The Solvency Debate Continues: A Quick Tour of the Financially Fragile
In August of 2021, we published Junk Stocks Funded by Junk Bonds, which noted that high-yield spreads had hit record lows. Our view was that record low-spreads on record-low nominal yields were a recipe for ruin. Using the Fed’s definition of financial fragility, we highlighted a group of equities that scored poorly on the Fed’s durability test and ranked poorly in our models.
Warren Buffett: Bond Investing, Private Markets & Complacency
"The private credit market has grown to the size where there is no edge other than the fake attraction of not having to mark their assets accurately and showing artificially low volatility. The space is competing for the same deals as the public market. So, the original concept where it was smaller specialty deals and the lenders had to pay up and give special terms is simply gone.
Stock Bubble Charts: YTD Update on the Echo-Bubble Driving Equities
Hello everyone. This is Matt from KCR. Today we will do what is effectively a tardy half-year update. The speed and tone will be quick and sharp as the year has been challenging for evidence-based investors like us. The summary is that the sharp speculative rally we have seen YTD
AI, Oil and Gas: Misadventures in Capital Allocation
Our recent pieces, How to Value Tech Companies and External Obsolescence: Tech Investors’ Newest Nightmare?, discussed how AI algorithms, big data, and machine learning could be undermining the moats of tech stocks that now sport multiples last seen during the dot.com mania. We noted that our empirically
A Nod to America’s Oldest Living World War II Vet
So often in the world, darkness takes over. Traumatizing events rock our foundations. Unexpected tragedies shock the world. And when these things happen, it affects people. We often grow a little darker. Cynical. Hardened. But some people—often the best of us—have the exact opposite reaction. They go through the worst and come out of it with a positive attitude and a sense of gratitude.
How to Value Tech Companies Everyone Loves?
“Disturbing research warns AI may be the ‘Great Filter’ that wipes out human civilization” -The Independent “…artificial general intelligence or AGI is AI’s ‘big brass ring’ and will become a trillion-dollar industry by the 2030s…it will also do good in the world.” -Business Insider “What is certain is that creating [artificial general intelligence] AGI is the explicit aim of the leading AI companies, and they are moving towards it far more swiftly than anyone expected...
External Obsolescence: Tech Investors’ Newest Nightmare?
The definition of external obsolescence principally applies to real estate. One real-estate firm explains that “...external obsolescence is something outside of a property, off-site, that negatively affects its value. Definitions of external obsolescence often include the chilling term “incurable,” and examples are trains, traffic, commercial properties, institutional properties, geologic conditions, and industrial installations.”
Mega Cap Stocks: Making Money in Large Cap Growth
“Didn’t we just learn that pouring trillions of dollars into technologies with uncertain profit profiles we didn’t fully understand was a bad idea? Tech investors seem to be most aggressive when they have the least visibility on the IP and valuation provides them with no margin of safety.” -Zac M., KCR Subscriber...
Warren Buffett, Apple, E. Coli & the Big Burrito Beat Down
Mr. Buffett recently extolled the powerful economic moat of one of the world’s most iconic companies: Apple. Berkshire spent a bit over $30bn to acquire their Apple stake, which now sits at 936 million shares.
Alternative Assets & the 60/40 Portfolio Crisis
This paper will demonstrate the following: 1. 60/40 Asset Allocation models have come under crushing stress over the last several months 2. Combined, popular alternatives like private equity, private credit & venture capital strategies are often merely leveraged, high-cost variants of “60/40” with lagged reporting, in our view
The Marshall Plan: Drawing From the Lessons of History
I need not tell you gentlemen that the world situation is very serious. That must be apparent to all intelligent people. … In considering the requirements for the rehabilitation of Europe the physical loss of life, the visible destruction of cities, factories, mines, and railroads was correctly estimated, but it has become obvious during recent months that this visible destruction was probably less serious than the dislocation of the entire fabric of European economy. … I need not tell you gentlemen that the world situation is very serious. That must be apparent to all intelligent people. … In considering the requirements for the rehabilitation of Europe the physical loss of life, the visible destruction of cities, factories, mines, and railroads was correctly estimated, but it has become obvious during recent months that this visible destruction Today we provide a brief review of the short-term spikes in some of the stock market’s most speculative stocks.
The Death of the Dollar: Bitcoin, Gold & their Miners
“The Fed has shown some mettle over the last year but historically I would not say [Federal Reserve chair] Jay Powell is a profile in courage … one area I’m comfortable is I’m short the US Dollar” -Stanley Druckenmiller “Bitcoin is a store of inflation and a hedge against value.” -Anon