Crypto thread

Rush,

I struggle to see how HD is worth what it is based on earnings, balance sheet etc. The numbers do not support their current stock price...but in this market and the market for the last ten years it is not about fundamentals or intrinsic company worth...the market is distorted and wrong and it can keep being wrong...but I struggle buying for the wrong reasons and it has impacted my returns.

I think HD is worth under 80, Boeing is worth under 30 etc etc...I think the NAZ is overvalued by probably 70% from true, real value based on earnings, ratios and accounting based reality. This drop was nothing and it was stopped dead in its tracks by reserve banks because the longer it dropped the higher the odds of deflation and to a central bank deflation is death.

If you look at the real numbers...compare revenues and cash levels, debt levels and stock price then HD isnt worth even 80. But the market thinks so and thus it is so at the current time.

Good time to be a car insurance company 

Virginia issues stay at home order until JUNE 10th? 

My goodness 

It's perfectly logical to seek value in the stock market, but when you say the market is mispricing HD by roughly $127,000,000,000 in value and should have a P/E of 6 you might as well spend your time shopping for million dollar houses with 100k to spend. 

This interruption will be over with in roughly another 9-18 months maximum. The fed announced a very clear plan with unlimited liquidity. The economy will not collapse but you guys can root your heart out that it does. 

God forbid the summer heat kills this virus and squashes your plan before it gets a chance to ruin us all.

Gamble, 

Why is HD $127 billion more valuable now than they were in 2014? 

States are telling everyone to shelter in place until June. This corona world has no end in sight. And stocks are up. That should scare you if you’re a bull. 

One thing I’m worried about is when this thing starts to free fall again is my gold and bitcoin going to get rekt? I think it is. 

Might have to take a bit of a cash position and buy back in after the next free fall. 

Thoughts? 

My point is that the market is most likely not overpricing HD by 127B. The "value" is going to be seen at others at levels somewhere in between your $80 prediction and the current price. I do agree with you that another leg down in the markets is likely, but some of the stuff you throw out there is aggro draconian. 

gamble,

FORWARD earnings, not backward...HD is not a growth stock, it deserves a PE in the low teens and that is what it traded at historically. Look at their balance sheet and income statements, where do they deserve a PE in the middle 20s and higher?

In the last four years their revenues are up just over 15% in TOTAL that means average revenue growth of 3.5%, gross profit same ratio so their earnings have grown 3.5% or so a year since 2017. Operating income is worse, in 4 years it is up about 12% so their operating profit is slower than their revenue growth. If you look at their income statement the bulk of their EPS growth has come from a declining tax rate, they are playing games like IBM does with their income tax rates and that has generated more earnings growth than actual operating margins.

Then take a peek at their balance sheet...the bulk of their operating cash has been spent on buybacks and they have increased their short term debt by over 50% and their long term debt by 30%, and their liabilities are outpacing the assets. Does this seem like a company that deserves a lofty PE ratio?

Their earnings are growing slowly, no margin growth...massive increase in debt both long and short term in duration...they are racking up the debt because they are paying less in interest expense due to the FED lowering rates and the chase for junk yield. Their growth in their debt is greater than the growth in their revenues and operating income. They are goosing their PE ratio by purchasing over 30 BILLION in stock in the last four years. Their gross and operating margins are flat, revenues are not seriously growing...this looks like a middle of the road value stock. 

Why would it deserve to be up over 100% in the last four years with marginal revenue growth, no growth in margins and a massive increase in debt?

The big picture is pretty simple to me. 

Buffet, Druckenmiller, and every other top shelf investor got out of the stick market in 2019. We were approaching a top and a pullback/recession was in order. 

Now add corona. 

Personally,  I think BTC and gold  hold up much better going forward when stocks inevitably take their next leg down.  I think a lot of the selling before was panic selling to raise cash due to overleveraged stock positions.  Therefore, I think a lot of this is already unwound.  

Wall.. good stuff on your analysis of HD.   I wondered how long it would take before I saw stock buybacks  ! Lol. Not knocking you, actually agree with you as we've discussed before how they distort the real picture on a company.   Like EPS.  stock buybacks significantly alter the earnings per share as you  know.   It would be nice to go back to a world where we just looked at raw numbers.  What did you earn last year (in dollar figures), what do you expect to earn this year ( in dollar figures) .  Heck, a company can drastically increase their EPS year over year with flat earnings,  due to increased buybacks.

 One thing that bothers me about beating up on HD, though,  is they are the go to home improvement store.  Loew's is a distant second IMHO and mom and pop hardware?  Do they even exist anymore?.   HD  always has busy stores and contractors use them lots.    There's gotta be so many other companies that are overvalued that don't dominate their industries like HD.

Even if their earnings deteriorate 20% this year and I assign a 15 pe handle, that still only gets me to $120 a share 

Wall. I'm not trying to justify HD going higher. At today's price the P/E is 19. Obviously, earnings are going to take a 3 quarter hit. Earnings are coming out over the next few weeks and I will bet you that very few will give any guidance whatsoever. A pass will be given with the outlook looking further out than the next couple of quarters. We are in a wild card environment. That said, I am too surprised about the past 4 of 5 trading days and will be looking to increase my cash positions accordingly.

Thus, my defense of HD has more to do with the ultra draconian views that seem to dominate when you and Detox get going. 

