tede02

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.

The one year US Treasury popped 40 bps this morning. Very close to 4%. Amazing considering it was 0.07% only 12 months ago.

This reminds me of the people that participated in "the big short." They all raised tons of money following that home run but, to my knowledge, no one has done anything remarkable in the last 14 years.

I don't think so. The Fed caved to the markets in early 2019 following the S&P selling off just shy of 20% and the yield curve flattening. I'd highly recommend reading Trillion Dollar Triage. It provides a great history. That said, I can understand how it optically looks like Powell succumbed to the political pressure because Trump never stopped badgering him. The Fed rate hike cycle pre-2019 is a humorous part of the book because it details many of Trump's tweets and public statements during that period.

I'm just finishing "Trillion Dollar Triage." One thing the book makes clear is the Fed, as an institution, is hell-bent on not repeating the mistakes of the 1970s when they basically caved to political pressure and didn't aggressively fight inflation. Powell DOES NOT want that same kind of thing as part of his legacy. My takeaway is it wouldn't surprise me to see the Fed continue to be more aggressive than the market anticipates. Also, even though the headline GDP number gets all the attention, nominal GDP was up 7.8% (annualized) in Q2. There's obviously some signs of slowing but the economy is still plowing forward.

I agree with your sentiment. I also found it amusing how an entirely new generation jumped into the markets 2020/2021. The overwhelming majority of these people had no clue that we were in a speculative craze. It's amazing how there's always a new generation coming of age that have never experienced a major down market first-hand and as a result, you get these periodic booms and busts. As for the economy, it sure seems like we have a ways to go before markets find equilibrium. There are so many things going on that have shaken up the global economy. Side note - I can't believe the Chinese are going to stick with their zero covid policy. It seems completely stupid given how contagious it is and the fact that the rest of world is just moving ahead and dealing with it. Maybe it's possible if you're an isolated island nation like Cuba or something.

Wow, the yield curve is moving towards total inversion. The 1-year Treasury is at 3.17% and the 30-year is at 3.16% today. The 3 month is still down at 2.5%. Also interesting to see how far commodities have fallen back. What's weird is it looks like we could experience a recession with moderate or even little impact on employment.

Wow, big move down on yields today. Lots of discussion about bond market pricing in slowing growth. I'm also curious what long rates are going to do as the Fed starts shrinking the balance sheet. Will it have any impact? I don't have a strong view but I've increasingly found the bond market as fascinating as the equity market.

I share the concerns regarding corporate earnings. Consumers are pulling back and I'd be surprised if we don't see that reflected in corporate revenue and earnings in the next 1-2 quarters which could hit stocks. I also think that the Fed knows they missed the mark on inflation and therefore are likely to be overly aggressive on the tightening side to show the markets they are serious. I'm sure they'll want to seen consecutive reports of CPI/PCE on the way down before they stop. But it's hard to know where the bottom is. Greg's point about what's priced in already is well taken.

Tim Ferriss recently had Ed Thorp on. This is kind of a short version of reading Ed's autobiography but it was a great discussion. It was interesting when Ed was asked if there are any investors he would invest with today, he basically said no. He thinks he'll do just as good indexing because of fees and taxes.

There's an article in the WSJ today regarding levered, closed-end muni funds, that have gotten hammered. I've never owned them but there definitely looks to be some opportunity. Might be early. https://www.wsj.com/articles/leveraged-muni-funds-face-losses-as-bond-rout-drags-on-11655871989?mod=hp_lead_pos2

Over the last few years I've chuckled watching replays of the Triple Crown Races. Several times, when the cameras pan over to the owners, I've seen Klarman cheering with a big ole shit eating grin. LOL.

I saw the news this morning on an emergency ECB meeting regarding sovereign debt yields spiking. That seemed to come out of left field. That's all the world needs...another debt crisis. Puts the ECB in quite a bind. How do you fight inflation and surging gov bond yields simultaneously?

I purchased PFIX as a hedge earlier this year. I hear your point. My impression is bond yields are moving into the range where the convexity starts to really show. The strikes on the underlying derivatives are at 4 & 4.25%.

There's been a big move over the last week. The 1-year treasury broke through 3% this morning. Just 9 months ago it was under 0.10%.

This is mostly for fun because it's a lot like asking where stocks will bottom. I don't claim to have any special insight here so take what I say as conjecture. But I'll be surprised to see the 10-year beyond the 4-5% range. I think the economy is going to break before that happens. The Fed is under so much pressure to act right now. I'm expecting them to tighten aggressively. I wouldn't be surprised, looking back, if the recession has already started.

I love Druck. He has such a unique approach and perspective. He also has humility as he regularly points out how often he's been wrong. His point on sizing bets, which I've heard him discuss many times, has really stuck with me.

This is a topic I'm very interested in. Musk has also been vocal about it recently. In the US at least, based everything I've read, we're probably still 20-30 years out from it becoming very noticable. Immigration is still high enough to keep growth positive albeit not by much. I believe the labor shortages we're seeing now are a glimpse of what we can expect in the future. I won't be surprised to see these problems temporarily wane as the pandemic fades and the Fed purposely pushes unemployment up. But it is a FACT that the population is aging which will continue to create labor shortages at a gradually increasing rate. Long-term (say 50+ years out), declining population growth seems like an economic time bomb. As mentioned by others, just go to towns in rural areas that have lost people over the years. What do you find? Loads of empty houses, buildings and storefronts (and therefore cheap real estate). Imagine the strain this will put on retirement plans, entitlements and local government revenues (which fund infrastructure, etc.). It looks like a very tough picture. I think this is why the Chinese leadership have basically panicked with respect to their family planning policies. Everything I've read about countries that have tried to incentivize more births has concluded these polices don't work. The impact is at the margins. As a parent with two kids under 6, I can see why this is an unstoppable trend particularly in advanced economies. My kids are great. I'm lucky they are healthy. But raising kids is extremely time consuming and expensive. Child bearing has gone from being a necessity in an agrarian society to what amounts to an economic burden in an advanced economy. For women in particular, having kids is not a recipe for career advancement. It's just a brutal reality. The one upside to peak population is it probably helps some of the environment challenges the world faces.