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El-Erian thinks today's "disinflation" trend will end with 4% inflation persisting, not continue down to the 2% that persisted for 30 years

Research

View above about Model Issue: 10-year USD inflation

After raging to multiple four-decade highs in 2022, inflation has fallen steadily over the past six months. But now, an increasing number of economists and business leaders are worried that the trend won’t last. “I think inflation is going to get sticky in midyear at around 4%,” Mohamed El-Erian, the president of Queens’ College at the University of Cambridge, told Bloomberg on Friday.
fortune.com

Top economist Mohamed El-Erian sees inflation getting 'sticky' at 4%—and a growing chorus sees the dawn of a new world in investing

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Parnasuss CIO Todd Ahlsten thinks 10-year Treasury yields will end 2023 between 2% and 3%

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View above about Model Issue: 10-year Treasury nominal yield

I worry about overextrapolating trends. That’s a theme I thought about coming into this meeting. In 2021, we had an epic peaking in conditions, such as zero to negative interest rates and ample liquidity, that made things perfect for the overextrapolation of secular growth. Now we may be over-extrapolating inflation dynamics and forgetting about a lot of long-term trends that are deflationary. Scott made some important points about demographics. Negative demographic trends, high debt, wealth inequality, and the productivity of technology haven’t gone away. They have merely taken a back seat because of all the stimulus jammed into the economy during the Covid pandemic in 2020.

Today, liquidity is being reduced at the same time that the Fed has been raising rates at the most rapid rate in generations, so we are going to have an economic cycle. Like Scott, we see inflation coming down, although it will be a nonlinear decline. At the end of the year, we could see the 10-year Treasury yield below 3%, maybe as low as 2%.
barrons.com

The Age of Free Money Is Over. But There Are Opportunities, Roundtable Pros Say.

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Franklin Templeton bonds head Desai expects the Fed will eventually cut rates from 5-5.5% to ~3%, not back to < 1% like in the last 10 years

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View above about Model Issue: 10-year Treasury nominal yield

Now central banks are looking at a decade of normalization. Many people expect that once we start to see signs of increased unemployment, the Fed will cut rates dramatically and take us back to quantitative easing. I don’t expect that to happen. The normal or neutral rate of interest is probably higher than the Fed or any of us anticipate. The new normal will be like the old, old normal: When the economy slows, the Fed can probably cut rates from 5%-5.5% to a little less than 3%, but not much below that.
barrons.com

The Age of Free Money Is Over. But There Are Opportunities, Roundtable Pros Say.

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Franklin Templeton bond chief Sonali Desai believes the market is wrong to expect the Fed to reverse from tightening to easing in mid-2023

Research

View above about Model Issue: Length in quarters for next tightening phase in the US

...Third, financial conditions lead me to expect that the Fed will raise interest rates to 5% to 5.5%, and maintain them there. Market expectations that the Fed will cut rates by close to 50 basis points [100ths of a percentage point] in the second half of this year are misplaced.
barrons.com

The Age of Free Money Is Over. But There Are Opportunities, Roundtable Pros Say.

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BIllionaire Bill Ackman believes the Fed will change its inflation target from 2% to 3% plus or minus

Research

View above about Model Issue: 10-year USD inflation

The @federalreserve 2% inflation target is no longer credible. De-globalization, the transition to alternative energy, the need to pay workers more, lower-risk, shorter supply chains are all inflationary. The Fed cannot change its target now, but will likely do so in the future.

When asked, Powell recommitted to a 2% target, but admitted that examining a higher rate was a possible ‘longer-term project.’ Businesses need price stability, but can thrive in a world with 3% stable inflation.

I don’t think the @federalreserve can get inflation back to 2% without a deep, job-destroying recession. Even if it gets back to 2%, it won’t remain stable there for the long term. Accepting 3%+/- inflation is a better strategy for a strong economy and job growth over the LT.
twitter.com

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Actually, I now think HIMS' CAC / new sub could be ~$200

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View above about Model Issue: Current CAC / new sub in Core Male

Management hasn't commented specifically on churn or CAC since 1Q21, so I'm tying together past statements to square to $200. Management has said in previous quarters churn in the subs base is msd % and CAC payback is sub-6 months. Back of the envelope, assume 5 month payback x $50 rev/sub/month x 75-80% gross margin gets you $200 CAC. The latest 10Q shows total CAC spend of $67M, so assuming $200 CAC implies 7% monthly churn - roughly in line with past "msd %" churn comments.
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I continue to think HIMS' CAC / new sub is $165 given no new material information from management

Research

View above about Model Issue: Current CAC / new sub in Core Male

Q3 2022 is the second quarter in a row management has not commented on the sequential trend in CAC and churn
cl.ly

Image 2022-11-14 at 2.14.32 PM

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HIMS' ARPU / month ticked up to $53 in Q3 2022

Research

View above about Model Issue: Current monthly revenue / sub in Core Male

cl.ly

Image 2022-11-14 at 2.14.32 PM

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HIMS days payable was ~17 days in Q2 2022

Research

View above about Model Issue: HIMS Payables days of expenses

25M accounts payable divided by 26M cogs and 134M total opex minus 1M capex times 90 days
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HIMS days payable was ~17 days in Q3 2022

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View above about Model Issue: HIMS Payables days of expenses

30M accounts payable divided by 30M cogs and 134M total opex minus 1M capex times 90 days
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HIMS doesn't have accounts receivables

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View above about Model Issue: HIMS Receivables days of sales

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Q3 2022 Inventory days of COGS was ~60 days

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View above about Model Issue: HIMS Inventory days of COGS

Average inventory of $21M divided by COGS of $30.4M times 90 days is ~60 days of inventory
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These are key judgments driving scenarios for the PEI management company's equity value

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View above about Research Category: Dashboard for PEI

  • Add Alias
  • Delete Alias
Add
Range settings
End Amount Settings
Advanced View

Format Issue

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Larry Summers argues that the FX weakness pushing US dollar inflation down is more transitory than the influences pushing it up

Research

View above about Model Issue: 10-year USD inflation

This excellent figure from Torsten Slok should give pause to anyone who thinks that inflation is driven by particular factors that will soon reverse themselves. The most important transitory factor affecting today's PCE figure is the NEGATIVE effect of the sharply rising dollar
twitter.com

Twitter post

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