Black Monday

[Bobdn]

I really enjoyed this interview on CNBC. What experts thinks of the bail out. Spoiler alert: they think it's terrible.

https://www.youtube.com/watch?v=4_0jNrlDZ0w&t=113s

Must be great having the Reserve Currency of the world to play with.

Aaron Klein, senior fellow in economic studies at The Brookings Institute, Raghuram Rajan, professor of finance at the University of Chicago Booth School of Business, and David Bahnsen, founder and chief investment officer of the Bahnsen Group, join 'The Exchange' to discuss the Fed's response to the SVB fallout, bank market risk, and the contagion effect from SVB.

[SailorRob]

Armco i don't know of the exact OPEX-CAPEX numbers ... but FREE CASHFLOWS at present and for many decades have been insanely massive as have been for many Oil&Gas producers ... returns on capital VERY high ...

.. we also seen HUGE profits in the Banking sector ... basically printing money out of thin air and charging interest on it ... as long as you keep your Capital base in check and lending risk low...banks make very good FCF ... COAL producers since anti Russia also doing really well .. YAL was around $2 SP couple years ago ...since then they have risen to present highs $6.86 ..also massive FCF paid near on $2 in dividends ....

all not very WOKE .... as they say go WOKE go Broke .... over the rest of the decade I think we will continue to see blowhards pushing woke feel good green failing lost making operation continue to lose trillions in invested capital ...while real primary industry core safe banking will continue to grow and make HUGE FCF ...

Of course going need to bring in all these anti major profit TAXES on successive business models to help pay for the loss making business models ...

Yeah a few things wrong here, huge misunderstandings. As is often the case with Sharetrader, a couple of facts mixed in with a lot of rubbish.

I'm not talking about OPEX or CAPEX.

Free cashflows are irrelevant unless you compare them to the capital invested to produce them and you correctly analyse depreciation and depletion. I can double free cash flow and double it again and again with a term deposit in a bank, just by doubling the amount of money I have invested.

Currently the oil/gas/coal sector has huge free cash flows yes, I would know having had a large portion of my net worth invested in this sector since 2020. But the returns on capital for this industry are notoriously terrible and the entire industry had earned nothing in the last 10 years until now. You could not be more wrong with what you're saying and just a few minutes of research would tell you this, the sector had shrunk to an all time low proportion of the S&P500.

So let me tell you, free cash flows have been insanely LOW and returns on capital negative for a VERY long time.

Free cash flows can only be judged based on the capital invested to produce them or what you can buy that capital for.

If as you say, free cash flows have been insanely massive for many decades then these companies would trade at 30 or 40 times earnings, the fact they trade at single digits is the market telling you that it thinks this is a one off burst in the midst of a multi decade quagmire, a pestiferous one at that.

The banking sector profits are also awful in relation to capital and if you spend 30 seconds looking at the share prices of the big banks since 2008 you'll figure it out fast. Most also trade at sub 10 PE's. Half of the market price.

You have drawn a very long bow from a few facts taken in isolation of the bigger picture.

[Bobdn]

Well, as I was saying in an earlier thread, the best share to own over the last 100 years was Philip Morris. Insanely high cash flow, insanely low PE - for decades. Even from the 1960s with the immese litigation it was still the best share to own, if one reinvested all dividends. People hated the stock but it still shat out/sh*ts out money at an incredible rate. Reinvesting huge and regular dividends into an unloved share does the business apparently. Whether it will continue to be excellent, I doubt it but what would I know.

Exxon is up there too over this period too.

Interestingly oil and gas accounts for just 5 per cent of the S&P500 but 12 per cent of the earnings currently.

I just finished Fossil Future by Bernstein. Absolutely brilliant. Now I'm onto Random Walk down Wall Street. Finally made it to Random Walk lol.

Life as an indexer/ETFer is pretty boring.

[SailorRob]

Well, as I was saying in an earlier thread, the best share to own over the last 100 years was Philip Morris. Insanely high cash flow, insanely low PE - for decades. Even from the 1960s with the immese litigation it was still the best share to own, if one reinvested all dividends. People hated the stock but it still shat out/sh*ts out money at an incredible rate. Reinvesting huge and regular dividends into an unloved share does the business apparently. Whether it will continue to be excellent, I doubt it but what would I know.

Exxon is up there too over this period too.

Interestingly oil and gas accounts for just 5 per cent of the S&P500 but 12 per cent of the earnings currently.

