square feet, as of a particular date as well as all leases fully executed by both parties as of the same date where the tenant has yet to take possession as of such date. For the third quarter of 2021 and as of October 31, 2021, there are 15 additional leases executed where rent commences over time between the fourth quarter of 2021 and the first quarter of 2022 totaling approximately 122,000 square feet. For the fourth quarter of 2020 and as of January 31, 2021, there were four additional leases executed where rent commences over time between the first quarter of 2021 and the third quarter of 2021 totaling approximately 34,000 square feet. 6 For the third quarter of 2021, includes (i) all leases fully executed by both parties as of October 31, 2021, but after September 30, 2021 and (ii) all leases under negotiation with an executed letter of intent ("LOI") by both parties as of October 31, 2021. This represents 15 executed leases totaling approximately 122,000 square feet and six LOIs totaling approximately 19,000 square feet. No lease terminations occurred during this period. There can be no assurance that LOIs will lead to definitive leases that will commence on their current terms, or at all. Leasing pipeline should not be considered an indication of future performance. For the fourth quarter of 2020, includes (i) all leases fully executed by both parties as of January 31, 2021, but after December 31, 2020 and (ii) all leases under negotiation with an executed LOI by both parties as of January 31, 2021. This represents six new leases totaling approximately 220,000 square feet, net of one lease termination for 5,000 square feet during this period. 7 Represents the contract purchase price and excludes acquisition costs which are capitalized per GAAP. 8 Cash capitalization rate is a rate of return on a real estate investment property based on the expected, annualized cash rental income during the first year of ownership that the property will generate under its existing lease or leases. Cash capitalization rate is calculated by dividing this annualized cash rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) by the purchase price of the property. excluding acquisition costs. The weighted-average cash capitalization rate is based upon square feet. 9  Capitalization rate is a rate of return on a real estate investment property based on the expected, annualized straight-line rental income that the property will generate under its existing lease or leases. Capitalization rate is calculated by dividing the annualized straight-lined rental income the property will generate (before debt service and depreciation and after fixed costs and variable costs) by the purchase price of the property, excluding acquisition costs. The weighted-average capitalization rate is based upon square feet. 10 Percentage of single-tenant portfolio tenants based on annualized straight-line rent as of September 30, 2021. 11 As used herein, investment grade includes both actual investment grade ratings of the tenant or guarantor, if available, or implied investment grade. Implied investment grade may include actual ratings of tenant parent, guarantor parent (regardless of whether or not the parent has guaranteed the tenant's obligation under the lease) or by using a proprietary Moody's analytical tool, which generates an implied rating by measuring a company's probability of default. The term "parent" for these purposes includes any entity, including any governmental entity, owning more than 50% of the voting stock in a tenant. Ratings information is as of September 30, 2021. Based on annualized straight-line rent as of September 30, 2021, single-tenant portfolio tenants are 46.4% actual investment grade rated and 11.8% implied investment grade rated, top 20 tenants are 57% actual investment-grade rated and 9% implied investment-grade rated and anchor tenants in the multi-tenant portfolio are 21.6% actual investment grade rated and 9.4% implied investment grade rated. 12 Contractual rent increases include fixed percent or actual increases, or CPI-indexed increases. 13 The weighted-average is based on annualized straight-line rent as of September 30, 2021.  14 Service retail is defined as single-tenant retail properties leased to tenants in the retail banking, restaurant, grocery, pharmacy, gas/convenience, healthcare, and auto services sectors 15 Experiential retail is defined as multi-tenant properties leased to tenants in the restaurant, discount retail, entertainment, salon/beauty, and grocery sectors, among others. The Company also refers to experiential retail as e-commerce defensive retail. 16 Total debt of $1.8 billion less cash and cash equivalents of $99.0 million as of September 30, 2021. Excludes the effect of deferred financing costs, net, mortgage premiums, net and includes the effect of cash and cash equivalents. 