CSCO … i was going to post on it …

A SA author beat me to the punch as priorities kept me from posting something intelligent. I commented on the author and will be spending time between now and EOY fleshing out this thesis (not specific to CSCO but it will be included).

SA Post

I agree w/ timelines, and I see 2021 as the beginning of a revenue upward cycle being driven by enterprise upgrades to meet 5G data and M2M usage demands. Between now and then, the macro winds will blow … a great buying opp in 2020 may surface, and if that happens, I will increase my % of CSCO to 7-10% from current 4.5% (long time kernel holding – cost basis <$15)

This 3 phase 5G implementation / roll out is the heart of the thesis mentioned.

Quite the table

Heisenberg pulled out this quote from the report:

The alarm bells are ringing loud and clear. Unless governments take decisive action to help boost investment, adapt their economies to the challenges of our time and build an open, fair and rules-based trading system, we are heading for a long-term future of low growth and declining living standards.

A new status quo for financial markets?

A Heisenberg post this morning has two elements in it – one BofA’s 2020 equity look-ahead, and two about the new status quo as a result of responses to 2008/09 crisis. The second is way more interesting imho. I found this piece brilliant.

He quotes often quoted Deutsche Bank’s analyst Kocic:

In its core, policy response to the crises was an extension of what in a political context is known as the state of exception: Market laws had to be suspended to restore normal functioning of the markets. The intrinsic contradiction of this maneuver is resolved only by understanding that suspension is temporary. Stimulus will have to be unwound. However, the accommodation has been in place for a very long time, during which traditional transmission mechanisms have atrophied and investors’ mindset has changed in a way that has altered irreversibly their behavior, the market functioning and its dynamics.

Engineering a state of exception comes with considerable risk. The Fed (and central banks in general) carries an implicit responsibility for orderly reemancipation of the markets, which makes stimulus unwind especially tricky. This highlights the deep dichotomy of power: While a state of exception is an exercise of power, there is a clear tendency to disown that power. And the only way to avoid facing the underlying dilemma is to never give up the power. This creates a new status quo — a permanent state of exception.

The question to be asked and answered over time and several different times is … are we now living in this permanent state of exception?

Not since 2000

Intel (INTC)

From Mott Capital Management: “Intel is testing a break out of its own around $59 with the potential for a push higher to prices not seen since September 2000 at $64.”

I have so much less than once upon a time and those funds did MUCH better elsewhere, but I’ll take this rise for time being.

5G & Cell Tower REITs

Hoya Capital posted a view on the big Cell Tower REITs. While their update is one of the best they’ve produced recently, I provided the following feedback.

@Hoya Capital Real Estate one of your better pieces imho. this is a complicated space and I would like to see a ‘usage’ view on the tower business contrasting 2 major usage models – a) consumer mobility (aka phones) and b) machine to machine communications. I believe that the latter in the 5G game will generate the majority of the data eventually (at least 5 years out). Have you all looked at that business driver vis-à-vis the tower REITs to determine if the usage models will change REIT pricing power?

I will update on their response if received. This is a very complicated space and investors are putting down big $ with little understanding. To follow up on my post yesterday … due diligence is required and can be hard work. Carry on!

Financial due diligence – reminder

A recent post at SA got me going … i own a small slice of this company and had missed this in my financial analysis due diligence. I made a mistake (was stupid), and now need to correct it. I will exit the postion quickly. Here is my comment to the author

Thank you for this analysis … I have a small portion of LAND and will discard quickly based on this as I had missed it. Seems way out of whack and with the games FPI management played back a bit, one would think the farm REITs would come to a ‘squeaky clean’ view. Not there.Also, I tried to reconcile this w/… … – no go even at the ‘roll up’ number unless the two sources are using different time periods (would be bizarre)Sad, as I too thought this was a plausible play on a real asset in limited supply … Good work on your part and reminder to all that financial due diligence takes effort.`

Hats off to the author for doing the needed grunt work, and ‘not to self’ do you due diligence better!

Heisenberg post today – corp. buybacks

Heisenberg report put out a great piece today on corporate buybacks using bank reports as is their practice. While there are political and economic arguments to be made about buybacks, that’s not their intent nor mine. Regardless of your opinion, buybacks are an element of stock selection and portfolio management. We need to understand their potential implications and risks.

Here are a couple of graphical apertifs

Source= Goldman

CSCO quarterly report – an important read

Cisco is a kernel element in my equity portfolio. The company released earnings this week and held the ritualistic earnings conference call. I will write more about this in the next week or so … it has big implications to the 5G timing.

Regardless, I will not be immediately adding to my position (which is minimal right now ~4.0% of equity portfolio). Patience is merited here. I am also sure that an army of analysts will provide their insights (mostly to take capital from your account). I will be adding more to CSCO but like in comedy, timing is everything.

Here’s the transcript for your own reading

Mr Toad’s wild interest rate ride

Mr Toad’s ride over last 30 days has been a mini adventure for sure. Pontificating on the reasons would be folly imho … the data speaks for itself. The table at the end tells a story that too few people are talking about – think about the quantity of capital that was impacted by those moves … whew.

First, the longer duration visual (~6 months)

Second the limited duration visual (~30 days)

Third, the % change in the rates over those 30 days

30 yr 9.46%
10 yr 10.23%
2 yr 3.07%
3mo -7.74%

Caution on market values

Lane Roberts posted a great piece on current equity valuations and trends … for risk management purposes, this is a good / valuable read. These visuals from Lance suffice to get ones attention, i think …

The sky is probably not falling, but risk management needs to be fully implemented at this point, imho.