Completely off topic but Bill Ackman just tweeted that Fannie Mae and Freddie Mac are major opportunities due to Trump administration likely "removing them from conservatorship" in the next two years.
I've no idea what that actually means. But it is very unlike Bill Ackman to make any of his stock picks public (or at least that's what he said in his tweet). Any thoughts? His reasoning is long and detailed, too much to copy and paste, but hopefully this link will work:
Each party has their holy grails, and this has been a Republican one for a long time. Will it happen now? Who knows?. But I don't see it as necessarily important because those two will remain systemically important institutions, getting bailed out by taxpayers at need.
Happy 2025! Yes TV is often worth reading. One needs to bear in mind that his goal is to forecast short-term price action. And that he is very much financially focused, missing some other elements of quality.
I like to read his take on short term price action since it helps me decide if I want to invest now or possibly wait a little while. Sometimes it also helps me decide if I am really committed to ride out short term price movements of a particular investment. If I just can't shake my doubts, then I am usually better off moving on to something else where I can stay the course...
That seems very sensible to me. I try to read every bearish piece I see on anything I hold or am considering. But if I know the author is an idiot then I don't submit to the torture. TV is very much not an idiot.
Happy New year and thanks for the ping on ARE. It’s a long term hold for me, I’ve already got a lot, so I check in on it less often. At this price level I will load up more. I like the SPG anology.
Re short term thinking, I work with about a hundred vendors, most of them publicly traded. If a large deal is set to close two weeks after quarter end, I get a call, almost without fail, from the vendor two weeks prior to quarter end. What do we need to do to get the customer to buy within the quarter? Like clockwork, price concession every time. That’s not just revenue they are giving up, that’s 100% profit dollars, AND it created a revenue deficit for the next quarter AND it chews up the time of the sales resources who are supposed to be out rounding up new business instead. One would think that a savvy CFO would put a stop to this, but it’s usually driven from the CFO’s office in the first place. Gotta pick up that quarter bonus.
I should specify that I work in the technology industry. The behaviour was true 40 years ago when I started and is true to this day. In fact it is an open secret. I have customers who deliberately schedule orders two weeks after the vendor's quarter end knowing that the vendor will cough up a price concession to move it forward in time two weeks.
I'm curious if similar behaviour occurs in other market segments. I would think financial industries would be much more disciplined, but I don't actually know. In the technology industry, margins are huge, particularly in software subscriptions. Names like SentinelOne, Crowdstrike, DarkTrace, Splunk, Varonis., dozens more, have operating costs, but there's nothing physical to deliver. So COGS (Cost of Goods Sold) is zero. Even in the good old days when we were selling 100% hardware in the form of a refrigerator sized computer for a million dollars, gross profit was in the 90% range. Lots of margin dollars to play with, all of which come directly out of the bottom line. My guess is that market sectors with much lower margins would exhibit far less of this behaviour, but once again I don't actually know.
Incentives matter, don't they? You would think that a CFO, paid big bucks to look out for the financial welfare of an entire company, would be above padding his income with counterproductive actions. But nope.
One of my mantras during a negotiation is to find out how the other person’s comp plan works. You can predict from there how they will react to any changes you propose. Cheat code for humans. 🙂
I also wanted to mention that in the comments section of the TV article someone mentioned that they were waiting to see what you had to say as they trusted your opinion.
Happy New Year to you and yours Paul. Wishing you good health, happiness, love, and an abundance of spectacular Red Wine. 2024 was quite a year for our Wolverines!! Go Blue. I am happily adding ARE here, and I will add more if it goes lower. Soon to be my largest REIT holding.
Completely off topic but Bill Ackman just tweeted that Fannie Mae and Freddie Mac are major opportunities due to Trump administration likely "removing them from conservatorship" in the next two years.
