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Category: Investing

How will senior housing change post C-19?

How will senior housing change post C-19?

As part of my review of the value chain and business model impacts of Coronavirus / Covid-19, senior housing will be one of the canaries in the coal mine, or spotted owls in the old-growth timber ecosystems. I just find it highly implausible (regardless of the demographic arguments everybody fell in love with, myself included) that these value chains and human interactions will surface unchanged from 12 months ago.

Here’s a global view of deaths so far by country within “Care Homes”; note that US figures are missing

Infographic: COVID-19: High Mortality Rates Linked To Care Homes | Statista

Source: https://www.statista.com/chart/21439/estimated-share-of-total-covid-19-deaths-linked-to-care-homes/

Non-urgent financial reads April 18, 2020

Non-urgent financial reads April 18, 2020

High level summary – nothing below that materially changes my current views, strategies or tactics

DOC: Physicians Realty Trust Is A Reliable REIT On Sale

— assumes biz model unchanged post C-19

IBM’s Second Chance At Cloud Computing Dominance

—in essence IBM needs to be a cloud connector and services provider which will tie them to the oldest slowest growing companies

Buying This Dip: Here Are 4 Cloud-Tech Names For Consideration

— not actionable for me

Hirst: If There’s One Place The Fed Has Your Back, It’s Money Markets

— not actionable for me

Our Five Favorite Positions Right Now

—not actionable for me

DGX: Quest Diagnostics: COVID-19 Testing Not Enough To Overcome Negative Effects

— not actionable beyond warning of revenue replacements at much lower levels – C-19 revs lower than traditional rev removed

Deutsche’s Kocic: The Last Two Months Show The Intrinsic Instability Of Our Entire Economic System

— hold on to your hats – implied is that fed balloon squeezing pushes risk and volatility into equities.  Overall system is very weak and consumer and biz level of liquidity is very, very small and when those fail, all tumbles down. THIS ONE IS IMPORTANT

The Wild World of Yield Chasing

— focused on longer durations – outside my current universe

CEFs: Two Utility Funds That Survived Through The Last Crisis Without Cuts

— outside my universe right now tho could be included in the XLU / FUTY research that has been suspended currently

When Too Much Is Not Enough

— not actionable for me

Weekly High Frequency Indicators: The Last Dominoes Fall

— stating the obvious with data

S&P 500 Weekly Update: ‘Balance’ – A Winning Strategy For Investors

— not actionable for me

A Grand Reopening? Winners And Losers Emerge

— summary recap – not actionable for me

Federal Reserve Watch: Here Comes The Money

— common narrative – short term deflation roughly 1 year then inflation

Kroger: Raise Prices, Print Money, Huge Upside

— if the narrative is either margins or MSS must increase, call me skeptical – I like my KR bonds, however

DGX: Quest Diagnostics: Stress On The Healthcare System Is A Bearish Sign

— echo of above piece on DGX – moving from my ‘watch’

—Q2 is kitchen sink for rev gro – thru earnings calls rev forecasts into Q3 & 4 are the tell – what’s the gro slope?  Goddess save us if lower than q2

— same story as above – key quote

Summary / conclusion: It’s pretty clear that Q2 ’20 is going to be the bottom for SP 500 earnings, but’s the rate or slope of the acceleration moving out of Q2 ’20 that will matter. The SP 500 earnings yield near 5% is always a red flag, but the environment makes this metric less useful.

2 scientific reports sustainable energy

2 scientific reports sustainable energy

2 recent studies were published that I found interesting and worth the read.

The first is about the solar panel cell chemistry improvements. Even with all my semiconductor design and manufacturing experiences, I found this science complicated but encouraging. https://www.sciencedaily.com/releases/2020/04/200415133625.htm

The second is complex modeling on the impact of wind turbines and their disruption to the micro weather (air-flow) patterns if capacity was increased. Even the authors’ description of the modeling was complex. Yet again, way encouraging if we can increase wind capacity without increasing unintended consequences, e.g., air flow around the turbines. https://www.sciencedaily.com/releases/2020/04/200414095737.htm

Disclosure: One of my main investment themes / narratives is sustainable energy, so I have a positive bias here.

Non-urgent financial reads 4-16-20

Non-urgent financial reads 4-16-20

Note: I batch up different articles that I want to read, and then read / comment on them several times / week while riding the stationary bike. These are generally deeper analysis pieces that fit into strategy, portfolio management or economics.

