Spekulatius

I don’t think China’s zero COVID-19 policy matters much, unless you invest in China. It’s doomed to fail and at some point the Chinese will probably abandon it. I think one reason the Chinese are doing it is because they know, but not admit, that their vaccines don’t work.

@sleepydragon Private equity has been one of the biggest beneficiaries of low interest rates and high asset valuation. These business could be in for hard times, if valuations compress and the cost of debt goes up substantially.

Canada RE has a structural problem that housing has become too expensive due to lack of supply. Supply constraint markets have been the most prone to boom and bust cycles in the past and I think the rising interest rates will trigger a decline if not an crash in RE prices that could be far larger than 10-15%. A 10-15% decline does not really solve the affordability problem, since with rising mortgage rates , the affordability would likely be even poorer than at the peak, due to higher mortgage costs. I could be wrong, a Canadian RE crash has been predicted for a long time, but as Taleb says, the markets that don’t have smaller corrections, tend to have a huge one, once the time comes.

I think you are right about the average Joe ( or Ivan) not see the war coming. Most people in Ukraine did not see it coming either.

No, this attack was prepared for quite some time. The buildup of forces took month. It’s just that the cannon fodder soldiers were not prepared. They were informed on a need to know basis and it turned out they knew less than they needed to.

I mentioned Station Eleven on HBO before in passing and I think it’s a masterpiece with its Shakespearean plot (on multiple dimensions), superb acting and storyline. I think I actually need to watch it again to fully understand the plot and the multiple layers. Great TV if you like this sort of style.

The Russian are far away still from using nukes. Keep in mind that the Russian aren’t even in a war yet, it’s still a special operation. If they keep losing (not a given in my opinion) then the next escalation steps are: 1) Officially declare war 2) Mobilize (to get more conscripts) 3) Total conventional war (the entire Russian economy will be switched to war footing) 4) potential nuke strike. So we are still 2-3 escalation steps away from a potential nuke use. In my opinion, I nuclear escalation right now is very very unlikely because Putin would basically jump several escalation steps, which imo does not make much sense. FWIW, I actually think that Putin is fairly predictable at this point.

I am with Druckenmiller. I only buy bonds when there is a dislocation every 5-10 years. Sweet spot is on the threshold of Investment grade BB to BBB-. I want to see around 10% yields for equity like returns. Last opportunity was in March 2020 for a NY minute, then late 2014 in energy/ pipeline bonds and then of course 2008/2009. The rest of the time it’s just equities.

The risk of nuclear proliferation is not prevented by doing nothing, if Russia uses nuclear weapons. It is almost guaranteed that Russia will use them more. Nuclear weapon use is a Pandora’s box - once opened , there is no telling on what happens next, but it won’t be nothing.

Georgia is sort of screwed, due to its isolated location . It’s virtually indefensible if it were in the NATO. Also, there is no strategic value to Georgia or its location for NATO. Georgia in my opinion will never get admitted to the NATO for that very reason. Ukraine is very different.

No, I am not kidding. NATO gets involved using a conventional weapon response when Russia goes nuclear. The reason is simple - letting it slide is not an alternative because once the Nuclear tactical strike pandora is out of the box, doing nothing is not a viable option because Putin will continue to use this weapon. Pretty simple , imo. I grew up in Cold War time Germany. My history teacher was Major in the German Bundeswehr and went to great lengths explaining Cold logic and NATO‘s Mantra of “flexible response”. The logic is badically tit for tat with similar it lesser weapons but equal in power to the aggression. My thinking is that NATO can get a similar response with conventional weapons than Russia can get with tactical nukes and that’s why I think it is likely. It certainly means NATO enters war.

