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Nat Stewart

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  • Hedgeye Report On Kinder Morgan Fails To Impress [View article]
    I thought the hedgeye report made a fairly compelling case The question to me: Is this business model legal, ethical, and sustainable? There is a difference between "not liking" how they operate and there being a serious legal, ethical, or sustainability problem.

    Outlining supposed problems with the IDR structure was the weakest part of the report. Basically, the IDR creates two security types: One focused on current yield, the other on growth. Which one is better at any given time depends on investor preferences and valuation.

    Also, the MLP structure has been fantastic in that it has allowed the very rapid development of needed energy infrastructure - a tremendous boon to the US economy. That should not be forgotten.
    Sep 11 10:57 AM | 11 Likes Like |Link to Comment
  • Is Tesla's Gigafactory Becoming A Gigafarce? [View article]
    "When the automobile changed from a horse and buggy, wonder if people thought this would work."

    Almost no one. Investors in particular thought it was a niche product with limited utility. Henry Ford CREATED the mass market when he drove costs down and productivity up beyond what was thought even remotely possible.

    The greats always go for what is beyond though possible. And, win or lose, they create a legacy beyond mere financial returns.
    Apr 8 02:38 PM | 10 Likes Like |Link to Comment
  • Are We Turning Japanese? [View article]
    "What really matters for national economic growth is not population per se, but the labor force and people's willingness to work."
    There is an increasing disconnect between productivity and "work", and it has been slowly accelerating for at least 70 years. Fake work is an epidemic. In one way or another, many jobs are a product of deficit spending with little economic purpose - In other words they consume more than they produce. Entire sectors of the economy that employ millions are a result of government complexity and regulation that in real terms do nothing to boost productivity and standards of living (Just as one example).
    In my opinion, we need to stop thinking about "growth" as an ideal in and of itself, and start thinking about wealth or well-being per person. The difference is much like the difference between "Earnings growth" and "earnings growth per share." Only the second one is really valuable to the shareholder.
    We can have "growing earnings and well-being per person" without perpetual population growth. With Automation and artificial intelligence very rapidly taking once decent paying jobs, new frameworks and new thinking will increasingly be required.
    Feb 10 08:07 AM | 10 Likes Like |Link to Comment
  • The Secret Of Warren Buffett's Alpha [View article]
    Good article. The "stable" part of the leverage equation is extremely important. Buffett does not like to use leverage that is subject to margin calls. If you look at how he set up his fairly recent put trades on stock indexes, he made sure that none of them were subject to collateral or margin calls between now and the settlement date. If you are subject to collateral requirements you can get squeezed out of your holdings at exactly the wrong times.

    The principle of accessing and using a stable, low cost source of financing and then investing stable, higher return assets is perhaps the most powerful wealth building formula that exists - The reason so many large fortunes have been made in real estate and private equity.
    Jan 7 08:54 AM | 9 Likes Like |Link to Comment
  • eBay's Dividend Will Be Huge [View article]
    Well, since you seem to believe that "something is going on inside of ebay" that is more than meets the eye, perhaps you should write the article - or at a minimum provide some clue as to what you are talking about.
    Dec 4 11:39 AM | 8 Likes Like |Link to Comment
  • The Better Burger Threat To McDonald's [View article]
    McDonald's is not a burger restaurant anymore, it is a low cost convenience restaurant where burgers are just one item on an increasingly diverse menu. Here is the current menu, note just 12 of the items are various "burgers".

    The real competitive advantages of McDonalds are its world class business systems, brand name, and strong record of product innovation.

    McDonald is about serving customers the foods they want conveniently, consistently, and at a low cost. "Burgers" are not of long term strategic significance within this formula and their share of the menu will continue to shrink.

    Gourmet burger chains have nothing to do with the future of McDonald's or its competitive strengths. And If I am wrong, It would be wonderful. A product slip-up would be a great time to buy the stock for the long (10+ years) term.
    Jan 1 12:03 PM | 8 Likes Like |Link to Comment
  • Sense And Nonsense About Climate Change. What Do Investors Need To Know? [View article]
    Individualistic, conservative, hierarchical-thinking white males are the ones who created this (USA) country and pretty much everything of tangible, man-made value within it. Perhaps such characters are confident they can solve any technical climate problems as they occur without resorting to a panic or hysteria - Just as we put a man on the moon, developed satellite communications, the fundamentals of computer science, put a lunar rover on mars, etc.

    And what is all this about "climate change" wasn't the problem "global warming" all of 5-10 years ago? And I believe before that it was the ice age. It is nice when every "change" in the climate can be used to prove your hypothesis - extremely useful from a political point of view.
    Jan 9 11:46 AM | 7 Likes Like |Link to Comment
  • Don't Judge Berkshire Hathaway By Its Book Value Cover [View article]
    "On a risk adjusted basis, Warren has destroyed investor value."

    As others have noted, this article is so full of inaccuracies and misconstrued opinions that it is almost not worth responding to.

