Note: We’re doing some website formatting soon and going forward “Ask Kuppy” will no longer be under the traditional “Ask Kuppy” drop-down. Instead, it will be part of the normal blog-roll. New decade coming and it’s time for AiC to catch up with modern trends in blogging…
Hi – I enjoyed your article on inflation, and a lot of your work for what it’s worth. Which sectors do you think will benefit from extreme fiscal stimulus, in the event of a crash? Does it depend on who’s in office, and when?
I don’t think it depends on who’s in office though the Democrats likely target cash handouts with some of the stimulus vs. the Republicans who will build infrastructure. Still, I want to be long basic materials, commodities and anything that goes into a bridge, highway or airport along with the service providers for these sectors. These are all job creators too, so expect consumer inflation. Lots of other sectors tied to inflation. The key thing is that you want to avoid duration (bonds, REITs, utilities, etc.) like the plague. I like to harp on the Ponzi Sector, but it’s really just a reflection of the epic bubble in duration assets that is pushing people out on the risk curve. All of this will be crushed.
Keep in mind, these winning sectors likely drop more before they go parabolic. Be patient and wait for fiscal stimulus to be obvious before you pounce.
Are you looking at Hafnia at all?
There’s lots of good ways to play the coming shipping cycle. While valuations are a bit more robust, I much prefer US listings as they’re likely to overshoot more. Why? Most US listed shipping companies aren’t yet in many equity indexes and ETF exposure is minimal—as these stocks continue to appreciate, there will be a perpetual passive bid below these stocks. Think of it this way, most $1b+ market cap companies are 20-40% owned by passive and closet indexers. I’d say the average for most shipping names is a fraction of that. What happens when someone is forced to buy a quarter of your float over the next 2 years?
Listened to a recent podcast with you. Well done!! Why do you think shorts are so aggressive lately in shipping names?
For the past decade, every spike in shipping was a great shorting opportunity. The computers are programmed to follow what has worked in the past. Their data probably doesn’t even have a single instance where a spike lead to more upside. The recent pause in shipping shares is likely from them aggressively adding to shorts. I suspect shorts are about to get run over.
I saw your article on Stage Stores. By the time I did research, it was over $5. Is it still safe to buy?
I can’t give personal financial advice. I haven’t sold a share yet. If results continue to look like Q3, it’s going much higher.
Hi Kuppy. With long duration bonds and stocks generally overvalued, and gold really being just money or an insurance policy, what short duration asset besides T-bills could be used in a strategic asset allocation strategy? Thanks.
What’s wrong with T-bills? It gives you optionality if something interesting happens. You don’t have to be fully invested all the time—especially in the “everything bubble”
The CEO of STNG bought quite a few Call options recently in the open market for January 2020. This appears to be highly unusual as most CEO’s would simply buy common stock. Any thoughts regarding these purchases and have you ever encountered CEO’s who have done that before? Thanks!
I haven’t ever seen this done before. Clearly, Bugbee thinks STNG is going to appreciate dramatically before January expiration and I tend to agree with him. I own a few Jan calls too, but most of my position is common shares.
Just walk in the supermarkets. Cauliflower is eight dollars a head. Inflation is here.
From Papa Kuppy.
Are you looking at TIPS to play the coming inflation?
They have faked the inflation numbers for years. Do you trust them to stop faking the numbers in the future? I think TIPS may work, but there’s better ways to make money with much more upside and less risk.
Just read through your inflation is coming post. Great work! Like you said, cheap money subsidized energy prices (shale) keeping inflation low. If Fed starts to print again, wouldn’t that be more of cheap money, keeping energy prices down? Thus not resulting in inflation. What do you see as a catalyst that will result in inflation, despite the Fed printing money?
Once investors have been burned by a sector, they aren’t fast to return. Think of the hundreds of billions lost in US energy companies. I have friends who repeatedly tell me that “energy is uninvestible.” These guys aren’t coming back if interest rates are 50bps lower. They also aren’t coming back, if oil is $20 higher. Shale’s bust is much like the Ponzi Sector bust that’s ongoing. The whole investment thesis was built on lies and QE. Trust takes a long time to recover.
I’m curious–do you think the shipping bull market that’s coming up will be affected by the potential recession that will be coming in the near future? I know you’re super bullish on shipping, but just curious what your thoughts are when… we’re in the 2nd inning of shipping, but 10th inning of the overall equities market. Thanks!
I think the trends in shipping will beat out the economic trends—especially if they do fiscal stimulus globally. That said, an economic crisis will certainly be a headwind to the thesis.
Is there any hope for Sandridge?
Haha… Yeah, this one has been miserable. I still have all mine and keep adding so I can lower my basis. It clearly hasn’t “worked” but there’s a whole lot of value there. They also have the balance sheet so make it until the turn.