As Lloyd Bridges' son's character Izzy Mandelbaum Jr. memorably asked in The English Patient episode of Seinfeld, "You think you're better than me?"
Here's the thing. I don't.
But we live in this crazy era of self-righteousness and moral superiority. It's like, to quote another Seinfeld episode, the Bizarro world.
The stock market should be a refuge from this craziness, but, thanks to the ESG craze, it's not. But, in my previous life, I worked in some of the world's largest investment banks, following auto companies, which were quite large (not Tesla (TSLA) sized in terms of market cap, of course) themselves. So, big companies do big things.
But do they do good, big things or bad, big things? Man, that's above my pay grade.
But let me just offer some insight having seen both sides of the coin. Working for megabucks and then incubating my own financial start-ups, Portfolio Guru LLC and Excelsior Capital Partners, has taught me a few things.
Most importantly, I have learned that capitalism is capitalism. When you try to spin it otherwise... you are making a BIG mistake. Is Apple (AAPL) better than Exxon Mobil (XOM) ? Again, way above my pay grade. I do think hydrocarbons are essential to human life in 2022, and that they pulled billions of people out of poverty in the two centuries from 1822-2022.
But there are some companies that stick in my craw, and let me reiterate that Twitter (TWTR) is one of them. It is a cesspool. Also, TWTR stock happens to be extraordinarily overvalued. In my last research report for OHM Research in Sao Paulo, headlined "Twitter is a 21st Century Ponzi scheme", I applied the same cash flow return on assets analysis to Twitter that I had performed in Tesla in a prior OHM Research report.
To my astonishment, TWTR's CFROA has been negative for the past seven quarters. That's, to quote another Seinfeld episode, bonkos. I am on every move Elon makes - and will remain so as my firm owns TSLA puts - but at least Musk makes moves. From a financial standpoint, it is difficult to see any motion from Twitter whatsoever. This is not the time in history to be raising capital - including another $1.05 billion from the divestiture of MoPub - and investing it in T-Bills. That's value destruction in 140 characters.
That's how I judge a stock. Not by my perception of the coolness of its CEO. Elon and I were born a couple months apart in 1971, albeit on different continents, and given my background as an auto analyst - I actually drove GM's EV1 in 1997 - I am sure he and I would have a lot to talk about if we hung out. On the other hand, if I ever ran into Dorsey or Agarwal from Twitter, I am quite certain that our interaction would end with me receiving a restraining order.
So, that's where my new portfolio HOAX (see here) enters the picture. This is a diverse group of companies with operations around the world that offer a clear picture of the global economy. In a word: inflationary. That's good for commodity producers and carriers, and thus my HOAX portfolio has gone gangbusters.
So, there's the rub. By titling the portfolio HOAX, I might be giving you a hint as to where I stand on the longevity of our 4.543 billion year-old planet. She's fine. In the past six months I have traversed her several times, and I haven't seen anything from the windows of a Delta flight that made me anxious. But, as I am writing this at home in New York City, I can hear my radiators whistling up a storm.
So spare me the lectures about the melting earth. My eyes tell me what is happening. People are hurting right now, not because of the weather, but because of the actions of the world's central bankers, and the generational wave of inflation they have created. I will be damned if I don't say anything about it, and thankfully, RM gives me a great platform from which to do so.
Economic history shows that the only guaranteed solution to runaway inflation is a nasty recession, which nobody wants, or to have interest rates that actually reflect the cost of money. I am hoping for the latter.
Investments with higher duration will get crushed in an environment of rising interest rates. Hence my decision to benchmark HOAX with Cathie Wood's (ARKK) .
When there is herd mentality in any market any time, valuations will become stretched and crashes will follow. Tulips, the South Sea, the Nifty Fifty, dotcoms, mortgages, and the rest.
Bubble-proof your portfolio, and add a little HOAX to your life. Rest assured that being a HOAXter means that no one will ever talk to you at a cocktail party again. That, in and of itself, makes the journey worthwhile.
(Apple is a holding in the Action Alerts PLUS member club. Want to be alerted before AAP buys or sells AAPL? Learn more now.)
