tede02

Greg, you crack me sometimes! LOL. Good stuff. I completely know what you mean. A lot of REIT managers (especially non-traded), peddle so much B.S. I get tired of it. It reminds me a lot of fracking companies before many blew up in 2016.

I have no interest in a big debate but the issue is he was profiting off his lies and causing real harm to people. I'm more sensitive to this now than ever because my oldest child is 6 years old, the same age as many of the kids were at Sandy Hook. Imagine your child is murdered, and the next thing you know all these psychos start calling you, sending threatening messages and stalking because some lunatic on the internet is peddling a narrative, for money, that the entire thing was a hoax. One of parents committed suicide ultimately. Alex Jones deserves every damn penny of that judgement. He earned himself a life of misery.

I've never heard this idea. Is the theory that the more negative real rates are/go, the result is capital shifting away from those currencies in search of return or something that is more likely to hold purchasing power (and thus putting demand/pricing pressure on other assets like gold)?

Random musing but is anyone else intrigued that the stories so often told about gold and (more recently) crypto being an inflation hedge have not panned out despite the highest inflation in 40 years? Gold is actually negative this year. Perhaps the dollar strength is a major factor. Nonetheless, I just find it interesting. I remember quite vividly how excited people were about gold a decade ago when QE was a relatively new thing and the doomsdayers were predicting runaway inflation. I don't really know what to think presently. Perhaps the story around gold being a great inflation hedge is just that, a story/narrative.

When will we start to see rising borrowing costs hit REITs? Separate but related question, do most REITs borrow at the corporate level vs property level? The handful of REITs I follow seem to borrow at the corporate level. One in particular is starting to feel the effects of rising rates as they've had to refi maturing debt. Rents have been stable but rising interest expense is starting to eat into profits. I was annoyed that management didn't try to lock in longer-term debt in 2021. Do most REITs borrow on shorter terms or does it largely depend on the type of real estate?

When I was in college and getting interested in investing, my dad set up a lunch with someone who had recently retired after being an analyst or portfolio manager for a fixed income fund (mid 2000s). I remember naively asking something like, "why were you on the bond side, it seems so boring." LOL. Over the last 5-years, I've developed a significant interest in fixed income partially via influences from Howard Marks and Jeffrey Gundlach. I've learned so much following Gundlach and his deputy Jeff Sherman closely. I also like some of the top managers at PGIM. One show I've also become a major fan of is "Bloomberg Real Yield" which is posted on Youtube weekly. The show is basically a rotating panel of top fixed income specialists that spend 30 minutes talking about fixed income. I've learned a lot. Recently, Gundlach has been talking about a strategy of buying some of the credit that has gotten absolutely crushed and hedging it by buying long-treasurys. It's an intriging idea. Separately, Druckenmiller once said that his biggest returns were made investing in long-treasurys ahead of Fed cutting cycles. That really perked my ears up and I've never forgot it.

I was thinking something very similar this weekend. Aside from being a token for speculation (and illicit activity), has cryptocurrency proven itself to have any utility? I continue to wonder if all the cryptocurrencies will ultimitely be $0 but the underlying tech survives. Blockchain is interesting and people make interesting points about potential applications, but that too has yet to materialize. I try to keep an open mind because people like Buterin and Hoskinson are obviously HIGHLY intelligent, but it seems like we're a long way off from widespread application.

I think it's quite possible on the long-end. Less certain on the short end. This is just conjecture from me but I think the market response today is overly optimistic. The Fed is gonna keep going until they get consecutive data suggesting things are slowing and they aren't going to pivot unless all hell breaks loose.

The 1-year Treasury is closing in on a 5-handle. Last year at this time it was <15 BPS. Amazing!

Maybe a 2. I came into this year with tons of cash. So I've been putting it to work, buying names that I've been looking at for years, notably GOOG, META and TTNDY. I'm down in all but trying to build up positions. Also been buying some fixed income and office REIT that has been hit hard. Yields well above 10%. As always, just struggling with how aggressive to be deploying capital into a falling market. I expect very tough sailing as long as the Fed continues raising rates. Market could be in for a big surprise on the downside if inflation stays hot and Fed Funds were to go to 5%+. Really tough to predict. Frankly, I don't want to ever put myself in a position where my pain index is over 4 or 5. I've always been conservative with debt and have learned my lesson being overly concentrated. Also, I was right in the middle of a big real estate transaction when the pandemic hit. Despite having a strong balance sheet and a decent amount of cash at the time, I briefly felt naked in March of 2020. As a result, I told my wife, I don't ever want to be in that kind of situation again. Consequently, I have, and probably always will, 2+ years of living expenses in cash/high quality fixed income.

I was on a call today with Doubleline's Jeff Sherman. One of the best questions asked was where he was putting his personal money. He said he's been adding to some of Doubleline's ETFs which have light leverage. The "Yield Opportunities Fund" currently yields around 11%. Piqued my interest. I've seen a number of levered bond ETFs that are down 20-50% in 2022. It's pretty crazy. They will turn out some big returns if rates ultimately decline.

Good discussion with Druck. I always learn something.

I'm no fixed income pro but it does seem like strange yield moves today. Middle of the curve is down. Long end is up.

