Author: Snippet.Finance

Tools

Long Volatility

  • This is a fascinating slightly old interview with Chris Cole of Artemis Capital Management.
  • He runs a long volatility fund i.e. a crash protection fund.
  • In the interview he talks about the core principle of the fund – to sacrifice the next linear predictable outcome in order to gain exposure to a truly convex upside outcome.
  • Around minute seven he goes into a brilliant analogy using George Lucas’ success with Star Wars.
  • Most interestingly, this idea can also be applied to life as Chris describes in minute 47 of the interview embedded here.
  • Worth checking out their writing and following him on Twitter.
Macroeconomics

US Labour Market

  • A big debate is going on about the tightness of labour markets in the US.
  • This chart from Pantheon Macro is instructive – 5 million people are missing from the labour force.
  • By Q3 factors holding individuals back will fade – enhanced unemployment benefit will expire (6th Sep) and all childcare/schools will likely be open.
  • Near term however we have lots of evidence of tightness (signing bonuses, rising wages) and the Fed is taking notice.
Stocks

Apple Wearables

  • Pretty stunning how far Apple is ahead in wearable technology.
  • This was a good article discussing their lead.
  • Start by watching the AssistiveTouch for Apple Watch video – truly science fiction come to life.
  • The article attributes Apple’s success to (1) being early (2) voice controlled devices distracting competitors (3) wearables requiring hardware design expertise (4) ecosystem synergies (5) and no price umbrella.
https://youtu.be/xlrnxP7XIho
Stocks

WeWork Resurrection Pt2

  • We previously mentioned WeWork‘s resurrection.
  • This was a really great bit of analysis which is positive on the stock ($BOWX).
  • For one there is this chart from CBRE – flexible work could be the option for lots of companies post pandemic.
  • WeWork could also pull off their turnaround ($2bn EBITDA targeted, implying EV/EBITDA of 5.8x vs. peer IWG on 9.5x)
  • The market could also look at the company and its community once again as a platform. It has certainly completed the hype cycle.
  • Interesting point also on incentives – Management don’t get paid until shares cross $25 and operating cash flow crosses $1.3bn.
  • Usual caveats apply.
Stocks

Hosking Partners on Value

  • Interesting latest piece (page 15) from Hosking Partners on why the rotation into value stocks will persist.
  • (1) They perform well at the end of recessions (2) stimulus favours value (3) Covid recovery will be long and is only getting underway now in some countries (4) fund managers are entrenched (5) Interesting ESG angle.
  • There is also a full webcast that is worth listening to.
Macroeconomics

Inflation Debate

  • There is a considerable debate raging right now on the future level of inflation, exacerbated by the consensus busting April CPI print (here, here and here).
  • This piece, written by economists, is worth reading.
  • It proposes looking at median CPI to construct the Phillips curve, as it better reflects macroeconomic conditions.
  • The resulting relationship is stable pre- and post-pandemic and suggests, under bullish unemployment scenarios, that implied core PCE could hit 1.8-2.3% by 2023, “broadly consistent with the Fed’s average inflation targeting strategy with inflation modestly overshooting its long-term level following a number of years of undershooting it.“
  • They also don’t see, unlike others, temporary government spending causing an unanchored inflationary spiral given a better communication framework from the Fed and positive supply side effects of infrastructure spending.
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