FCF or Bust

Style Agnostic | Capital Structure Agnostic | Never Long Frauds | 90% Indexed with 10% Fun Money | Mostly retweets, not investment advice

[Evergreen @evrgn11112231]

The key to making money through cycle in cyclical industries is not by nailing the fundamentals of your companies’ customers but in your companies’ customers’ customers (and their customers).

Visibility in immediate to mid-term demand is not enough because the tail of the dog is the last to whip (and you will lose money before you know the dog has even blinked).

[Andy Constan @dampedspring]

What do I mean with "it's a bubble " and there's "not enough pie"

Enjoy

https://t.co/8Ta1gglghz

[Brett G @brettgardner_10]

I think deep value investors underestimate the need for a catalyst to realize value. There are two primary mechanisms:

1. Mean reversion of returns on capital (in other words, earnings improvement). A business earning shit ROICs returning to normal.
2. External pressures (an activist).

In my book (https://t.co/IqjRXffvWr), I talk about a few of these. Cleveland Worsted Mills never really had the mean reversion, so returns to shareholders were poor even though Warren bought the stock below NCAV. Greif was a company that had ROICs improve as Jack Dempsey transformed the business.

Net nets don't work unless the returns on the underlying business improve or capital is re-allocated away from the dismal enterprise to better uses (such as returned to shareholders.

Graham was pretty aware of this as well, and went activist a number of times throughout his career.

[FCF or Bust @CapStructKing]

@Mr_Neutral_Man Yup, buy the discounters (TJX, BURL, Ross, probably not Kohls) and their landlords instead.

[Fed @lord_fed]

Most people buying options are just paying for lottery tickets and wondering why they keep losing.

So I dropped a guide which isn’t full of jargon or emojis that I wish existed when I started.

https://t.co/zXujU7uKSb

[David Abbott @runliftrunlift]

A lot of runners peak in training, then underperform on race day. Fitness doesn’t improve forever, it follows a curve.

You only have a limited window to accumulate hard training before fatigue starts catching up.

The key is timing your peak so your best fitness shows up on race day, not three weeks before it.

[FCF or Bust @CapStructKing]

@Mr_Neutral_Man Perks of low supply!

[Matias Scalbi @MatiasScalbi]

🔥 "The Volatility Edge" Esta estrategia de volatilidad hizo +86,9% en 2008, el año que el S&P 500 se desplomó 36,8%. Y rinde 16,3% anual desde entonces cobrándole el miedo al mercado

Zarattini y Aziz, los mismos del paper de ayer, se juntaron con Antonio Mele, profesor del Swiss Finance Institute, para atacar el trade más temido del mercado: vender volatilidad

La idea de fondo es simple. El VIX sobreestima la volatilidad que después se materializa el 80% del tiempo, porque la gente paga de más por asegurarse

El que vende ese seguro cobra una prima. El problema es que cobrás de a poquito y cada tanto viene un 2008 o un COVID y te lleva puesto

El paper arma 4 versiones de la estrategia, de la más naive a la más fina, usando solo ETNs de VIX que opera cualquiera:

- Pasiva, siempre vendido: 6,2% anual, Sharpe 0,48, drawdown de 32%
- Con filtro de prima esperada: 6,9% anual y menos drawdown
- Sumando la pendiente de la curva del VIX, y si se invierte se pone COMPRADA de volatilidad: 10,5% anual, Sharpe 0,87
- Con tamaño dinámico según el nivel del VIX: 16,3% anual, Sharpe 1, correlación de 15% con la bolsa

Los años bravos son una bestia:
- 2008: +86,9% contra -36,8% del S&P
- 2020: +42,3%
- 2022: +1,8% contra -18,2% del S&P

Todo neto de costos de transacción. Y el detalle que más me gustó: publicaron el código Python completo para automatizarla por la API de Interactive Brokers, gratis

Para no vender humo: vender volatilidad ya fundió gente, XIV cayó 97% en UN día en 2018 y lo terminaron cerrando. La diferencia entre cobrar la prima y volar por los aires son las reglas y el tamaño de la posición

Mi conclusión: la volatilidad dejó de ser terreno exclusivo de los hedge funds, pero es un seguro que cobrás de a centavos y pagás de a millones si no tenés reglas

Link al paper en el primer comentario

[FCF or Bust @CapStructKing]

@taobanker Feels like you might be better off entering on the next leg down if the region sees a repeat of the 97 Asian financial crisis.

[FCF or Bust @CapStructKing]

@yenoms Never mind, was thinking of Blue Owl parent 2028s. Interesting to see Blue Owl parent and Ares Strategic Income at same credit ratings.

[FCF or Bust @CapStructKing]

@Mr_Neutral_Man Can you start wearing Gap so the stock starts gapping down too?

[FCF or Bust @CapStructKing]

@Mr_Neutral_Man Honestly not that incremental for a heavy equity focus but does come in handy for the options or fixed income stuff.

[FCF or Bust @CapStructKing]

@AuclairsDad Only the cutest girls wearing the grippiest of socks.

[FCF or Bust @CapStructKing]

@calvinfroedge Ah $SSL, basically the cleanest way to play oil price in a chems wrapper.

[Adam Butler @GestaltU]

Open model capabilities now exceed what is required for most enterprise tasks. Which - along with the ability to self-host for security purposes - is prompting enterprises to switch away from expensive private models toward open models like Deepseeks at a fraction of the cost.

[FCF or Bust @CapStructKing]

@Mr_Neutral_Man @thepupil11 Long corn farms, short bitcoin farms

[@aahan_prometheus @AahanPrometheus]

Macro Regime Views 🧵

Quick thread on our macro views and how we’re thinking about playing them.

And ofc some systematic applications

0/13

[Imran Lakha | Options Insight @options_insight]

Looking at the skew dashboard right now...

Bonds skew put biased. Gold skew put biased. Equities put skew cheap as chips. One of them is wrong.

Bond put skew is sitting around the 75-85th percentile. Gold put skew is 85th percentile. Investors are loading up on downside protection outside of stocks.

Equity put skew? Near bottom-of-range.

Three asset classes, three reads on the same macro. One of them is probably mispriced. I don't know which way it resolves, but it doesn't tend to sit like this forever.

For me, I kind of think it gets resolved by equity skew catching a bid rather than the other way around. Stocks ignoring what bonds and gold are pricing usually ends with the put skew waking up.

Doesn't mean short stocks. Could mean owning a few equity puts before the rest of the surface catches up makes sense.

[carried_no_interest @carrynointerest]

It begins:

The whole thesis I hear VCs say of “you will always want the latest frontier model” falls apart once unit economics come into question