Spain Remains Different

The last few weeks have once again shown that Spain is different.

The at-times conservative party (Partido Popular, or PP) obtained its first outright majority in the regional parliament of Andalusia. The Socialist Party obtained its worst result ever in the region since its parliament was created in 1982, confirming its decline. The PP obtained the support of centre-right Ciudadanos’ former voters and thus successfully repositioned to the centre. Vox, the ascending and more conservative party, made small gains. The Left got their heads handed out to them proving once again that “you cannot fool all of the people all of the time.”

On that same day, France’s V Republic became ungovernable as the populist vote surged both on the left and the right and the former Gaullists seem intent on not going the way of Ciudadanos by joining Macron’s Government. Borgen is a wonderful TV series but coalition politics do not work well south or west of the Maginot Line.

Very few expect Prime Minister Pedro Sanchez to call a snap election, even as his coalition government seems to be faltering and, more importantly, as the people are speaking loud and clear. This recent debacle at the polls is just the latest in a now long series of regional elections where former socialist voters show their immense displeasure with his politics. It would appear that they dislike Sanchez’s subservience to not only the radical left of his party and communist-leaning Unidos Podemos, with whom he governs in spite of a campaign promise not do so, but also to sworn enemies of the state including secessionist and convicted terrorists.

Such is the nature of political governance in Spain. Socialist governments will hold onto power even when their mandate is questioned repeatedly in regional elections because a meek centre-right party will not call for a no-confidence vote. We should not be surprised if in his waning years Sanchez continues his unrelenting attacks on the constitutional framework that is still the law of the country.

Thus, one should not be surprised if the usual suspects take advantage of the turmoil in politics to gain unfair advantage in other pursuits. A couple of weeks ago, we discussed the blatant self-dealing attempt by the Berlusconi family controlled MediaForEurope NV (MFE) with their coercive tender offer for Mediaset España Comunicación S.A. (MSE), which they control.

MSE is one of the few remaining public companies in Spain not to have embraced the governance guidelines recommended both by the EU and the securities market regulator. Thus, just three out of eleven directors are independent. (Indra, a defence contractor that provides the electronic vote counting software in Spain, joined that elite group of malfeasants last week when a group of shareholders, including a Government-owned holding company, acted in concert to take control of its board without launching a hitherto mandatory tender offer to all shareholders).

On June 13, MSE filed its board’s report on the merits of MFE’s tender offer. As we had suggested it do in a previous post, MFE raised the cash portion of the tender offer to the minimum level of the sum of its Cash position and the market value of a 13% stake in a German media company. Judiciously, only the independent directors had reviewed MFE’s revised tender offer when on June 6th they gave the thumbs up. This raises several questions on how these three people reached that conclusion.

The fairness opinions from Deutsche Bank and Citi are from June 7 and June 9 respectively. MFE was not required to present a fair value for the target, as the tender offer is voluntary. Thus, we wonder how our three independent directors agreed on the valuation not just of MSE but more importantly on the valuation of the MFE non-voting shares, which constitute nearly 50% of the consideration of the tender offer. This is quite a mystery as none of them has either a financial, legal, or accounting backgrounds.

They may well be independent directors, although two of them do not seem to have any other source of income. But the real question is whether they are qualified to make such recommendations. Competence has replaced independence as an important requisite for serving on UK public companies’ boards since the financial crisis highlighted the shortcomings of well-meaning people without the right background to exercise judgement on business or financial issues. UK boards have some of the best standards of governance in the world, if not the best.

Also interestingly, one of the banks extending a favourable fairness opinion did not deem it necessary to value MFE, even when MFE non-voting shares are an important part of the consideration of this tender offer. They also remind us that this offer is an opportunity to gain access to our cash, thus implying that we will not see a cent of it when and if MFE and MSE merge if the tender offer fails. The threat of an unrequited yet forceful merger should have sent the alarms going at the Spanish market regulator, for if that merger goes through what is to prevent Fininvest Spa, the Berlusconi family holding company, from proposing a second merger down the road with MFE in similarly disadvantageous terms. This is self-dealing at its best. In some jurisdictions, this behaviour is still a felony.

