UltraVioletMyth @UltraVioletMyth

@BHoggberg @grok is this even real or just ragebait.

A hardware store is the best-performing US stock of the last 45 years. $1,000 in Home Depot at its 1981 IPO is worth about $18 million today. The same $1,000 in Apple, bought at its IPO a year earlier: under $4 million. Home Depot beat Apple by nearly 5x selling lumber and paint. The biggest fortunes come from great businesses held for decades, not from guessing the next hot ticker. $HD

@RambutanRed I'd love to see @michaelxpettis opinion on this!

Stunning stat: "Anthropic’s investors are expecting the company to reach a valuation of $2tn when it goes public in the coming weeks. Add in SpaceX, which began trading at $2tn after its IPO in June, and OpenAI, which is considering raising money privately at $1.2tn ahead of a public listing next year, and these companies alone could be worth well north of $5tn. Now compare that with the entire history of IPOs from 1980 to 2025. The 3,365 tech companies that went public in that period were worth a combined $4.1tn when they started trading." While I've written much about AI's transformative potential across sectors, I've always been dubious about how much value hyperscalers can seize enabling that transformation. As I dissect in my recent report on "The AI Trade" (sageroadresearch.com/collections/re…), it's not about user acquisition. OpenAI claims to have over one billion active users across its services and two million businesses using its AI models. Anthropic has claimed to have more than 300,000 business customers. The question is not whether they can bring users to their services, but rather how much average revenue they can generate per customer relative to the price of building and maintaining their models. The cost of compute is inflating at the same time competition is depressing token pricing power. That's a precarious dynamic when so much hinges on the success of two companies. To again quote the report: "It’s hard to overstate how much hinges on these IPOs. As mentioned in the Executive Summary, OpenAI and Anthropic will account for 13% of AWS revenue and 27% of Google Cloud revenue this year. As for Microsoft, OpenAI alone accounts for roughly 70% of its AI-specific revenue ($24.1 billion out of an estimated $34 billion total for the fiscal year ending in June 2026). OpenAI has committed to tens of billions of spending on chips from the likes of Nvidia and Broadcom. Deepening circularity concerns, tech giant earnings growth has been increasingly driven by paper gains in the private-market valuations of Anthropic and OpenAI. In Q2, Amazon, Alphabet, Nvidia, Meta, and Microsoft reported $160 billion in cumulative “other income”, trouncing the $69 billion in “other income” reported in Q1. To quote the FT: “These one-off valuation boosts, derived in large part from enthusiasm around AI, risk distorting the financial picture at a time when investors are closely scrutinizing tech earnings.” If either Anthropic or OpenAI stumble in their IPOs, it’ll hit tech giants on multiple balance-sheet fronts and likely ripple through the US and global economy. A pin-prick popping of the AI bubble may not be our base case, but if a pin is out there, it’s likely the revenue versus spending trajectories of Anthropic and OpenAI." FT link: ft.com/content/8c4143…

Investors are increasingly questioning the safe asset status of US Treasurys, but policy makers are still wedded to the safe asset view of US Treasurys. This sets the stage for policy errors. I explore this challenge in my new policy paper, prepared for the Aspen Economic Strategy Group: economicstrategygroup.org/publication/am…

