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Travel M&A Coverage Report

3/8/2019

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Travel M&A Coverage Report
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Where to Put Your Money in 2019

12/31/2018

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Where to Put Your Money in 2019          
12/31/2018
We can wax-poetic on the recent market volatility or debate whether a recession is coming or not. The fact of the matter is volatility is likely here to stay. I’ve long grown tired of hypotheticals and have little desire timing bear-raids or attempting to short cult-frenzied tech stocks.
A well-defined strategy makes it easy to find investment candidates. Nothings set-in-stone and of course positive returns are never guaranteed but falling back on fundamental analysis and dividend income makes it easy to sleep at night with minimal regard to political nonsense and interest-rate hyperventilation.
The easiest way to search for actionable investments is to set minimal investment criteria.

Investment Criteria
Dividend Yield
> 5%
* The Core of my Investment Strategy which relies more on Income than Capital Gains. Care must be taken in assessing the sustainability of the Dividend Yield.

Operating Margin
> 0%
*An Investable Company should be profitable. Many REITS do not show Net Profitability but should at the very least show a Positive Operating Margin.
 
This search will return a list of profitable companies that pay a respectable dividend.

There is a myriad of additional metrics you can apply to the screener perhaps the most useful being ROE & ROA. However, it is truly mind boggling how many companies do not meet these basic criteria.

The key to this strategy is diversification. I want my portfolio to pay me consistently and often. I do not expect all of these companies to hold up. I go into this strategy knowing that some will fail and others will go on to produce nice returns. However, I don’t concentrate any one position in my portfolio. Currently, my portfolio is holding around a hundred or so different securities. These securities encompass all types of investments of different industries, nationalities and market-caps. Almost every day I have dividend income coming in, even if it may seem negligible in isolation, in aggregate it all adds up. Once this income is received, it is immediately reinvested in more dividend paying securities. This is where the fun and challenge of this investment style comes in. Gone is the trend-following, market-timing game. In is the fundamental analysis and long-term investment game.

​That being said, the speculator in me knows that low-priced stocks have the greatest probability of delivering strong capital-gains. Therefore I tend to focus on stocks trading below $15/share. It’s important to note that theoretically share price is irrelevant to the value of the company. In fact there are many companies with huge market caps that have low share prices.  Conventional wisdom generally goes, the larger the market cap, the less risk. This makes sense when you consider that larger companies simply have more resources at their disposal to help protect and sustain themselves through downturn and recession.

...to be continued with specific suggestions...
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The Stock Market is a Complete Disaster

12/26/2018

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The stock market is a complete disaster.

There were plenty of red-flags before the big 20% sell-off such as, the housing slump, oil unable to hold a bid, rising interest rates, and a clear global economic slowdown. However, these red-flags have been persistent for years and the market never blinked an eye in its relentless charge upwards.

If I’ve learned anything in my years as an avid market observer and participant is that timing major market moves is impossible. One day, stocks stop going up and start falling; it’s a slow drip drip drip drip that eventually turns into a volatile flush. October 2018, three years after I thought, the QE Bubble popped.

In hindsight, it was going to go down one of two ways. I thought that the mere cessation of QE was going to be enough to derail the train. It did throw some jitters into the market in late 2015 – early 2016. These were my day-trading days. As a futures cowboy, I experienced unbelievable monetary swings and experienced both the extreme highs and lows that only a naïve highly-leveraged trader understands.

What followed was a three year blow-off top. Seemingly every short-seller and skeptic was systematically beheaded in a euphoric tax-cut induced mania. Prices and stock buy-backs pushed all-time-highs as the financial media touted a ‘goldilocks economy.’ Despite the persistent structural problems deeply embedded in the market, no one cared. I paid little attention to the market throughout this period as I went back to school and studied academic finance. Finished my degree and took level I and II of the CFA. Principles of finance never really change, as despite bouts of mania and despair, ultimately fundamental analysis is the only ‘concrete’ concept people have to navigate the madness of markets. I will never forget reading in one of my textbooks that, ‘negative interest rates are impossible,’ as Eurozone Treasuries were trading with negative yields.