The two banks that produced fairness opinions do not find it unusual that we do not get to share in the alleged synergies. Nor do they find unusual that the controlling shareholder states they may reach these synergy targets partially even if they do not reach their 85% target. Since when are synergies a function of percentage ownership? Why have they waited three decades to obtain these alleged synergies? What kind of duty to MSE and its minority shareholders has the controlling shareholder exercised over the years? These questions may need to be addressed in a court of law.

Just as minority political positions should be represented in Government in a well-functioning democracy, minority shareholder rights are of paramount importance to the well-functioning of capital markets. We have been concerned for years about laws such as the Florange Law that enable, even incentivise, control with declining percentages of ownership, as tenure as a shareholder results in automatic super-voting rights.

Just as competence and experience for board members are rightly prized in the UK, the search for “new kinds of expertise and diversity in the board room” in the EU may not lead to optimal outcomes. We find alarming that 69% of directors appointed to CAC40 boards in 2021 had no listed board experience. The percentage is 59% for Spain and 55% for Italy. We also find most alarming that the average non-executive director compensation for IBEX 35 companies is €122,455, which is higher than that of CAC40 or FTSE-MIB directors at €85,000 and nearly that of FTSE directors at €123,177. We are concerned that that level of compensation ensures that many allegedly independent directors become quite dependent on that sinecure, especially when you take into account that such generous director’s fees may be the sole source of income for a large number of them.

We do not expect the tender offer to succeed and therefore there will be a tense period of six months before MFE comes back with a merger proposal. It behoves the market regulator to inform all parties in this transaction of what are the best practices in such a conflicted situation. It also behoves independent directors to initiate a dialogue with minority shareholders to understand their concerns. In the interim, we will keep the regulator, ISS, and Glass Lewis appraised of our concerns.

For full disclosure, one of the funds that we advise has an investment of less than 1% of the share capital of Mediaset Espana Comunicación S.A.

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Brave New Investment World

The Financial Consequences of Higher Rates

Measuring rates of change is the key to the analysis of many problems. The scale and pace of change of discount rates for equities that we have observed in just a few weeks is extraordinary. Not so much because of the amplitude of the spike in Treasury yields or that of the change in the equity risk premium, rather because the sensitivity of securities prices to changes in rates is so much higher when the starting point is so low. With the US Treasury yield curve so close to the zero lower bound and the euro area yield curve piercing the zero lower bound for some maturities just a few months ago, equity markets were very vulnerable. The most fragile categories started imploding in the second half of 2021. SPACs, unprofitable tech, biotech, and work-from-home stocks were the canaries in the coalmine.

For many people who are nominally financial investors this has been a rough and tumble introduction to the concept of convexity. It turns out many portfolios were not well prepared for this change of regime. This development is somewhat surprising since Central Banks telegraphed their change of stance on monetary policy well in advance. In spite of all the recent fireworks, the signs of trouble were there for all to see.

Modern financial theory and the Capital Asset Pricing Model (CAPM) in particular, suggest that the cost of equity of a firm is the sum of a risk-free rate of return and the product of the equity risk premium and the Beta of the firm’s stock (of which more later). During the Pandemic, the risk-free rate, as measured by the yield on the 10-year US Treasury, declined to a record-low when it hit 0.6% vs 3.6% today. Conversely, the equity risk premium has remained stable at about 5%, according to data published by Professor Aswath Damodaran of NYU Stern. In such a troubled sea as we are in today, stocks in the value category have performed far better than those in the growth category. This brings much relief to the long-suffering value camp, which had been left out of the party for most of the 13-year long bull market.

What does this all mean, if anything at all? Since an investment in a company’s stock is riskier than an investment in a risk-free security, by definition, investors should get a premium return for taking on such a risk. How big should that premium be is the focus of research in financial economics and on Wall Street. The riskiness of the investment has two components, often referred to as systematic and non-systematic risks. One of the few interesting ideas in finance is that the latter risk, which is specific to that particular company, can be easily mitigated at a nominal cost through diversification. Conversely, the market risk cannot be diversified; it can only be hedged at a cost. Beta measures a security’s sensitivity to market risk only, the higher the Beta of a company the higher should your expected return be to take on that risk.

Who’s got Beta?

