Gmthebeau

I think we will see 5% on the 10 year and higher on the 30 year, but it might consolidate first before the next move...or maybe not. If we keep seeing an unabated rise in 10-30 year part of the curve stocks will start having crash risk.

Yes, all the debt will eventually be deflationary. The FED can manipulate the game along time though with quantitive tightening/easing, and other levers they pull. I had been expecting the 5-30 part of the yield curve to shift higher and it finally has. All the pundits now say don't buy bonds, after telling everyone to buy them early the year. The consensus views are nearly ALWAYS wrong. I don't think we are quite a full peak rates on the long end yet but getting close. The cycle is taking longer to play out because of a labor shortage is keeping unemployment low. It will eventually crack and bonds will rally bigly and stocks will plunge bigly.

30 year tips at current levels could make a lot of sense for retirees, or others wanting to duration match.

I buy treasury bills, which currently pay about 5.4%. You can buy through Schwab, fidelity etc pretty much any competent broker. They are very liquid and easy to sell if an opportunity comes along.

No, I don't code. I just saw some guy on CNBC talking about his AI model to pick stocks. I remember this same guy on there a couple years ago recommending UPST at like $300 per share before it fell to $15 (now its like $50), so I suppose AI can't do any worse than him. Can't believe people are still paying him fees.

Exactly, hoping rates go down in their case would be normal. Buying something you may not be able to afford because you EXPECT rates to go down is a whole other thing.

There will be some applications but it's all incremental basically, nothing game changing. It won't be anywhere near as big as the internet. Prior to the AI frenzy, we heard how the Metaverse was going to be the next big thing. It hasn't caught on, so they moved on to AI - basically to get a rally started. I would bet the XLU (utilities) vastly outperforms the AIQ (AI ETF) over the next 20 years.

AI is wildly overhyped. You can tell this because there are virtually no practical applications for it. Every company issues press releases and powerpoint presentations. There is no there there. NVDA reached pretty much same P/S ratio that CSCO did at its peak in 2000. I suspect they may be able to push it up a bit more but it's mostly done. Elon Musk will never have full self driving cars its all smoke and mirrors.

I have seen reports that many recent homebuyers are expecting rates to fall and they "will just refinance". I agree a lot of people are betting on a return to low rates. This seems like a very risky bet to me. I think it is more likely we see the treasury yield curve shift up on the long end when people finally realize the FED is serious about getting back to 2% inflation and it will take much longer than the market expects. Mortgage rates may very well go higher not lower.

retail sales still look pretty strong. The consumer drives most of the economy. Unemployment not moved. CRE defaults won’t bring down inflation. The easy inflation comps are done, now they have the hard work of bringing it down to 2%. If they don’t it will just ramp back up. I think the bond market will be proven wrong and rates go higher but that’s definitely not the consensus view.

With interest rates having moved up so much it will be very hard to spend the way Trump/Biden did recently. I don't see that at all. I do believe due to the massive debt the FED was intentionally slow in responding to inflation, and continues to be slow to respond. They want to help inflate way the debt, but obviously they can't say that. I don't see stocks breaking out from their old highs for years. At best they top the old high slightly to pull in the last suckers then get trashed. Stocks will be in a trading range for years in my opinion. At the top of the range people get giddy - as always.

Lots of people think the 10 year is going back to 2.5% or so - which explains the stock market ramping. Inflation has come down but the core is still more than double the target of 2%. The FED still has alot more work to do if they are serious about inflation. Policy rate should be 6 or even 6.5 already. I suspect they will be forced to recognize this sooner or later. The fact that the economy has barely slowed down at the 5% rate tells you they are not really still restrictive. I think there is a good chance the 10 year goes back to 4.25 and surpasses that high. The entire curve from 5-30 is still to low. When/if the FED is forced to recognize they have to once again go higher then they think the curve will probably shift up.

most investors today have only EVER invested under the FED put regime. If thats changes due to structurally higher inflation, they will learn a very hard lesson.

I had been trading the range but on this latest rally in bonds I have gone all T-Bills. The narrative seems to have changed to where more and more people are saying buy bonds. I think the top end of the range is going to be taken out and we challenge the old cycle highs in yields on the 10-30 year part of the curve.

Management of a company is super important. Sears was eventually run by some really incompetent people. GE was at one time on top of the world until incompetents took over. This list is endless. Ballmer ran Microsoft into the ground practically, once he left boom they got a real leader and are minting money again. This is why turnarounds almost never work unless you bring in an outsider with a proven track record of performance. Simply thinking the management that ran you into the ground will somehow magically right the ship virtually never works. Also, why I don't think Iger will turn around Disney. Chapek takes all the blame but he inherited what Iger left him which was a company not positioned very well. Iger will try to put lipstick on it and hope he can sell it.

I am showing a Demark 13 sell signal printing on SPY today, for anyone interested in that.

How can he be pleased with how things are going? Hasn't he been in this holding since like 2009? He has massively underperformed since then. His performance has been so bad if you go to his website it isn't listed anywhere on it. You have to open the annual report where it is required to be published to find it.

Berkowitz has pretty much destroyed his reputation and his poor shareholders money on this gambit. I guess most of the shareholders left. This reminds me of Eddie Lamberts boondoggle in Sears. Eddie was the only one who ever made any money off Sears. Berkowitz got sucked into that too. Pretty sure Berkowitz won't make much if anything ever off St Joe. You have to wonder how someone who trounced the market so soundly for years went so wrong. I imagine he has enough money that it isn't that important to him whether it works or not. He simply has gone so far down the road he feels compelled to show he is right rather than cut his losses.

About 60% in t-bills and some bonds. “It takes character to sit there with all that cash and do nothing. I didn’t get to where I am by going after mediocre opportunities.” Charlie Munger

Bonds should be looked at from a wealth preservation standpoint in my opinion. If you buy quality bonds, hold to maturity, you won't lose money and you make the income - which is pretty decent for the first time in like a decade. Most people who buy bonds buy them for this reason. They already have enough money to live the rest of their lives, and want to preserve wealth. Trying to get the highest return possible is not everyone's goal. If bonds yields eventually fall you could sell them for a capital gain - but that should not be the focus of why you bought them. Trying to predict which way interest rates are going to go in a given timeframe is pretty tough to do.

I have gotten more defensive. The easy money has been made from last fall. I think the market may grind higher from here but I don’t have a lot of conviction here. That said the most recent things I bought are PYPL, UL, HEINY, SR, DEO

All of them are overvalued. It won't end well. Apple has been using 90% of the GAAP profits to buyback stock. At higher and higher valuations it has less and less an impact. Nobody is going to buy a $3000 headset or whatever they came up with. They can sell more watches and services but it barely moves the needle at this size.

NVDA is approaching the same P/S ratio that CSCO peaked at in 1999. Took CSCO decades to recover once it rolled over.

I have proven your definition. I just don't agree with it that all completed software implementation is AI.

I guess if you classify all software automation is AI, but I don't think thats true. AI is supposed to be the computer writing the code. Much of the automation you described is a guy who sat at his desk and banged out the code. I dont call that AI.