17 Defined as the carrying value of total assets plus accumulated depreciation and amortization as of September 30, 2021. 18 Weighted based on the outstanding principal balance of the debt. 19 The interest coverage ratio is calculated by dividing Adjusted EBITDA by cash paid for interest (interest expense less amortization of deferred financing costs, net, and change in accrued interest and amortization of mortgage premiums on borrowings) for the quarter ended September 30, 2021. Adjusted EBITDA includes termination fee income of  $10.4 million which was recorded in the third quarter of 2021. Webcast and Conference Call AFIN will host a webcast and call on November 4, 2021 at 11:00 a.m. ET to discuss its financial and operating results. This webcast will be broadcast live over the Internet and can be accessed by all interested parties through the AFIN website, www.americanfinancetrust.com, in the "Investor Relations" section. Dial-in instructions for the conference call and the replay are outlined below. To listen to the live call, please go to AFIN's "Investor Relations" section of the website at least 15 minutes prior to the start of the call to register and download any necessary audio software. For those who are not able to listen to the live broadcast, a replay will be available shortly after the call on the AFIN website at www.americanfinancetrust.com. Live CallDial-In (Toll Free): 1-877-407-0792International Dial-In: 1-201-689-8263 Conference Replay*Domestic Dial-In (Toll Free): 1-844-512-2921International Dial-In: 1-412-317-6671Conference Number: 13724121*Available from 2:00 p.m. ET on November 4, 2021 through February 4, 2022. About American Finance Trust, Inc. American Finance Trust, Inc. (NASDAQ:AFIN) is a publicly traded real estate investment trust listed on the Nasdaq focused on acquiring and managing a diversified portfolio of primarily service-oriented and traditional retail and distribution related commercial real estate properties in the U.S. Additional information about AFIN can be found on its website at www.americanfinancetrust.com.   Supplemental Schedules The Company will file supplemental information packages with the Securities and Exchange Commission (the "SEC") to provide additional disclosure and financial information. Once posted, the supplemental package can be found under the "Presentations" tab in the Investor Relations section of AFIN's website at www.americanfinancetrust.com and on the SEC website at www.sec.gov. Important Notice The statements in this press release that are not historical facts may be forward-looking statements. These forward-looking statements involve risks and uncertainties that could cause actual results or events to be materially different. The words "anticipates," "believes," "expects," "estimates," "projects," "plans," "intends," "may," "will," "would" and similar expressions are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. These forward-looking statements are subject to risks, uncertainties and other factors, many of which are outside of the Company's control, which could cause actual results to differ materially from the results contemplated by the forward-looking statements. These risks and uncertainties include the potential adverse effects of the ongoing global COVID-19 pandemic, including actions taken to contain or treat COVID-19, on the Company, the Company's tenants and the global economy and financial markets and that any potential future acquisition is subject to market conditions and capital availability and may not be identified or completed on favorable terms, or at all, as well as those risks and uncertainties set forth in the Risk Factors section of the Company's Annual Report on Form 10-K for the year ended December 31, 2020 filed on February 25, 2021 and all other filings with the SEC after that date, as such risks, uncertainties and other important factors may be updated from time to time in the Company's subsequent reports. Further, forward looking statements speak only as of the date they are made, and the Company undertakes no obligation to update or revise any forward-looking statement to reflect changed assumptions, the occurrence of unanticipated events or changes to future operating results, unless required to do so by law. Accounting Treatment of Rent Deferrals/Abatements   The majority of the concessions granted to the Company's tenants as a result of the COVID-19 pandemic are rent deferrals or temporary rent abatements with the original lease term unchanged and collection of deferred rent deemed probable. The Company's revenue recognition policy requires that it must be probable that the Company will collect virtually all of the lease payments due and does not provide for partial reserves, or the ability to assume partial ...Full story available on Benzinga.com.....»»