Which stocks have high Betas? Theoretically and empirically, stocks that trade at low P/BV multiples, the so-called value stocks, had higher Betas from 1926 to 1963 (‘The Value Premium and the CAPM” Fama and French – Journal of Finance 2007). This makes sense intuitively as ‘value’ companies typically have higher operating and financial leverage than growth companies. This is also what the Capital Asset Pricing Model suggests should be the case. Yet, that same study concludes that from 1963 to 2004, value stocks have lower betas than growth stocks do. ‘For the entire 1926-2004 period, if portfolios are sorted on the basis of company size and P/BV, returns and betas are not associated as indicated by the CAPM. The authors conclude that it is not beta but company size and P/BV, or the risks related to them, that are compensated in the form of higher returns’. Confused? You should be. On the one hand, financial economics espouses a very elegant theory, the CAPM. On the other hand, if Messrs. French and Fama are right, the market has its own mind on how to price risk, which is divorced from that very neat theory.

A word of caution, Messrs. Fama and French are also the authors of a seminal paper published in 1993 that reached similar conclusions. Their research at the time impelled a wave of factor investing. Many managers since specialize in Value or Growth or in managing portfolios of companies of a certain size.

Unfortunately, our ability to analyse historical data is constrained by the available length of the data series for commercial indices. The Russell 2000 value index series starts in 1979. Since then, the index has an annual equivalent total return of 11.04%, which is higher than the Russell 1000 value index at 9.66%. Thus, even within the value category, size matters. (This is also a great example of why low fees matter. The apparently innocuous 148 bps difference in annual returns translates into making 54x your money on the Russell 1000 or 93.8x on the Russell 2000).

The Russell Growth 1000 CAGR for that period is 10.65% (even with the latest significant correction of 21% vs 8% for the value indices). The shocker comes when we look at the Russell 2000 Growth Index returns. They are much lower at 8.82% (34x). In the case of Growth stocks, size seems to be a negative factor for performance. We further test that hypothesis by looking at the return of the Nasdaq 100 index for that period and record that in spite of the recent correction, it is the big winner at 13.71% CAGR or 119x cumulatively. Clearly, technology has done very well historically relative to other factors. In addition, size mattered, but exactly in the opposite direction suggested by Fama and French’s paper, which in any case needs to be updated for the 2004-2022 period.

While we wait for their update, we will do our own naïve hypothesis testing using the Russell Indices. Since Dec 2004, the Russell 1000 Growth index has massively outperformed the Russell 2000 Growth and the Russell 1000 Value. The laggard, by a significant margin, has been the Russell 2000 Value. Interestingly the performance of the Russell 1000 Value and the Russell 2000 Growth indices are nearly identical, c. 7.78% CAGR and 2.67x cumulatively. The Russell 1000 growth for that period returned 11.01% CAGR and 5.17x cumulatively. By these measures, bigger is better and growth is a better strategy than value.

A common explanation for this outcome is that markets for new technologies lead to winner-takes-all outcomes and therefore the concentration of revenues and profits in a small number of firms follows a power distribution. Think of your choices when you got your first mobile handset vs. today. We could also infer from these results, that, as investors try to benefit from the factors identified by Fama and French, their asset allocation decisions eliminate any arbitrage gains.

Investment Styles

In thirty-three years in the financial industry, we have seen many famous value and growth investors at work. Many value investors are not afraid of investing in terrible companies facing nearly insurmountable problems as long as they believe the risk reward is good. This past decade of free money has been very trying for that category of investments. In an environment of nearly free capital, most securities trading at distressed valuations are very likely to have to go through restructuring, bankruptcy, or liquidation. Many did. Other value strategies involve investing in cyclical industries such as banking, construction materials, or mining. These stocks offer the thrills of great rollercoaster rides, as the amplitude of price moves can be very large. These investments also require good timing getting in and out. Thus for US taxable investors this may be an issue as it gives rise to tax liabilities that detract from overall returns. Granted there are $12.2 trillion in assets in IRAs and $6.7 trillion in 401k plans, but for well-advised investors these should be the vehicles for their income funds. The tax code may explain the preference for growth (or quality) stocks in the US for long periods and perhaps the preference for value managers in Europe as in most European countries investment funds are efficient tax structures for deferring realized capital gains. The best companies in cyclical industries make good returns on invested capital over the cycle. Others, such as most banks in developed economies do not. They fall squarely in the camp of speculation.