I'm with you. I read Trillion Dollar Triage in recent months. One of my favorite parts of the book was the brief history of the Fed with a focus on each chairman. One thing that is made very clear is the Fed as an institution DOES NOT want a repeat of the 1970s. Basically every Fed chair since Arthur Burns has vowed not to make the same mistakes he made. Given that, I agree, the Fed probably will keep financial conditions tight until it is overwhelmingly clear that inflation is easing. And to your point, that will probably come after some significant pain is felt. One thing I keep thinking about is the likelihood that long rates go up significantly more than consensus. Presently, prominent fixed income investors like Gundlach seem to think a 10-year over 5% is VERY unlikely. But what if it does go to 6%, 7% or even higher? The headline inflation numbers in the UK this week were disturbing. What if inflation is stubborn in the US? I don't have any special insight but it seems like this type of scenario is reasonably possible. At the same time, growth is already showing signs of strain so perhaps the risk is coming down. I sure as hell would think we'll know sometime in Q1 if inflation is coming down.

One year ago the 1-year Treasury was at <0.10%. Now it is moving towards 5% (around 4.7% today). Amazing. I follow Gundlach closely. He deserves the "bond king" title. As for rates, if long rates pop up another 100 bps, I expect we're going to see more turmoil like the UK pension situation. Who knows where it's going to come from. I was reading this morning that the Japanese yen is trading at the lowest level against the dollar in 25 years. Bank of Japan is intervening. It's just one thing after another. I've deployed some of my dry powder this year but I think the best deals may still be in front of us in all markets.

All-right guys, 10-year has broken well through 4%. Man, it is going to be interesting to see where things go in the next few months. The inflation numbers in the UK are crazy. US economy remains resilient. Fed will keep hiking short rates. Will balance sheet reduction result on long rates moving up? Or will foreign investors start dumping money into long treasurys? I don't know but what a year it has been. 10 year is presently at highest yield since 2008.

Although I'm in finance, I love doing physical work. Building stuff, cutting wood, carpentry, tractor work, etc. I get a huge sense of satisfaction from this kind of work.

I love this attitude! You're 30 years ahead of me but I keep telling my wife that one of my biggest goals in life is to stay in shape so I can do most of the same things I'm doing in my my 30s when I'm in my 60s and 70s. Virtually all my clients are baby boomers or the silent generation. It sucks to see some of them let themselves go to an extreme degree. I also have a handful of relatives in their 70s that act like they are 90 years old because they sit and watch TV all day. NO WAY! There's so much stuff I want to do in life especially once I'm not so anchored down by my little kids. Gotta stay healthy.

Preferreds are probably more similar to junk bonds than equities. Interest rates and credit risk are the big factors which determine any discount/premium to par. One investment I made in recent years that I think is going to work well is Seritage preferred. Everyone has debated the value of the common. As long as the common is worth at least zero, I'll get paid out at par. I bought at a discount so I'm getting >9% along the way. I'd have to check my notes but if I get paid out at par by the end of 2023, I think my IRR will end up around 20%. I find preferreds interesting. They are generally less liquid and therefore less followed. This is probably the type of environment where some very attractive opportunities exist. If interest rates do come back down, that will be a big help.

LMFAO! I was also belly laughing seeing headline about Cathie Wood trying to convince the Fed the pivot.

LOL. I know what you mean. That said, many Fed officials this week have been doing a lot of jaw-boning that they need to see definitive evidence core inflation is coming down before they stop raising rates. There seems to be a lot of conviction to keep going. Assuming they do, that is going to keep significant downward pressure on the markets. They probably will keep going until there is a major crisis (the UK situation times 10). I heard Kashkari this week say they have seen little to no data that core inflation is declining. Yet, we are seeing deflationary signals all over the place such as housing, used cars and commodities. I think Gundlach makes a good point the Fed should slow the rate hikes down to give the effects time to work through the economy. But it doesn't look like they will.

I swung through a Dairy Queen last weekend for the first time in probably a year. Thought a small blizzard sounded good. I was stunned when the total, including tax, was just shy of $6! I don't know exactly but I would guess that price is up 50% over the last 24 months.

2022 might be a once in a career situation in the context of bonds. They've been absolutely crushed. There are some closed end funds with leverage that are down in the 50% range. But what's interesting so far is all the losses are duration related. I was on a PGIM fixed income call yesterday and they pointed out that spreads over treasurys are still pretty average. Separately Jeffrey Gundlach made an interesting point. He noted how forecasters are expecting inflation to come down and magically stop at 2%. He went on to suggest that there's a good chance that central banks over-do it, we get a global recession and inflation plummets to the point of deflation. Long duration could then be a big winner. Its just interesting to me. I used to spend little to no time on fixed income but in recent years I've learned a lot and found it quite intriguing. It's a different game than equities and there can be very profitable situations.

One big question in my mind is whether the ultra tight labor market is going to result in the Fed having to raise rates significantly higher than concensus. Everyone is talking about 4%ish being the magic number. But what if Fed Funds has to go to 5%, 6%? Stocks could really get smashed.

Jim Bianco has been repeating the "death of office" narrative lately. But I'm skeptical. It seems similar to "death of retail." Has office utilization changed...yes. But an apocolypse seems unlikely.