Tom Lindmark

Long/short equity, bonds, reits
Tom Lindmark
Long/short equity, bonds, REITs
Contributor since: 2008
Excellent article. I wrote a critical piece on the nonsensical price of Tesla stock that appeared on Seeking Alpha in March. Like you, I was inundated by comments from the Tesla True Believers so I decided to skip it this quarter. While bothered by the non-GAAP games they played in their announcement I found the brokerage communitys' flogging of those numbers as real particularly egregious.
One point in your article may need some more elaboration. When you sell a car for cash not 100% goes to the bottom line. Some of it has to go to future warranty expense. I have looked briefly at Tesla to see how much they're reviewing for this future liability but haven't found the figure. Have you noticed how much they're setting aside?
OK, I agree you don't put up new subdivisions overnight, but that doesn't explain why this recovery in home building is so much more anemic than past recoveries. Look at the increase after the 1990 recession. Starts more than doubled then and earlier in the recovery phase.
I agree with a lot of your analysis though I don't buy the Boomer argument - at this time. Only a small fraction of the Boomers have passed the 65 threshold and only a fraction of them have gone the downsizing route. It's going to take decades for the Boomers to unwind their housing positions and we are only at the tip of that movement right now.
Thanks for the pointer, it's an excellent article.
Point taken. It was an overly broad generalization. No insult intended.
Well Herbalife sure is an emotional subject.
A couple of points.
1. I was wrong when I said that Hempton did not have an interest in Herbalife. Mea Culpa. He is long Herbalife but I don't think that invalidates his observations or the point of my post.
2. Hempton is a pretty analytical guy. If you check out his writing I think you will conclude that he did more than just drop by a Herbalife outlet.
3. Contrary to some of the comments, I've never seen any evidence that Ackman or any of his subordinates did in fact spend time in Herbalife outlets.
4. This post was mostly a way of ranting a bit about the propensity of modern analysts, bankers etc. to rely on spread sheets as opposed to getting a bit of dirt under their fingernails. I think Hempton demonstrates the value of getting a granular view and Ackman the peril of ivory tower analysis.
And finally, thanks for reading the post and commenting. It's always nice to confirm that their is life out there.
Correction. Alex Tabarrok is the author of the post not Tyler Cowen.
You might find these comments from Tyler Cowen interesting -
I highly recommend that you follow his link to the Seattle Times editorial which provides some context for what has transpired and despite being the hometown newspaper opines that Boeing has a right to site its plants where it chooses.
Interesting comments. The consensus seems to be tilted towards a negative view of the prospects for housing. I probably fall into that camp but wouldn't be surprised to be proven wrong.
How's that for fence straddling.
Wow! I didn't realize that I was forecasting that result. Actually, I have a great deal of faith in the staying power of capitalism. I just think that it's going to take a major crisis to move the country back towards a more sustainable form of that sort of economy.
I could probably have made a case for the "dark side" and I'm not unaware of the negatives floating about. It just seems that halting though it may be, the trends indicate some growth.
Just for the record, no one is likely to end up with a free house. The issue is chain of title and transfer of title, not that the underlying note and deed of trust are faulty. The only winners in this game will be the lawyers.
For what it's worth, I didn't write this post. SA obviously erred in attributing it to me.
Unfortunately, you're probably right. A lot of people are going to work a lot longer than they ever imagined.
Good question! I don't have a lot of time right now but you have to start with entitlements. Raise the retirement age by a couple of years and start laying the groundwork for perhaps means testing for anyone under 50. Get health care expenditures down to the European level of 9% to 12% of GDP. I think we're in the 16% to 18% level. That's going to take a huge amount of skin off of everyone but it has to happen. We just need a good leader that explains the reality of life. Then start whittling away at the personnel expense in the federal government. Salaries and benefits are out of control and don't match up with the private sector any longer. They need to be synced back up.
What do you think would constitute serious measures?
I don't think Kling is arguing that the 30-year mortgage should disappear, rather it should just be priced at a market rate.
Great comment! Thanks. I like the last sentence a lot, but it also scares me.
To all who caught the fact that F&F will likely cost us $400 billion, not $400 million, I apologize. Just wishful thinking on my part.
To all who objected to the term Tea Baggers let me assure you that it was not meant as a slight. It was in fact a simple error. I should have used the term Tea Party. Sleep deprivation is my excuse.
I have no particular animosity towards the movement and think some of their positions are worth serious consideration. At the same time, I do feel they are a bit too inflexible. At any rate, that's a subject for another post, so for now take the phrase I used as having been inadvertant with no slight intended.