It’s always been clear to me that for the most part finance is all smoke-and-mirrors and that this period of QE Induced madness is particularly barmy. Learning academic finance only confirmed my suspicions. In the overarching QE ‘everything-bubble’ many smaller manias flourished. Bitcoin and cryptocurrencies gripped people’s fantasies. I had professors who became crypto-enthusiasts. I met with a guy who had bought something like $30 of Bitcoin years ago for a pizza and forgot about it discover his investment appreciated over a hundred thousand dollars. He actually started his own crypto-hedge fund with outside investors and everything. I remember his certainty that bitcoin was eventually heading to a million dollars a coin. I suggested that his fund diversify in non-crypto assets. I’m not sure what his fate was but in a mania, reason falls upon deaf ears.

That two year blow-off top period of limbo still baffles me but it appears to have wound down with a vengeance. During this period, the Federal Reserve’s Jerome Powell hiked interest rates 8 times as the Monetary Authorities reversed course on a path of ‘Quantitative Tightening.’ QT is essentially rehab for the free-money addicted markets. The central banks are hiking interest rates and letting the mountains of treasuries they bought slowly roll off the balance sheet. It’s hard to foresee this unwind going smoothly. If QE created this asset bubble, logically QT will deflate it. Asset bubbles almost never end smoothly but who knows? It’s human nature to cry, ‘this time is different.’

I still follow markets closely but am no longer gunning futures like a cowboy. I’ve learned enough about the knife edge of leverage to avoid that route. The short-term trading, market timing game is not one for longevity. Working a day-job and observing with some distance allows me to see the forest from the trees. My strategy has been for quite some time to simply employ the timeless principles of reasonable investment. I buy and hold a widely diversified portfolio of profitable companies that pay generous dividends. I then reinvest those dividends into more profitable dividend paying companies. My aim is to eventually amass a large enough cash-flow generating portfolio where I can comfortably live off that income. It’s not as glamorous as futures cowboy, but it’s also much more likely to work. In my mind, an investment pays dividends, whereas a stock that pays nothing is just a capital gain lotto-ticket.

I’ve written in the past about how out-of-whack momentum to value has gotten. Since then, the FANG stocks have crumbled. Chasing momentum works until it doesn’t at which point it fails miserably. This bear market will be unique thanks to the proliferation of passive-investing and high-frequency-trading. There’s no liquidity to be found thanks in part to management’s greed for share buybacks.  Everybody is loaded up on ETF’s where indiscriminate buying leads to indiscriminate selling.
​
I could bore you with market internals and stats but the usefulness of such data is fleeting. At the end of the day the point that needs acknowledgement is that the era of QE Easy Money is over. The market will have astounding rallies and terrifying swoons but volatility is here to stay. In my mind this plays out two ways: either there will be a Debt-Deleveraging  where the ecosystem purges the mountains of malinvestment that has been built up with decades of reckless monetary policy and resets itself or the monetary authorities will panic, revert back to money-printing and spur a period of hyperinflation.  Perhaps the market can limbo and stagnate for a while as Japan has done since the 1980’s, but ultimately unsustainable policies must be dealt with. 
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Market Update 10/25/2018

10/25/2018

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bsi_-_market_update_-_10-25-2018.pdf
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October 23rd, 2018

10/23/2018

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Why should the market go down now?
I’ve been bearish since I first learned of this Quantitative Easing Nonsense.
The governments just printed money out of thin air and suppressed interest rates at zero for a decade.
How could the Ponzi not have dire consequences?
But it just went up, and up, and up. 

The upward grinds last for months, the drops are dislocations, a matter of days. 
So here we are teasing the 200 DMA. I made a fortune the last time this support gave out… that was three years ago… the markets a hell of a lot higher than it was then… Learned a painful lesson about calling tops. Nothings changed except things are even more jumbled now. 
Interest Rates are like a pin to prick this Bubble of Madness.

Then again, the economy is not the stock market. 
Asset Prices are out of hand. What’s the value of money?
What do we value?
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Market Update 10/18/2018

10/16/2018

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market_update_-_10-18-2018.pdf
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What in the World?

9/6/2018

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What in the world is going on?
There is a great divergence between American and Emerging Markets.
Something happened in January 2018.
American market euphoria continues, while Emerging markets bleed.

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The question is, who’s bluffing?
Will EEM snap back and play catch-up or will the S&P eventually succumb to global forces?
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The QE Bubble has been relentless, incredible, one for the history books.
Valuations are stretched. Interest Rates are rising.
A swift unwind seems inevitable. Yet, timing remains impossible.


My strategy of holding a portfolio of heavily-diversified, value oriented, high dividend paying securities still seems like the necessary core.