Category: earningsSource: benzingaNov 3rd, 2021

Greenhaven Road Capital 3Q21 Commentary: Digital Turbine

Greenhaven Road Capital commentary for the third quarter ended September, 2021, discussing their largest position, Digital Turbine Inc (NASDAQ:APPS). Q3 2021 hedge fund letters, conferences and more Dear Fellow Investors, On the first page of every recent letter, I have noted that we will have down months, quarters, and years. Well, we just had a […] Greenhaven Road Capital commentary for the third quarter ended September, 2021, discussing their largest position, Digital Turbine Inc (NASDAQ:APPS). if (typeof jQuery == 'undefined') { document.write(''); } .first{clear:both;margin-left:0}.one-third{width:31.034482758621%;float:left;margin-left:3.448275862069%}.two-thirds{width:65.51724137931%;float:left}form.ebook-styles .af-element input{border:0;border-radius:0;padding:8px}form.ebook-styles .af-element{width:220px;float:left}form.ebook-styles .af-element.buttonContainer{width:115px;float:left;margin-left: 6px;}form.ebook-styles .af-element.buttonContainer input.submit{width:115px;padding:10px 6px 8px;text-transform:uppercase;border-radius:0;border:0;font-size:15px}form.ebook-styles .af-body.af-standards input.submit{width:115px}form.ebook-styles .af-element.privacyPolicy{width:100%;font-size:12px;margin:10px auto 0}form.ebook-styles .af-element.privacyPolicy p{font-size:11px;margin-bottom:0}form.ebook-styles .af-body input.text{height:40px;padding:2px 10px !important} form.ebook-styles .error, form.ebook-styles #error { color:#d00; } form.ebook-styles .formfields h1, form.ebook-styles .formfields #mg-logo, form.ebook-styles .formfields #mg-footer { display: none; } form.ebook-styles .formfields { font-size: 12px; } form.ebook-styles .formfields p { margin: 4px 0; } Get The Full Henry Singleton Series in PDF Get the entire 4-part series on Henry Singleton in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues (function($) {window.fnames = new Array(); window.ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';}(jQuery));var $mcj = jQuery.noConflict(true); Q3 2021 hedge fund letters, conferences and more Dear Fellow Investors, On the first page of every recent letter, I have noted that we will have down months, quarters, and years. Well, we just had a down quarter. The funds returned approximately -6% net for the third quarter, bringing YTD returns to approximately +14%. Please check your statements for actual numbers as they may vary by entity, investment date, and class. This may be of little solace to those like my Italian cousin who just joined the partnership, but since the Q1 2020 depths of the pandemic, we have had five straight quarters of positive performance returning well in excess of 250% over the past 15 months. We remain focused on the long term. Declines along the way are inevitable and sometimes offer buying opportunities. We are not trying to time the market; we are trying to generate attractive risk-adjusted returns over a multi-year period. Summer Of APPS When a top five holding starts the quarter at $76 and drops to $48 in a virtual straight line, questions should be asked. This was my July and August with Digital Turbine Inc (NASDAQ:APPS). If I liked the stock enough at $76 for it to be a top five holding, I should love it at $48, but Mr. Market was clearly flashing warning signs. While some of you may have enjoyed a carefree summer, I dove back into Digital Turbine to try and figure out what I might be missing and what the market might be missing. I did the best I could to parse every word and action of CEO Bill Stone, connected with dozens of investors, looked at every sell side report and model I could find, studied competitors, and spoke with former employees. There was such a wide gap between my perception of the company and the daily drubbing of its share price, and I was eager to understand if I was missing something or if there was actually a compelling buying opportunity in front of me. I went deep into the weeds, looking at what was said as well as what was unsaid. Over the summer and into the fall, a more detailed mosaic emerged, and I reached three conclusions. The first is that, after making four acquisitions in a little more than a year, the company has many more moving parts and is very difficult to model at a granular level. Nobody has a robust multi-year model that they have any certainty in. This includes yours truly, who (via the funds) has a large percentage of his family’s net worth invested in APPS, as well as sell-side analysts and even firms that specialize in building financial models for public companies. Digital Turbine’s model has gone from requiring three inputs – phone activations, revenue per phone, and percentage of revenue shared with carriers – to requiring dozens in order to achieve any real detail. The acquisitions each have different drivers, and the company’s new complexity is compounded by the fact that the most recent acquisition closed