“Rule of 3 in conversation. To get to the real reason, ask a person to go deeper than what they just said. Then again, and once more. The third time’s answer is close to the truth.”
“Separate the processes of creation from improving. You can’t write and edit, or sculpt and polish, or make and analyze at the same time. If you do, the editor stops the creator. While you invent, don’t select. While you sketch, don’t inspect. While you write the first draft, don’t reflect. At the start, the creator mind must be unleashed from judgement.”
They comb company transcripts for interesting quotes.
A few from the latest one.
“I’ve been so impressed with the Disney+ execution. Over 20 years of watching different businesses, incumbents, like Blockbuster and Walmart and all these companies, I’ve never seen such a good execution of the incumbent learning the new way and mastering it. And then to have them achieve over 50 million in six months, it’s stunning. So to see both the execution and the numbers line up, my hats off to them.” Netflix CEO Reed Hastings
“Thus far through April, our in-patient admissions are running about 30% below the prior year. Our emergency room visits are running about 50% below prior year as our in-patient surgeries. Our hospital based outpatient surgeries are running about 70% below our prior year as most elective procedures have been deferred. We have started to see these volume declines stabilize over the past week.” HCA CFO Bill Rutherford
“There hasn’t been enough debate about ability to make billions of doses. And for the record, we have 10,000 people producing over a billion doses right now of our own vaccine portfolio. This is not easy to do.“ Sanofi CEO Paul Hudson
A survey in 2019 of nearly 5000 people showed that 49% of product searches start on Amazon. For Prime members who are frequent users this figure is closer to 80%.
Google is notching up the competition.
Shopify, which Ben points out is a key member of this anti-amazon alliance, is also launching an app of their own to showcase the nearly 1m merchants using the platform.
Whereas Einhorn thinks that inflation is coming, Hoisington think this couldn’t be further from the truth (and hence think the yield curve will be anchored at zero).
“Recent articles have suggested that the Federal Reserve and the Department of the Treasury are engaged in Modern Monetary Theory (MMT) or some form of “helicopter money”, the famous Milton Friedman phrase also referred to by Ben Bernanke. The inference is that once the virus is contained, these new efforts will yield different and more powerful economic and inflation results than did the Quantitative Easing periods following the 2008-09 Global Financial Crisis (GFC). Further, the suggestion is that the fiscal policy actions taken this year totaling $2.7 trillion will be far more effective than the $2 trillion stimulus package of 2009. Are these assertions that MMT is in place and monetary and fiscal actions will spur economic and inflation rates higher true? The short answer is no.”
What follows is a rather technical economic theoretic description of what is going on.
It is worth getting one’s head around this. Especially understanding how quantitative easing leads to increased excess deposits by banks at the Fed and not borrowing (a decision that is independent) and hence economic impact.
Overall they are predicting deflation – grim reading indeed.
“One of the most influential things he [Buffet] said to me was if you want to be successful, all you need to do is look around the room and think about the classmate or classmates you most admire and what qualities they have and just decide to adopt those qualities. If you do that, your chances of being successful go up enormously.”
“I actually think that people will be that much more desperate for human connection after this experience than they were before.”
He is probably right on the last point – long human connection?
The fund is -21.5% in Q1 and down a futher -1.1% in April (despite the market rebound).
Interesting discussion of how, despite taking net from 74% to 15%, they still struggled with performance against a falling market.
Eninhorn’s value style is struggling in recent years and these markets. Despite this Greenlight is starting to market the fund again.
Letter includes interesting debate on inflation post-crisis, what to buy in that environment, his current holdings and shorts (incl TSLA), new positions. Always worth a read.
They plot the markets trailing P/E ratio against CPI inflation (right hand side) and the 10-year real treasury yield (left hand side).
The data is from 1948 to today and sourced from BofAML
As real-rates go negative or inflation falls multiples tend to be lower.
KKR analysis suggests there isn’t some funny data skewing results here.
What about today? at the current real 10-year yield of -1.5% and inflation rate of 2.3% (likely to fall) the 17.5x P/E ratio for the market (since increased) stands out as too high.
These types of equity strategy charts are good to hang on to.
Many things are forced to change and it creates lots of opportunities especially in the way people work together.
“tens of thousands of software engineers are cooped up at home getting frustrated with their current tools and wondering if they can spot some pain point, or mechanic, or small difference to the flow, and solve some opportunity that no-one ever quite realised was there.”
Success can happen even if things look entrenched. The anecdote about Dropbox is telling – everyone told Drew Houston ‘there are dozens of these already’ and he kept replying ‘yes, but which ones do you use?’
There are already some interesting new ideas in the chat app market.
It shows that the majority of the improvement in mortality since the 1900 in the United States has come from improvements in infectious disease mortality.
