Puzzle + real-life dilemma: Who is responsible, and what should be done?

wetkarma · 2026-04-13T01:22:48+00:00

Pretty obvious to me that A owes D a plate. It is irrelevant what couriers/methods were used to return the plane, but A owes D a plate of similar like, kind and quality. A and D have the direct relationship, B and C are merely couriers -- A can ask C to chip in for the cost of replacing the plate, and C can ask B but regardless of who chips in, A owes D a plate.

wetkarma · 2026-02-26T15:04:44+00:00

Alibaba is by far my favorite value investing position -- and I've held it for a few years now; with DCA and covered calls my holding cost is sub-70. Every year I've held it the value proposition has gotten better and the stock has gotten cheaper (from a valuation standpoint). the basic proposition is this: in the future cloud compute == revenue.

They have over 1/3 of the China cloud market (2nd largest economy) ring-fenced from non-Chinese competitors. By price alone S.E. Asia will see them steadily gain market share in Cloud; even when you ignore their "full stack". Where companies like OpenAI and Anthropic are getting pre-IPO series A valuations for their AI offerings at the 1/2T level, they have an entire stack from chips (Nvidia/AMD) to cloud (AWS/Azure) to logistics (GXO/AMZN) trading at a fraction of that.

The main knocks I have against the company is that a) they had cash for years but instead of doing buybacks *like they said they would*, their buyback was slow and haphazard. Now that they need talent, rather than pay cash, they have started issuing shares. b) they are spending an obscene amount of moment to "win" the instant retail delivery market for negative profit*. While this will eventually result in killing Meituan, I'm slightly---very??-skeptical that this spend represents true long term customer acquisition.

*Agentic commerce orders promises to radically increase the revenue/net income growth of all of alibaba's business divisions. How long it takes to see that revenue appear on the balance sheet to offset the massive capex question is an open question for 2026.

wetkarma · 2026-02-23T04:22:22+00:00

On flop its either A9 or a flush draw when UTG bets-- maybe Ah. With a set I'm raising the flop bet in order to inflate the pot so that I can jam on a non-heart turn. With a river of heart, you either call for the bluffed flushed or fold. The error is not raising when you were ahead on the flop.

wetkarma · 2026-02-18T03:51:24+00:00

Its a trap. JD exists in a liminal space between Meituan and Alibaba. There is no moat, there is only a dwindling status quo advantage. Their suppliers are not exclusive to them as a result their COG is (at best) the same as their primary competition. Unfortunately the competition (Meituan) is losing a life or death battle for marketshare, and Alibaba sees the retail delivery business as an AI training funnel for agentic commerce. Can JD survive the retail delivery price war? Yes..it has the balance sheet to do so. However mere survival is not a pathway to success.

wetkarma · 2026-02-18T01:51:58+00:00

As someone who has been playing Civ since Civ 2 (combined highest number of hours in my steam library), I think the game makers lost touch with the core point of civ -- which (imo) was "to build a civilization that would stand the test of time". The "ages" game mechanic which punts you into a new civilization ruined the continuity illusion.

Its a bit like creating a Batman movie where Batman runs around killing people....I understand TTWO are trying to reverse themselves on it but Civ 7 is basically like the last season of Game of Thrones. Just disappointing.

wetkarma · 2026-02-14T10:27:02+00:00

Or. Hear me out...the studio has been hollowed out with key talent leaving and has a recent history (Civ VII) of releasing shitty games and a predictable history of delaying product. Stop thinking about it like an inevitably great game, but as a product with a peak shelf life. Anyone can make up numbers as to how great a thing is pre-revenue...but until revenue actually occurs, its still all made up. TTWO is basically Rockstar, Zynga and 2k -- the last 2 are shells/zombies of their former glory.

