The Daily Update
Student loans, Investing wisdom from Stan Druckenmiller, Warren Buffet was wrong about the gum business, The Opioid crisis, Euro longs, Giliead, The Koch brothers, Amazon prime.
Economic News
The % change in commercial and industrial loans(1st chart) and consumer loans(2nd chart) have been falling YoY.
From what I read, most investors and economist think the economy is just o.k. Not great, not terrible, just o.k. I would think that these loan trends will revert back to the mean at some point?
Are we underestimating future growth? I don’t know, but I read a lot more, “Hey, we haven’t had a recession in 7–8 years, we are due for one”, than “I think future growth prospects will surprise to the upside.”
Goldman Sachs thinks the Opioid crisis could be a drag on the economy.
This chart shocked me. Not that it was high, but it’s hockey stick like growth since the recession.
This is total student loans owned by the federal government.
The Traders Corner
Euro spec longs are at the highest levels since 2011(red arrow).
I will be looking for short positions near 1.16. See chart below.
Stan Druckenmiller is an investing legend. However, when the internet craze in the late 90’s took hold, he could not help himself.[Bloomberg]
From the article:
It was February 1999. Investors went cuckoo for the internet, and tech stocks were absurdly expensive. The S&P 500 Information Technology Index traded at a trailing price-to-earnings ratio of 66. Druckenmiller spotted the madness and decided to short internet stocks.
A month later he was out $600 million and down 15% for the year. So he….
Druckenmiller sought advice from techies. It’s a new world, they told him. Throw away the old playbook. The technology revolution demands sky-high stock prices. Druckenmiller dumped his shorts and bet big on technology.
And then…
Drunk with internet riches, Druckenmiller plowed an additional $6 billion into tech stocks in March 2000. The bubble burst just days later and he lost $3 billion.
Surely he must have learned something.
When asked what he learned from that experience, Druckenmiller replied, “I didn’t learn anything. I already knew that I wasn’t supposed to do that. I was just an emotional basket case and couldn’t help myself.”
We are all susceptible to giving in. That’s why I didn’t laugh when I read this story. If one of the investing legends can fall prey, so can I.
Quant + human beats just quant and just human. Taking smart beta portfolios and trimming them down to the best reward/risk trades per my judgement.
Gilead[GILD]-Part of iShares quality factor ETF[QUAL]. Currently supports a 2.94% div yield. The model portfolio took a 5% position on 7/3. Entry price was $70.78.
Will hold this position until we are stopped out under $55 or the target at $120 has been reached. If $120 is reached we will re-evaluate the R/R prospects at that time.
Business Stories
An inside look at how Koch industries does business. You usually don’t read as much about the business side of the Koch brothers. The coverage of them is usually related to politics.[Washington Post]
Here are some of my main takeaways:
1. After taking Georgia-Pacific private, Koch jettisoned annual budgets and quit focusing on quarterly earnings.
2. They plan years or decades out. No short-term thinking.
3. Charles Koch requires 90% of the profits be re-invested.
The iphone has affected gum sales. Warren Buffet has always referred to the chewing gum business as his ideal business. I mean, technology won’t affect the way we chew gum right. Right?[Recode]
Scientific publishing is a monster business. At least for one company.[The Guardian] VERY LONG READ, BUT GOOD
Below the Fold
The number of Amazon prime households are close to passing paid cable subscribers.
The biggest economies in the world, in pie form.
Be careful what you post on social media, your employers are watching. Number 3 surprised me, not that it was on the list, but that is was as high as it was.
What websites do potential employers check?
A good breakdown of the healthcare market in the United States.[Axios]
