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Dr Duy & a FOMO fix

Dr Duy & a FOMO fix

My investment thesis is unchanged that current prices are artificially elevated and gravity will have its day; my portfolio is cash rich in anticipation. However, this morning with futures up again, there were moments of FOMO …. YIKES!

Dr Duy posted his view this morning and it helped put some rationality and gravity in my thinking. It is totally worth the read …

His take-away puts the risk exactly where it belongs – the US government (that’s HIGH risk imho), quote:

Bottom Line: On a certain level this shouldn’t be that hard, at least from a macro-policy perspective. Keep pumping money into the economy to support incomes as you build out the public health infrastructure to contain the virus while gradually ramping back up the economy. We just can’t fully commit to that program. That lack of commitment leaves us with a few more downside risks than I would like.

Non urgent $ reads – May 31, 2020

Non urgent $ reads – May 31, 2020

Note: These are no more than a week old, but some are older than normally posted

RY: Royal Bank of Canada (RY) CEO David McKay on Q2 2020 Results – Earnings Call Transcript

Academic look at C-19 economic impacts – jobs

Academic look at C-19 economic impacts – jobs

This working whitepaper is about 1 month old (from the data used) but holds a couple of interesting take-aways.

Source: https://bfi.uchicago.edu/wp-content/uploads/BFI_WP_202059.pdf

I have to give credit to the authors for their attempt to use data and academic rigor to articulating a possible post c-19 jobs picture. It’s not an easy read, and I came away with two key points to help my portfolio management.

First, the post c-19 recovery is probably going to take longer than current equity prices assume. This article suggests 2H ’21 the earliest GDP could return to pre C-19 levels; but that does not suggest nor imply same levels of employment, revenue and profit – currently unknowable?

Second, a number of 77% of lost jobs are assumed to be either kept, returned or relocated. That leaves 23% lost until economic growth creates them … sometime AFTER 2H ’21 based on above. The absolute numbers are less important than the levels (~20% lost jobs) and one can easily do the math.

If the authors analysis and assumptions hold, then consumption driven activity will be reduced by some number close relative to that 20% – and, higher government support for unemployed, underemployed … discretionary spending will take a hit almost certain and local governments will be further stressed.

C-19 death rates change senior housing investing risks

C-19 death rates change senior housing investing risks

Early on the C-19 days, even before US had acted, I predicted that senior housing and the companies that provide those services were going to be challenged in the longer term. The business model future was questioned in my mind. Hence, I sold all my shares in REITs holding those properties, e.g., WELL and LTC. (disclosure, I did NOT sell at the top and ignored my intuition; i sold later at profit, but with less than possible).

Some data on C-19 deaths and ‘where’ they occurred supports the thesis that this business model will be challenged moving forward. Will folks stop using long term senior care facilities … NO! Will people use them less or consider more options (opening up new business models) before signing that lease / agreement, YES!

The business model will be challenged, but the how, when and who remains open. That level of ‘unknown’ is just beyond my portfolio risk tolerance given all else going on … Eventhough, the LTC management is absolutely top-notch, and under most circumstances I would take the risk w/ them … but C-19 is different.

Infographic: High COVID-19 Mortality Rate Linked To U.S. Care Facilities | Statista

Source: https://www.statista.com/chart/21824/covid-19-deaths-in-us-long-term-care-facilities/

A balanced view on C-19 impact to investing – Dale Roberts

A balanced view on C-19 impact to investing – Dale Roberts

One of my always read authors posted a good balanced view on C-19 impact to economy and investing. Dale helped me a couple of years ago in taking solid positions in 10yr bonds that have proven out so far, e.g., MSFT, AAPL, BRK, KR, etc. The majority of voices at the time were calling a bottom on yields and putting fear into bonds … I took the plunge in part based on Dale’s analysis.

My portfolio strategy remains anchored in risk mitigation is foremost; don’t worry about ‘beating the market’ and resist any and all temptation to succumb to FOMO. My capital can remain very conservatively placed until I have confidence in investable value with commensurate risks. – Not much in it today, imho.

