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Michael King Profile picture
@WallStCritic
Nov 27, 2017 • 7 tweets • 3 min read • Read on X
It's different in #Canada. (Thread)
Eurozone countries don't have monetary autonomy or even absolute control over their banks. Canada does.
Japan's population is demographically very old and thus intolerant of inflation. Canada's isn't.

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More from @WallStCritic

Michael King Profile picture
Oct 3, 2018
The financial system is absolutely drowning in debt which suppresses interest rates, meanwhile we have real inflationary pressure both through the real economy and federal deficits. (Thread)
Back of the envelope math shows deep problems in capital heavy industries if nominal rates keep rising even if real rates are negative.
$AVB recently sold non CBD apartment buildings for 4.7% cap rate. Rising rates will obliterate the new buyers.
Rates affect asset PRICES while inflation affects asset revenues and expenses.
Say an apartment building earns $1m in NOI and is valued at $21.25m (4.7% cap), and rates and inflation both rise by 1%. The building would be worth $17.7 (yikes).
Read 11 tweets
Michael King Profile picture
Aug 14, 2018
My investing philosophy is built around nothing.
Nearly every bad investor that I've ever met has started with an investing thesis that somehow relates back to a theoretical investment process. While I have mental processes, they're incoherent.
I look at momentum sometimes and sometimes I ignore it.
If I'm bottom fishing a cyclical stock then I want to see it up 50% from its low before I take a bite.
When I'm buying into a wonderful business I ignore it.
I both buy and short companies that are undervalued on a sum of the parts valuation basis. These are usually value traps, but exceptions abound. If management is mediocre or better and the company makes some money I occasionally bite. I'm long $TRCO for that reason.
Read 13 tweets
Michael King Profile picture
Nov 13, 2017
Capitalism really only works one way. Companies with revenue declines over almost always have terrible returns.
(Thread)
Fixed costs are... fixed or sticky.
Interest expense can't be lowered without paying down debt or restructuring. Leases and locations can't be abandoned without significant costs.
Pension expense can't be lowered without bankruptcy.
Workers lose productivity as layoffs are faster or slower than work reductions. A situation for which there is no remedy.
Read 7 tweets
Michael King Profile picture
Oct 6, 2017
Companies to short and why.
Long thread coming.
The overvalued company:

If a company is merely overvalued it should appreciate more slowly than the market over time. Over a long time horizon the returns will still be positive if there is no other problem. These shorts must be matched against longs.
The fraudulent company:

As a matter of course these shorts are excruciating. In essence you are betting that a master criminal fails at some point and can't find new cult members.

Until the cat is out of the bag the stocks behave like STRONG compounders.
Read 13 tweets

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