This batch

Post‑Pandemic Interest Rates: Lower For Longer

— ny fed published recently a review of feds work around ww2 on rates and debt – learning from the past – start on short end and extend maturities naturally as fed releases hold on monetary control – risk this time is higher global interdependence – but totally worth a read for historical perspective on what was done before

Debt-Free Companies Of The S&P 500 – T. Rowe Price Group

— key take away: 1- how are companies with new debt (either from gov or market) spending new capital and 2- what did the company really use its old debt for? – the stock or the business. Same fallacy of strategy as investors – did you buy for the stock or did you buy for the company? (this could become a stand-alone post if investigation surfaces novel notions)

AY: Atlantica Yield: Renewable Energy YieldCo Offers 7% Yield For Clean Income

— interesting and positive on AY but the AQN story is more appealing to me. Posed a question in comments let’s see in answers – Author’s answer- “I figure AQN receives $71 million annually from AY distributions, or about $0.13 per AQN share”

Intel: It’s Go Time by Business Quant

— key here is ADSL EUV installs – lever for INTC future gains – my INTC position is about 15% of once upon a time. INTC has to win the data center, period.

T: AT&T: Expect Some Pain

— nothing new but the comments help separate wheat from chaff – the main engine will remain mobility – their challenge will be to competitive and focused to win there with complexity and challenges elsewhere – needs great leadership – do they have now?

A Complete Collapse

— marketing teaser – losing confidence in the author as this is becoming pattern. plan on sending author private note.

Factory Orders And PMI Data Suggest These Industries Are Bullish

— too general to make actionable

Utility ETFs: Boring, But Tasty In Their Own Way

— good view on XLU comparison to other ETF and deep compare to FUTY on same metrics published in the author’s comparison. I started this analysis today and did not get far before I realize better to buy utility directly – not ETF

Riskiest Dividend Yields In Today’s Turbulent Markets

— good look at true cash flow – D is a risk in this analysis but PPL is not – yet street adds risk premium to PPL – why?

Analyzing Which REITs To Buy In The Post COVID-19 World by Yield Strategist

— not relevant to my strategies

Mr Duy update

Mr Duy update

Quote: “Bottom Line: Controlling Covid-19 requires drastically constricting economic activity; the proof that the plan is working is that the data collapses and we bend the infection curve. The former has definitely happened and it looks like the latter will as well – social distancing works. We still have a long way to go until we return to some semblance of normality, but expect people to begin working in that direction when the restrictions on activity ease. Most important now is to keep the pressure up on Congress to provide sustained support for the economy; that support should be open-ended, based on economic conditions not time or dollars.

Duy’s other great point is, quote: “Eventually that time will come (but don’t rush it or all the work we just did will be in vain; I am hoping by the end of June if not the beginning), and we should anticipate the economic numbers to pop on the upside. Think of the same story in reverse. Even assuming that reopening the economy is like turning up a dimmer switch, there will still be pent up demand activated and some activity will be starting from a base of almost zero. There is little place to go but up.

Bolds are his originals.

Source: https://blogs.uoregon.edu/timduyfedwatch/2020/04/16/its-ugly-out-there/

Non-urgent financial reads batch 4-14-20

Non-urgent financial reads batch 4-14-20

A short preamble. My portfolio management methodology is based in fundamental and traditional analysis – I am buying companies and as an owner have a responsibility to really know / understand the companies that I own. Recently, I have done a poor job of that — learn from failure and move on!

With that said, there is a principle to convey to help understand some of the comments below. It’s a market of stocks which are companies – there is no entity (in my financial head) ‘stock market’ (traders can have the market; investors will take the companies). As part of this, unless I can fully comprehend the business model (costs, margins, customers, risks, etc), it’s VERY hard to value a company. Without understanding the business, how can anybody value the company? Hence, we all take about the stock price being cheaper, rich, high, low, etc … until the clarity of structural changes are clearer, my valuations and stock purchases will be TRADES, not investments.

Here’s my reading from today (my comments follow the reading URL)

Qualcomm: 5G Wave Only Delayed

— weak- focused only on phones and Apple 5g phones – so much more to this story

This Chart Might Explain Why Berkshire Is Still Waiting On The Sidelines

— article didn’t really provide anything new but BRK is an interesting idea to look at salvage ops after this C-19 is thru

Even If The Fed Keeps Pumping Money, We May Still See Deflation

— primer nothing new

Inflation Is Coming

— a plausible scenario that needs to be considered but for me too early to claim one scenario

S&P 500 Valuation: When A Margin Of Safety Trumps Economic Fundamentals

— risk approach but at market level –  add to BRK article and it’s an echo chamber