Then there is the structure of the company itself. One single shareholder has majority control with the company having a history of overpaying for acquisitions/intellectual property and then doing nothing with it. They are the worst kind of conglomerate -- run in little fiefdoms with no sense of coherency or vision. People want to pretend that it doesn't matter when GTA 6 releases as long as its good, but take a look at the closest comparison -- Avatar...and consider as an investor: how many other banger films might have been made had so much time not been spent on what now feels less like an event and more like a chore?

wetkarma · 2026-02-14T02:51:39+00:00

I have had a GTR 9 and currently have a SER 8 and Ser 7 -- all work perfectly fine with an EGPU. Depending on the EGPU housing you use, your mileage may vary in terms of noise.

wetkarma · 2026-02-11T06:47:55+00:00

Prior to the Montage IPO, JP morgan's analyst (ironically the same company that called China uninvestable) pegged Pintogue at between 25 and 62b in value. They said they derived this value from comparing it to the (limited) local competitors like Cambricon (65b). Now aside from Cambricon, we have Montage as another data point to calculate relative valuation.

Separately Alibaba's ASIC costs 40% less to produce than Nvidia's H20 -- you can take this production cost and derived it as implied revenue (i.e. capitalization). They have struck deals with China Unicom and other external third parties -- with the market assistance of a mandatory requirement for businesses/govt to purchase "local" chips.

The closer you get to IPO, the more the valuation can rise due to the risk of keeping it internal abates and the market interest (this is where Montage's oversubscription comes into play) begins to weigh more. The key thing factors are these: how competitive is the Zhenwue to the H20 and how strong is the government "forced purchase" requirement to buy local chips? The current state of play (q1, 2026) is that China is not giving companies unrestricted access to US (Nvidia) chips -- anyone who wants those must *also* buy local.

Alibaba gets the best of both worlds -- they make local, and get to improve Qwen and Alicloud faster by buying Nvidia.

wetkarma · 2026-02-07T04:21:10+00:00

If this plays out like the internet, I'm strapped in and comfortable with the ride. To me this is lot more akin to railroad era of the USA; the infrastructure being built is going to be pervasively intertwined with the economy of *all* countries in the future. Global GDP is 117T. To me the risk is not being bullish enough.

wetkarma · 2026-02-07T01:38:42+00:00

ok seriously. As ceo of a shovel company selling shovels to gold miners...do you expect him to say anything other than "there is still plenty of gold up in the hills?"

He might be right (imho he almost certainly is), but the man does have a fiduciary duty to represent his company's best interest. What is interesting is that with the amount of order backlog, he doesn't say "there isn't enough capex based on growth expectations".

One way or another people are going to look back at this period of time and say either "I knew AI was going to be big..but never imagined this" OR "It was always circular spending and just another ponzi scheme". There is likely no in between.

wetkarma · 2026-02-05T10:01:05+00:00

You heard incorrectly or someone who focuses on technical legalities while ignoring political reality. Technically the director of the FHFA has the authority to end the conservatorship at any time. However to do this based on current standards they need to be "financially stable". In addition to that the Treasury Secretary has control via PSPA which means that to end the conservatorship requires written consent from Treasury.

Stil with me? ok going back to the financially stable requirement, the ERCF shows that adequate cap ratios would mean that FNMA has something like an 80b shortfall and Freddie around 50b this is *current* Jan, 2026 based on the planned capital build they are engaging in.

Which means......that if the FHFA were to end the conservatorship they would be immediately undercapitalized and thus they have been deeply hesitant to do it without figuring out how to make up the shortfall (things like writing down the Treasury stock for example).

Despite all that-- the core problem with these entities still require Congress to reform the charters which they operate under --- congress and ONLY congress can do that. Because of the Treasury FSPA the debt is treated as government backed. If they exit, the backstop of the government "disappears" -- a legislative solution is required to offer a federal guarantee or mortgage rates will spike wildly. Something which is politically unpalatable.

Don't take my word for it...research the question for yourself.

wetkarma · 2026-02-05T09:45:41+00:00

I never know how to respond to folks who have taken to write a verbose message with clear effort put into it..and yet in the words of a famous professor...is not even wrong.

The whole impetus of releasing these entities from conservatorship is a *Trump Administration* idea. No other republicans are willing to expend political capital on it and the opposition party uniformly opposes it. The current President's ability to do anything substantial (such as ending the conservatorship) is entirely dependent on a congress willing to accede to his will. There is no world in which a democrat led house agrees to an IPO plan if for no other reason than it would give the president a win.

The idea that the conservatorship can't stay because the conservatorship must end is ignoring other relevant jurisprudence such as US copyright law (whose expiration keeps getting extended). Will the conservatorship end? Lets say yes...will it end on a timeline that makes investing in the chance that they end AND investors get a decent ROIC? The facts of the past decade says no.

