Thoughts from June 15, 2020

  1. CalPERS borrowing $BILLIONS

In a short few weeks, it will mark the 7th anniversary of moving my family from Los Angeles to Raleigh, NC.  The list of reasons why is long.  CalPERS is just another ridiculous organization that I am glad to be away from, but sadly, the stable retirement of many friends and family is dependent upon CalPERS.  This is an insane practice, but one which has been used before and will be used many times over in the years to come by pensions that can’t keep up with their obligations.  Any deepening of the stock market correction for any significant period of time will blow the whole thing up anyway.

  1. Tesla #1

Shares of Tesla are now up 139% YTD while everything about the company seems to be trending in the wrong direction.  Sales down.  Deliveries down.  Earnings non-existent.  Factories offline.  Demand down.  But with all of that as a background, Tesla became the largest Automaker IN THE WORLD (in terms of value…not actual making anything), surpassing Toyota.  I am not surprised in the least considering we are in the age of valuing only the distant future while completely discounting the past.

  1. Jobs lost from Demand Destruction will not come back

While many of the 40M+ jobs that were lost over the past few months will come back as the economy reopens, many will not.  And not just from restaurants closing or small businesses shutting their doors.  Ultimately, when demand stops, companies cut.  Those cuts are permanent and will only be replaced when demand returns to a robust pace.  For many industries, it may be years.  Recessions (and dare I say Depressions) change people’s behavior.  The financial security there once was is now in question.  There will be more saving, and therefore less spending.  With many out of work, they also will be spending less.  Less spending means less revenue for companies which typically means less profit which means more job cuts.  It is and likely will be a vicious cycle.  I keep reminding people.  We are only 3 months into this.  3 months.  There is a lot more coming.

  1. Speculation is not investing

Hertz did announce today a $500m follow-on offering, but was quick to note that is was very likely the shares are worthless.  Wow.  Typically I am more of an anti-gvt involvement kinda guy, but this is one where I wish the SEC would step in and protect investors.  There is very little moving Hertz stock except retail speculators.  More to come on some of these other companies that should be worth next to nothing.|linkedin&par=sharebar

Thoughts from June 12, 2020

  1. Robinhood’s user activity might be speculation

Robinhood, a free trading platform adopted by many a day-trader during this crisis, is showing us that retail investor activity is heavy bent on speculation.

  1. Bankrupt companies stock is still worth $0

Hertz filed for bankruptcy and Chesapeake Energy has said bankruptcy is basically imminent.  These companies will not disappear due to bankruptcy.  That’s not how it works.  Debt holders will become the new equity owners and current stockholders (equity owners) will get wiped out.  That is how a re-organization works.  Trading a bankrupt company’s stock is like a 2-year old playing with fire…it always turns out badly.

  1. Starbucks closing 400 cafes – I’m not happy

For those of you that know me well, you know that coffee is important.  Next to God and family, coffee is highly ranked.  My kids roll their eyes when dad is heading to Starbucks at 2p for a coffee!  Speaking of Starbucks, they are closing/modifying 400 cafes.  This was after refusing to pay rent at thousands of locations affected by COVID-19.  Sadly, there may  be more changes coming.

  1. COVID-19 “second wave” or “lingering nemesis”

I guess COVID-19 is still with us.  I didn’t think it was eradicated, but it has been thoroughly ignored over the past month or so.  The hope of the economy re-opening coupled with social justice issues has diverted our attention (and right so).  Momentum and focus is shifting again, and it is coming to many as a surprise.  I have been saying all along that this is going to last awhile as more of a “lingering nemesis”, and we need to figure out how to live with it, treat it well and protect those vulnerable.