PETITION provides analysis, commentary and curated links about financial markets, distressed investing, restructuring and bankruptcy.
Our primary product is an a$$-kicking email briefing sent on Wednesdays and Sundays.
For context, there are more millennials in China than there are citizens in the United States. This screams "opportunity," which is why Apple Inc. ($AAPL) and so many others are looking to play ball there. Starbucks ($SBUX), for example, is fusing tech with retail to appeal to the Chinese consumer. The IMF, however, is concerned (must read).
So, apparently organized crime is a "new" threat to retail. Granted The Sopranos hasn't been on TV for years, but wethinks organized crime has always had a grand ol' time boosting valuable merchandise. Not entirely sure what's new about this. The masterplan that the Sun describes at the Apple Store in Towson hardly sounds like a sophisticated operation. But, what do we know? That said, we read the piece and we couldn't help but think about Walmart's ($WMT) employee delivery program. We mean, seriously, what could go wrong?
Corporate cash load - now a record $2.26t - is showing solid growth (Apple is literally 10% of that). And people wonder why the private markets are the new public markets. With that much cash on balance sheet, is it any wonder that Bonobos, Plated, Jet.com, and others are getting scooped up by corporates prior to ever hitting the public market (and having to show the grotesque nature of their revenue models)? P.S. This doesn't count the $1.53 trillion of private equity "dry powder" that's just laying in wait.
We've been giving a lot of thought to the retail malaise currently infecting the US and one thing we debated recently is what would happen if Apple, Tesla, and some of the other saviors of US malls were to see a massive turn to the downside? Well, earlier this week Apple had a bit of bad news including potential delays to the iphone 8 and this: an indication that the flagship Apple store in the (recently CMBS'd) Boston Properties' GM Building on 5th Avenue is experiencing some flagging revenue numbers. No bueno. Choice quote NSFW: "'I think retail is f*cked, plain and simple,' developer Billy Macklowe said at a conference in April. Walking down Fifth or Madison Avenues, he said, 'just on a visual basis, you will get to a radical vacancy rate the major brokerages aren't putting out there.'" Wow. (PETITION note: read the comments too. Many appear to be spot on).
The recent New York Times profile on Andrew Left (@CitronResearch) is fascinating and worthy of a solid read. There are a ton of little nuggets in there even if, in some cases, it begs certain follow-up questions. The comments following the article are equally interesting, many of them decrying the author for pitching Left as this savior of the little man without any regard whatsoever for who might be affected by a stock decline of the sort suffered by Valeant Pharmaceuticals ($VRX)(spoiler alert: lots of Moms and Pops...but also a lot of hedge funds who checked into the "hedge fund hotel").
A few things left us curious:
1. Track Record. The article notes that Left has a positive track record. But unlike Jim Chanos, another reputed short seller, Left needn't disclose his holdings and manages his own money. So how does the author KNOW this? He backs up the statement with this: "On average, the value of companies he writes about drop 10 percent in a year, and some drop as much as 95 percent." Well, on average, how many of Left's investments does he actually write about? Isn't the denominator there important?
2. Abstract References. Why not more detail behind the referenced jewelry chain masquerading as a subprime lender? Presumably this is Signet Jewelers ($SIG)(which has now sold its financing business)? Wouldn't it make sense to highlight a business that caters to that demographic?
3. Lacking Disclosures. Left's observation that companies don't disclose information for a reason is interesting. With negative free cash flow and increasing heaps of debt AND no transparency behind viewership of original content, Netflix ($NFLX) comes to mind. If the numbers were bananas, they'd presumably justify the high content costs, yeah? We'd think that, as a basic matter, any analyst trying to understand the billions spent on such content would want to know what some of the metrics are there. Similarly, Apple ($AAPL) doesn't line-item Apple Watch sales; instead, it embeds those sales in a catchall line-item of "Services." That, too, should give some cause for concern (though Mary Meeker says 25% of Americans now own wearables).
We may have to dedicate more time to this at a later point but for anyone who has some time to kill, we HIGHLY recommend this lauded report by Kleiner Perkins' Mary Meeker. The short version: smartphone growth is flat-lining as is internet growth (in the US, India on the other hand has only 27% internet penetration); 20% of mobile inquiries are via voice now - a mind blowing number (per Google); 25% of Americans own a wearable and 60% of consumers are willing to share their health data (with Google, Microsoft, Samsung and Apple best positioned to take advantage of it); US Net Debt to GDP is 77% as of 2016 and trending towards 105% by 2035 (US record surpassing WWII); household debt is back at peak levels last seen in Q3 2008 with student loans +144% and auto loans +44%.
Some movement within FTI Capital Advisors. In other news, there is an entity called FTI Capital Advisors.
LeEco is a sinking ship - in the US at least.
Looks like the Skip Barber Racing School had to step on the breaks to park in bankruptcy court. No, we're not proud of this joke...not at all. Our eyes are set on the beach, dudes.
How Apple, Alphabet, Amazon, Microsoft and Facebook make their money - broken down in chart form.
As the markets wait to see what happens with Spotify, Pandora ($P) is now looking to explore strategic alternatives (and we're listening to"This House is on Fire" by AC/DC as we listen to this). Is this also Amazon Effect? The Apple Effect? After Rdio filed for bankruptcy not long ago and Soundcloud has taken on more debt, it's clear that the music space is still in flux with the big players crowding out the smaller guys. PS. Since we're so sick of hearing about the "Amazon Effect," we'll double down on the "Apple Effect": Fossil ($FOSL) watches appear to be feeling it.
Are you wondering why we spend so much time talking about technological innovation and what that means in terms of "disruption" of incumbents? Well, this is why...
