Not very and not very. But that’s the short answer.
You see, while the markets seem to have made a fabulous recovery from the march 23 lows in our Aggregate Index, a closer sizing-up of things reveals “the Crooked Casino.”
How? Well, the money supply from the previous all-time highs (around Feb 19 in our work) is up 31%.
So let me ask you this:
If there is 31% more fiat (scrip) money chasing the same stocks, wouldn’t the prices be higher?
Damn-straight they would be!
Onward and what-ward?
But they are counting based on dollars and those are up 31%, right?
This is Fed week, so no telling what to expect. Maybe some “buy the rumor” ahead of the announcement Wednesday?
Housing report out tomorrow, too. But how, hard assets are on a roll…leading to?
Screaming Metals, Delirious George
You may not have been reading UrbanSurvival – because if you were a long-term reader – you’d remember what we did in 2004 (or 2005, memory isn’t awake, yet!).
We went out – back then – and scooped up bars of silver. Told everyone we were doing it. One batch was $6.95 an ounce while another was $7.03.
Fast-forward to this morning. On FinViz (yes, you should bookmark it!), you’ll see silver is up 6.83% just today. It’s hovering in the $24.41 area.
Now, to be sure, this is only a return of 351.22% (on the cheaper bars). But think about stocks from back then. Our Aggregate Index, September of 2005, was around 10,640. At the close Friday, our Aggregate Index was? Oh, try 28,476.
Now some of that “heavy-duty math” to make the point: 267.63% return.
Or to compare gains: Market has a gain of 167.63 while silver’s gain is 251.22%.
Not All Joy, Though
Joy is a taxable event in today’s world.
BTW: Gone are the metals from Ure’s locale, long ago. We had to move into paper to avoid being old “sitting ducks” in the woods. Sell metal, buy guns and ammo. Alarms, drones… But, that gets to a meaningful (and painful) discussion of tax consequences and stategic living.
Ask how much bread you could buy for a bar of silver in 2005 and then how much bread you could buy today with the same number of ounces.
If the actual number of loaves is smaller today, then someone has “cooked the books” if they are charging you for a gain. BUT THEY DO!
That’d be the fault of Congress (damn Fools on the Hill they are!). Their junkyard (tax) dogs, hold that Ure’s metal had a taxable gain. Even with receipts and piles of bread. Because (check with your tax advisor) gold and silver are taxed as “collectibles.” Not the cheapy rates of long-term paper. Still, kicked stock’s ass, but that’s off point.
Paper is the game. If you bought into TSLA and held until the recent highs…sure. Stock made more than metals. But, how many people actually did the in and out timed perfectly? See, the problem with any stock is people tend to buy in based on product emotion. Then, they often “fall in the love” with the stock and ride it back down.
Selling stock is like getting a divorce. Do it early. Better to structure things and get the hell out early because there’s a clock in Life. I can’t count, though, the number of people I’ve seen ride “hot stocks up” – and then fall in love with the “story” and ride them back down.
Not to Pick on Tesla, But…
I’m not a financial advisor and we don’t pretend to offer investment advice. Well, except maybe saying we bought bars of silver in 2005, lol. And we have been buying tools for the shop, lately…
We don’t say when we sell, though. Because you could have a loss and try to blame us. No. So we won’t go there!
We do, on the other hand, discuss (a LOT) about the financial thought processes involved in (and behind) making of investments in Life – in general.
Let me share my most powerful Stock Analysis approach.
I look at everything like it’s a lemonade stand business. To make the numbers make sense (so I can wrap my smallish head around them), I whack zeros.
Tesla as a Lemonade Stand
Tesla make really good lemonade. Which they sell.
We begin on the Yahoo “statistics” page over here. Let’s whack zeros and see how this “lemonade stand” is working, shall we?
- Lemonade sales: $25.71 in the trailing 12 months. (OK, remember, this is billions, but I’m an axe murderer of zeros. Keeps me sane…er…)
- Lemonade Profits: Gross profits $4.07. Basis EBITDA (which is Earnings Before Depreciation, Income Tax, Depreciation, and Amortization) $3.45.
Got it? Successful lemonade stand. Sells $25 bucks in lemonade and makes $3.45 EBITDA (*ttm).
The investment question is “What is the fair market price of such a stand?” The answer is “What would YOU pay for it?” Imagine yourself buying lemonade stands…
The answer – based on recent stock price action – is? $280.64 on a market cap basis or $286.16 on an “enterprise value” basis.
Roll me a dutchy.
The Silly George Rule
To borrow from Jerry McGuire, “Show me the Money!”
Take the Market Cap and divide profits into that. I think of this as my “investment pays-for-itself horizon.” The lemonade stand (profit of $3.45 but even that is sketchy) divided into Market Cap of $280 comes out to 81.3 years.