I just finished Fossil Future by Bernstein. Absolutely brilliant. Now I'm onto Random Walk down Wall Street. Finally made it to Random Walk lol.

Very true and what I've been banging on about on OCA thread for ages. Rising share prices, what EVERY person on share trader wants, is the last thing that will make you a lot of money. You want your groceries to be cheap

[BlackPeter]

Life as an indexer/ETFer is pretty boring.

True ... but lets face it - in some areas (and health and finances are some of them) boring is good. You still can take some play money you don't need and do with that whatever you want.

[Bobdn]

I agree. Boring has its place

[JBmurc]

Yeah a few things wrong here, huge misunderstandings. As is often the case with Sharetrader, a couple of facts mixed in with a lot of rubbish.

I'm not talking about OPEX or CAPEX.

Free cashflows are irrelevant unless you compare them to the capital invested to produce them and you correctly analyse depreciation and depletion. I can double free cash flow and double it again and again with a term deposit in a bank, just by doubling the amount of money I have invested.

Currently the oil/gas/coal sector has huge free cash flows yes, I would know having had a large portion of my net worth invested in this sector since 2020. But the returns on capital for this industry are notoriously terrible and the entire industry had earned nothing in the last 10 years until now. You could not be more wrong with what you're saying and just a few minutes of research would tell you this, the sector had shrunk to an all time low proportion of the S&P500.

So let me tell you, free cash flows have been insanely LOW and returns on capital negative for a VERY long time.

Free cash flows can only be judged based on the capital invested to produce them or what you can buy that capital for.

If as you say, free cash flows have been insanely massive for many decades then these companies would trade at 30 or 40 times earnings, the fact they trade at single digits is the market telling you that it thinks this is a one off burst in the midst of a multi decade quagmire, a pestiferous one at that.

The banking sector profits are also awful in relation to capital and if you spend 30 seconds looking at the share prices of the big banks since 2008 you'll figure it out fast. Most also trade at sub 10 PE's. Half of the market price.

You have drawn a very long bow from a few facts taken in isolation of the bigger picture.

LOL man good laugh ... wow you have been investing in the Energy sector since 2020 ..good for you

So how do you think all these successive Banking O&G Coal Giants created Capital .... If they have been like you say such bad business models then they shouldn't have High earnings to share values they should have HIGH P/E right so you think TESLA was a better business when it had a very high P/E 1000 to present 40's as TESLA has increased earnings ..

.. XOM been around in present form since 1999 and direct descend back to standard oil from 1870 ... paying many dividends all along the way growing into the giant it is today ... one of the largest revenues in the world ...but in you view a poor investment

Both Saudi Aramco and Apple have the same net Profit margin late last year report which I found interesting...

yes I should have replaced FCF with Cashflows(was very late several hours in front of a screen etc!!) as I did recall the 2011 to 2016 period investing in the micro-jnr resources sector as being very tough ..as you see I've been investing trading the sector since early 2000's

Still I'd love to know your much better sectors to be invested in going forward that have far better Cashflows and high potentials for great FCFs.. I'll take Banking / Energy / Minerals ...

[JBmurc]

Still getting my head around present banking issues in USA

A bunch of banks regulated by... The Federal Reserve
was suddenly shut down by... The Federal Reserve
and depositors bailed out by... The Federal Reserve
all bc of interest rates set by... The Federal Reserve

[ynot]

Still getting my head around present banking issues in USA

A bunch of banks regulated by... The Federal Reserve
was suddenly shut down by... The Federal Reserve
and depositors bailed out by... The Federal Reserve
all bc of interest rates set by... The Federal Reserve

Not to worry, Biden says he has it under control so sleep well.

[Balance]

US$300 billion US bank put under administration.

Some perspective:

US economy is 103 times the size of NZ economy.

So the US$300 billion is equivalent to a US$2.91 billion bank being put into administration.

That’s equivalent to a NZ$4.7 billion situation - the finance company sector collapse in NZ cost depositors & the government $7 billion.

So the bank failure is hardly going to hit the broader US economy and the financial system. Maybe similar or equivalent banks and financial institutions with heavy exposure to the venture capital and crypto scam industries.

No risk of contagion but don’t let the doomsayers dissuade you that it’s Lehman all over again.

Just as crypto is the new global currency system just 15 months ago, remember?

Some perspective on what’s happening from someone at the coal face :

https://vt.tiktok.com/ZS8XqQmY1/