in Q2. As a result, Digital Turbine has not yet issued one full quarter of reporting with all of the acquired companies included. As best as I can tell, very few investors are letting themselves imagine what the economics will look like if there actually is an industrial logic to these acquisitions – if the companies truly are better combined than as stand-alone entities. To be fair, management was not spoon-feeding investors and was cautious with their public statements, spending months restricting their comments/guidance to saying that operating margins will improve over time. They finally opened up a crack in September, acknowledging that they were tracking 13 areas of potential revenue synergies. The combination of complexity and management conservatism created uncertainty, and many investors sell uncertainty and ask questions later. There was plenty of selling this summer. The second conclusion I reached is that Digital Turbine’s underlying business is extremely healthy. The core app discovery business was profitable last quarter and had organic revenue growth over 90%. The companies they acquired are growing revenue quickly, e.g. AdColony at +46% and Fyber at +198%. Even excluding the opportunities presented by the acquisition discussed below, there is the possibility of substantial future growth from increased penetration. Digital Turbine’s software is still on only 700 million phones, so there is a long runway for international growth with both carriers and manufacturers. Further, the company’s Mobile Posse division (a Q1 2020 acquisition) will be rolling out a new offering to Verizon and AT&T Android customers, and Samsung will be rolling out SingleTap on all devices worldwide. Despite what the share price was implying during Q3, I don’t believe the growth story is impaired. The third conclusion that I reached was that the acquisitions were done to control the advertising transaction from end to end, allowing Digital Turbine to capitalize on both a distribution advantage and a data advantage. They bought AdColony for its relationships with large advertisers and Fyber for its inventory of ads, effectively adding demand and supply, respectively, to their digital advertising platform. Digital Turbine’s distribution advantage is derived from a new offering called SingleTap, which allows an Android phone user to click on an app’s ad and download it in the background without being taken into the Google Play store. This patented offering leads to 2X-5X improved advertising efficiency. In the app world, this is massive, lowering the cost per install by 50% to 80% just by running ads with SingleTap embedded. What started as a $1M/quarter business is quickly approaching a $100M/year business. On an October investor call for Oppenheimer clients, management revealed that this $100M run-rate had been achieved with only 12 clients. A number of “last mile” technical issues have slowed growth and are being addressed, but the logic of taking the SingleTap technology and introducing it to AdColony clients to purchase ads served on Fyber’s networks is very interesting. Controlling the transaction and technology from end to end can yield superior outcomes for all parties. To date, none of the reported numbers reflect the opportunities presented by owning AdColony or Fyber, and there are reasons to believe that a technology that lowers acquisition costs by 50% will be used by more than 12 clients. The second reason that Digital Turbine wants to control the digital advertising from end to end is to take fuller advantage of their data advantage in the marketplace. They do not publicly emphasize their data advantages, but because Digital Turbine software is on the phone and operates under the carrier or OEM’s user agreement, they have access to a lot of data that other digital advertisers lack. How much data and how they can use it is determined, in part, by each carrier or hardware manufacturer, but at a high level, they know the model of phone and when it was activated, the demographics of the owner, what apps are installed, and which and when they have been opened. In a marketplace where advertisers are paying for app installs and activations, these data advantages can yield significantly lower cost per activation and drive advertising dollars towards the Digital Turbine ecosystem. It will take time to integrate the data advantages into campaigns and sell those campaigns to AdColony clients to be run on Fyber ad networks, but the combination of SingleTap and a measurable data advantage for a growing client base could yield lollapalooza results. It is easy to look and feel smart by being pessimistic and snarky, but optimism is usually more profitable. Buying more shares of a company that is up over 10X from the start of 2020 is not easy, but we did. I think Digital Turbine is in an enviable position with sound strategic rationale for controlling the digital advertising from end to end, pairing significant supply with