Germany destroyed its own price controls in 1948 and watched an economy resurrect itself inside eighteen months. Ludwig Erhard did it unilaterally. On June 20, 1948, he abolished the Nazi-era price and wage controls that the Allied occupation forces had maintained, then went on radio to tell Germans what he had done before anyone could stop him. The American occupation authorities were furious. General Lucius Clay demanded an explanation. Erhard told him he had not reformed the controls, he had abolished them. The results were immediate. Goods reappeared on shop shelves within days. Germans who had been hoarding anything of tangible value started trading again because currency reform and price liberalization made holding marks rational for the first time in years. Industrial output rose 50 percent in the six months following the reform. The villain in this story is price controls, and the economists and bureaucrats who insist they tame chaos rather than create it. Price controls tell producers to stop producing and tell consumers to hoard. Every time. The postwar German black market proved it: the official economy was starving while the illegal economy fed people. Erhard simply liberated the black market by freeing prices. You benefit from this history whether you know it or not, because it settled an empirical argument that interventionists have been trying to reopen ever since. Free prices coordinate production without a central planner. Suppress them and you get empty shelves and queues. Germany in 1946 had both. Germany in late 1948 had neither. The so-called Wirtschaftswunder, the economic miracle, was not miraculous; Erhard applied basic economic logic that Friedrich Hayek had already formalized in 1945 in "The Use of Knowledge in Society." No central authority possesses the dispersed, local, constantly changing information that prices aggregate and transmit. Bureaucrats trying to set correct prices are not just inefficient; they are epistemically incapable of the task. Hayek made the theoretical case, thrn Erhard ran the experiment on a starving nation, and proved it. West Germany grew at roughly 8 percent annually through the 1950s. East Germany, running Soviet central planning across the same ethnic population with similar prewar industrial infrastructure, stagnated and eventually built a wall to prevent its citizens from leaving. That comparison is about as clean a controlled experiment as political economy ever produces. Same people, same history, radically different institutions. The lesson: prosperity flows from secure property rights, sound money, and voluntary exchange. Erhard gave West Germans all three in one afternoon.

Still crazy to think that one of the smartest minds of history (Isaac Newton) lost all his money investing in a financial bubble Goes to show that raw intellect has very little to do with being a good investor

Not one FOMC member sees downside risk to US growth. Zero, across the entire committee. This is peak complacency from the same group that has been late to every turn in the cycle. Their unanimity is a contrarian signal, and the growth scare they cannot see is the one that catches markets offside.

The S&P 500's Shiller CAPE just hit 40.58, higher than the 1929 peak and higher than 2021. The only time US stocks were ever more expensive was in 2000, and that bought investors a lost decade of flat returns where your money went no where. CAPE won't call the top, but it could set the ceiling on the next 10 years. Lots of research is saying to price in single-digit returns from here, not another 15%-a-year run.

You need to stop and read this again… Warren Buffet’s final words of advice from his very last annual letter 🥹 "One perhaps self-serving observation. I’m happy to say I feel better about the second half of my life than the first. My advice: Don’t beat yourself up over past mistakes – learn at least a little from them and move on. It is never too late to improve. Get the right heroes and copy them. You can start with Tom Murphy; he was the best. Remember Alfred Nobel, later of Nobel Prize fame, who – reportedly – read his own obituary that was mistakenly printed when his brother died and a newspaper got mixed up. He was horrified at what he read and realized he should change his behavior. Don’t count on a newsroom mix-up: Decide what you would like your obituary to say and live the life to deserve it. Greatness does not come about through accumulating great amounts of money, great amounts of publicity or great power in government. When you help someone in any of thousands of ways, you help the world. Kindness is costless but also priceless. Whether you are religious or not, it’s hard to beat The Golden Rule as a guide to behavior. I write this as one who has been thoughtless countless times and made many mistakes but also became very lucky in learning from some wonderful friends how to behave better (still a long way from perfect, however). Keep in mind that the cleaning lady is as much a human being as the Chairman." And then today, his last letter to shareholders as chairman…

Evan @StockMKTNewz

a month ago

Warren Buffett is stepping down as chairman of Berkshire Hathaway $BRK.B, effective immediately - CNBC

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This is getting interesting. US 3-month bill yield: 3.95% Fed funds target: 3.50–3.75% The front end is now yielding ~20 bps above the Fed’s upper bound, effectively pricing tighter conditions ahead. At the same time, Treasury is relying on bill issuance for marginal funding while it has just at least doubled its buybacks of 10–30Y Treasuries to support long-end liquidity. Think about that structure: Sell more short-term paper. Buy back long-term paper. Yet long yields keep exploding higher. They are trying to relieve pressure at the long end while the front end itself is beginning to demand a higher yield. The bond market is becoming harder to control from both ends of the curve.