His closing is worth the full text, quote:

So yes, there’s hope

That said, even given the best possible miracle outcome and timing, it’s quite likely that economically, the damage will have already been done. And it will be a challenge for a rushed vaccine to change our already ingrained new normal behaviours. It may take a while for most of us to leave the fear at the door.

We have been asked to be too scared for too long, and that was for our own good. And mostly for the good and health of healthcare workers and the at-risk populations.

But I certainly hope that we begin that economic rebuild as quickly and safely as possible. To protect the health of workers, the vulnerable and the healthcare workers we will need to do this economic restart in very slow and measured fashion. If we step on the accelerator too hard the virus will take us into oncoming traffic.

We cannot afford a failed restart. This is the most dangerous economic experiment in human history.

Be safe. Be well. Be generous.

In summary I’d suggest we have a scared consumer, scared business owners, businesses that are going away; businesses that won’t be able to survive the new normal. There is that ceiling on how much we can fight back economically. All while the virus attempts to make things worse and more challenging at every stage.

There are many headwinds that will make a V-shaped recovery more than unlikely.

Non urgent $ reads – 5-21-20

Non urgent $ reads – 5-21-20

Non-urgent $ reads – 5-12-20

Non-urgent $ reads – 5-12-20

Note: There were several days w/out bicycle time (too nice outdoors, so biked in the sunshine); this is a collection that is at least 1 week old.

Mary Meeker’s team on C-19

Mary Meeker’s team on C-19

The ever insightful Mary Meeker and team put together a piece on C-19 following her typical content pattern. https://www.documentcloud.org/documents/6842117-Our-New-World.html

I did not find it as actionable as her regular internet updates, but she and team definitely put down things that a) need to be included in my framing of investment opportunities and risks, and b) are going to require additional research / work and time to provide actionable insights.

The piece is worth the read

I will leave their insights to your harvesting, but the one point she closes on and I totally agree … “We will get thru this, but life will be different”

Non-urgent $ reads – 4-30-2020

Non-urgent $ reads – 4-30-2020

  • Household Debt: The Anchor Dragging Economic Recovery
    • —not actionable for me
    • but did point out interesting demographic in younger consumers and their absence of mortgage – which means their disposable is tapped and insecurity just spiked
  • The Facade Of Financialized Demand
    • — CSCO was example from 2000 – I thought a great thought exercise and commented
    • Comment: A good thought exercise – another example – CSP sell elastic capacity – as new companies and existing companies reduce their demand the infrastructure to support elastic demand was in place – somebody now owns a under utilized capital asset(unless demand elsewhere surfaces) … who owns that capital asset? They are holding the risk without elastic demand staying even or positive. Enterprise corporates own less and less of those assets vs yr 2000. But somebody has those assets on their books
Mr Duy on FOMC – April 2020

Mr Duy on FOMC – April 2020

The ever rational and candid Mr Duy posted his views on the FOMC decisions and actions from yesterday’s presser.

Here’s the ‘bottom line’ quote: “Bottom Line: The Fed has pulled out all the stops to support the economy and will continue to use every tool at their disposal to minimize the tail risks to the outlook and support the recovery. Powell and his colleagues have not declared victory; they anticipate a long road ahead. Here’s the thing: Powell gets it. He understands the enormity of the situation. He isn’t going to stand by and let it all fall apart without a fight. And he isn’t going to walk away after the first round.

For me, there were three things that hit me – 2 from Mr Duy and 1 from Mr Powell.

1 – Powell is the right person for this job and we almost lost him

2 – FED is in the game 100%; they have become the ‘pig’ at breakfast when so many others are hardly the ‘chicken’ (if you don’t know that little contrast, let me know)

3 – Powell made it very clear like at least 3 times – FED loans money, they (legally) do NOT grant money – that’s the job of fiscal lords (Congress and Treasury)

One more add to compliment Powell – (Heisenberg mentions it too in a rather cutting criticism of Powell’s critics) – he showed empathy to people suffering and to all of us dealing with this – something in short (very short) supply from current elected / appointed DC officials.