    However, I will debunk the above statement. BRK.A has the highest sharpe ratio of any stock or mutual fund over the past 30 years. The very highest, not just one of the best. And this is based on stock price returns, not book value. In other words the author makes a declarative statement and is not just "kinda" wrong, but is 100%, dead wrong, as wrong as one could possibly be. And this is very typical of the rest of the article.

    Anyone who wants a real understanding of Buffett's massive risk-adjusted outperformance should read the following academic paper (PDF):
    Mar 12 03:31 PM | 6 Likes Like |Link to Comment
  • Are Pyramid Schemes Inherently Fraudulent? [View article]
    I doubt the HLF participant marketing material is any more misleading than the State Lottery commercial I heard on the radio this morning. The formula is to get people fantasizing about easy riches, wile ignoring the basic math (Most tickets expected value = less than 60 cents on the dollar).

    Everyone knows state lotteries function as a tax on the poor but no one cares.

    "Herbalife's grand deception is suggested by the high failure rates of its new recruits"

    Not true at all. All 100% commission opportunities have a tremendous churn rate of participants. For example, life insurance is sold by promising a great career, but the real formula is to capture the new participants "natural market" then let them (the 99%) fail out. Participants by and large know this, but they do it because they figure, "it might work".
    Mar 10 11:45 AM | 6 Likes Like |Link to Comment
  • The Paper World Of Brookfield Asset Management [View article]
    Didn't reply? What is this?

    The company spent a great deal of time replying, as can be seen in the above author provided link.

    This article is in fact a textbook or classic smear job: It raises a bunch of questions and suggests something nefarious or underhanded is going on, while not offering a shred of documentation or proof. Clearly, the author has an axe to grind.
    Mar 11 06:59 PM | 6 Likes Like |Link to Comment
  • Hedgeye Report On Kinder Morgan Fails To Impress [View article]
    So I am also perplexed by the way some people are starting every comment with the word, "so". I first noticed it about a year ago when I it was done on an analyst's call by the CEO of a power company. It seemed odd to me that someone with such a title would be saying, "So, we made that investment in Brazil..."

    If you are forming an old and cranky club, maybe I can pre-buy my membership?
    Sep 11 06:38 PM | 5 Likes Like |Link to Comment
  • Hedgeye Report On Kinder Morgan Fails To Impress [View article]
    MLPs are vulnerable because they access capital markets frequently. When the L.P. units get trashed, it raises their cost of capital, which harms the underlying business.

    In other words, the short arguments can create events which actively make the short case more compelling. Kind of a George Soros Reflexivity effect.
    Sep 11 10:48 AM | 5 Likes Like |Link to Comment
  • Tesla Motors Presents A Terrific Shorting Opportunity [View article]
    The problem with a stock that has lost touch with fundamentals is it can just as easily double or triple as it can lose 50%. That is the problem with trying to fade momentum-squeeze plays while the positive feedback cycle is still in tact. Much easier (if you must try these plays) is to wait for the dissipation cycle to set in - deep declines, false breakouts to the upside, with prior super bulls clinging to hope at each positive uptick. In a stock like this it usually only sets in after a period of massive volatility - one of the most opportune yet dangerous market phases to trade. Enjoyed the article.
    Aug 6 08:31 AM | 5 Likes Like |Link to Comment
  • Sense And Nonsense About Climate Change. What Do Investors Need To Know? [View article]
    "So, when terms like denier and believer are invoked, one should suspect organized superstition (i.e. religion) is involved."

    I agree. The best way to understand this debate is through the lens of Edward Bernays classic book (1928), "Propaganda". If you have not read the book, note that he is a defender and practitioner of Propaganda, not a critic. I highly recommend that anyone who has not read it to pick up a copy. You will have a much better understanding of what drives public "debate" in a democracy and why "acceptable" viewpoints are often so monolithic.

    For a taste of the book, here is the first sentence:

    "THE conscious and intelligent manipulation of the organized habits and opinions of the masses is an important element in democratic society. Those who manipulate this unseen mechanism of society constitute an invisible government which is the true ruling power of our country. "
    Jan 9 04:59 PM | 5 Likes Like |Link to Comment
  • The Secret Of Warren Buffett's Alpha [View article]
    I just noticed your use of the Average True Range indicator for the screen. I think this is a very useful indicator for trading, however I think there is an issue with the way it is used here and it might not be doing what you intend it to do.

    The problem is that for the indicator to capture volatility accurately in this context, it needs to be relative to the stock's dollar price.

    For example a 10 dollar stock with a .75 ATR is much more volatile in real terms than a 100 dollar stock with a .75 ATR. This is going to bias your list towards lower dollar priced stocks, not necessarily lower volatility stocks.

    For example more than 50% of your stocks are under $20 and none are greater than about $56. If your reverse the sign on the ATR measure, all are over $20 and the highest price is almost $170.

    For your purpose it would be nice if the finviz screen had something like "ATR/price" or "ATR/average price"
    Jan 7 02:49 PM | 5 Likes Like |Link to Comment