A really brilliant interview with Enrico Moretti, a researcher in labour and urban economics.
He makes two points on the future of post-pandemic cities, which, due to agglomeration effects he sees as bright.
There will be two forces – the first as employers accept some working from home, workers will accept a longer commute if it is less frequent, thereby growing the size of cities and hence the amenities they support.
This process will also lighten the load on the urban core – thereby making it more attractive.
A nice article showing that holding winners is a trying experience.
For example Amazon – “The near-95% crash following the tech bust is the one most people point to. The stock was underwater from 1999 to 2009! But there was a 54% crash from 2005-2006, a 58% dive in 2008 and 5 separate losses of 25% or worse since 2009.“
Why is it so hard – “Since 1980, more than 40% of all companies in the U.S. stock market have experienced a decline of 70% or worse without recovering.“
This link has a full analysis of the business “failures” 2017-2020 which is worth reading.
Interesting measure from Bridgewater – it shows the number of years it would take for US companies to repay all their corporate debt and equity capitalisation via internal cash flow.
The measure reflects leverage and market cap to cashflow equity valuation.
Alternative way of looking at the US housing market – suggesting it isn’t as frothy as it seems.
Adjusted for inflation and interest rates, using median house prices and a 20% downpayment the monthly mortgage payment in the US has actually come down over time.
This is especially so if you adjust for the “quality” of the median house.
Chart from Empirical Research shows price paid for growth (P/E multiple divided by trailing 5 year revenue growth) against the term premium in the bond market.
“We’re now exiting a unique period of negative term premiums and growth multiples are still high. As a result, growth stocks are at risk for possibly minor changes in perceptions of future interest rates and inflation, irrespective of what the Fed decides to do and when.“
Movies are the second most popular out of home experience in the US.
“…the industry sold 1 billion movie theater tickets in the United States, 1 billion. It’s the third most popular out-of-home — sorry, it’s the second most popular out-of-home experience in the United States. Other than going out to eat a meal in a restaurant. If you take the attendance of all 5 major professional sports leagues together, all 150-ish teams, all sports, all games, all season long, movie theaters sold 7x the quantity of every sports event tickets sold in the United States in 2019.” Source.
WeWork is trying to go public again, this time via a SPAC.
Below is a link to their investment deck. Lots of interesting data.
The company lost $1.7bn last year but expects things to improve as normal conditions return.
They believe a WeWork solution would save 26% vs. the cost of traditional real-estate.
The transaction puts enterprise value at $9bn or 6.6x adjusted 2023E EBITDA.
There are a lot of adjustments to EBITDA that need to be looked into and SPAC transactions have issues, but on the surface that looks a lot more reasonable than the peak valuation of $47bn.
