Spekulatius

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.

Very good presentation on the economical side of the war: It’s interesting that you can get this type of analysis from a no-name account (at least for me) on YouTube. The likes of CNBC have nothing of this sort at all, not even close.

There are a lot of ways to play a boom on housing, besides home builders. The distributors are one way - they have benefited from higher demand but also structural changes (consolidation). Then there are material suppliers like OC, which basically doubled their margins on top of a demand increase. is this margin boost permanent - that's the big question here. I do like OC and the stock is cheap (~12%+ FCF yield) . It's also a green play in the way that insulation products help with energy conservation. I think most of their revenues go into building updates not new construction, so probably much steadier than a homebuilders business. https://investor.owenscorning.com/investors/overview/default.aspx

The russian black sea fleet being damaged is important because they currently blockade the last and most important Ukraine harbor, which is Odessa. this is imporant because grain shipments are typically coming via Odessa. Ukraine a while ago stated that 2/3 of the fields were seeded this year, so there is a chance that a decent grain harvest is possible and that this grain can make it out. I think sooner or later, NATO will force the Russian fleet to abandon the blockade if they don't go away by themselves or as part of a peace deal. Will be interest to find out what exactly happened and if it's true that Russian ship defenses can't handle more than one incoming target. Again I said it before - if your army/ navy / air force has bought a lot of Russian material, I would seriously consider how much that is worth. Turkey for example has some pretty good stuff, if you need it cheaper than US/EU/UK can provide. With Russian tanks popping turrets, IFV vehicles exploding after getting hit from bombs dropped from consumer grade drones, Helicopters getting into Russian air space and ships getting damaged because the defense system was overwhelmed means you bought a bunch of obsolete scrap.

Fake news. Kremlin: Moskva destroyed Ukraine drone, completed fire drill. All Russian sailors who evacuated the ship are safe.

@changegonnacome I disagree that working from home is a gamechanger for LGIH. While WFH shifted demand, it probably isn’t something permanent especially with the kind of jobs that first time home buyer are having. I think there is a pent up demand for the homes that LGIH offers right now, but once that demand surge from this pool of buyers is satisfied, it’s probably very cyclical again.

Very convincing:

Yes, the gap between CPI and PPI seems to imply margin erosion. Some of it can be compensated with productivity gains and salaries (an important input cost) growing slower than inflation, but overall it does not point to great pricing power.

Yes, there are videos around on reddit that look authentic. The siege of Mariupol is on it's last legs.

Yes, the psychological aspect should not be underrated. In fact if anything , it has caught many by surprise that people actually do care (just read the early comments here) about Ukraine. Politicians see this too and adjust accordingly. Classical reflexivity at work here - perception can change the outcome. This applies to investing and even more so to politics or even wars.

I agree. The very real aid that the US and the Europeans gave to the Ukraine is changing the outcome. I also think that dumping the Russian NG in the long run will change energy policy. This is not virtue signaling. The US has fought many wars and some were worth fighting and other were not. This one is worth fighting, imo.

Oh boy 11.2% producer price increase after 8.5% increase for CPI: https://www.cnbc.com/2022/04/13/producer-price-index-march-2022-.html

Navalny is irrelevant, Imo. I don’t think he makes a difference. There seems to be a documentary out that is going to stream on HBO: https://en.wikipedia.org/wiki/Navalny_(film)

I think it is retail and probably traders as well trying to latch on retail trends and scalp them. There are certainly institutional traders in meme stocks for example. The narrative explanations behind market moves are mostly meaningless. You often see headlines in CNBC for example that market is down because of XX and in reality the market is already green again.

Russian drone breakdown. Has a Canon SLR for optics. No Russian without a bottle. LOL: @Pelagic I agree one drone effectiveness. I think the Azerbaidzan - Armenian war showed already how effective relatively cheap drones are. Stingers and Javelins are much more complex than these loitering drones and they have a rocket propulsion, so much faster. they can take a 50-$100M jet fighter, so a 50-100K price tag may actually be a good value. The Ukrainian Stugna anti tank missile which is seen in a lot of Ukrainian clips is wire controlled (80's technology basically) and allegedly costs $20K as another point of reference.

Switch blades drones are not that expensive - about $6K/ unit. High end consumer drones are 3K and are worse for this purpose (slower, don't have payload, not compatible with other weapon systems). Not everything made for the military is expensive. You would be surprised how little GPS controlled glide bombs cost - I think it's a only few thousand $. That's a lot of bang for the buck.

@Broeb22 I believe it is correct that the home owners business model has not changed in the last 15 years. My favorite metric - Inventories/ revenues ( a measure of capital intensity) is actually worse now than it was in 2005 for DHI (to my own surprise). For me, it's clear that home builders likely would lose a lot of money in a severe housing decline. However, keep in mind that DHI always was a quite well and efficiently managed builder, so all this may not apply to the entire industry.

I suggest a consumption based model. Order Satellite images for free - its on you to identify target - and order the drone strike with a button. Pay once you see the destroyed target.

If you think retail doesn't matter just look at how stocks are trading right after they announce a stock split (TSLA, AMZN, GOOG, SHOP) are recent examples.