significant demand, and layering in distribution and data advantages in a massive mobile advertising market where their overall market share is still small. On the left tail of negative outcomes, there are execution risk as well as risks associated with Google’s control of Android. At the same time, there are also massively positive potential outcomes such as the possibility that Digital Turbine eventually runs Verizon- or AT&T-branded app stores for the carriers. SingleTap could also be licensed to Snap or other large platforms. Again, SingleTap currently has only 12 clients. What will their revenue be with 100? When you layer in a below-market multiple with potentially dramatic sustained growth, the set-up is attractive. APPS’ price has rebounded from the lows of the summer, but I don’t think my summer was wasted. I now have a different (and potentially more informed) view of Digital Turbine’s distribution and data advantages than many in the market and believe that the market will gain a greater appreciation for the magnitude of the opportunity after the company’s analyst day in November. I think that the summer of 2021 will wind up being a lot more financially rewarding than the summers I cleaned pools. Here is a link to a brief slide deck on APPS that I presented at VALUEx Vail. Given the limited time window to present, it does not get into the details of data, but I think it will still be informative. Top 5 Holdings Our top five holdings should be familiar to limited partners, as we have owned them all prior to this quarter. The largest position is Digital Turbine Inc (NASDAQ:APPS) – discussed at length above. Below are brief updates on the remaining four: PAR Technology (PAR) PAR Technology Corporation (NYSE:PAR) continues to make progress towards moving quick-service restaurant chains to a cloud-based point of sale (POS) system, positioning itself to take advantage of all the opportunities that creates, such as integrating payments, inventory management, and loyalty program apps. The company raised capital during the quarter, which some may view as a negative, but I thought was incrementally quite positive. CEO Savneet Singh’s excellent capital allocation decisions are core to our PAR thesis. So far, every time that he has raised capital, he has made an acquisition. I look forward to seeing what he buys. The other positive development in Q3 was the announcement that PAR’s defense business won a large contract that they had been waiting on. This non-core, non-strategic asset greatly muddles company reporting, and I believe the announcement increases the likelihood that the defense business will be sold, simplifying the story and giving Savneet more capital to invest. KKR (KKR) KKR & Co Inc (NYSE:KKR) remains an extremely resilient business with an A+ team enjoying the secular tailwinds of the migration of investable dollars toward alternative assets, where large allocators like the returns and love the muted volatility. Elastic Software (ESTC) Share prices are up more than threefold since our first purchases of Elastic Software. Elastic NV (NYSE:ESTC) continues to report best-in-class net revenue retention (amount generated from existing customers) of 130%. With recent acquisitions, they are continuing their expansion into security. This is the company with the highest product velocity and largest addressable markets in our portfolio. With a massive base of customers using freemium/opensource products, there are fertile hunting grounds for growth. MarketWise (MKTW) During Q3, MarketWise Inc (NASDAQ:MKTW) reported their first quarter of earnings as a public company. I think it is fair to say that the market was underwhelmed. As of the writing of this letter, shares are down approximately 30% from our purchase price, which I thought was a fair one. As a reminder, MarketWise sells subscriptions to financial newsletters and related products. It is one of a very small handful of businesses that I know of that has grown to $500M+ in annual revenue with only $50,000 invested in the business to date. Gross margins are higher than most software companies at 86%, the company has been profitable all 20 years of operation, and revenue has grown for 18 of the 20 years. In the second quarter, they grew revenues 71%, generated over $50M in cash flow from operations, grew paid subscribers 45%, and grew free subscribers 75%. MarketWise has many attributes we seek from the businesses that we own, including: High Insider Ownership: 92% of outstanding shares are owned by insiders Recurring Revenue: 90%+ customer retention Operating Leverage: Incremental subscriber additions are highly profitable Long Runway for Growth with No Additional Capital: Customers are added at less than 1/5 of their lifetime value and marketing spend is paid back in less than 9 months. By most measures, this is an extremely healthy business, so why the decline? One can never be certain on this question, but my supposition is that the main driver