Growth investors come in at least two flavours, those who only invest in Technology (which is quite a broad definition of activities) and the rest. For very long periods of time the market assigns probabilities to future growth that prove to be too low in retrospect. This was the case from the early 1980s until the late 1990s. It was also the case from 2008 until sometime in the late 2010s. Those long bull markets created fabulous wealth for both these companies’ founders and their investors. According to the Forbes 400 list, seven of the top ten wealthiest people in the world made their fortunes in Technology. The question before us is whether this is a fad or a trend. Some would expect a reversion to the mean process such as the one that afflicted the Japanese real estate tycoons that topped the charts in the 1980s. We note, though, that Messrs Gates and Ellison have been on that list for decades and that neither Messrs. Bezos, Brim, nor Page are new kids on the block.

At the peril of sounding cute, we would set forth that value investors believe they know the right price for everything today but ignore the value of most things tomorrow, while growth investors believe they know the value of everything tomorrow but ignore most of today’s prices.

What to do now, if anything?

The policy response to the pandemic with the combination of fiscal and monetary easing produced bubbles in many asset classes, especially fixed income securities but also in the broad technology sector. Those who held onto fixed income usually believed that Central Bankers would not have the resolve to tighten, at least partly because overburdened Treasuries could not afford higher rates. The reasoning that the Pandemic had brought forward the adoption of new technologies also supported never-seen valuations for some new companies. The former were too cynical or too tired of fighting the Fed; the latter suffered from “investing myopia” or naiveté.

We shall see how far the correction still has to go before investors return to some of these technology stocks, which in our opinion are likely to be safer in the long-term than most companies in the value category. This is true especially as we face a slowing economy as the fiscal stimuli turn into fiscal drags in a high inflation environment with higher rates and credit spreads. In the background, we will continue to see disruptions in supply chains for as long as China refuses to use effective vaccines from Western pharmaceutical companies.

There are some long-term trends such as decarbonisation and electrification, Artificial Intelligence (AI) or the Internet of Things (IoT) that are more likely to underpin growth and profitability for some companies than other trends that have proven to be short-lived. In this new environment, we would avoid companies with high operating and financial leverage such as banks or infrastructure companies. We are familiar with the thesis that higher rates, especially in the euro zone, will result in higher profitability for banks, but we believe that any margin improvement will soon be offset by a higher cost of risk. Bad loans are bound to rise from their current very low frequency.

The euro zone is very fragile. Energy supplies are in danger. Financially, the end of QE may result in further fragmentation of the sovereign debt and banking markets. The highly levered periphery countries may soon be back in the headlines. The widening of sovereign spreads is compounding the massacre in the sovereign bond markets of the euro area. Those who held the Republic of Italy 0.95% bond of 2032 are looking at a hole from which they will not recover anytime soon as the bonds are trading at a price of 75.25. This time around, in addition to the usual suspects – Italy, Portugal, Spain or Greece – we would add France. As of Q3 2021, Total Credit to the non-financial sector in France reached 361.1% of GDP, which is the highest for large developed economies and 80 pp higher than the Euro area’s, at 282.1%, and nearly 50% higher than Germany’s, at 205% of GDP. Should the Left win in the French legislative election next weekend, ‘cohabitation’ may take on an entire new meaning.

If only we had a euro for every time when we warned friends or business relations about the dangers lurking in the fixed income market! You would have thought that fixed income investors would know enough about bond math not to buy zero coupon bonds at a premium to par at issue, yet they did. We fear that a significant portion of Euro area insurance companies’ capital buffer is gone. Whether investors focus on capital or the higher reinvestment income at current yields remains to be seen. In any case, dividend expectations should be reassessed. Banks had generally reduced the duration of their bond portfolios in a timely fashion, thus most banks should not need to adjust their equity for the losses in a meaningful way.

Obviously and very sadly, the war in Ukraine and China’s warmongering over Taiwan present another layer of complexity that is hard to price. There are two clearly defined political camps in academia analysing the war in Ukraine. On the realist camp, there are those like the late George Kennan or University of Chicago professor John Mearsheimer, who attributes the invasion to constant provocation from NATO. Conversely, the idealist camp, perhaps lead by the Stalin specialist professor Stephen Kotkin, currently at Stanford University, denounce an illegal war under the treaties to which Russia is a signatory.