Income Lab Ideas: Zero To Near-Zero Interest Rates

—take away is to look at calls within fixed income portfolio – ETF or CEF – seems obvious but I was not paying attention

http://fundamentalis.com/?p=10099  – same? Look At 2021 (And Forward Quarters) For A Better Read On Earnings

— key here is to not get bogged down in q1 or 2 numbers – use annual averages and estimates

‘Boomer Crisis’ – Crash Permanently Delays Retirement Plans

— nothing new but reminder to make sure daughter has sufficient fund

Consumer Prices Sharply Decline In March: Keep Your Eye On Wages

— watch wage growth go negative in sustained trend – very bad

Income Lab Ideas: Zero To Near-Zero Interest Rates by Nick Ackerman

— duplicate

Technically Speaking: The Reward Doesn’t Justify The Risk

— quote

With only a 6.7% advance available to achieve the 62.8% retracement, the “risk” required to achieve that gain is heavily offset by the 19% decline to retest the March 23rd lows.

In other words, for each $1 of capital you have exposed to equity risk currently, you are risking nearly $3 of loss. Such hardly seems to be a “rewarding proposition,” but those are odds any casino in Las Vegas would love to give you

Today’s Crisis And The Impact On The Real Estate Market by Jussi Askola

— fair analysis but imho overly optimistic – didn’t highlight different segments – disappointing from author as his posts are usually deeper analyzed

CSCO helping its customers

CSCO helping its customers

Seems like CSCO has a good idea, imho. Helps everybody if everybody helps out (rather than everybody expecting tax payers to help out).

quote from Seeking Alpha

Cisco (CSCO +2.4%) has launched a $2.5B Business Resiliency Program designed to help customers and partners invest in recovery while deferring costs.

“Cash flow is a top concern for Cisco customers and partners in the current environment,” the company says.

The vendor financing program offered through Cisco Capital includes an upfront 90-day payment holiday, and allows customers to defer 95% of the cost of a new product or solution until 2021.

Starting in January 2021, customers then make monthly payments based on the total amount and remaining term of the financing.

Non urgent financial reads – batch April 12

Non urgent financial reads – batch April 12

Disclaimer – just my observations – no recommendations

Coronavirus Roundtable – Still In The Early Innings

— nothing new

Mirror, Mirror On The Wall, Who Is (One Of) The Ugliest (Market) Of Them All?

— relative values by country markets – Korea surfaces as does UK as better values / cheaper based on current metrics (question their accuracy given stale earnings forecasts)

Weighing The Week Ahead: So Many Good Questions, So Many Poor Answers

— nothing new

LEVI: Levi Strauss & Co. (LEVI) CEO Chip Bergh on Q1 2020 Results – Earnings Call Transcript

— well articulated strategy and focus on recovery tactics – build position out

D: Dominion Energy: Nearly Decade-High Dividend Yield, But Wait For A Better Entry Point

— nothing new

SJR: Shaw Communications Inc. (SJR) CEO Bradley Shaw on Q2 2020 Results – Earnings Call Transcript

— impressive articulation of strategy and position – factual that ‘this quarter is dead and next q could be wrt new subs

The Case Against Treasury Bonds by Movement Capital

— key point is opportunity cost of cash is not enough to shoulder treasury real rate return

High-Yield Bonds: Not So Junk Anymore

— duplicate read from earlier

Dividend ETFs: Anomalies Are Great, So Long As They Aren’t Mirages

— common sense for newbies but nothing new

Beware Lazy Diversification In Preferreds

— key action – look for fixed + float to diversify current positions – could think same in bond space too – a good view on diversification

Bank Of Montreal: Comprehensive Analysis And Today’s Value Vs. The Great Recession

— positive view but did not dive into oil loan book; which seems like the largest risk area

The Frightening Economy On ‘The Other Side’ Of COVID-19

— L shaped recovery but some changed forever … not much confidence in V or short U recovery

AT&T: Brace For Impact by Business Quant

— nothing new

Key Takeaways From PIMCO’s Cyclical Outlook: From Hurting To Healing

— baseline U shape recovery – high quality debt longer durations and TIPS shorter

The U.S. Likely Faces A Deep, Hopefully Short Recession by PIMCO

— nothing new

Closed-End Funds: Bear Market ‘Buys’ by Nick Ackerman

—likes RNP at lower price at discount of >5% – hard to hold in volatile market but makes sense as leveraged diversification

A view on small biz

A view on small biz

Note: I have tried to refrain from publishing COVID-19 information and data, as I strongly believe there is too much false, misleading and invalidated information floating around making the situation MORE dangerous.

