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✍️ Maverick Charts - Stocks & Bonds - November 2023 Edition #13 is not live, enjoy!
  • 25 Sleek charts that say 10,000 words ... save precious time and provide insight!

  • This edition: Sleek fundamental research tool that I use answered, US mega tech Magnificent 7 'M7', stocks & bonds 2023 performance, S&P 500 and Nasdaq-100 valuation, small caps IWM, Tech XLK, Banks XLF, Berkshire Hathaway, Elon Musk & Tesla, Cybetruck, Disney advertising and X, China Tech, Alibaba BABA, US treasury bonds TLT, Volatility VIX, Carvana, Auto 1, Swiss Franc, Ark Invest

Structured in 3 parts and designed to have a natural flow:

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✍️ Maverick Charts - Stocks & Bonds - November 2023 Edition #13
25 Sleek charts that say 10,000 words ... save precious time & provide insight!

Here's why $GM finds backs a better way of allocating capital than investing in the future
General Motors had a rough 2023. The UAW strikes. California suspending its robotaxi operations in SF after numerous accidents and connectivity issues. Higher interest rates making it expensive to continue operating as a business. As demand for cars wanes, $GM is halting investment in retooling their factories for EV production.

_Hummer EV on Call of Duty: Modern Warfare 2

With a market cap of $44 billion, spending $10 billion on buybacks would mean the Company is buying back nearly 25% of its business, making each share of GM more attractive. Sure, investments in retooling factories and improving robotaxis would help make the business successful in the long run however, shareholders would prefer guaranteed returns over volatile capital investments. Investing in factory retooling isn't wise when demand for electric vehicles is hard to decipher. investing more in Cruise isn't wise when everyone isn't sure when California will allow Cruise to reopen operations in SF and other cities. Treasuries are a great use of cash but when doing the math, the returns from buybacks are higher.

Let's assume:

  • $44 billion market cap
  • $10 billion buyback would represent nearly 25% of market cap
  • Reducing shares by 25% should lift price by around 33%
  • For GM that would equal a $14 increase from $30 to $44
  • On remaining 75% shares (1.05 billion) the rise equals $14.7 billion in market cap

So with GM's $44 billion valuation, a $10 billion buyback could boost market cap by around $15 billion. A near 50% return overall. Of course, we don't know how the market will perform during the buyback time period but assuming conditions remain constant, buybacks are a rational choice for use of capital.
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It's not only office deals that are falling apart; apartment deals are also falling apart
With a simple search of "defaults on apartments" on Google, you find a plethora of stories of apartment real estate deals falling apartment. Since Google has my location near SF, I'm finding stories like:

  • Luxury San Francisco apartment complex next to 'X' HQ could default on mortgage (source)
  • Developer of proposed apartments in San Jose defaults on loan
  • Walnut Creek apartment complex goes back to lender after loan default

These are some of the headlines. Once you look outside the SF Bay Area, you find many more apartment real estate deals going under. The problems that are happening with office real estate are leaking into other forms of commercial real estate like retail and multifamily. For perspective, with office buildings empty, rents for apartments go down and apartment complexes get riddled with vacancies. This makes it difficult for operators of real estate deals to find the cash flows needed to pay their maturing loans.

REITs that have been investing heavily in expanding their portfolios through new developments are going to be massive impairments as demand for apartments, retail space, office space, etc. grind to a halt. Could dividend cuts come to some of our favorite apartment REITs like $AVB and $MAA? I'm not sure. Overall, the issues with real estate are so bad that I hope that those looking to get into real estate no longer see it as a place for easy money. The era of low interest rates has made the industry bloated, less competitive, and has distorted the way industry veterans have allocated capital.

A massive cleanse of the industry, which has already arrived, is necessary for the industry to see a brighter future.
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Luxury San Francisco apartment complex next to 'X' HQ could default on mortgage
When luxury high-rise NEMA opened 10 years ago, it was meant to attract tech giants and revitalize the Mid-Market area. But it's failed to regain its footing.

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Here's the math that potentially justifies Alaska Airlines's acquisition of Hawaiian Airlines
On a peaceful Sunday, $ALK agreed to acquire $HA for $1.9 billion. In this acquisition, Alaska Airlines and Hawaiian Airlines will share resources with each other while maintaining each of their respective brand identities. With amped up competition form $LUV and a plunge in travel to Hawaii due to the fires in Maui, Hawaiian Airlines has struggled immensely compared to other airliners. Buying out Hawaiian Airlines when investors are fearful to invest in the stock is bold but may also be a smart move for Alaskan Airlines.