Nice comment. The reference to the Soviet Union was not meant to imply that China is as centrally planned as was that economy. It was intended to draw attention to the fact that China, if it wants to continue to grow meaningfully, must take steps to not only privatize the commercial sector but ultimately move towards a democratic society that abides by a rule of law above the control of the government. Not an easy task, and given events of the past 18 months in this country not an easy system to abide by.
Nice comments. I hadn't thought about the currency exchange effect but you make a valid point. The question remains, though, as to whether Chinese policy will work to encourage consumption or continue to thwart it as Pettis maintains.
On Dec 11 09:20 AM mna wrote:
> I think Michael Pettis brings me fresh perspectives on the Chinese
> economy. Although I may not agree with him on most things, I find
> that his pessimism keeps me in check and makes me double check assumptions
> about my investment positions in China. I for one welcome his bearishness
> to balance out my bullishness on China, even if I find his arguments
> to be somewhat too narrowly focused and tend to miss the big picture.
> I've pointed out what I believe are flaws in his article below:<br/>
> The necessary consumption rates cited in the Pettis article do not
> factor for currency exchange rates. If you believe that the Yuan
> is undervalued, then the appreciation in the next couple of years
> will both allow the nominal GDP to grow AND allow Chinese consumption
> to grow at a healthy clip (from the increased purchasing power).
> The currency exchange rate effect is far from trivial, and I believe
> leaving it out is a big mistake.
> I would also add that chinese retail consumption grew at a very healthy
> 15+% for the past year, even through the recession. So although
> the numbers cited are high, perhaps it's not quite an unrealistic
> number for the Chinese economy.
Interesting take on the subject. I agree completely that any job you can take your dog along with you on is not half bad. But I do disagree that the guy was overpaid.
The problem as I see it is that a lot of jobs require skills that don't necessarily require a college education. These are precisely the kind of jobs that have been sent overseas to workers that don't produce the quality of work that one would expect to see. In the end we import inferior products from low wage countries. Our workers are out of jobs, our consumers have to put up with shoddy products and we lose both ways.
On Dec 01 08:48 PM Scrapmaster wrote:
> A big part of the problem is that this guy was making $100,000 a
> year.
> He operated heavy equipment. How much education does this take?<br/>What
> kind of skill set does he have?
> Lest you think I'm a W.S. Banker or something - I have a handyman
> business. I do a little bit of everything, bust ass, have a $5000
> health ins duductable, no vacation, sick, or holiday pay,
> and have never made 1/2 of what he made.
> You may think I want some sympathy - wrong. I love what I do and
> I'm the boss. Hey, any job that you can bring your dog to can't be
> too bad!
> The point is, he was way overpaid in the first place. Now, he is
> certainly underpaid, I agree. However, the salaries that many (certainly
> not all) manufactoring workers made was plain and simple way too
> much.
> Time to accept the new reality and stop the pity party.
Not bad advice. I agree with a lot of your points.
On Sep 05 04:29 PM Stimpy wrote:
> We are on a path towards a utility model of banking. Banks will emerge
> (as credit is re-privatised) as the central intermediary structure
> in our economy, replacing the non-bank securitizing model.
> Banks will continue to use securitization (more of a covered bond
> model with clear, formal reps and warranties) as a balance-sheet
> optimization tool.
> We will see a (Fed and Treasury sanctioned) evolution towards 5-10
> large banks with virtually total market share.
> These banks will be almost beyond profitable--in a very low risk
> sense.
> The economies of scale they will enjoy will allow spread lending
> to sustain profits WITHOUT excessive leverage.
> Credit velocity in the general economy will suffer (relative to the
> 2006 orgy-years) as a result, making equities of all kinds a less
> favorable asset class.
> Banks will be the one exception; in a sense they will be taxing the
> rest of the economy for many years to come.
> These regulations make much of this both clear and inevitable.<br/>
> Buy the biggest banks and avoid all other stocks over tyhe medium
> to long term.
I thought of the FDIC angle when I wrote the post and I agree it has parallells. I tend not to be so concerned about the exposure to loss as I do think the proposal can insulate the taxpayer if adhered to as I am the concept of further subsidizing housing. As it is, it receives the largest federal subsidy of all, the tax deductability of mortgage interest.
We've probably relied too much on housing as a driver of the economy for well nigh on 40 years and perhaps it's time to let it stand a bit more on its own two feet and see if investment gets channeled into other sectors.