The temptation remains to gun down these insane bubble tech queens…
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TSLA will most assuredly crumble in time.. However, I’ve been burned with shorts and derivatives so many times, it’s hard for me to want to risk anything…


So do we stick with what we know works and grind out the dividend strategy, or do we gun it for the fast money?
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The market's getting weird.
Interest Rates are going to affect the economy sooner or later.
Rates are already beginning to hit median housing prices in the United States.
The public at large has an unduly large amount of their wealth tied up in real-estate.
Real-Estate prices have been bid-up to insanity levels. Almost no young-adult can afford to buy a house and lord knows there has been a builder feeding frenzy in commercial real estate / multi-family housing for years. At some point demand will be fully-saturated and the pendulum/price trajectory will tip.
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As always, Timing.
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All You Need

8/30/2018

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August 30, 2018


All you need is sufficient cash-flow to support your existence.
The difficult part is obtaining the means to the end.
For my money, the most obvious solution is cash-producing financial instruments.


Initially, the allure of fast-money that only trading can bring seems appealing.
Success with leverage can delude one to think that’s the answer.
However, with time comes defeat. A gambler rarely persists.


Margin, futures, options, derivatives: They have their place but are too easily misused and abused.
They are not the solution and in my experience bring far much more trouble than success.


It’s hard to get lost on a well-traveled trail. Sticking with what you know for sure works may not be as glamorous as going out on a limb. The well-worn path probably is going to take you longer to get to the destination than going for the shortcut, but it’s also a hell of a lot less likely to get you killed.


The capital gain game, doesn’t make a lot of sense. This is because market movements are completely irrational. Humans have a knack for justification. It’s possible to find ways to justify everything you do. Life is strange in that nobody really knows anything. There’s no one true universal definition of truth. Everything is subjective to your own personal existence. Nobody knows what it’s like to live a life that is not your own.


There is risk in everything, but excessive risk when an investment entirely depends on the subjective valuation of others.


People love real-estate. Many have gotten rich through rent-seeking.
Real-estate is it’s own universe but it plainly distills the essence of wealth creation.


Assets and the return those assets bring.


There are constraints in life. We live in societies. People are average, normal for a reason. Evolutionary this makes sense. The further away from the norm you stray, the greater risk of ruin you face. We’re social animals, herds on the Savannah. Safety blending in. Those who stray face hyenas.


Risk is deadly.
Consistent cash-flow. That’s what we want.


My solution is a very diversified portfolio of high-yielding dividend paying stocks.


More on this later..

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Elon Musk is a Fraudulent Con-Man and Serial Stock Manipulator

8/10/2018

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Tesla had earnings last week showing record losses. With a rotten balance sheet and cash-incinerating income statement, Tesla is sprinting towards bankruptcy.

As proof that the market trades on fairy dust, TSLA promptly surged $50, obliterating short-sellers, skeptics, and anybody who wants to believe that there is any sort of rational basis to make sense of stock valuation.
As clearly that wasn’t enough, just 3 days later, during market hours, in an unprecedented and likely illegal[1] move of brash self-indulgent stupidity Elon Musk tweeted a remark stating that he had plans to take Tesla private at $420/share and that funding was secured.
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The stock rallied, was halted, opened, and then rallied even further as algorithms and fan boys rejoiced without a thought to the truth and viability of the asinine statement.

I’m going to lay this out for you right now. If I am proven wrong so be it but this is the truth as I see it.
No rational entity would make a bid to take TSLA private at $420/share.

Tesla is not in the business of manufacturing losses. Tesla is a car manufacturer, perhaps the shittiest car manufacture of all time. Tesla makes shotty cars that literally burst into flames out of the blue.[2] Thanks to an overhyped ‘autopilot’ functionality, crashes are frequent and as a result, the Tesla Model S is the most expensive car in the market to insure.[3]  Tesla makes cars whose panels misalign[4] and wheels fall off.

Terrible consumer reviews, ridiculous delays, tent shaded manufacturing lines, repair shops booked solid for months. Tesla made cars are dogshit, but let’s be honest; nobody is valuing TSLA stock based on TSLA cars. People are valuing TSLA stock based on a widespread disillusionment that Elon Musk is some sort of demi-god sent from the heavens to save humanity. Unfortunately for the true-believers out there, not only is this notion false, Elon Musk will assuredly go down among the biggest charlatan, soothsayers, and con-men in history. 