I don’t think China is really a factor here, They haven’t been doing much to help Putin and I read that trade with Russia is actually down, the reason being that Chinese companies quite correctly asses that the risk to get sanction is much higher than the pot, benefit from trade with the fairly small Russian economy is worth. China may be waiting to get some scraps here and their, but they haven’t done anything to actively help the Russian. It is also noticeable that Belarusian besides allowing to be a staging ground hasn’t helped Russia either, nor did Russias ally Kazakhstan. Russia clearly doesn’t have many friends that it can count on right now. Being somewhat vague on how to respond is the right thing to do to a nuclear strike. I think it is clear that there will be a NATO involvement but it would be a mistake to directly commit to a nuclear counter strike because it isn’t necessary. The NATO has enough conventional firepower to respond to a tactical nuke strike in kind and then some, which again gives Putin the choice to ask for more, doubling down yet again, of finally let it be.

@SharperDingaan well said. I just don’t think that “Putin in a box” is likely. Any idea what NATO would do if Russia uses nukes in Ukraine? Biden stated that chemical weapon use would “ get a response “, so nukes for sure would get a response. My own guess is that NATO would get involved and put a lot of “birds in the air” (missiles, planes ) with conventional weapons. Targets would be the Russian Black Sea fleet, any Russian buildup in Ukraine, Crimean military in stations / rocket launch sides. targets within the Donetsk / Luhansk and perhaps logistics center in Russia used to stage war. Of course the nuclear launch asset would get one too, regardless of where it is located.

Mr Market hates tech companies without FCF even more so than tech companies with FCF. I may add some PYPL as well, just added added a bit more to PINS.

Nukes are useless, except as a deterrent to prevent the opponent from use nukes first. That why I think in the long run, the Ukraine needs nukes, if they remain a neutral state. A well armed Ukraine with nuclear weapons is the only way to guarantee safety from future russian interventions. The other alternative is that Ukraine either directly joins NATO (which means they get protected by NATO‘s nukes) , or gets contractural guarantees from thr NATO that sort of are the equivalent of the Ukraine joining NATO. Neither of these alternatives are to Putins liking of course.

There is almost no chance that Finland is not joining NATO. We know that the dumbest thing a country could do with waver back and forth between joining and not, as it risk getting the Ukraine treatment. jt looks like Sweden is going to join too. I thought they are less likely to join because they don’t share a border with Russia, but they have been getting in ruffles with the Russia before in the Baltic see. That would be a milestone because Sweden has been neutral for a long time predating WW1. The nuclear threat around the baltics is nonsense too, because Russia has nukes installed in the isolated Kaliningrad enclave. https://www.cnbc.com/2022/04/14/russia-threatens-new-nuclear-deployments-if-sweden-finland-join-nato.html I remain to believe that NATO expansion wasn’t the issue, the issues was that NATO never took Ukraine in after they tried to join 2008 and wavered backhand forth on this issue.

BaFin overdoing it. - LOL. This Institution had been napping for a decade. Just from his investments (CVNA, Grenke) , one can tell that Vinod doesn’t look much under the hood.

Thats the thing that many people don’t get. Europe and the US banning Russian crude won’t prevent the Russian from selling selling it. If Europeans and the US don’t buy it, somebody else will (China. India) at a discount instead of buying crude from OPEC and others. Europe now will buy from OPEC instead of Russia, but it’s essentially a ring around Rosie. It still might have an impact, because the Russian crude will sell at a discount. We can tell the effectively of the embargo by the amount of discount the Russian gas relative to comparable qualities. A NG boycott would be more effective , because the NG will be stranded, until Russia an redirect it ( China, LNG facilities) which will require a long time (years), discounts as well compared to what they are getting from Europe and tons of investment (money that Russia doesn’t have) These are all things that are not in Russia favor. But first Europe needs to set up alternative supplies which requires some time as well. You really want to ruin the opponents economy, not your own with any sanction, otherwise it’s just self flagellation and doesn’t do us much good.