I've no idea what that actually means. But it is very unlike Bill Ackman to make any of his stock picks public (or at least that's what he said in his tweet). Any thoughts? His reasoning is long and detailed, too much to copy and paste, but hopefully this link will work:
https://x.com/BillAckman/status/1873818034428694837
Each party has their holy grails, and this has been a Republican one for a long time. Will it happen now? Who knows?. But I don't see it as necessarily important because those two will remain systemically important institutions, getting bailed out by taxpayers at need.
Happy 2025!
I generally like what TV has to say, so your timely aticle was much appreciated.
Here's to a great year for you and your family.
Happy 2025! Yes TV is often worth reading. One needs to bear in mind that his goal is to forecast short-term price action. And that he is very much financially focused, missing some other elements of quality.
I like to read his take on short term price action since it helps me decide if I want to invest now or possibly wait a little while. Sometimes it also helps me decide if I am really committed to ride out short term price movements of a particular investment. If I just can't shake my doubts, then I am usually better off moving on to something else where I can stay the course...
That seems very sensible to me. I try to read every bearish piece I see on anything I hold or am considering. But if I know the author is an idiot then I don't submit to the torture. TV is very much not an idiot.
Happy New year and thanks for the ping on ARE. It’s a long term hold for me, I’ve already got a lot, so I check in on it less often. At this price level I will load up more. I like the SPG anology.
Re short term thinking, I work with about a hundred vendors, most of them publicly traded. If a large deal is set to close two weeks after quarter end, I get a call, almost without fail, from the vendor two weeks prior to quarter end. What do we need to do to get the customer to buy within the quarter? Like clockwork, price concession every time. That’s not just revenue they are giving up, that’s 100% profit dollars, AND it created a revenue deficit for the next quarter AND it chews up the time of the sales resources who are supposed to be out rounding up new business instead. One would think that a savvy CFO would put a stop to this, but it’s usually driven from the CFO’s office in the first place. Gotta pick up that quarter bonus.
Thanks for that real-world snippet!
I should specify that I work in the technology industry. The behaviour was true 40 years ago when I started and is true to this day. In fact it is an open secret. I have customers who deliberately schedule orders two weeks after the vendor's quarter end knowing that the vendor will cough up a price concession to move it forward in time two weeks.
I'm curious if similar behaviour occurs in other market segments. I would think financial industries would be much more disciplined, but I don't actually know. In the technology industry, margins are huge, particularly in software subscriptions. Names like SentinelOne, Crowdstrike, DarkTrace, Splunk, Varonis., dozens more, have operating costs, but there's nothing physical to deliver. So COGS (Cost of Goods Sold) is zero. Even in the good old days when we were selling 100% hardware in the form of a refrigerator sized computer for a million dollars, gross profit was in the 90% range. Lots of margin dollars to play with, all of which come directly out of the bottom line. My guess is that market sectors with much lower margins would exhibit far less of this behaviour, but once again I don't actually know.
Incentives matter, don't they? You would think that a CFO, paid big bucks to look out for the financial welfare of an entire company, would be above padding his income with counterproductive actions. But nope.
One of my mantras during a negotiation is to find out how the other person’s comp plan works. You can predict from there how they will react to any changes you propose. Cheat code for humans. 🙂
Happy new year Paul, happy to see you still love ARE (so do I).
I also wanted to mention that in the comments section of the TV article someone mentioned that they were waiting to see what you had to say as they trusted your opinion.
Thanks, I saw that. Figured I would give my gang here my view first. Will put up a response on that comment string, likely Thursday.
Very timely article as I read the write up by TV yesterday. Thanks.
Happy New Year to you and yours Paul. Wishing you good health, happiness, love, and an abundance of spectacular Red Wine. 2024 was quite a year for our Wolverines!! Go Blue. I am happily adding ARE here, and I will add more if it goes lower. Soon to be my largest REIT holding.
Happy New Year to you and yours as well, Lawrence! Go Blue!
I started adding more ARE when it dropped under $100. Like you Paul, I'm hoping for $90. Did the same with SPG and no regrets.