Thoughts on market instability re. global events
-
just canvassing opinion on the direction of the markets following all of the recent global instability.. used to post occasionally on the PH forum but less so here.. are we in for a rough ride to come? seems to be a noticable dip in the last few days could this be the start of something bigger... Also does anyone get updates from Cobens generally? Am I missing somthing as I dont seem to get any kind of comms from them at all despite having a fair bit (for me anyways) invested with them. Thanks!
-
Hi JQ74,
Ive discussed how markets move when uncertainty flares up and how quality rebounds. I would say that there hasn't been a noticeable dip and YTD overall we are doing very well. Nearly all other external portfolios im looking at are red and most of ours are positive.
On communication, unless we have a specific need to contact you we generally don't, rather, relying on any Direct Clients to use the forum, the dashboard and contact us if they need assistance, guidance etc.
No one can say what the market will do day to day however over decades when wars start, volatility increases for a period. As mentioned we have, so far been relatively unscathed. This is due in part to the USD which is seen as secure in uncertain times. I can also say with confidence that the businesses we invest in are largely unaffected notwithstanding longer term impacts from inflation and energy costs if the situation persists but even so that would be very small. It would be a concern if we held hospitality or infrastructure assets in the Gulf-we dont have any exposure.
If you want to discuss anything I'm happy to set up a call, alternatively you can email us:
support@cobensdirect.co.ukRegards
Adam
-
I see that there was some news/rumours around the US approval on these Chinese chips for Apple over the weekend
-
it's DT using it in wider negotiations over China/US trade(he will U Turn 5X in the next 5 weeks alone :)) . Honestly it changes nothing-it's been discussed extensively. Bottom line there is a global shortage of DRAM. And the big money is in bleeding edge enterprise grade which the Chinese can't produce and won't for many years and even if they could there is a big difference between allowing a chip into an Apple phone SOLD IN CHINA and a chip allowed in a western data centre.
-
Read a fair article linked below, nothing to be concerned about in big scheme of things. The Chinese state used to own near 40% of CXMT and needed billions to invest in new fab plants so they IPO the company making lots of noise. With a 5-10 year payback on a fab plant its a long game. CXMT will focus on supplying Chinese companies, they are not going to give apple a discount rate, even for Chinese market iPhones
doubtful it will affect the market pricing it could just give apple 4 suppliers instead of the big 3 https://wccftech.com/apples-china-related-memory-demand-of-600-million-gb-requires-6-6-of-cxmts-year-end-capacity-but-the-memory-giant-is-already-booked-through-2027-and-even-by-2028-it-will-meet-only-half-of-china/ -
thats the point. China demand as per GS is 3X CXMT supply so currently many Chinese companies buy memory from SK/Samsung/MU because they can't source enough domestically. In turn MU which is typical, can only supply 50% of its customers. It's not absolute supply that matter, it's the gap between demand and supply. Demand is growing faster than supply. Globally it's total Wafers which is the constraint and you can not produce more in the short term. It's a multi year problem.
The fact remains we have known supply, say out 3 years and 50% of that is contractually sold. So big memory can spout whatever they want about throwing 10s of billions or 100b building more and it wont change the landscape for 5 years. Micron think we have a decades long period where memory demand will exceed supply. For example if CXMT sold memory to Apple it only means another customer goes without (a Chinese customer). I don't see that happening and if it does, what's changed. Nothing. It's the same argument with Nvidia not selling into China, apart from the fact they have $10b in stock(H200) they cant supply GOOG/MSFT/Meta so it doesn't matter.
Short sellers can point to Nvidia using LESS HBM per GPU and suggest demand is falling when the fact is Nvidia is using less memory because of a. wide range of reasons, namely the shortage and heat management. Nvidia will pack twice the chips into a rack using just as much memory as planned, NVL 72 becomes NVL 144.
All of the above before you see, frankly moronic 'reports' suggesting one memory business is a better buy than another when one is at 4.9X and one is 5.3X.
memory businesses are trading at low multiples because most still think it's all going to end badly and the cycle peak is in. I think they are wrong, and not slightly so.
-
and today this comes out. I'm patient
-
Great info as always …
Be nice if Micron gets a re rate soon -
We need to remember we paid $90 18 months ago. To say it's been a fantastic investment is a huge understatement. My view is simple.
Value is based on durable earnings and cashflow (and a bunch of other 'stuff). Are their earnings durable. Well, every piece of evidence, and I mean every, says yes. If their biggest customers are locking in supply agreements for 5 years they think so. Nvidia thinks so, TSM thinks so, Musk thinks so. Mehrotra, a veteran in the industry thinks so. The only ones who don't think so are a few shorts. And I don't believe they believe what they say. Anything that moves +10X can be knocked down a peg or two if you sew the seed of doubt. It's a simple but effective play on human nature. Fear and greed.
And here is the icing on the cake. It's not like we are sitting here with a bubbly multiple, one in the 40s or 50s(or more). It's 5. Put another way, Micron will earn more money than Apple, MSFT and even Google in 27/28/29/30 but its valuation is 25% OF them. It may even catch Nvidia. I like the margin of safety