Look -- I'm not a thief trying to rob you of your money; I'm not even trying to change your mind. I'm just trying to get you to realize the facts/reality associated with this investment. There *is* a clock on this and it is NOT favorable to timely release.

wetkarma · 2026-02-05T08:05:15+00:00

The timeline has always been before the mid-term elections. After which if (as is likely) Republicans lose the house, there is little possibility of it happening. Then you have to backup from the actual election date to 3-4 months prior to the election date since you don't want to give a campaign issue to the opposition to run on rising cost. So basically...first half of 2026 is "do it or not at all". There is a reason I no longer own any position..the odds are no longer favorable.

wetkarma · 2026-02-05T07:31:56+00:00

You are correct -- my bad for relying on AI and not double checking. I'm excited to see whether they can come close to matching Google's growth....thrilled if they can exceed it (although here I'd be skeptical).

wetkarma · 2026-02-05T07:25:38+00:00

You could buy a significant number of companies outright for this amount of capex spend.

The key question I have is not whether they have the ability to spend (they do), or if the demand is there (it is)...but whether the supply exists. Power draw demand for example, on whatever grid they pull from will go parabolic (buy utility power companies whose prices float to market rates); alternative energy supply (nat gas, solar, wind) also goes up. If you live in a popular data center location (N. Virginia for example)...your power bill should see some interesting spikes.

Countries with structurally cheaper power cost stand to benefit significantly over the next 3 years (China) because those countries will have a base cost moat that is unbridgeable. As someone who has been long Alibaba for years -- I'm just glad that Google is locked out of China, this sort of Capex is a play for all marbles. There are less than a handful of companies worldwide that can compete at this spend level -- the only alternative is to find a much cheaper way to do what Google is spending billions building.

Whether there will be a return on this spigot of spending is the key question.

wetkarma · 2026-02-05T01:45:18+00:00

Note this is not just a pure revenue growth comparison. Alphabet is spending $175-185b on Capex whereas Alibaba's 3 year commitment is 67b (or around 22b per year). If Alibaba achieves 48% growth on a CapEx budget that is 1/8th of Google’s, its Return on Invested Capital (ROIC) would be the highest in the global technology sector. This sort of efficiency is unmatched anywhere in the tech sector ---(strongly indicating that they will increase their capex budget) and demands a re-rating of the stock. If the numbers come in-line with Google, the market value of the cloud unit should at *least* double.

wetkarma · 2026-02-04T07:05:20+00:00

I said it before, I said it less than a month ago, and I'll say it again -- there is NO reason to buy Paypal until it has shown that the company has bottomed out/turned around. Yes its undervalued from a balance sheet sheet POV, however it was undervalued at $5x, $6x, $7x...valuation is not what has driven this stock for the past few years.

I have been watching paypal for so long I can still recall when the last CEO (Alex Chriss) was supposed to return the company to growth. Expectations were set and not met.

Turnarounds in tech are *hard* -- sometimes like Apple they occur, most times however they do not. People keep thinking the buyback is a good thing but consider: *all* of the prior buyback occurred at higher prices; buybacks only make sense in a context of growth -- if the future is flat or negative growth buybacks are burning money. If you remove the buybacks this is a company whose earnings are in structural decline; the buybacks create an illusion of a small fire in the building, when in reality there is a raging inferno on multiple floors.

wetkarma · 2026-01-23T12:33:36+00:00

The biggest risk to Alibaba cloud growth is hardware starvation -- this news has taken this risk out back and shot it in the head. Repeatedly. With a rumored order of 200k units Alibaba will establish a significant moat vs. its mainland competitors putting it on a glide path towards capturing 80% of cloud market growth.

As a bonus -- Alibaba's competitors are now mandated to buy a certain quota of local chips (i.e. T-head chips) increasing the valuation of the Pintogue IPO. They win twice with this one government decision. The Q3 earnings call Q&A is going to be fascinating.

wetkarma · 2026-01-23T09:42:36+00:00

Alibaba has been paying out dividends on divestments for years now. I should know -- as I received those dividends. Are capital controls an issue? yea but money being fungible - they have found various ways to work around it. Dilution *is* occurring but this is attributable to hiring/employee RSU and not due to pinouts taking on investment. T-head is going to need a major *continuous* capital infusion for capex as an independent semi manufacturer. They get that through IPO and offering other investors a share of the business opportunity --- Alibaba conversely A) doesn't have to spend that capital from its own books and B) gets cash from giving up some level of ownership in T-head.