On the bright side, J&J ($133) announced today that they are fast tracking a vaccine through phase 1 trials and are "hopeful" that distribution can start happening as early as January. That's the kind of news that will comfort the markets and allow investors to become more confident that those forward P/E's can actually come to fruition. 

Thank you for exemplifying my point Rush. 

“They will create the viruses themselves and sell you the antidotes. Thereafter, they will pretend to take time to find the solution when they already have it.” 

Former Libyan Leader Muammar Gaddafi 

2009 United Nations Assembly 

Have you guys ever looked into Gaddafi and the Gold Dinar? How much support Gaddafi has from the leaders across Africa? Or what Libya looked like before Gaddafi was killed (Obama/Hillary) compared to what happened to Libya after Gaddafi was killed? 

Fascinating stuff. 

Gaddafi was working on one currency for all of Africa that would be backed by gold. 

Public health care in Libya under Gaddafi was the best in Africa.

Undernourishment was <5%.

Libya had the highest literacy (90%) and educational enrollment (97%) rates in Africa. 

Libya had the highest GDP per capita in Africa and fewer people lived below the poverty line than the Netherlands. 

Look at the before and after pictures. Wild stuff. 

So after 9/11 our country was on high alert for terrorism. Dr’s and other experts across all fields were assigned to study all of the ways that we could be attacked. 

What do you think they found? 

July 8, 2003 (CIDRAP): An influenza virus — especially one genetically manipulated for increased virulence — would be an attractive weapon for bioterrorists. 

“An enormous potential for bio terrorism” 

“Known stocks are held in secure locations in the United States and Russia” (also China more recently) 

— 

Why doesn’t the news talk about this? Would they tell us if this was a terrorist attack? How do you think this started? From a Chinese guy eating a bat? 

Someone explain to me how this corona curve doesn’t fire right back up once we start living life again 

According to the stats, 349.9 million Americans have not yet been affected. And one infected person kick starts an exponential wave to a zillion dead. 

So ... what’s the plan? 

Very dicey and a fine line.  But basically The Pareto Principle (20% of population being responsible for 80% of the transmission events — you especially see this with birds {a good study in bird-shedding demonstrates this}) has/will start to evolve.  So, at some point the logarithmic turns linear.  Then the pandemic part goes away; maybe becomes endemic.  As far as we can tell NO pandemic disease can possibly threaten our species. Pretty much only we as a species can do that. Therefore, as people recover — 98-99% or so — the proportions of immune people steadily increase.  Then we would calculate a Transmission Threshold from this.  Usually around 61% or so. 

Worst you might get is 62% infection rate — 98-99% survivor rate (60-61% of the population).  Now 61% of people are immune, 1% die — leaving 38% still susceptible, but almost screened because of a preponderance of immune people now. 

From then, pandemic stops spreading — the epidemic curve goes into reduction mode until we are left with sporadic cases only.  Of course, this has assumptions — 1% fatality, Ro 2.6.  Making mortality rate .6%.  Figure normal Crude Mortality Rate at .9% making this year a 67% increase.  

If you go back and look at late January prediction/actual numbers of confirmed cases and deaths — it is a little telling.  I.E. confirmed day-by-day prediction of confirmed was 730, 1080, 1590, 2350.  The actual was: 654, 901, 1125, 2009.  By this point it was already 5 days behind the predicted numbers.

However, looking at deaths.  Predicted day-by-day: 15, 22, 33, 48 vs. actual deaths 25, 26, 41, 56.  They were out in front — already showing the signs of being logarithmic.

 But as the weather warms, people are outside and apart more naturally, more people are immune, etc.  This should get ‘absorbed’ into the rest of the exposure strains.  Maybe, something added to newer flu vaccine dosage. Etc.  

But there are instances where a second and even a third wave shows up.  For example, Spanish Flu — most people do not realize the second wave was way worse then the first wave.  The third wave was worse the than the first wave — but not as bad as the second wave. 

But time alone will tell.  But this is looking to be a ‘normal’ virus path thus far. 

So, once we ‘flatten out the curve’ this one should be gone for the most part. 

It seems that the end game here is a mandatory vaccine. 

Amirite? 

As far as the 349.9M not infected — don’t forget that way more than the documented cases have already occurred.  For example, CDC estimates, I think, 1 in 6 people got Swine Flu.  50M people, or so.  

So, for sure a lot more people have already been exposed to CoronaVirus and survived without it being ‘reported’. 

Nah. Probably not mandatory vaccine.  Obviously, it would help.  But this does not seem to be severe enough to require it.  But can for sure be added for the the folks that get the flu shot or have a compromised immune system, etc. 

But this is now a day of mass media, constant news, social media, ratings and — whether you like it or not (and disagree on how big a factor) — Trump is in office. 

All of these things play a part.  And every virus  is unique and slightly unpredictable.  But this shows all the signs of being a ‘standard’ run through.  

This is exactly what would happen when experts were writing papers on the effects of bio terrorism. Thoughts on that angle? 

This thing is shutting down the world how is it not serious enough for a vaccine? 

Is it tied to what’s going on with oil somehow? 

Is it tied to the governments around the world giving out trillions and trillions of dollars? 

Trump calls for $2 trillion infrastructure bill 

Raiders. Thank you for your insight. I had been following your point of view in the NBA thread but that loon Packers was only concerned with pushing his paranoid theories and shutting you down with childish insults. 

Your views should be more welcome here in his absence. 

Yeah pretty good Raiders! 

Looks like you just typed off the top of your head. What’s your background in? I think I knew this at one point.