Non-urgent $ reads – 4-25-20

Non-urgent $ reads – 4-25-20

NOTE: These were read over a couple of sessions, but posted together

*Session 4-24*

Most important read:

— read 2x – incredible deep and important but the immediate actions are not obvious, but this will prompt several deeper dives, starting with historical assets price trends 1933 thru 1950

BAC: Big Bank Comparison: Bank Of America, Wells Fargo, And Chase

— thro out WFC – BAC cheaper but JPM higher yield and better management. Next step for me is to combine BAC, JMP, BMO and RY as to which 2 deserve new capital. Ideally, 1 US & 1 CA

Southern Company Is A Powerhouse Among Utilities

— average value solid dividend – good view in valuing doc quality but nothing on their markets just a numbers in the book review – necessary but not sufficient

Alphabet Proves Why Cash Is King

— not actionable for me; with that said, however, i am seriously evaluating GOOG for a 2H investment after marketing spends are re-normalized

Tons Of Insider Buying Lately – Is That A Bullish Indicator? You Might Be Surprised

— basically don’t trust insiders any more than u trust analysts

The Buying Opportunity Of A Lifetime? Think Again

— uses history to refute and dies not seem to see the near term lows- yet

Coronavirus Sparked Healthcare ETFs In General, But Ultimately, We Really Do Need To Pick And Choose

—- all etf – not actionable for me

Inflation Expectations Are Way Underpriced

—not actionable for me

The Risk Of A Lost Decade For Stocks

—interesting but not actionable for me

***Session 4-25***

POR: Portland General Electric Company (POR) CEO Maria Pope on Q1 2020 Results – Earnings Call Transcript

— simple straight forward – happy new shareholder – increase position as opportunity surfaces. $43 is next buy target after nibbling at $45.

ERIC: Telefonaktiebolaget LM Ericsson (ERIC) CEO Börje Ekholm on Q1 2020 Results – Earnings Call Transcript

— no material change to strategy – q2 will be risk as expected C-19 and seasonally – comfortable with design win, momentum. Stock price may / may no fall further as Q2 unfolds, but additional capital should wait those results – better line of sight to 5G spends globally (delays).

Divergence In REIT Valuations Creates Opportunity

— favs include MPW, FPI & pref too, STAG; I am not a fan of any of them but for different reasons. I am staying with DOC within REIT common.

Coronavirus Harms Supply Chains: Prof. Ted Stank

—pretty high level but aligns with my views – supply chain will become more expensive eventually; not because of fundamental producer changes, but stocks within flows that today do not exist as everybody was working on J-in-T-I without any stocks.

https://pplweb.mediaroom.com/2020-04-16-2019-Sustainability-Report-highlights-how-PPL-Corporation-is-moving-energy-forward-for-our-community-customers-and-shareowners

— really PR collateral, but I applaud them for publishing and it only confirms my selection

The Fed Versus Reality

SH is an interesting idea – seems at face value better than SPY puts

Weekly High Frequency Indicators: The Decisions Made By A Few Will Determine Vastly Different Economic Outcomes

— no material changes and a tough exercise when data changes so materially

Bank of Nova Scotia Provides Opportunity For Safety And Growth

— Div as safe as BMO, Mexico weak link – consumer still has high risk – too early – pacific strategy is sound but C-19 risks outweigh the entry point … after Q2 for me when better direction visible, especially vis-à-vis BMO and RY that I already hold

Rocky Start To REIT Earnings Season

— still bullish on home building – seems 1q too early for me – numbers will get worse before uptrend

S&P 500 Weekly Update: Staring At The Crossroads

— not actionable for me

INTC: Intel Headed For An Extended Downturn

—sky is falling, but it’s really the old story imho – INTC is leaning in to servers, but CSP grow with lower margins and enterprise shrinks – so simple to see / evaluate. Until enterprise or non CSP server volume picks back up, margins will suffer

Jobs or no jobs … but people!

Jobs or no jobs … but people!

Heisenberg posted today on the job numbers which were a continuation of terrible. Two points struck me.

First, Heisenberg did a fabulous job (consistently over the last few weeks) of making sure we remember that behind those numbers are real people. I was often reminded when i managed teams and was required to redeploy human resources that there is a curse of dehumanizing it all due to the simplicity of spreadsheets and numbers – there are humans represented by those numbers; quote: “Obviously, one can extrapolate and otherwise work with the numbers to create a smorgasbord of alarming statistics, but, as I’ve been keen to emphasize, these aren’t just statistics – they are people”

Second, the stock markets took 4.4m jobless people as a positive as it was not even higher … what kind of world is that a rational response?