1/2 Michael Froman: "Perhaps the most significant, if implicit, subsidy is Chinese manufacturing firms’ access to Beijing’s state-directed financial system, which channels vast credit to prioritized sectors, enabling Chinese firms to expand without the same concern for profit and return as their international peers." This helps show why rebalancing is so difficult. Raising interest rates and cutting off financing to unprofitable producers would set off a self-reinforcing process in which a large number of producers would have to close down facilities and fire workers which, in turn, would reduce domestic demand further. foreignaffairs.com/china/next-glo… via @ForeignAffairs

Warren Buffett explained why interest rates are basically gravity for asset prices. In an interview, Buffett was asked why Berkshire was sitting on roughly $100 billion in cash instead of buying everything in sight. His answer was simple: Stocks had become less attractive as prices rose. Then he made the bigger point. “Interest rates are to stock prices what gravity is to matter.” When rates are near zero, investors are willing to pay much higher prices for future cash flows. When rates rise, those same future dollars become worth less today. That's why Buffett could look at a 10-year government bond yielding around 2.15% and say investors were effectively paying 45× earnings for an asset whose earnings couldn't grow. The lesson: Valuation doesn't exist in isolation. The price you should pay for an asset depends on what you can earn elsewhere. Change the interest rate → change the opportunity cost → change the valuation. Most investors obsess over whether a company is “great.” Buffett asks a harder question: “Great compared to what?”

Bender @Benderxxx7

2 months ago

x.com/i/article/2089…

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Everyone keeps saying the Fed is going to hold rates higher for longer. The swap market, one of the biggest markets in the world, is quietly betting the opposite. Ten and thirty year swap spreads are still sitting near the lowest levels in their entire history. That is not noise. That is the market pricing where short term rates actually end up over time. If the swap market believed the Fed's own narrative, spreads would move to reflect higher for longer. They have not. Instead they compressed further as oil prices rose, which is a bet against the Fed's story, not for it. The message underneath all the technical language is simple: rates go lower, and stay lower, for a long time. The forward curve is not buying the headlines.

@SantiagoAuFund Goldbugs don't realize the opportunity cost they're incurring by simply sitting on gold and nothing else.

Charlie Munger sat in a chair alone on a stage and described his entire investing philosophy in nine words. Find a few great companies and sit on your ass. His name was Charlie Munger. He died on November 28, 2023, at 99. He was Warren Buffett's partner and vice chairman of Berkshire Hathaway for 45 years. Together they built a trillion-dollar company by holding a small number of businesses for decades. He graduated from Harvard Law in 1948, made his first fortune practicing law in Los Angeles, then walked away to invest full time and spent the rest of his life saying "no" to almost every deal Buffett proposed. The clip in this video is one of his talks on how to invest, filmed for the Buffett Archive. His framework fits on a napkin. All of it is worth doing on Monday. Only invest inside your circle of competence. Not the biggest circle. The one where you actually know what you do not know. If you cannot explain a business to a twelve-year-old, do not buy the stock. Buy only companies with a durable moat. Ask what stops a well-funded competitor from doing exactly what this company does. If nothing stops them, it is not a moat. Only trust managers who own significant stock in the company. If the CEO would not put his own kids' college fund in the shares, you should not either. Never pay a premium price for a mediocre business. Buy a wonderful company at a fair price, not a fair company at a wonderful price. Then hold. Buffett has owned Coca-Cola since 1988 and never trimmed. He has owned See's Candies since 1972. Berkshire's Apple stake started in 2016 and has never been sold in a single quarter. Do not check the price. If the business is intact, the price will follow over five years. Checking it daily is how ordinary people talk themselves out of a fortune. Say no fifty times before you say yes once. Munger and Buffett rejected almost every deal that ever crossed their desk. Their portfolio is the ten they said yes to. Never buy on margin. Never sell into a panic. Never own anything you would not want to own if the market closed for ten years. "The big money is not in the buying and selling, but in the waiting." That is Charlie Munger, summarizing 60 years of investing in one sentence. It is the exact reason a lawyer from Omaha and his partner from Wall Street out-compounded almost every finance PhD who ever traded a share. Every retail investor who sold Nvidia at $200 in 2023 is inside the sentence. Every founder who quit his own company two years before it worked is inside the sentence. Every parent who pulled a kid out of a college where he was starting to thrive is inside the sentence. Every Berkshire annual meeting since 1994 is free on YouTube. Poor Charlie's Almanack, the book that collects Munger's talks, is under thirty dollars. Almost no investor about to click "sell" this week has read a page. The book is under thirty dollars. The willingness to actually sit on your best decisions for ten years is the entire edge.