Within a “united” EU, there are also marked differences on how to approach the Ukrainian conflict. According to political scientist Ivan Krastev of the Centre of Liberal Strategies in Sofia, the division is a struggle between the ‘“justice party”, strongest in the east (of the EU), that wants Russian forces pushed back and punished, and the “peace party”, strongest in the west (of the EU), that wants the war to end quickly, minimizing the short-term human and economic damage.” Since wars are usually won with resources paid for by money, one would think that the countries holding the purse in the west might have their way, but this may come at the price of a Visegrad-exit down the line.

Perhaps the carnage we see on a daily basis prevents most of us from exploring other plausible causes. A very unusual aspect of this conflict is the voluntary dependency on Russian hydrocarbons developed by the EU over the years. The reverse is also true in the short run. Thus, perhaps the Russian leader gives more credence to the EU’s grand plan to reach zero emissions by 2050 than European politicians do. The massive Green Hydrogen EU plan might have been the real provocation. Certainly, this ambitious target from the EU Commission is a major change in energy policy, especially for Germany, which has been importing gas from the USSR (later Russia) since 1973. Conspiracy theorists in Europe believe that USSR financed the Green movement because the Soviet leadership saw nuclear power plants as a threat to energy exports. Observe that fracking has never taken off in the EU either, because of pressure from that same ubiquitous Green movement. The early retirement of nuclear and coal-fired power plants have left the EU’s electricity market at the mercy of Russian gas in the short term.

Commodities, especially oil and gas, were the smart money contrarian bet going into 2022. The investment thesis was very solid. There had been massive underinvestment to replace reserves for years and ESG obsessed investors would continue to starve public companies of capital for exploration and production. Traded crude oil contract prices actually sank into negative territory in the early days of the pandemic, spurring companies and countries to shut in production. Other bull cases such as copper and nickel benefit from electrification trends and there are supply constraints for those commodities as well.

The war in Ukraine has changed those scenarios in the medium term. The Biden administration is opening more Federal land for oil and gas exploration. Shareholder proxies asking financial institutions not to lend to the hydrocarbon industry have been voted down at some of the largest banks in the US. In fact, the recent surge in Greenwashing regulatory investigations and prosecutions, while well deserved, is not a coincidence either. Western societies tend not to self-destruct; when facts change people are free to change their minds. It will be much more difficult going forward for Western democracies to pursue energy policies that depend on the goodwill of illiberal regimes. The EU is already considering the recommissioning of coal-fired plants, as we expected.

A global recession, which this time will include China and its collapsing home builders industry, will not be demanding the same volumes of commodities for long, especially not at current prices. Commodity bulls point out that this time around, “the solution to higher commodities” would not be “higher commodity prices” because of supply constraints. They will continue to be right for some time, but conversely, the terminal value of many more companies is more likely to be closer to zero than before this supply shock, as consumers and markets adapt to higher prices as they have in the past. We would also expect solutions that are more creative. For instance, the cost of decarbonisation is likely to be much higher in most EU countries than in most Emerging Markets. Add this to the fact that the EU only accounts for 8% of global CO2 emissions and perhaps it makes more sense for the EU to provide decarbonisation grants as development aid to emerging economies to meet some of its domestic CO2 emissions targets.

Where is the silver lining, if any?

There is an old saying on Wall Street: ‘The stock market has predicted nine of the past five recessions”. Certainly, the Fed seems to be behind the curve and rates are going up just as consumer sentiment reaches an all-time low. If you take your cue from the yield curve’s flatness, you might conclude that investors are indeed concerned about growth. Many people are making comparisons to the 1970s, as we did so ourselves going into 2021 after the once in lifetime expansion of Central Banks’ balance sheets and supply shocks, but before the current energy price shock. Yet, there are numerous differences with the 1970s.

For starters, unemployment is very low across most developed economies and demographic trends coupled with curbs on immigration suggest it will remain below historical levels for as long as these restrictions remain in place. We are willingly Japanizing our labour markets. This is largely because the misguided austerity policies that followed the GFC gave rise to an unstoppable surge of successful populist politicians and demagogue economists who support their hare brained neo-mercantilism. We need to reassess both the frictional unemployment rate and the non-inflationary rate of unemployment (NAIRU). While a tight labour market is a problem for firms’ profit margins in the long run, in the short run, the misery index, which measures the sum of the unemployment and inflation rates, is nowhere near its 1970s or 1980s highs. Indeed, at 12.2 in the U.S., it is at the same level it was in 2011.