Non-urgent $ reads 4-22-20

Non-urgent $ reads 4-22-20

TSM Taiwan Semiconductor Manufacturing Company Losing Its Process Leadership To Intel by Arne Verheyde

—solid update on process tech but nothing about products

RFI The Best And Worst-Performing CEFs YTD, And 5 To Buy Now: April 2020 by BOOX Research

— RFI best idea in REIT land – what are nibble prices and triggers?  An overlay of big holding earnings

RFI Healthcare REITs: Back On Life Support by Hoya Capital Real Estate

— an excellent overview – validated my approach to storage, industrials and cloud with MoB too – only MOB is Common stock all else cum pref

“Greater Fool” Bonds: Turning Portfolio Management On Its Head

— not actionable for me

10 Dividend Stocks On My Buy List When The Market Turns Negative by Mark Roussin

— his list is interesting but what the commentators are missing is his view of a tough q2 earnings- I think that will show where blood is flowing in the streets as well as where it is temporary and where it’s not discernible – too early for me to place big bets

Important Message To All REIT Investors by Jussi Askola

— the message is good imho – its just that the examples are tough to evaluate yet – for younger higher risk tolerant investors makes sense tho

The New Era: It’s Being Led By Tech And Health

— not actionable for me

Deflation And/Or Inflation by WWS Swiss Financial Consulting SA

— not actionable for me

Did Rent Get Paid? Previewing REIT Earnings Season

— not actionable for me

Non-urgent $ Reads – 4-21-20

Non-urgent $ Reads – 4-21-20

MacroView: This Time Might Be Different

—not actionable for me

TU: Telus: This 5%-Yielding Stock Should Continue To Grow Its Dividend By 7%-10% Through 2023

— the article was a bit shallow, but there was 1 comment that is important, quote: 

“You should have added a section analysing there balance sheet. The amount of long term debt they have taken over the years is too much. They went from 11B$ in 2015 to 17B$ in 2019 (+50% increase), while there operating cash flow has stayed relatively constant. It’s the same accross the industry, they are lucky to have Canadian government blocking competitors from entering the Canadian market.”

Sentiment Speaks: Can The Bears Come Back Roaring

—not actionable for me

Market Rallies Into The ‘Resistance Zone’

— echo chamber caution as his thoughts reflect most of mine at this point.  Here is key point: 

“This doesn’t mean we aren’t long equities. We are, but we are also carrying a much heavier exposure to cash, and have reduced exposure to fixed income. We continue to be selective buyers of quality companies opportunistically and will continue to prudently build our portfolios.”

JNJ: JNJ Q1 Earnings Call Key Takeaways

— basically medical devices will be hit due to non-C-19 surgeries being postponed and equipment purchasing being delayed … unless hospitals get more funding from FEDS I am not sure this will quickly correct … hard to see others (unless some magical vaccine surfaces from JNJ) make up the loss – while not something to sell, not something to buy here either until things calm down; I trimmed off ~15% of my shares from DRIPs and am back to my original position.

Alibaba’s Game-Changing Role In China’s Digital Currency

— long rambling and mixed up set of information – C-19, BABA, etc … author knows their content and worth continuing to read, but not this article.  I am still a fan of BABA but am still leaning to ETF for the play – IEMG and EMQQ being my favorites tho I do not hold EMQQ at this time.

Business Interruption Claims From COVID-19 Could Bankrupt The Insurance Industry

— outside my interest space

Verizon: 3 Questions To Ask On Earnings Day

— not actionable for me; though did have a good idea in the comments about selling PUTS – I looked into May PUTS but I will only buy more <$50, and there’s no short term PUTS that gets me there

Straight From PIMCO: A Closer Look At Emerging Markets

— not actionable for me; key point was stick to dollar based debt from quality companies – duh!

CSCO: Cisco: Unjustifiably Cheap, Yet Well Positioned For 2021

— not actionable for me, but repeats my view that the next several quarters are buying opp

— specific to oil and ETF that hold oil contracts – it’s NOT a pretty picture