- A useful inflation tracking index (consisting of seven measures of inflation) that is both more timely and overcomes the challenges of each individual measure.
- The latest update (7th June) – pictured – suggests inflation could be peaking.
- For the first time this year the mean and median are holding steady.
Author: Snippet.Finance
Semiconductor Market
- Neat demonstration of a structurally growing cyclical market – integrated circuit (IC) units excluding memory chips over time.
- Currently we are above trend but inventories are generally low.
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.
Shared Branches
- Interesting trend of big UK banks sharing branches in smaller towns.
Compounding
- Helps to be reminded of this table from Hayden capital Q1 letter.
- Truly the 8th wonder of the world, as they put it “time in the market, beats timing the market”.
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.
Churn Rates by Industry
- Useful chart from the latest Mauboussin note showing churn rates in various industries.
- The piece itself is about valuing customer based businesses – interesting read.
Andreessen Interview
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.
Defensives vs. Cyclicals
- In the current environment – with PMIs at highs and economic surprise indices flirting with zero – it is worth keeping this chart in the back pocket.
- Source.
Production Bottlenecks
- Bottlenecks and supply chain disruptions are reaching extreme levels – is this temporary?
Carson Block
- Detailed and raw profile of the short selling legend behind Muddy Waters Research.
- Block named his research firm Muddy Waters after a Chinese proverb that translates as “muddy waters make it easy to catch fish”.
Impulse Buying
- How do you make online shopping conducive to impulse buying of gum and candy?
- Many food companies are trying to find creative solutions.
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.
China Credit Impulse and Cyclicals
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.
Fire Arms
- Everyone knows the US has the highest civilian gun ownership.
- Somewhat surprising to see which countries come next in the list.
- Source (h/t Big Picture).
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.