While inflation is the proximate monetary policy concern, high debt in most large economies should be a financial stability concern except that the sole positive characteristic of inflation is that it benefits fixed rate borrowers. For the current generation of investors a recession usually means a drop in nominal GDP, but in this new higher inflation environment, nominal GDP will continue to grow perhaps even faster than it did in many expansion years. This is very different from the deflationary contraction in GDP of the GFC, the euro area Banking and Sovereign crisis or the Pandemic. In all three of those episodes nominal GDP declined in most economies. A recession in this higher inflation environment will be different from the previous three “balance sheet” recessions, which are characterized by higher savings rates. On the contrary, a higher inflation environment pushes households to anticipate some purchases in order to avoid future price increases.

US Nominal GDP growth y oy 1973 – present

Levered companies, especially those facing short-term maturities or exposed to floating rate debt, are going to see lower earnings as interest rates rise, ceteris paribus. Interestingly, many technology companies have net cash positions, which in some cases are large relative to their equity value. We do not expect sophisticated investors to pay a multiple on the interest income as they did in 2000, but to have liquidity is not going to be such a value destroying strategy in the near future, as it has been for the past few years of financial repression and helicopter money. Some highly levered companies may do well as they may be able to pass inflation to prices more than offsetting higher interest expense. While most of the focus is on the Consumer Price Index, the Producer Price Index for finished goods is running at 15.7%, we will soon find out which industrial companies can, and which cannot, pass on these cost increases on to customers. Conversely, labour is the largest operating expense for many technology companies. Perversely, the sudden freeze in the private and public capital markets may become a real advantage to the more staid tech companies as talented workers may seek job security over an increasingly compromised future for many unprofitable start-ups.

This new scenario will also test the all-weather resiliency of the buy-out fund industry. If a recession materializes, it will be the first slowdown since 1994 where rates are going up and not down. Other highly-levered companies such as infrastructure operators, real estate funds, or credit portfolios at banks or at direct loan funds should also suffer from the triple whammy of higher funding costs, a slowdown in activity, and higher unemployment. When all is said and done, some investors will have a hard time justifying their asset allocation decisions of the past few years. While trying to protect their portfolios from exposure to a bear market in rates, they might have invested inadvertently in many asset classes that had equivalently poor convexity characteristics. Those who know us may remember our fair warnings.

Yesterday the S&P500 entered bear market territory from its January 3 highs. The NASDAQ had already entered bear market territory on March 14 from its November 11 all-time high; it has since given up an additional 14%. As is normally the case, most reasonable people get out of the way of a falling knife. In addition, as is always the case portfolio leverage is not recommended for a correction such as this, so even those investors with balance sheet room will delay adding gross exposure. Bear markets in developed markets are not infrequent. There have been ten, including the current one, in the US since the delinking of the USD from gold in 1971, of which six in since we got our first jobs in finance. We have seen a few more thanks to the thrills provided by investing in emerging markets.

What we have learned from that experience is that we face changes many of which will be painful. Very few people in the financial industry do well in bear markets. This is especially true of two types of innocent bystanders: funds that do well are often rewarded for their good performance by becoming ATMs, as large institutional investors will gain access to liquidity wherever they can and financial intermediaries, which will suffer from lower volumes in the capital and secondary markets. The rest of the world will go on about their business more or less afflicted by our woes.

The only good news here is that there are many opportunities when there is a large sell-off. More often than not, the opportunity lies in the eye of the hurricane as people throw out the baby with the bathwater as they shrink their portfolios quickly. This is the reason why we keep asking ourselves why more value investors are not looking at profitable technology companies. For example, Alphabet trades at 10.7x EV/EBITDA with a growing consensus EBITDA. The stock trades at a 5% free cash flow yield. As a shareholder, besides the Google web-based search business, you also get YouTube, Android, a cloud business, and Waze, among other businesses in the package. Alphabet has $105 billion of net cash. Alternatively, you could invest in The New York Times Company, a media company that saw peak revenues in 2000, trades at 14.2x EV/EBITDA, has $475 million in the kitty to fund new ventures such Wordle, its most recent acquisition. The company also trades at a 5% Free Cash Flow Yield. You may argue that the consensus EBITDA for Alphabet is too high, but in such a scenario would you not agree that the New York Times Co.’s consensus EBITDA might also be too high. In any case, this is what makes a market.

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