has been the fact that MarketWise does not have a long history in the public markets or any publicly traded peers. Their forward guidance indicated a softening of demand as consumers focused elsewhere with the economy, recreational opportunities, and travel opening back up. These facts – combined with the market’s lack of familiarity with the business, its lack of publicly traded peers, the general apathy for SPACs, and overall uncertainty – led MarketWise to join a very long list of SPACs trading below their $10 IPO price. My working theory is that the company will get better at communicating and the market will get more comfortable with the inputs of the business and the strength of its operating model. There is a large list of free subscribers to convert and a history of growth and operating profits. If growth and profits continue, there is little room for multiples to compress further, and thus we believe the price should rise over time. Shorts The partnership remained short major indices and no individual companies. We have identified a couple of SPAC-related shorts that were not actionable; in one case there was no borrow available, and in another it was at the rate of 200% per year. While we continue to look for diamonds in the rough, rest assured, SPACs are still a fertile hunting ground for shorts. Outlook I generally believe that if we own good businesses run by great management teams, we will do well over time. I tend to discount many of the macro themes of the day. For instance, in 2015 when Greece’s issues were roiling global financial markets, I took some solace in the fact that the GDP of Greece was one-quarter that of the state of Ohio and represented far less than 1% of revenue for any of the companies that we owned. As I look at the wall of worry that is facing investors today, most items, such as supply chain issues, seem temporary and isolated to specific industries. The one worry that is more insidious than supply chains and has a far broader reach than a country-specific issue is inflation. Could the hangover of printing trillions and trillions of dollars include inflation? Yes, there are certainly indications that it could. When I look at our portfolio, I take some solace in the fact that most of the businesses that we own should be able to navigate an inflationary period well. KKR and Digital Turbine are not apparent beneficiaries of inflation, but they should be able to bear the environment as they operate with high margins, have no debt, don’t suffer from major labor costs, and lack long-term contracts where increases cannot be passed on. I also believe that my being right or wrong about my variant perceptions related to core holdings will have a larger impact than the CPI index movements. Thus, I am not building a bunker and we are not going to pivot immediately to gold, but of the thousands of variables out there in the cacophony of worry, inflation is the one I am focused on the most and it may influence our portfolio over time. Just as I have ended many of our letters... as volatility arises, I will attempt to take advantage of the opportunities it creates. We will continue to invest with a long-time horizon, and we will continue to invest like it is our own money – because it is. Thank you for the opportunity to grow your family capital alongside mine. Sincerely, Scott Miller Updated on Nov 2, 2021, 5:09 pm (function() { var sc = document.createElement("script"); sc.type = "text/javascript"; sc.async = true;sc.src = "//mixi.media/data/js/95481.js"; sc.charset = "utf-8";var s = document.getElementsByTagName("script")[0]; s.parentNode.insertBefore(sc, s); }()); window._F20 = window._F20 || []; _F20.push({container: 'F20WidgetContainer', placement: '', count: 3}); _F20.push({finish: true});.....»»

Category: blogSource: valuewalkNov 2nd, 2021

The top execs behind startups racing to trying to transform the auto industry, including Rivian, QuantumScape, and Aurora

Insider has interviewed and profiled the leaders of today's top automotive startups, as well as the potential leaders of tomorrow. Rivian CEO RJ Scaringe is among the leaders of today's top transportation startups. Carlos Delgado/Associated Press The auto industry is in the beginning stages of a transformation toward electric, self-driving cars. Startups are helping drive this transition. You can find our coverage of some of the top leaders behind these startups below. The auto industry is in the beginning stages of a transformation that's changing the vehicles we drive - and whether we drive them at all. A key force propelling this shift is a group of startups working on electric vehicles, automated-driving systems, batteries, and other technologies that will define the future of transportation. Insider has interviewed and profiled many of the executives behind these startups, as well as their potential leaders of tomorrow, to better understand their strategies and leadership styles.Below, you can read more about