Pete Bronson, CPA, CA

Previously worked in SaaS financial modelling. Like to read and discuss investing and politics. Love data, numbers, statistics, marketing, CAD real estate.

[Pete Bronson, CPA, CA @rantsofmich]

@foxenflask eBay and PayPal back together again under $GME - now we're talking.

[The All-In Podcast @theallinpod]

Ryan Cohen: “Why Does Everyone Want GameStop to Fail?”

$GME CEO @ryancohen:

“The media is an example. Why is it that you've got a ($EBAY) management team with no skin in the game, they're not builders, they haven't built anything themselves before, they've basically just been employees at major companies, they’ve been overpaid, I don't think they've ever broken out a sweat in their entire lives, why does everyone want them to succeed?

But when you have someone that, and by the way, I'm putting $500M of my own money into this transaction, I haven't pulled a penny out of GameStop, and it seems like everyone in the media basically wants us to fail, and wants them to succeed.

And you've got a board that's making hundreds of thousands of dollars a year. They don't buy stock with their own money. They end up showing up to a handful of board meetings, and they're making a fortune. You've got a management team that is grossly overpaid, taking zero risk.

There's nothing more American than basically risking your own capital. So why does everyone want us to fail?

@friedberg:

“I do think that the media, in order to give you credibility, they're gonna have to acknowledge that all of their takes on GameStop just being a meme stock were wrong, and that there is actually a business here, and that there is value being created here, and that they missed that, and they got the story completely wrong.”

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[Pete Bronson, CPA, CA @rantsofmich]

@adeoressi Instant veto from the Grifter in Chief

[Pete Bronson, CPA, CA @rantsofmich]

@DeItaone You're also not allowed to blow up unarmed ships but tell that to the US...

[Pete Bronson, CPA, CA @rantsofmich]

@8arani Neither

[Pete Bronson, CPA, CA @rantsofmich]

@market_sleuth @grahamformaine So he makes $50M for every employee he employs

[Pete Bronson, CPA, CA @rantsofmich]

@SPXTrades They can't oppose this because it's made up, no such visas exist

[Pete Bronson, CPA, CA @rantsofmich]

@NickWoolos Why would Trump end the war when pretending to end the war boost the market so much

[Pete Bronson, CPA, CA @rantsofmich]

@LegacyPathCA Case against: enforcement almost impossible

[Pete Bronson, CPA, CA @rantsofmich]

@akramsrazor This is Musk so 18 months really means 50+ months

[Pete Bronson, CPA, CA @rantsofmich]

@DeItaone This is Musk so I'd guess 2035 at best

[Pete Bronson, CPA, CA @rantsofmich]

Amazing post

[Ptuomov @ptuomov]

HOW TO ABANDON THE PRESENT VALUE FORMULA IN POLITE COMPANY

While retail investors are free to completely abandon the present value formula whenever they so desire, professional sell-side research analysts do not have such freedom. The professional standards force those analysts to follow a set of complex rules and social conventions resembling a tea ceremony to do so.

The research analyst has a target price that has to be about 15% above the current price. Then he must construct a set of cash flow forecasts, long-term growth forecasts, and discount rates that mechanically justify that target price.

In a bubble, the price is unjustifiable, which means that those forecasts must also be unjustifiable, but they must appear on the surface to be as justifiable as possible. Furthermore, the near-term cash flow forecasts must actually be relatively accurate because the reality of those near-term cash flows will, by definition, be revealed in the near term.

The two main ways analysts can tune their present value formula to justify the unjustifiable target prices are (1) pushing out the earnings in the multiple and (2) increasing the long-term growth rate. The first method simply says that the front page of the report will not compute multiples based on year 2026 or 2027 earnings, but year 2030 or even year 2040 earnings. This is relatively safe, as both the analyst and the institutional investor listening to the analyst are likely pursuing other career paths by 2040, when those 2040 earnings fall short of the forecasts.

The second method is just to increase the terminal value and terminal multiple after the explicit forecast horizon by increasing the long-term growth rate forecast. Owen Lamont has recently written about this, but the observation that the analyst long-term forecasts become unrealistic in a bubble is almost as old as the field of security analysis itself as each analyst covering each stock has to stretch the long-term growth forecast higher and higher.

Although some stocks may meet these high long-term growth forecasts, at some point of the bubble they will aggregate for the whole market to a level that is almost certainly impossible for even the godliest Machine God to produce. This observation is also not original but has been made, among other people, by Cliff Asness in his “Bubble Logic” piece.

A good proxy for Step 4 of the bubble is to compute the difference between aggregated individual stock analyst long-term growth forecasts and macroeconomic analysts’ long-term GDP growth forecasts. (This may be the sole case in which macroeconomic analysts’ forecasts of anything have any utility.) When the bottom-up LTG aggregated across stocks is unusually high compared to the long-term GDP growth forecast, that is evidence of the professional investors taking the fourth step and abandoning the discipline of the present value formula in a polite way.

[Pete Bronson, CPA, CA @rantsofmich]

@foxenflask Not sure how this method benefits GME though? I guess by increasing value of % they own butt then he would need to splash the cash

[Barron's @barronsonline]

Ryan Cohen Is Ready to Talk About eBay. For Real. https://t.co/NQ73FWZZ7H

[Pete Bronson, CPA, CA @rantsofmich]

@optionscjp @gurgavin Hey watch it!

Crazy jobs report though, equivalent of US adding 888,000 jobs...

[Pete Bronson, CPA, CA @rantsofmich]

@Crussian17 Yup every company spending like a headless chicken chasing AI. Apple the exception, so only a matter of time before they're #1 biggest company again.

[Pete Bronson, CPA, CA @rantsofmich]

@markminervini Ah the classic announcing your short was perfectly placed at ATHs after the fact

[Pete Bronson, CPA, CA @rantsofmich]

@SimulatedLie @ryancohen Why would he buy back at $25 when the market keeps giving us $21-22 and even dropped below $21 which was his queue to release earnings

[Pete Bronson, CPA, CA @rantsofmich]

$INTC is still over $100. This pull back isn't even close to being over.

[Pete Bronson, CPA, CA @rantsofmich]

@Jetskigrizzly Lol now do FCF and their balance sheets compared to pre bubble

[Pete Bronson, CPA, CA @rantsofmich]

@CanadaTaxGuy Don't speak the language of that country? Just have you and your family learn it, won't take that long. Your kids will thank you for helping them leave their stupid friends behind & getting to immerse themselves in a whole new culture. It's so easy!