Rossst.03 @Rossst_03

2 months ago

x.com/i/article/2088…

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Nike's market cap hit a peak of $280B in November 2021. It's now down to $57B (a $223B drop) and will be delisted from S&P 100. Former Nike branding exec Massimo Giunco wrote a viral post in 2024 laying it all out. He blamed CEO John Donahoe (2020-2024) for going all in on direct-to-consumer (DTC)...with a cameo from McKinsey: ▫️ELIMINATE CATEGORIES: McKinsey advised Nike to get rid of categories (running, basketball, soccer) and re-classify everything into “Women”, “Men” and “Kids”. The logic was that Nike was duplicating resources and a pivot to DTC would provide enough customer data to inform product decisions instead of relying on the category experts (eg. a basketball vet that spent 20+ years at Nike). A lot of these experts were fired and Nike lost their insights. This was a clear L because Nike quietly brought back categories at end 2023. ▫️END WHOLESALE LEADERSHIP: Nike ended hundreds of relationships with wholesales partners and prioritized Nike's website over retail. The change looked genius during COVID but as customers returned to brick ‘n mortar, Nike’s product were nowhere to be found. It had burnt bridges with partners, who were happy to give shelf space to upstarts (this wasn’t covered but I think On and Hoka took advantage of this for running) There was also a lack of feedback from retailers, which led to inventory issues (the “data-driven” insights from online sales proved to not be a panacea). ▫️PRIORITIZE DIGITAL MARKETING: Nike changed its marketing budget to focus on driving users to Nike digital properties and membership platforms. For decades, Nike spent 10% of sales on brand advertising to create an aspirational halo. The prioritization of programmatic ad spend meant Nike went from “create demand” (new customers) to “serve and retain demand” (re-targeting existing ones). The result was a slowdown in sales. “Because of that,” writes Massimo Giunco (who spent 21 years at the company), “Nike invested a material amount of dollars (billions) into something that was less effective but easier to be measured vs something that was more effective but less easy to be measured. In conclusion: an impressive waste of money.” The quality of advertising was also...not great. *** The focus on DTC is not surprising. Donahue was formerly CEO of B2B SAAS firm ServiceNow. Nike’s DTC business peaked at 44% of sales in 2024 (vs. under 30% before the strategy change). The digital focus seems to have commoditized the product, impacted Nike’s brand perception and created an opening for competitors. *** Original post: linkedin.com/pulse/nike-epi…

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The Kobeissi Letter @KobeissiLetter

2 months ago

BREAKING: After falling -80% from its record high, Nike, $NKE, will be removed from the S&P 100 at the end of this month, ending a near 18-year run in the index. The stock has now erased -$230 billion in market cap since its all time high. A collapse for the history books.

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Paper muy elegante de R. Caballero (el de los estudios sobre las empresas zombie de Japón). Llega un punto en el que para emitir nueva deuda pública de calidad hay que hacer un ajuste fiscal tan duro que la demanda agregada cae. EEUU ya está en ese punto.

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Warren Buffett: “I spend more time looking at balance sheets than I do income statements. There are certain things that are harder to hide or play games with on the balance sheet…” “I like to look at balance sheets over an 8 or 10 year period before I even look at the income.”

Hedge funds may now be a bigger risk to Treasuries than China: For years, China was considered the biggest threat to the US Treasury market, as China’s official Treasury holdings grew to as large as $1.3 trillion in 2013, or 14% of the total. This proportion, however, has steadily declined since then, to ~2%, its lowest since 2001. Meanwhile, hedge funds now account for ~9% of all Treasuries outstanding, more than double their level seen in 2013. Hedge funds now hold ~$2.6 trillion of Treasuries, with their gross exposure at ~$4.0 trillion, which includes short positions. More importantly, these positions are increasingly debt-financed, with hedge fund repo cash borrowing surging to ~$3.0 trillion, more than doubling since early 2023. This makes the Treasury market more vulnerable to forced selling, since a rise in yields can trigger margin calls for these leveraged funds, forcing them to sell Treasuries to raise cash and reduce their debt. Hedge funds have become a major force in the Treasury market.