On Sep 02 08:22 PM Alan Young wrote:
> From my reading of your excerpt, it seems that the mortgage lenders
> would finance the insurance pool, making it no different from the
> FDIC in function. So, yes, I'd say you are overreacting.
> Of course there were plenty of people who thought the FDIC was a
> Socialist plot when it got started, too. I wonder how many people
> still think that, and whether they all self-insure their bank accounts?
Thanks for stating the other side of the argument. You make some very valid points. It isn't as simple as it looks and you're comments about those at the top of the pyramid raking in an excess amount of the pie resonates.
On Sep 02 12:32 AM Carolina wrote:
> Comments from a City Employee (Municipal vs State or Federal noted
> here- none the less, a government staffer if you will)
> I have spent the last 18 years, earning less than the average wage
> in my field of expertise, and though I hold the valid degree, and
> necessary experience, (often much more than others in the private
> sector) I have over the years made much, much less in both salary
> and benefits..Granted, could be because I am not in the higher levels
> of management- or those favored within any government system to recieve
> a higher salary than their real worth to the job produced on the
> market. Therefore, I am a somewhat maddened to see what is obvious
> to us on the gov side- and that is...during the flush years - most
> people I know (all walks of industry..made a fortune, in both salary
> and employees are on a wage sheet, and benefits creep
> up slowly, many of us are Y rated after a few years in salary, not
> gaining a penny more in salary...unless, we get promoted, and often,
> there are few job promotions, or any merit plans. Most work ot, don't
> get the car allowances, phone allowances, cars, or any other perks
> allotted in private industry. And as said here, work in expensive
> communities, and must do the commute, not allowed to telecommute,
> have laptops etc.....
> The bottom line for me at least is that I accepted the lame conditions,
> for the future hopefully locked in benefits of a retirement salary-
> still just a pittance, when compared to others in private sector
> who took 6 figures for years, and the combined living perks (so fewer
> cash expenses as well) again bottom line- often spent their $$$ over
> the last 10 years along with the American gluttony- vacations, cool
> cars etc, while we watched on, only hoping that at least, during
> retirement,, could make our wages as my comment after
> this diatribe, is "now that the cash cow of the dot com, and realty
> bust is real, and now that the $$ hogs at the top of the private
> industry have taken it and continue to rake it , all the general
> employees will lose the work, and are now reviewing just who has
> $$$ which is not them- standing in unemployement lines and dealing
> with the anitiquated systems that we gov employees have had to deal
> with, since few vote in extra money for our gov systems to be upgraded,
> or add $ to help out when systems fail...bottom line, these folks
> look to who has the work now, love to point the fingers at gov.
> I don't think overall it is the average gov employee ripping them
> off- look within- it is the hierarchy of the large company bosses-
> that lost in the recession, and wadded their pockets, and let their
> employees go...luckily gov still has employee assoc- to help us out,
> but in anyevent, look around, it is not the ave gov employee who
> is in the Caribean or driving that sports car- bet your prviate bosses
> still have the I ask all of you reading this to review
> how many gov jobs are really above your wages over the long haul
> and if so, who it is that is raking it in on both sides of this issue
> - the exec.managers....not the frontline people who make any business
> work.
> Orange County , California
One of the best comments I have ever received on any post. I particularly like your last sentence.
On Aug 27 05:39 PM Pat C wrote:
> I bet we will be seeing a large shift in society's views on employment
> and working in general. I, like you, disagree with Mr. Ferrell's
> conclusions on savings and microenterprises at least for the short
> to medium term. There just isn't enough savings and profitable microenterpises
> to go around. Let's face it, labor has been commoditized with the
> opening up of 3+ billion people in China, India and the Soviet Bloc
> competing for work. Tehnology and modern business processes encourage
> the transfer of labor. We simply have not made the social changes
> to adapt to this phenomena. Business and finance is operating in
> an international arena but our government and social structures are
> national or local. We have a tax based government and consumer economy
> that is dependent on taxable and disposable wages - right?! We have
> had our heads in the sand for the last 20+ years. It is absolutely
> astounding how long human beings can look the other way, delude ourselves
> into thinking that we were only outsourcing the unpopular stuff in
> the middle, etc. etc.
> How long will US and Western European societies put up with it?
> I just don't know. If this current healthcare debate has showed us
> anything, it is that our ability for intelligent dialogue is severely
> hampered by outrageous demagoguery and media hype. Reasoned change
> is frought with unreasonable special interests. Will we hit a tipping
> point of revolutionary change? I have accepted it, but I honestly
> don't know when it will hit everyone else to get to the revolutionary
> scale to tip things over.
