History rhymes. Doesn’t repeat. Valuation doesn’t matter until it is all that matters.
Stocks valued at 10x price to sales (P/S) are difficult to justify. The CEO of Sun Microsystems made the merciless math of 10x P/S easy to understand after the dot.com bubble imploded. We have reprinted his quote here again for the sake of convenience.
"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.
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.”
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.
“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
Happy Friday everyone! This piece is going to be brief, brutal, and to the point. Over the past two years, some readers have complained that the cheapest stocks that dotted our top-ranked companies “were at the peak” and destined to collapse. Counter to intuition, some have come to believe expensive stocks are safer than cheap stocks. For many of these names, earnings did not peak, the world did not end, and many of these stocks ran higher...
KCR is not surprised at the amount of Wall Street shills claiming they can predict the Federal Reserve Chairman’s next moves. Equally unsurprising is the market’s overwhelming interest in how market conditions might shift based on a leveling off or outright reduction in interest rates. The thinking goes like this: the stock market bubble that drove low-quality stocks to unsustainable levels could come roaring back to life if only the Fed would...
We recently posted a year end piece summarizing KCR’s work from 2022. There were so many blistering charts that we broke the recap into two parts. The first, Short Term Stock Speculators Beat a Hasty Retreat, and A Basic Industries Boom & the Return of the Real Economy as the follow-up.
When we posted our 2022 year-in-review we highlighted the charts as they were...
Last week’s piece Short Term Stock Speculators Beat a Hasty Retreat, walked through the blizzard of work we did on the continued collapse of speculatively priced stocks in 2022.Today, we present the best charts on the bullish material we highlighted last year.
At the end of last year, we posted a piece reviewing our research from 2021. We explained that after a brutal 2020 where we were bombarded by skeptics, ‘21 had been a terrific year for KCR and we expected more in ‘22 based on the data. Thankfully, fortune favors the patient, disciplined, and empirically inclined.
Our team believes in inefficient markets, behavioral finance, empirical evidence, and common sense. Having penned brutally simple pieces explaining the risks large cap, large-cap, and small cap index fund owners are taking, our recent exchange with an advocate of index funds was inevitable. The caller was upset.