“THE DRUCK” SPEAKS
We watched this in-depth conversation with the legendary Stan Druckenmiller, and one particular quote stood out:
Actually, I think it was just a little over two years ago, I went on national television and said we had monetary policy that was the most reckless and extreme relative to the economic circumstances I had ever seen.
And at that time, inflation was two and half percent. You had a booming economy, you were coming out of COVID and it was clear post-vaccine that we were on our way to maybe the most rapid recovery I had seen in my lifetime.
I was not surprised that about a year later inflation reached nine percent. I was not surprised that SPACs went crazy, Bitcoin went crazy, Dogecoin went crazy, equities went crazy.
What I was surprised by, was that for the next year while all of that happened, Jerome Powell’s Fed continued to have their foot on the gas… this obviously led to everything I just described.
If you’re a long-time reader, you know we’ve been for the past couple of years calling out the insanity in the markets and steering our readers and paid subscribers away from the reckless
investors gamblers peddling these “investments.”
And of course — as “the Druck” rightly points out — none of this would be possible without the the pointy-shoed central bankers, who made it all possible.
PUTTING THE DOT IN DOT-COM: PART 2
Speaking of things that were absolutely “en fuego” during this crazy era of monetary insanity…
We came across this stunning chart recently:
As the author (h/t to @@OKavrak) notes, “one of these is Goldman Sachs’s non-profitable tech index. The other is the ARK Innovation ETF (ARKK).”
Reminds us of what CEO of Sun Microsystems, Scott McNealy said after the burst of the dot-com bubble — when investors who bought Sun’s stock at 10x sales saw their investment drop 95%…
At 10 times revenues, to give you a 10-year payback, I have to pay you 100% of revenues for 10 straight years in dividends. That assumes I can get that by my shareholders. That assumes I have zero cost of goods sold, which is very hard for a computer company. That assumes zero expenses, which is really hard with 39,000 employees. That assumes I pay no taxes, which is very hard. And that assumes you pay no taxes on your dividends, which is kind of illegal. And that assumes with zero R&D for the next 10 years, I can maintain the current revenue run rate. Now, having done that, would any of you like to buy my stock at $64? Do you realize how ridiculous those basic assumptions are? You don’t need any transparency. You don’t need any footnotes. What were you thinking?
Nothing new under the sun. But at least Sun was making a profit!
ALL THINGS TRANSITORY…
Feels like a lifetime ago, when — back in February 2020 — we started warning that lockdowns will bring about inflation and shortages. Fast forward to today, and this pesky stuff is now part of our daily lives. We recently set up a dedicated inflation channel in our Insider private forum, where members can share their own experiences with all things “transitory”.
First off, Member Sean from the Bailiwick of Jersey with a quick note:
Sour dough bread in Jersey was £2.80 on Thursday but is now £3.29 on Saturday…that’s almost an 18% increase in 3 days! Has hyperinflation hit the island of Jersey for food?
And from the other side of the planet, this… shall we call it a glass-half-empty report from Grunter:
OK, business trip in Auckland, NZ. Asked for a glass of Ozzie Shiraz. It’s a decent red, but not over the top brilliant. Price NZ$18/glass. Problem is a “glass” has been hit by a drought on the way from the bar. When questioned ….”that is a standard drink”.
FFS – glad I’m not paying!
DIRTY, DIRTY COAL
We often wondered who was buying up all the coal mines in Germany and the like. Now we know:
From the article:
Kretinsky was acting on a bold assumption: Europe’s vaunted green transition will be a messy, prolonged affair that requires burning coal and gas for longer than anticipated. The 47-year-old former lawyer has built a fossil fuel empire estimated at more than $17 billion by scooping up dirty assets at fire-sale prices from utilities rushing to decarbonize. Unencumbered by the investors and regulators that pressured those public companies to cut emissions, his privately held company has been able to freely reap the profits from burning dirty fuels. The gamble has paid off, for now, with the war in Ukraine stoking energy prices.
We would like to think we are doing the same thing in our Insider service. Namely, buying assets that are vital for the functioning of society, but which have been left for dead. The only difference is we are limited to publicly traded companies.
Seems like Kretinsky started acquiring coal assets in 2016, which was the bottom, but it wasn’t without a 50% fall in the price of coal from 2018 to 2020.
The road to making big money in the markets is seldom easy. Usually, it has been because someone(s) has been patiently building positions months or years prior. It takes conviction, testicular fortitude, and patience.
So be like Kretinsky, and don’t be distracted by meme stocks, monkey JPEGs, or whatever hogwash comes next.
A few gems from our Insider member community today. First, a vignette from South Africa from Sean:
And this one from Nic. Wisdom truly can be found in the unlikeliest of places:
Have a great weekend!