Elon Musk’s wild tweets, magnified oil spill and Cole’s retail dumpster fire

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Throughout my 20s and 30s, I primarily used Excel for my workouts – building my career, my business, and my portfolio. It wasn’t until my 40s that I started getting serious about fitness.I thought a lot about starting but took The time between when I first wanted to try something and when I showed up. I wasn’t fast enough to try trail running, strong enough to try CrossFit, strong enough to try jiu-jitsu or MMA, or flexible enough to try yoga. I know I want to do every one, but I look stupid. I really want to try yoga, but all these young moms will have balance and flexibility, and I’ll be a bald old dude, neither. My solution became my mantra – just show up and “look stupid”. If this is what I should be doing, I should start without thinking too much. I exposed my lack of speed, strength, toughness, balance and flexibility. Every time I do it, every 1% increase. I like to look stupid, but after a while I don’t look so stupid anymore. Or caring about how I look.

When approaching an idea, I first ask if my source is honest (no further need to go when I’m being lied to), and then ask him if he’s smart. Once I narrowed the world down to the overlap between honesty and smartness, my mental Venn diagram had a third circle – does he want to look smart or actually make sense. Many high-priced helpers can piece together lucrative careers just to look smart. But if the idea does make sense, what I’m looking for is indifference to people who seem smart. Because the two are often on edge, being willing to look silly, at least for a while, may be some of the best ideas hidden in plain sight.

In today’s market, where are some methods that seem really, really stupid? What is everyone throwing away who wants to look smart? These can provide some attractive time frame arbitrage. They are easy losers in the days and weeks ahead. They could also emerge victorious in the months and years to come. If your boss might fire you for an embarrassing position: don’t read further. If your audience can comment on your short-term performance: close this tab. These can ruin your life if you use aggressive leverage on your margin account. However, these methods of maximizing my pain and humiliation in the short term can also have very positive expected value if you can hold on to it in the long term and take control of your destiny. This can get quite noisy, so you need strong hands. Can you start something today that you only end at a time and place of your choosing? Then keep reading.

Twitter

Twitter(NYSE: TWTR) volatile buyer, Elon Musk of Tesla (TSLA), basically told us he didn’t want to buy it again for $54.20. If the deal closes in the second quarter of next year, the current IRR exceeds 50%. The implied probability of the market is about one-half. I like to look at market implied probabilities to frame questions, but using them to answer questions is circular. Yes, the downside is as low as $20. Yes, the share price is around $30.but this is the chance. The market can’t tell you what to think. If the market is always right, then just buy the S&P 500 (SPY) and be done with it. For every idea I’ve come up with publicly, at least one commenter thinks that if the market price is right, I can’t possibly be right. Regulation. In fact, it’s a tautology. The $0.01 per page view I get for this reviewer is worth it, but a little more. Investing is often the practice of finding gaps between surface appearances and deeper substantive understanding.

In the case of Twitter, the gap is widening. Elon’s wild tweets are followed by millions, but few take the time to peruse his recently signed commitment to a definitive merger agreement. Unless circumstances change, he owes every Twitter shareholder $54.20 for each share we own. If he fails, he can explain to a Delaware judge that he is one of the few people who will read the contract carefully but may or may not keep up with the frantic tweets. How can I look really, really stupid?If Elon manages to walk away basically told us he would. How can I make money? three ways. First, the deal can be done on current terms with or without Delaware court intervention. From here, it’s a bonanza of results, even if the results are pushed back to next year. Second, Twitter could capitulate and re-cut expenses, possibly closer to $45-50 per share, in exchange for a stricter shutdown commitment from buyers. Disappointing, but expected to be a solid result. Third – and this is also for no bosses, audience or leverage – the deal could burst and the stock could drop to $20 as the arbitrage dumped their positions and you’d be left with the most important and mismanaged franchise One of social media. One would imagine that they could lay off half their staff, slash costs, and better monetize the site. If they manage to screw up the deal, management and the board will lose all credibility and shareholders may need to take over. But they would leave behind such a bad but good company. Fortunately, in the sense that it is easy to improve. In the long run, that could be at least twice the initial trading price after the deal was terminated.

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Yahoo!

Of all the states with oil spills, California may be the 50th best state for avoiding political drama. Unfortunately, this is the amplification energy (NYSE: AMPY) has recently had an oil spill. Shares doubled as it turned out that the leak was the anchor drag and not the pipeline company’s fault (and as commodity prices soared). But if they can get the pipeline back online this year, the stock price should double again. It’s actually a very good investment, but another investment that actually maximizes short-term pain and humiliation as politicians attack companies and try to delay regulatory approvals while commodity prices have time to cool. It can get noisy and unstable. This could be the bait for angry anonymous internet trolls to hunt me down (I’m safe when it comes to bosses or overleveraged, but not so much when it comes to audiences). But with or without the return of the beta pipeline, Amplify has provided stunning exposure to the energy commodity. They can unhedge, make enough money to pay off the debt in full, and monetize the asset over the next year. If they did, their shares would be worth at least $15 per share. This is not ESG. It is not green energy. They spilled oil in Huntington Beach, California. If it was a disaster, in hindsight it looks like an obvious disaster. Almost everyone (except me) will know, and they will remind me.

Franchise Group and Kohl’s

Franchise Group (FRG) is in talks to acquire Kohl’s (NYSE: KSS). I own both. Everyone else seems to have left Kohl’s. We’re in weak equity and credit markets, retail has been a dumpster fire this year, and unlike Twitter, there’s no final deal. Potential buyers can walk, all but one. The three-week exclusivity ends in a few days, after which the last buyer is likely to walk, causing the price target to plummet. Almost everyone knows this except me. But given all this, the market seems to be overreacting. They can close the deal at the originally envisioned $60 per share, they can take into account mid-market conditions and renegotiate around $50 (I support both, so there are complex incentives). Or Kohl’s shareholders could change the board and re-auction the company next year, which could be a more benign market environment. Anyway, if you have enough time and are willing to look silly for a while, this is a lot of fun for both buyers and sellers today. Oh, and the CEO of FRG is a deal genius who repeatedly buys stuff no one else understands, refinances them, takes out more cash than you put in, and then grabs their rebounds for free. This made him quite rich. But Cole was big enough to make him very rich. I bet on him a long time ago at a much lower price and I am still happy with the bet today. KSS is worth at least $55 per share to FRG, with or without it, FRG is worth at least $60 per share.

in conclusion

There is a tension between maximizing certainty and expectation. Want some certainty? Warren Buffett’s Berkshire Hathaway (BRK.A) (BRK.B) will complete its acquisition of Alleghany (Y), and Mr. Buffett won’t be posting any crazy tweets. But holders will get 5%, while Twitter holders can get more than 50%. Berkshire’s holding of Occidental Petroleum (OXY) is a smart way to get some energy exposure without embarrassment (I actually own and like their OXY.WS warrants), but not like Amplify There is any upside there. Staying away from retail altogether this year is one way to not irritate your boss, reader, or margin clerk. But if no one is paying attention to what you are doing with your money, money that you can afford to lose and won’t need any time soon, then the highly uncertain ideas above have very positive expectations.

TL;PhD

If you don’t have a boss, audience or influence: Buy TWTR, AMPY, FRG and KSS. If you do, if you read this on paper, burn it. If you are reading on the desktop, close the tab. If you’re using your phone, throw it into the dark waters near Huntington Beach. These are chaotic situations that almost certainly provide an opportunity for them to panic. If you have to sell when they crash, then don’t buy them.

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