Seeking Alpha, however, put out a short post on the current state of small business in US based on a recent survey from NY FED. If this does not increase your empathy for small biz owner, you may have lost your heart …

quote:

Some 86% of U.S. small businesses would need to take some action to mitigate losses if they missed two months of revenue, according to the New York Fed’s Small Business Credit Survey, which was conducted in the latter half of 2019 before the COVID- 19 pandemic emerged in the U.S.

Such actions might include using an owner’s personal funds, taking out debt, or reducing salaries of the owner or employees.

Less than half of small businesses have received funds from a bank in the last five years, according to the survey.

That’s particularly salient now because it could slow their access to the Payroll Protection Program funds available under the CARES Act, as banks still need to vet applicants to meet strict anti-money laundering and anti-terrorism laws.

Even before the coronavirus outbreak, almost two-thirds of the firms surveyed faced financial challenges in the previous year, with the most common being paying operating expenses (43%) followed by difficulties with credit availability (33%).

Source: https://seekingalpha.com/news/3559403-small-businesses-lack-cushion-for-missing-two-months-of-revenue-ny-fed

Is stock market cheap? & what to do if it is / is not?

Is stock market cheap? & what to do if it is / is not?

Unfortunately, too many people are loudly barking recommendations, hypotheses, and confident forecasts about the stock market’s health and / or valuation and what we all should do about it … basically, buy the product they are selling! Idiots! Both the barkers and the followers …

My own posts recently have become few and far between as I have found that a) it takes most of my time to manage my portfolio (lessons still be processed on that front) and b) by the time i read something to comment on, it’s stale & out-of-relevance … events and conditions (or at least our reception of accurate descriptions) are moving very, very fast and often with inconclusive or factual errors – not the foundation I want to be making financial decisions on …

Two posts recently, however, address a mind-set and a data-set that I found helpful … there are a bushel of readings / comments that I found less than helpful and can be summarized as following: a) if you believe that Covid-19 will create a sharp / deep V recession and recovery – BUY!; b) if you believe that Covid-19 will be much more damaging and drawn out – SELL!

Regardless of your opinion, this recent post will help from Lawerence Fuller. Here is how he sets up the article, quote: “No one knows for certain, because there are too many variables that can’t be determined at this time, but I suspect that the future will fall somewhere in between the most optimistic and most dire predictions. I also think it’s extremely risky for investors to position their portfolios in such a way that they profit only from either the most bullish or bearish outlook. We need to be prepared for both. The bottom line is that you better have a game plan, …”

Doug Short one of the best data devils I read has a good perspective that should be included as an input to your decision making imho (Doug gives you really good unbiased clues). His post this week penned by his colleague Jill Mislinski is terrific. A quick summary quote: “Relative to the mean, the market remains quite expensive, with the ratio approximately 45% above its arithmetic mean and 57% above its geometric mean.”

Here is a post on Apple that demonstrates this split opinion perfectly – one must read thru the comments to pick up the barbell opinions.

In keeping with my blog theme … a) collect the best clues you can find and b) make a flexible, actionable plan to deliver desired results … Plans and Clues

Post on FED’s bubble management

Post on FED’s bubble management

One of favorite writers put out a great post on the FED’s recent (COVID-19 required) actions to create another bubble to fix the bubble that just popped in the credit markets. Sounds like a comedy or a tragedy depending on your point of view. But Lance’s insights have helped me make and prevent losing money over the last couple of years. His inputs are worth the time to understand … I also echo the ‘pension problem’ issue and the recent decline in assets will make it bigger – but nobody is really talking about it yet.

https://seekingalpha.com/article/4334541-fed-trying-to-inflate-4th-bubble-to-fix-third

Quote from his conclusion: “The lynchpin in the U.S., remains demographics, and interest rates. As the aging population grows, they are becoming a net drag on “savings,” the dependency on the “social welfare net” will explode as employment and economic stability plummets, and the “pension problem” has yet to be realized. While the current surge in QE may indeed be successful in inflating another bubble, there is a limit to the ability to continue pulling forward future consumption to stimulate economic activity. In other words, there are only so many autos, houses, etc., which can be purchased within a given cycle.

There is evidence the cycle peak has already been reached.One thing is for certain, the Federal Reserve will never be able to raise rates, or reduce monetary policy ever again.

Welcome to the United States of Japan.” (lance’s italics)

Mr Toad’s wild interest rate ride … wiplash!

Mr Toad’s wild interest rate ride … wiplash!

From the beginning of the year … just eye-popping … what do you do w/it to preserve your capital and maybe beat inflation?

I’m still working on that answer for my own portfolio – hardest times I’ve seen since 1985 when I started investing.