> You know what's really scary? I'm a reasonable person and I just
> typed and published this.
Thanks for the comment. I reread some of the material and I have to agree with you. A trader would apparently not be held liable for others failures. I interpreted a couple of provisions incorrectly. I apologize for the error.
On Aug 27 01:43 PM Paul Hodgson wrote:
> From what I can tell, M. Sarkozy didn't say that bonuses would be
> forfeited if a trader's department lost money, though you would certainly
> get that impression from the English translation of his comments.
> But when he was speaking in French, he only ever referred to the
> singular. In other words, if in the two years following the award
> the trader loses money, then the bonus will be clawed back or forfeited.
> Here is what M. Sarkozy said in French: “attendre trois ans pour
> toucher l'intégralité du bonus et si dans les deux années qui suivent
> son activité perd de l'argent, il ne touchera pas son bonus. Pas
> de bonus sans malus, ce n'est pas à tous les coups on gagne. “ Which
> roughly translates as: “wait three years to get the whole of the
> bonus and if in the two years following his activity loses money,
> he won’t get his bonus. No bonus with malus, it’s not heads I win,
> tails I win.” Not their activity, but his activity. With this in
> mind it seems more reasonable, at least to me, though I can't be
> said to be a fan of government interference in this process. But
> no one else seems keen on making the jump except the Swiss banks.
> Paul Hodgson
Actually, the new homes sales data is based on contracts signed not escrows closed. There are always some cancellations and during the worst of the crisis there were many. The figure isn't absolute but it's useful for period to period comparisons and now that things are settling down, the cancellation rate is trending towards the norm.
As for the spec homes that you point to as seeing a decline in sales, most are guessing that the bulk of new home buyers have been first time buyers who are opting for stripped down smaller houses. The existing inventory tends to be bigger homes with lots of upgrades, thus out of the price range for fist time buyers.
On Aug 26 08:03 PM qqq fox wrote:
> I am surprised no one has dug into today's new home sales report.
> If anyone bothers to get to page 4, they would find that sales of
> new homes that are finished and ready for occupancy were actually
> down 6%. The category showing the biggest gain, 33%, was for homes
> that haven't even been started yet. In other words, they are merely
> sales contracts that are entered into without any mortgage financing
> being lined up. Desperate builders will sign these no money down
> contracts with the understanding that nothing will happen until the
> buyer comes in with a downpayment and mortgage financing. That these
> sham deals are allowed to be counted at all shows the political clout
> of the NAHB. Very misleading to say the least !!!
Agreed, but it can make the difference if the bank is on the edge of the cliff.
On Aug 21 08:25 PM Big Al45 wrote:
> A bad investment portfolio is usually not enough to bring down a
> bank. Most of the failures also made a lot of poorly underwritten
> loans - particularly AD&amp;C loans.
It's a good question and I don't have a good answer. I think you can assume a lot. Since most of the buying is at the low end it's reasonable to assume that many were first time home buyers. Take out the investor purchases and you can probably come up with a decent estimate. If I see the answer I will post it.
On Aug 21 07:20 PM Jiang Nan wrote:
> Any data on how many of the buyer receives the US$8000 tax credit?
Good question and I'm still trying to reason it all out. I think that the UK problems with real estate may have something to do with the fact that they are lagging. In fact, when you look further than Germany or France, you find that real estate played some part in their problems.
Though I have tended to be a critic of large social safety nets, I am changing my opinion. I think they may act very quickly as counter cyclical stabilisers and may be one of the reasons that Europe or at least some European countries are pulling out quickly.
Check my blog tomorrow for some more thoughts.
On Aug 14 10:12 PM Joel87 wrote:
> Well seeing as the U.S was "ground zero" for the explosion of the
> subprime debt bubble, the fact that it would take a little longer
> to "clear the rubble" does make sense, the UK was up to it's neck
> in U.S and its own subprime mess also.
> Now if your arguement, or Blodget's, is the social saftey net Europe
> provides for it's citizens helped the economies of France and Germany
> see growth in the last quater. Why hasn't other members of the EU
> bounced back als including Great Britain?
It's humorous but like the zoo, you don't want to feed the animals. I made the mistake of replying to him.
On Aug 07 09:00 PM Bruce Vanderveen wrote:
> It is a pity slobs like Fre-Freddie exist. Seems they can't come
> up with anything rational so they degenerate into a name calling
> diatribe.
> Good Article!