No. of Recommendations: 11
i must remark that i have very disappointed in the constructive bears that have gone into hibernation.
The term "bears" generally refers to people who think the market or a particular stock is likely to produce sub-standard returns in the near term. That's not what critics of Brookfield have generally argued, so its recent highs don't contradict their complaints. Not to compare them in any other way, but critics of Big Tobacco or Big Oil are not necessarily forecasting near-term stock performance; neither are critics of Brookfield. They are, I think it's fair to say, contending that unacknowledged risks might lead to bad consequences sometime in the future, but a rally in the short term doesn't affect those concerns one way or another.
Judging by his remarks in the comments section of one of his post-Keith Dalyrimple report pieces, Alexander Steinberg closed his Brookfield position as a result of concerns raised by that report, so I would not expect further analysis from him. I gather Apollo has supplanted Brookfield as his favorite alt manager. If I'm not mistaken, a couple of other Seeking Alpha analysts did the same, so there's currently a dearth of Brookfield analysis there. No doubt new bulls will emerge in due course. All the major alt managers are at or near their highs, so these analysts did not miss the rally if they shifted funds from Brookfield to Blackstone or Apollo or Ares or KKR or even Blue Owl.
The rally coincided with the perceived pivot by the Federal Reserve from raising interest rates to sitting tight in anticipation of lowering interest rates next year. That suggested much of the bear market in all these names was based on the high levels of leverage they employ, and particularly, in Brookfield's and Blackstone's cases, the effects of high interest rates on their commercial real estate portfolios. Even S&P Global lowering BPY's credit rating to junk status did not derail the rally.
Dalyrimple's report was his first truly independent analysis in my opinion, and the concerns it raised were not rendered moot or illegitimate by rallies in the stock prices. Instead, they reinforced the feeling that it is very difficult for an individual investor to know what's really going on inside Brookfield. The jarring example they tended to cite was the toll road operator whose revenue was reported by BIP as part of the predictable income stream it advertises as an operating company. Dalyrimple reported that the filings of the operator, by contrast, reported the capital costs of building and maintaining the road actually exceeded the toll revenues, meaning a net result that did not contribute to BIP earnings at all. The unsettling part was not so much this fact, but its omission from BIP's filings and the requirement to check the filings of other businesses to uncover it.
One doesn't have to make a value judgment about Brookfield's reporting, or decide if BIP is actually a holding company and not an operating company, as Dalyrimple suggests, to conclude that this is way more work than most of us are willing to do to stay on top of a stock investment. There are a lot of simpler, more transparent businesses in which one can invest, including alternative asset managers similar to Brookfield.
I still have a position in Brookfield, chiefly because I have to manage capital gains taxes, but it's smaller than it used to be. The smaller it gets, the less time I spend worrying about what I don't know.
