“There’s mistakes of omission — things you didn’t do that you should’ve” – Tom Gayner.
Good afternoon — I was in Wellington y’day—Floriditas is still as excellent as I remember though the city seems to be quieter than I remember — have Luxon’s job cuts hit the civil servant majority? Anyway, let’s get cracking —
Dirty Docs Done Dirt Cheap
Before I rant about this I’ll tell you my preference list for luxury stocks in order of how much I like them – CDI, RMS, BC, CFR, KER. (That’s Christian Dior, Hermes, Brunello, Richemont and Kering). That’s actionable. Now I will tell you about the worst investment I ever made.
The worst investment I ever made
I know it is Chloe Swarbrick’s favourite shoe — and it is, famously, probably the worst investment I ever made (100 moments of hate for me!) — my thesis with that one was way off; it turns out if all the art girls are wearing them around High Street it doesn’t matter. Stock is down 32% … trading at 67 pence. Almost every statement from them was a sinker — sales expected to decline on a double-digit basis; more inventory storage needed in the US (15mn quid sink there..)…worst of all, they can’t increase prices to stay above inflation. CEO Kenny Wilson is gone (good) but the business needs a rethink…it has done appallingly as a listed co…might be time for it the co to be taken private and fixed. Still trading at 9x EV/EBIT…even if I were tempted to re-enter this diabolical stock there are cheaper things around.
Compare this to Birkenstocks — revenue increased 26% for the first quarter (the stock is still down 11% YTD). I’ve been burned on shoes before… if I ever buy a shoe company again please ring me up and take me to a twelve step programme. Please. Think of the mistake of omission I made by selecting Docs rather than something else — I took one path and missed another. D’oh!
Watches get smol
A while ago I wrote about how small watches are the new big watches, and how Cartier was set to be a beneficiary of this. Cartier is owned by Richemont, of course —one of those luxury stocks we love. Anyway, here’s a piece in the Robb Report on the hottest and smallest watch of the moment — Cartier’s Tank mini. It’s little (or as Prince once said — it’s little but it’s loud).
As the writer’s watch world contacts wrote:
“Thissss one,” one friend wrote. “I want,” chimed in another. More than a few asked the most important question: What was its MSRP? When I told a colleague the E.U. price was set at €6,500 (just over $6,900)—a lot to ask for a minuscule piece of gold, with a quartz movement, no less—he didn’t hesitate. “10,000% buying,” he typed back.
I have a theory that men’s fashion echoes women’s fashion a couple of years late. Think of Jacquemus’ tiny bags (good luck fitting a phone in there)…men’s fashion is now echoing that. The large watch is dead; long live the tiny watch.
Going down … watches that have lost value… end of the Moonswatch bubble?
Elsewhere in luxury…
LVMH finally reported a slow-down in sales — while revenue increase +2% YoY (hardly anything to get excited about), China and Asia slowed down — -6%. Bright spots — Tiffany’s, Japan, Sephora (a puzzle for you — skincare is booming, but Estée Lauder is suffering — it isn’t enough to have a nice brand anymore; even the uber-popular Drunk Elephant has active ingredients).
I’m not worried about this. We’ve been expecting a slowdown for a while. The upper-middle that buys LVMH’s mass-market products (i.e. lower-priced Vuitton bags, etc) has got to be hurting — if you’re leveraged up the wazzo on your mortgage(s) you’re not going to buying an LV bag. Again, not worried about that — LVMH’s emerging strategy is to target the 1% that spends up big. Preference is CDI (Christian Dior SE) — the Arnault’s holding company for their LVMH stake, which trades at a discount to LVMH stock proper (21x earnings vs 25x earnings).
NZX hubbub — “NZX in for a tongue lashing at AGM” — Businessdesk.
Yours truly (it’s me, hi, I’m the problem it’s me) quoted on the upcoming NZX ASM — link. I’ve said this before and I’ll say it again — before directors look at a pay increase I would like to see either the funds biz partially or fully floated/sold or a merger with the ASX. I don’t expect that last option will be very popular. As I keep writing you — the +38% director’s fee pool increase is egregious. I will be at the meeting tomorrow — I look forward to seeing fellow shareholders there — I hope the proposal will be voted down, given it is a waste of shareholder’s hard earned money.
Water water everywhere…
Following up on yesterday’s Thames Water story with these three charts cribbed from the FT…78bn in divvys paid out to owners … no wonder Thames Water and associates are in a rough spot. I know Seymour and co are gung-ho about regulation (whoever said this isn’t a political newsletter?) but this is the risk presented with privatising any assets here — that one-off payment looks well and nice until the taxpayer ends up bailing out the asset (this, by the way, is the problem with “free market” rubbish that gets expoused every so often…markets so free that the government comes in with a bailout. As the Tui billboards used to say “yeah, right”.)
Dead internet theory
Dead internet theory is the idea that most of the internet is just bots up-voting and commenting on bot-created content. Proponents of the theory usually put 2016 or 2017 where bots started descending onto the internet in droves. This feels “vibe right”, though that’s hardly empiric. Think about YouTube — it was still going off in 2015; there was long-form content being made, Vice was making interesting documentaries — etc. I don’t know what has happened vibe-wise in the internet since? I mean — TikTok. I am old.
Anyway, if you log onto Facebook, you will see dead internet theory in its latest iteration, where AI appears to be prompting other AI to generate images and prompts, and then other AI comments on these AI generated images. Something strange is happening. There is a a lot of Jesus. They are talking about it on TikTok!
I mean, a fun thing you might think is that even AI sees Jesus — he’s encoded in technology! A more plausible theory is that AI has scanned through Facebook, found a lot of boomers (and AI boomers), they tend to comment on images of Jesus, and the AI goes “OK, people like Jesus and they comment on it, therefore let’s make a lot of content like this!”
It gets weird: Beautiful cabin crew, Scarlett Johansson??
Or:
I mean — this is weird? If you are scrolling through the wasteland of Facebook now, you are more likely than not to come across something of this ilk. And I think — this is my theory — that this is closer to the “promise” of AI than anything else. An internet polluted by bots and bot-fed images. Bots on bots on bots, in other words. Who, uh, wants this? Who needs this? I am not saying that AI is terrible — it is a tool — but, lol, pretty funny to think of Nvidia processors in some data centre whirring furiously around (I know they don’t whirr!) to produce AI images for an audience of AI bots. Image below…courtesy of Kuppy…
