Category: personal_noteS

Foreclosure during GFC

2008

A total of 861,664 families lost their homes to foreclosure last year, according to RealtyTrac.

A total of 3,157,806 foreclosure filings—default notices, auction sale notices and bank repossessions—were reported on 2,330,483 U.S. properties during the year, an 81 percent increase in total properties from 2007 and a 225 percent increase in total properties from 2006. The report also shows that 1.84 percent of all U.S. housing units (one in 54) received at least one foreclosure filing during the year, up from 1.03 percent in 2007.

2009

RealtyTrac, the online marketer of foreclosed homes, reported that one in 45 households — or 2,824,674 properties nationwide — were in default last year. That’s 21% more than in 2008, and more than double 2007’s total.

2010

RealtyTrac, a leading online marketplace for foreclosure properties, released its Year-End 2010 U.S. Foreclosure Market Report, which shows a total of 3,825,637 foreclosure filings—default notices, scheduled auctions and bank repossessions—were reported on a record 2,871,891 U.S. properties in 2010, an increase of nearly 2% from 2009 and an increase of 23% from 2008.

And a 14-year graph

https://www.attomdata.com/news/most-recent/2018-year-end-foreclosure-market-report/

Very good podcast on Visa by Acquired

Link: https://www.acquired.fm/episodes/visa

Three major pieces of technology

1/ authorization network letting banks talk to banks

2/ automated clearing house

3/ digitized point of the transaction

Very interesting timing of the IPO (2008) that gives selling banks an important lifeline.

A fair problem raised – this “regressive tax” on transactions as merchants raise price for all customers but rewards are higher for premium customers.

New tariff

Electric vehicle tariff sounds preventative. No Chinese car companies are selling mainstream in the US. 100% tariff is more political and sounds tough to voters maybe.

Batteries tariff is around 25%, which is about the gross profit margin of CATL. So it makes CATL export (if at the same price) 0% gross margin.

China data center left behind?

Equinix capex for 2024 is ~$3bn

Digital Reality capex for 2024 is close to $3bn

The largest independent data center GDS operator only has rmb 6.5bn (less than $1bn) capex for 2024, of which rmb 4bn is outside of mainland China.

GPU shortage is the key, which limits the development and usage of AI.

Overall weak demand in China is also the key, as main internet companies need a surge in net income or cash flow first to support a surge in capex.

2025/26 could be interesting. If US feels the lead in AI is firm, and the H800 etc. is more of a legacy chip, and Huawei develops better AI chips, it doesn’t hurt to sell some Nvidia chips to Chinese customers.

$EQIX capex guide

$DLR capex guide

 

 

Growing capital expenditure for AI firms (MSFT + GOOGL + META => $150bn)

MSFT capex saw 41% increase in CY2023 and 79% increase in the first quarter of 2024. And MSFT expects material sequential increase in capex, which could mean 50-60% increase yoy.

Alphabet capex saw 2% increase in 2023 and 91% increase in the first quarter of 2024. The company expects similar amounts in the following quarters, which points to 50% yoy increase in 2024 capex.

Meta capex saw 12% decline in 2023 and 5% decline in 2024q1, but the company upgrades capex guidance for 2024 to be $35-40bn, which indicates a 33% yoy increase at midpoint.

Adding the 3 above would be $150bn combined capex already, up from ~$100bn in 2023 for those three.

Chinese companies share-based compensation (3)

See previous

Chinese companies share-based compensation (1)

Chinese companies share-based compensation (2)

 

Tencent (HK.700)

2023

FCF: 167 bn rmb (company defined)

SBC: 21 bn rmb, or 12.6% of FCF

Note: FCF significantly improved, while buyback is doubling SBC

 

Meituan (HK.3690)

2023

FCF: 33.6 bn rmb (op. cf minus purchases of pp&E)

SBC: 8.4 bn rmb, or 25% of FCF

Note: FCF significantly improved; buyback starting in 2024

US homebuilders in 2008

What did US homebuilders do in 2008? Residential property market was really bad.

D.R. Horton revenue dropped by 41% yoy in 2008; loss of $2.6bn (more than 2x of 2006 net income) was incurred. Book value was only $2.8bn at 2008 YE.

But D.R. Horton maintained positive cash flows, scaling back expansion and selling inventories.

D.R. Horton started to pay down some debt in 2007 and did so in 2008 as well. It continued to do so until 2011. In 2012, it started to take on more debt.

Similarly for Lennar – revenue dropped 55% yoy in 2008 and incurred loss of $1.1bn. Book value was $2.6bn at 2008 YE.

It maintained positive operating cash flow, reducing supply (deliveries dropped 68% from 2006), pausing expansion and selling inventories.

It didn’t take new debts, but focusing on paying back.

 

 

Microplastic (detection & replacement), sounds like a future business

This article is pretty good at summarizing the importance of microplastic to health (downside), including in cardiovascular disease etc..

Global companies are trying to address this issue for a long time. The most recent development is Starbucks’ announcement of redesigned single-use cups with 10-20% less plastic.

EU’s objective: aims to reduce microplastic releases by 30% by 2030.

See a previous article for fast-fashion and microplastic.

 

Chinese companies share-based compensation (2)

See previous Chinese companies share-based compensation (1)

 

Baidu ($BIDU)

2023

FCF: 25,424 mn rmb

SBC: 6,345 mn rmb, or 25% of FCF

Note: FCF improved over the last two years

 

iQiyi ($IQ), a subsidiary of Baidu

2023

FCF: 3,315 mn rmb

SBC: 637 mn rmb, or 19% of FCF

Note: 1) FCF turned positive in 2023. 2) Capex defined by mgmt is narrow – only “fixed assets”; note that acquisition of intangible assets is higher than acquisition of fixed assets.

iQiyi does say that “Capital expenditures are incurred primarily in connection with construction in process, computers and servers.”