Let's assume:
  • Hawaiian carries ~7 million passengers annually
  • Alaska's average revenue per passenger is $150
  • Alaska can achieve $20 million in annual cost synergies
  • 10% net profit margin

This means that Alaska Airlines will receive:
  • $1.05 billion in additional revenue
  • an additional $105 million in net profit

On a $1.9 billion acquisition, the ROI on this deal looks to be ~7%. Even if the returns may be similar to what one could get in treasuries or corporate bonds, Alaska Airlines sees this opportunity as "once in a lifetime". As travel demand to Hawaii returns to normal, the ROI that Alaska will gain from owning Hawaiian Airlines will grow. I say bravo to management for capitalizing on the opportunity.
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Pack your lunch. Southwest is flying to Hawaii
Southwest Airlines announced late Wednesday that it would start selling tickets to Hawaii.

Capital Allocation in Mining vs Oil
The biggest thing I've observed in the commodities space is that out of all the industries there, the oil industry has done a fantastic job with emerging bigger after every downcycle. Returns in the oil industry far exceed that which is found in mining and farming.

Here's a look at Exxon Mobil $XOM

And here's a look at $RIO, the Exxon Mobil of commodities

When adjusting the timeframe of the stock returns, Exxon's stock look like it took a more wild ride. However, since Exxon offers consistent and bigger dividends than Rio, Exxon still beats Rio in terms of returns by a wide margin. A question many have is, why does the energy sector have better capital allocators than the mining sector?

A few things come to mind:

  1. Returns are more predictable

Oil exploration often involves substantial upfront costs but can yield more predictable and higher returns compared to mining. The geological uncertainty in mining (variations in ore quality, accessibility, etc.) adds risk and reduces predictability in terms of returns on investment.

  1. Technology and Efficiency

The oil industry has been a pioneer in adopting advanced technologies for exploration, drilling, and extraction. These technological advancements have often resulted in increased efficiency, reduced costs, and improved returns on investment compared to mining operations that might not have undergone such transformative changes. Enhanced oil recovery, fracking, etc. are primary examples of this. For mining, most of the innovation is in the form of automation, which helps with reducing the labor intensity of the business.

  1. Market stability

The demand for oil is more stable than the demand for metals. In good and bad times, we need oil to go from Point A to Point B. As for metals, demand is dependent on whether factories are producing more cars, phones, etc. or not.

When looking at the mining industry, there are a few bright spots. Lithium is one of them where the increased usage of lithium-ion batteries for cars and electronics have pushed demand consistently higher. $SQM has been a major beneficiary of this. To some, SQM is the Aramco of Lithium.

Then, there's $SCCO, which acts as the Exxon of copper mining. Even if its rival, $FCX, produces more copper, Southern Copper has lower production costs.


With the severe commodities downcycle that started around the timing of Brexit, I'm hopeful that the industry will be very wise with how it allocates capital. As the big shift towards EVs stresses the mining capacity for copper, lithium, etc. the eventual commodities supercycle will lift all commodities stocks higher. How these miners use their fortunes to improve their business is something I look forward to seeing. Those who use the great times to lower their cost of production will do far better during the downcycle than those who don't. And if I were Warren Buffett and I wanted to invest in a miner for the long run, I go for the lowest cost producer.

A concern I have with the mining industry is the scarce amount of capital flowing into the sector. Too much capital has been sent towards the EV and battery producers, and less of it has been sent to the miners. Until miners can find a way to attract more capital, I do see the mining industry relying more on metal prices spiking to boost their profits as they struggle to raise capital to expand production.
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Took a tracking position in $DTM, the natural gas offshoot of DTE Energy ($DTE). They have some existing pipelines and a sizable expansion planned. With natural gas demand growing, this could be an interesting play. They also have exposure to hydrogen and carbon capture.

They also have grown their dividend to just under 5% with over 15% dividend growth since spin off. Certainly this small cap is going to start popping up on radar soon.
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Leon's avatar
Epsilon Net $EPSIL announces Epsilon Smart Cyprus to enter the cypriot market with more specific requirements of Cypriot entrepreneurship.
The Epsilon Smart series has already exceeded 100.000 subscriptions.
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📈 Leveraged Momentum Trading Update for Optimum Mix
Momentum continues to be strong for $MSFT, $CRM, and $UPRO but has declined for $WMT so I placed the appropriate trades.

Any questions or feedback?
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Will Bitcoin hit $100K before the Bitcoin Halving in 2024?
Bitcoin's current trading price, standing at approximately $40,665.60, sits notably lower than its peak value of $68,789.63. Anticipation is growing within the community as discussions circulate about the potential introduction of spot exchange-traded funds (ETFs) linked to Bitcoin in the United States. This development is anticipated to draw in a substantial wave of institutional investments. Amidst this conversation, the approaching Bitcoin halving in 2024 remains a focal point of analysis. The speculation surrounding these ETFs hints at the possibility of sparking the next upward surge in Bitcoin's value, often termed a bull run.
Coinpedia Fintech News
Bitcoin Halving: Why It Matters & What To Expect 
Imagine a currency that is not controlled by any government, bank, or institution, but rather by a decentralized network of computers around the world.

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