Elon is an eccentric and perhaps it’s no shock. The apple rarely falls far from the tree and Elons father Errol is a peculiar man. At 72 years old Errol Musk recently had a child with his 30 year old step daughter, claiming it was ‘God plan.’[5] It’s this lineage that gave rise to the paranoid schizophrenic Elon, a man who claims we are ‘almost definitely’ living in a Matrix-style simulation. 

Looking at the valuation of Tesla stock, it’s hard to dispute Musk. In what rational world do cognizant people value a cash-incineration flamethrower that has never turned a profit at $60B? This quirk must be a glitch in the Matrix. Perhaps Elon is the overseer reprogramming the simulation as he sees best… Or maybe... just maybe... he’s a fraud no better than Bernie Madoff.

That little tweet of his (among countless others) has launched a full-scale investigation from the SEC that may well lead to criminal charges.[6]

However, before Elon gets arrested and rots away on the tennis courts and tiki bars of the finest white-collar prisons money can buy let’s examine the viability of taking Tesla private of examining the financial condition of the operation.

Tesla is hurtling themselves towards bankruptcy at an accelerating pace. The Altman’s Z-Score is a bankruptcy prediction model initially found to be 72% accurate in predicting bankruptcy two years before the event. In a series of subsequent tests over the next 31 years (up until 1999), the model was found to be approximately 80%-90% accurate in predicting bankruptcy one year before the event.

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​You don’t need to be a CFA to look at the financials and see that Tesla is effectively insolvent. 
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​Clearly, the broad market doesn’t give a fuck about tangible numbers.  Alas, the retardation of algorithms and mouth-foaming fan-boys does not necessarily extend to large private equity players.

Private Equity focuses on cash-flow. Generally private equity companies like to find healthy, cash-flow positive operations with low debt. These investors then use immense leverage to effectively buy out the old-guard owners and pay down the debt with operational cash-flow from the acquired company.

Are you seeing any problems here? Terms such as “Cash-Flow Positive”, “Low Debt”, and “Healthy” are all terms that do not apply to Tesla and should immediately strike investors eyes as burning red-flags.

It will be interesting to see how this saga unfolds. Tesla is a stock for the history books. Much like the QE Bubble, the logic defying euphoric exuberance continues to burn strong in the hearts of the true-believers. Just like every bubble throughout history as the drums march onward, there is no end in sight. Just like every bubble in history, the end will be tragic and obvious in hindsight.

​When will this aberration end? When will fundamentals matter again? I have no idea..  



​[1] James. "Did Elon Musk Violate Securities Laws With Tweet About Taking Tesla Private?" The New York Times. August 08, 2018. Accessed August 10, 2018. https://www.nytimes.com/2018/08/08/business/elon-musk-tesla-sec.html.
[2] Washington Post. (2018). [online] Available at: https://www.washingtonpost.com/news/innovations/wp/2018/06/18/video-shows-tesla-bursting-into-flames-on-la-street-out-of-the-blue/?noredirect=on&utm_term=.4715c5eaf9ab [Accessed 10 Aug. 2018].
[3] Usatoday.com. (2018). [online] Available at: https://www.usatoday.com/story/money/personalfinance/budget-and-spending/2018/05/25/25-most-expensive-cars-to-insure/35234533/ [Accessed 10 Aug. 2018].
[4] Ray, T. (2018). Tesla: What Do a Failed Touch Screen and Misaligned Panels Add Up to?. [online] Barrons.com. Available at: https://www.barrons.com/articles/tesla-what-do-a-failed-touch-screen-and-misaligned-panels-add-up-1520598253 [Accessed 10 Aug. 2018].
[5] Rob Crilly (2018). Elon Musk's father has baby with step-daughter he has known since she was four. [online] The Telegraph. Available at: https://www.telegraph.co.uk/news/2018/03/25/elon-musks-father-has-baby-step-daughter-has-known-since-four/ [Accessed 10 Aug. 2018].
[6] Robinson, M., Bain, B. and Hull, D. (2018). The SEC Is Intensifying Its Probe of Tesla. [online] Bloomberg.com. Available at: https://www.bloomberg.com/news/articles/2018-08-09/tesla-is-said-to-face-broader-sec-scrutiny-over-musk-statements [Accessed 10 Aug. 2018].


​
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Emerging Market Currency Crisis

7/6/2018

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This was a draft from 7/6/2018. I should've posted it because now it's headed towards complete collapse. Especially the Turkish Lira.
I'll update this more thoroughly when I get time,


​
Emerging market currencies have been having a tough go this year.
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In conglomerate, exotic currencies are deprecating fast.
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    R. J. Sullivan IV

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