the key players running the top automotive-tech startups. EVs Tesla CEO Elon Musk (left) and Lucid Group CEO Peter Rawlinson (right). Maja Hitij/Getty Images; Lucid; Samantha Lee/Insider After years of hype, this generation of EV startups is just beginning to roll out their first models. The auto industry has long been a difficult environment for startups, and in the coming years, we'll see which have the staying power to separate themselves from the pack. Rivian and Lucid Group are seen as early leaders, but they, and their rivals, have plenty of work ahead of them.Read more:Lucid insiders worry CEO Peter Rawlinson's 'vendetta' against Elon Musk could undermine the EV startup's bid to be the next TeslaMeet 13 power players of the electric-vehicle industry, from leading companies like Tesla, Rivian, and QuantumScapeMeet Rivian CEO RJ Scaringe, who's been called the next Jeff Bezos as he electrifies Amazon's delivery vansCanoo's stock price has plummeted this year amid a management shakeup and an SEC investigation. Here's how its new CEO plans to prove his doubters wrong.  Autonomous vehicles Aurora Innovation CEO Chris Urmson. Aurora The race to perfect the self-driving car has taken longer than the industry expected, but some outfits are really moving toward a world where drivers can let a computer take the wheel. An early focus on robotaxis has expanded to trucking and logistics, which are now most likely to be the first sites of mass adoption for self-driving tech, even that milestone appears to be years away.Read more:A 25-year-old college dropout just pulled in $600 million in funding for his self-driving-truck tech that could hit the road by 2024The world's youngest self-made billionaire is proving Elon Musk wrong by bringing lidar — and self-driving savvy — to the mass car marketThe CEO of Uber-backed Aurora reveals how the self-driving outfit can hit $2 billion in revenue by 2027 — without owning a single vehicleMeet the 11 power players of the self-driving industry from leading companies like Tesla, Zoox, and Morgan Stanley Ride-hailing Uber CEO Dara Khosrowshahi. Riccardo Savi/Getty Images for Concordia Summit; Indraneel Chowdhury/NurPhoto via Getty Images; Leigh Vogel/Getty Images for Concordia Summit; Samantha Lee/Insider Uber and Lyft are more established than today's EV and self-driving startups, but each will interact with those companies as their fleets gradually shift toward electric, autonomous vehicles. Before they reach that point, they'll have to prove they can make their businesses self-sustaining without the help of new technology. Uber CEO Dara Khosrowshahi has received praise for his role in transforming the company's culture, but some employees aren't sure if he has the vision to lead them into the future.Read more:Some Uber insiders worry Dara Khosrowshahi's leadership has made the company 'boring' and 'confused' about its futureInside Uber CEO Dara Khosrowshahi's 4-year quest to root out the toxic culture that nearly sank the world's most valuable startupDara Khosrowshahi is 4 years into his quest to make Uber profitable. These 17 execs are leading the company's effort to become the Amazon of transportation.Uber's top lawyer rejected the company's attempts to recruit him twice. Here's how CEO Dara Khosrowshahi finally won him over. Batteries QuantumScape CEO Jagdeep Singh. QuantumScape Batteries are taking on a new importance as the auto industry transitions from gas-powered to electric vehicles. The battery pack is the most expensive part of an EV, and the biggest factor in determing how far it can drive between charges. Startups have struggled for years to reinvent the battery, but a new generation is hoping it's cracked the code on cells that are safer and more energy-dense.Read more:Startups like QuantumScape are trying to kill off the lithium-ion battery. An early Tesla employee's company just achieved a breakthrough that could prove them wrong.The CEO of a Bill Gates-backed battery startup explains how his breakthrough solid-state system could finally make EVs affordableHow the CEO of a Bill Gates-backed battery startup convinced the tech mogul to invest in his solid-state tech  The next generation of leaders Some of the rising stars of the autonomous-vehicle industry. Kodiak Robotics; Waymo; Nuro; LaunchSquad; Skye Gould/Insider In addition to profiling today's top transportation-startup executives, Insider has also worked to identify the potential leaders of tomorrow. Below, you can read about the brightest up-and-comers in the electric and autonomous-vehicle industries.Read more:Meet 2021's rising stars of the electric vehicle industry, from companies like Rivian, Arrival, and Solid PowerThe rising stars of self-driving vehicles, from companies like Waymo, Aurora, and CruiseHow to break into the self-driving industry after college, according to 10 rising stars in the field  Read the original article on Business Insider.....»»

Category: personnelSource: nytOct 30th, 2021