Hmm… since I’m sneaking up on 72…is that something I’d buy? Well, if my anti-aging research works, lol…
Is Ure crazy? Maybe not. Remember the Buffett and Munger view: Look at “Book Value to Share Price.” The “Price to Book” is a ratio: 28.48. In other words, if there was a gargantuan liquidation sale, the stock prices are 28.48 times more than the liquidation price.
The good news is that Tesla is still growing like a weed. Expanding to Austin, Texas, we hear. 5,000 more jobs.
But, where is the Buffett & Munger “buy point? on Price-to-Book?
Well, if they can find a price-to-book of under 1…well, those are disappearing due to the Fed sloshing money around…but these are wise old gents when comes to remaining rational in times that are not.
Thus, Zeus the Cat, Elaine and I have a small office pool going.
Mr. The Cat wandered through this morning and meowed “Did you know GM dropped from $1.5-billion a year in revenue in 1929 and down to $32-thousand in 1932? Sez so over here, Fatso…Do your readers a fave and pose the question ‘Is TSLA the GM of this coming debacle…'” Uppity frigging cat.
Still, may be onto something besides a mouse. Tesla’s 6.83% decline Friday, notwithstanding it was $1,401 and change when I priced it in the extended hours session this morning. Strangely, I could not buy one share in the extended hours session. Still, a quick buy-sell…kind of like a trophy on the wall. I want to be able to say “I sold Tesla in July…”
Dog-eat-dog world, this lemonade stand business.
We’ve been holding to our outlooks on CV-19 – and how 300,000 dead in the U.S. figures by year-end is still likely way too low. We’ve got models more than twice that, but all depends on too many variables to count. Just a quick look at this chart, though, as this should speak volumes:
We’re only mentioning this because so many people are claiming the “Virus hype will disappear right after the election….” Like being wrong?
If you think that, you really, really need to understand Cesare Marchetti’s S-Curves work. Before the news can disappear, the plot needs to go linear first and then begin to roll off the growth rate.
Is Ure’s truly the only one who read Marchetti’s paper “Looking Forward – Looking Backward — A Very Simple Mathematical Model for Very Complex Social Systems.” Seriously:
“If we look at the guys who pick the flu, day by day, we find a bell-shaped curve quite resembling the normal distribution (although it is not the same as the mathematics show). If we integrate, counting all people who already got the flu, we get a logistic equation. This equation can be constructed from the basic mechanism of epidemic diffusion
The rate of new infections runs then as proportional (a) to the product of the infectious N by the infectable N – N ones. Simple and logical.
That is all our mathematical equipment. Transporting this simple reasoning to social systems (much simpler, by orders of magnitude, than biological systems), we find a precise matching between equations and events, stretching at times for centuries.”
Great — and from 1996!
Don’t tell anyone this, but you can use the same logistic to express market advances and declines – think of it as a variant of Joseph Granville’s On-Balance-Volume work, based on Woods & Vignola’s “continuous volume” work, but much easier graphically to digest.
Back on point: While we are sympathetic to baseless optimism, we also know how to mash-up data and statistically, the world won’t peak (herd immunity?) until 60% of the planet is exposed. And that would mean June 10th of 2021 when the global number could hit 4.6 billion.
Just this morning, China Reports Biggest Virus Spike Since End of Wuhan Outbreak.
With death rates dropping, maybe only 16.7-million dead. With the US peaking (modeling 60% community immunity) earlier (say March 7th of 2021) with 200-million cases and (*sharpening pencil) about 1.4 million dead here. Not Spanish flu, but does put a hole in the soul of growth, doesn’t it?
Good news? Viruses may mutate down. Bad news? Could mutate up, too…
But whoever is turning a medical/epidemiological/S-curve stochastic into political rancor is truly stupid at the knuckle-dragging level.
Which is when we N-95 and glove and Clorox… but that’s just us.
If you want to NOT wear a mask and take your chances, just remember the Ures want you to be around for the tax consequences to be shared by survivors. UrbanSurvival at its finest and worst in one ball-o-wax.
In Ure Shorts
Don’t open a cabbage patch in North Korea! Undiagnosed disease, cabbage – North Korea: (HN).
Sticks and Stones Dept: Live updates from weekend protests: Man shot to death in Austin, Seattle police declare riot, armed militia in Louisville. There’s a certain similarity between communist uprisings elsewhere…and here, now.
I never promised you a…what? Melania Trump to Announce Plan to Revamp White House Rose Garden.
And here’s a special one for us “grown-ups” – ‘Rolling’ down a window: 17 common phrases that no longer reflect the action.
Ah, the action, indeed: Off to slurp oatmeal…trying not to pin the cholesterol meters in my periodic blood test this week…
Dow futures are +80 as we roll…
Write when you get rich,
George@Ure.net *(and yeah, the server’s back up!)