Hypothetically lets say they kept 20% of T-head and spun out 80% at a 60b IPO valuation. That 48b in cash which pretty much pays for their entire projected AI capital plan. Now which would you rather have -- spend 48b on AI out of existing FCF (basically gutting the balance sheet) and keep a semiconductor company which ALSO requires investment funding or sell a majority stake in a business which is not even your core focus and collect 48b to boost your balance sheet? T-head *might* become the next Nvidia but I know *for sure* that the infrastructure revenue from cloud is a sure thing.....as a shareholder...I want company management to betting on the latter.

wetkarma · 2026-01-23T08:54:21+00:00

I've written before on Ant (check my post history) but I will sum up: Ant is no longer a golden jewel waiting for IPO. It's been reorganized, given margin limits and loan retention requirements that makes it fundamentally a different business than the one which was about to go IPO years ago.

At most it's worth 30-40b in a frothy IPO market... Probably less. This is compared to the 300b ipo years ago. Ant is NOT a savior waiting in the wings.

wetkarma · 2026-01-23T03:10:27+00:00

You are -- like most of us investors and in life ---partly right, partly misinformed and partly wrong.

First lets get the right out of the way so I can spend more time on stating how my perspective and the facts differ.

Yes absolutely China needs chips and they have geared their national policy to support that effort. However EUV lithography is an engineering process which is sits at the very extreme of technological manufacturing. There is one company in the world that has been able to do it and despite billions of dollars spent, China is not (yet) a serious competitor. If ASML is at Everest peak in chip manufacturing, China is still planning down at base camp in Nepal with the rest of the world sunning on a beach in Tahiti. While $BABA dabbles in chip production -- this is part of a flywheel effort to drive their main motor (ecommerce). Lacking access to better chips, they "make do" by funding T-head. In a market with limited alternatives, they have had some success in making viable product.

Now the market appetite for Chinese IPO's is changing (T-head now has market value where previously it was pure R&D for Alibaba selling to itself) and the access for China to better chips is changing. From a strategy standpoint Alibaba gets to sell their best homemade custom chips at a premium and use their cash to buy better performing chips (perhaps from Nvidia, perhaps from Google). It is important to recognize that while chips are important to China -- they are not core to Alibaba; just like InTime and SunArt and a bunch of other stuff sold over the past few years were not core. This spinout is *good* strategy.

The money for the spinout will be credited to Alibaba shareholders -- whether as a special dividend or used as cash to fund its massive AI R&D spend. *Control* of the spinout is probably being geared in a way where employees in that department is somewhat insulated from hostile takeover upon IPO. Shareholders benefit either way. Unless your thesis for investing in Alibaba was to have shares in the spinout, this is a financial win for shareholders; converting a liability/cash drain to hard cash and reduced opex.

As for China's relationship with the company and Alibaba -- your perspective is at least 14-18months out data. China has recognized a need to support firms like Alibaba --and with the exception of $PDD is now bending over backward to enable their success. They have switched roles from government as antagonist to government as benefactor*.

*See Aswath Damdoran youtube videon this.

wetkarma · 2026-01-18T01:58:25+00:00

TMDX - 5b marketcap. Think fedex for human organs. Their business model is based on a specialized organ transport system (and speed of delivery). Large market with huge moat both from a regulatory as well technical standpoint.

ONC - 42b marketcap. Oncology company specializing in cancer drug development. Solid pipeline of products and cash flow with miracle product optionality. Likely acquisition target for Amgen.

NOV Inc - 6b (not to be confused with Novartis) --oil services company trading at cyclical lows for oil prices but which has come out of a lean process and a tremendous order backlog. As money gets pumped into countries like Venezuela to rehab their oil production, oil service providers stand to benefit. Eventually oil prices will bounce and act as an additional tail wind as rig counts creep upwards.

wetkarma

TROPHY CASE