Carson Block is short Sunrun; Americans Are Still Spending Like There's No Tomorrow; Stop Betting Against America; Why Are Interest Rates Spiking?; Why Investors Are Heading Back to Ukraine
1) Greetings from Zurich, Switzerland – my eighth trip to Europe since February (phew)!
After attending the Robin Hood Investors Conference the past two days, I flew in last night, am spending the day here visiting a friend, and flying to London tonight.
As always, the conference (which I helped start a decade ago) was outstanding.
I enjoyed catching up with many old friends, hearing lots of great investment ideas, and listening to investing legends – including Paul Tudor Jones, Stan Druckenmiller, David Einhorn, Larry Robbins, Izzy Englander, Steve Cohen, Jim Chanos, and Ken Griffin. I also heard from a few prominent people in other areas – such as Sam Altman from OpenAI, former Secretary of State Condoleezza Rice, and futurist Ray Kurzweil.
Unfortunately, it's off the record so I can't share anything that was presented, with one exception...
My friend, activist short seller Carson Block of Muddy Waters Research, laid out his short thesis on home solar company Sunrun (RUN) and then posted his presentation on his website here. Here was his final slide, summarizing his points:
The stock initially dropped almost 10%, but then recovered a bit by the end of the day after the company released this rebuttal: Deceptive Short Seller Muddy Waters Once Again Has Its "Facts" Wrong.
2) Following up on three recent e-mails, in which I shared slides from my presentation last week on why my macro outlook is quite favorable, here are additional reasons...
As this Wall Street Journal article notes, Americans Are Still Spending Like There's No Tomorrow. Excerpt:
Consumers should be spending less by now.
Interest rates are up. Inflation remains high. Pandemic savings have shrunk. And the labor market is cooling.
Yet household spending, the primary driver of the nation's economic growth, remains robust. Americans spent 5.8% more in August than a year earlier, well outstripping less than 4% inflation. And the experience economy boomed this summer, with Delta Air Lines reporting record revenue in the second quarter and Ticketmaster selling over 295 million event tickets in the first six months of 2023, up nearly 18% year-over-year.
Economists and financial advisers say consumers putting short-term needs and goals above long-term ones is normal. Still, this moment is different, they say.
A tough housing market has more consumers writing off something they'd historically save for, while the pandemic showed the instability of any long-term plans related to health, work or day-to-day life. So, they are spending on once-in-a-lifetime experiences because they worry they may not be able to do them later.
"It's not a regret-filled, spur-of-the-moment decision," says Michael Liersch, who oversees a team of advisers as head of advice at Wells Fargo. "It's the opposite of that, where I would regret not having done it."
Liersch cautions that it's too soon to say whether the spate of spending is a fleeting moment or a new normal.
And here's a smart post by Ben Carlson on his A Wealth of Common Sense blog, with lots of charts and data on why people should Stop Betting Against America. Excerpt:
There's this guy on Twitter, Paul Fairie, who does these threads using old newspaper clippings to show how the stuff we worry about today is the same stuff people have been worrying about for decades.
There was one called a brief history of we are raising a generation of wimps. Every older generation thinks this (and will always think this... it's called progress).
There was also a brief history of no one wants to work anymore.
And a recent favorite: A brief history of America is in decline like the Roman Empire...
My whole life people have been predicting things like a crash of the dollar, a government debt crisis and the end of America as we know it.
In the 1980s, Japan was going to overthrow the United States as a global power. In the 2000s it was China.
I'm not completely dismissing the idea that other world powers will rise. I just think it's a bit premature to be dancing on the grave of the United States just yet, especially as an economic power.
3) Speaking of Ben Carlson and following up on Tuesday's e-mail about the carnage in the bond sector, here he is with another smart post exploring the various reasons why interest rates have spiked: Why Are Interest Rates Spiking? He concludes (correctly, I believe):
The least satisfying explanation for the sharp rise in yields is the bond market is confused. We've never seen an environment quite like this with pandemic-induced government spending, supply chain shocks and aggressive monetary tightening.
Maybe the bond market is just telling us we live in confusing economic times.
There are so many cross-currents right now that I'm ok admitting I don't know what comes next from this grand economic experiment.
As Charlie Munger once observed, "If you're not confused, you're not paying attention."
For more on the bond market and interest rates, see items 3 to 5 in Charlie Bilello's The Week in Charts (in it, he also has interesting charts on the housing market and inflation).
4) I try hard to keep these e-mails focused on investing, with little personal things like travel tips, life lessons, etc. thrown in – and, above all, to stay away from politics because I have no interest in needlessly alienating my readers.
As I got deeply involved in supporting Ukraine earlier this year, including traveling there twice, I wrote about it a fair amount because it was something I was interested in and it didn't seem political.
Well, unfortunately, that has changed... so I won't be writing about it again here. If you want to keep abreast of what I'm covering in this area, you can subscribe to my personal Ukraine e-mail list by sending a blank e-mail to: ukraine-subscribe@mailer.kasecapital.com.
I will, of course, continue to follow investment-related matters, such as this Wall Street Journal article: Why Investors Are Heading Back to Ukraine. Excerpt:
John Mazarakis got rich lending money to cannabis companies and running a chain of pizzerias along the Eastern Seaboard. His next big bet: houses and industrial parks in war-torn Ukraine.
Mazarakis and the $2 billion asset manager he co-founded, Chicago Atlantic, are preparing to invest as much as $250 million in the country. He isn't alone. Steel-nerved investors are trickling back into Ukraine, lured by the chance to help the country in its fight against Russia – and to score assets on the cheap.
"We come from out-of-favor industries, which makes it easier for us to fund a $10 million deal in Ukraine tomorrow," Mazarakis said. "The country could use the help now, and we have the bandwidth to do it."
Prospects for Ukraine's economy remain fragile. Republicans in Washington, who control the House, have become increasingly skeptical of supporting Ukraine.
Losing long-term backing from its biggest financial supporter would derail a nascent economic rebound in the country. Activity expanded in the second quarter for the first time since the start of the war, after a devastating 29% contraction in 2022. Businesses and households have adapted to life during war, buying diesel generators to get through blackouts and moving to cities in western Ukraine.
I'm not aware of any way to invest in Ukraine via publicly traded stocks currently. However, I think there are incredible opportunities for very brave private investors – and there will be many more when Ukraine wins the war and huge amounts of aid flow into the country to rebuild it and the spirit of the country is unleashed.
I have spent enormous amounts of time over the past 18 months working with all sorts of Ukrainians – high-ranking government and military officials, businesspeople and entrepreneurs, front-line troops, drone pilots and special forces guys, doctors and nurses, volunteer aid workers, etc. and have been universally incredibly impressed.
Best regards,
Whitney
P.S. I welcome your feedback at WTDfeedback@empirefinancialresearch.com.