The 2005-2009 crash was unique in terms of this being exaggerated by a full blown financial crisis. This was also really the first time that housing prices went down nationwide. Prior real estate crashes were all more or less regional affairs. Earlier housing declined may be a better indicator what should happen with respect to housing. CA had one in the early to mid 90‘s which was a decline of 10-15% followed by stable prices for a couple of years. 2001 was a short crash in CA that was caused by rising interest rates and a tech crash. It was very short lived and shallow because tech came back quickly. Looking at the above , none seem to match what we likely going to see in the future. We may have seen decades of low interest rates reversing, or maybe not. We might see permanently higher inflation or maybe not. One things do know is that affordability is declining rapidly. The last chart does not have the recent increases in interest rates baked in so the March and April numbers will be much lower: https://fred.stlouisfed.org/series/FIXHAI

Someone forgot to tell the Ukrainians that there is no war going on already. Note that there is some calculated significance to this ridiculousness - the Russians haven’t declared war yet on Ukraine, so they can’t mobilize the transcripts yet (technically have already to some extend, but it’s not publicly admitted). I think mobilizing the transcripts is the next escalation step for Russia and for that the Putin actually needs to declare war. Right now, it’s just a “special operation“ for the Russian officially. Putin is a fellow who raises table stakes on losing hands, no matter what. So, if the Russian offensive in the Donbas fails, then Russia is likely to declare “War” on Ukraine as ridiculous it sounds.The goal is to allow for mobilization of more conscripts, so he has more material to throw into his meat grinder. At that point, he is doing the total war thing (switching the entire economy to a war economy) that the Nazis did in early 1943.

I have a similar problem with American Airlines. We also booked a flight and it was rescheduled in a slightly worse ( for us ) itinerary. Well we were fine with that,but when we tried to get the seat assigned , my wife realized that only some seats with upgrades were available on the new itinerary. Cost us $170 extra to actually get seat online for the new flights. Flying out today, so will complain at the customer service desk at the Airport . If that doesn’t work, I am going straight the FTA.

I actually think that one catalyst that cracked the housing bubble in 2007 was a rise in interest rates. Interest rates went from 5.5% to almost 7%. It wasn’t enough to crack housing on its own, there was the subprime component to it, but it certainly worked against it. 4 cap really doesn’t work any more with 5% mortgages. 5% mortgages and the property taxes means that cost of capital for housing went to 6% +. It was 4% just 6 month ago. I think the housing market is in for a breather at least, because the cost of housing (purchase price and cost to finance the purchase) has increased much faster than the income. None of these trends bode well for housing. Also, Wage growth has not been the driver of inflation, in fact it looks like wage growth has been less than inflation since the pandemic, except for jobs around the minimum wage. This does not mean housing needs to crash, but I could see housing prices stall out and buyers getting choosier, getting concessions or going on buyers strike. This happened in California in my area (where I lived back then) in late 2005. Then housing sat there slightly skitting down until late 2007 when the bottom fell out due to the subprime crisis. I don’t expect an exact repeat, but I have seen housing markets with very tight inventory turn on a dime within a few month and it was kind of hard to tell just based on the overall numbers, but when you closely watched the market or knew some realtors, you would know that the market has shifted.

It’s a website /social network ideally suited for discovery & shopping. I don’t think they will be independent in 5 years, someone is going to buy it eventually. It‘s already profitable and relatively cheap. Not a major bet yet, but worth a small position. User trend KPI‘s are a concern. I have a position in PYPL as well.

You can’t buy homes partly because sellers are reluctant to put them on the market, because they see prices going up quickly. For the same reason, buyers are getting into the buying panic. Both are sort of psychological and reflexive in nature and can quickly disappear. Supply and demand both have lot of elasticity. I don’t think that looking at supply and demand or days on the market tells you much about the health of the housing market, except for the very short term. I think affordability metrics are a way better measure for the long term health and for these, the metrics don’t look great on that end. We have seen the interest rate for mortgages almost double in a brief period of time and this comes on top of record increased in housing cost, which also increase the mortgage size needed to purchase homes, the taxes to be paid for houses, as well as increased insurance and heating costs. At some point, this cumulative increase in cost is going to hurt demand, I have no question about this. I just don’t know if we are at the point yet, where both home buyers and renters need to scale back their demand for space or move to cheaper alternatives. We know it can’t go for ever, or even for and extended period of time at the rates we have seen in the past.

Added back a bit of PINS and PKE ( I really like PKE’s management). I also bought a starter of SONY in one account.