tede02

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.

Will be interesting to see how far things go on the downside. It does seem a lot of the extreme excess has been wrung out. There are tons of stocks down > 50%. Crypto is getting crushed, etc. That said, I personally expect a recession. The magnitude is anyone's guess. Perhaps corporate earnings are weak for several quarters and stocks keep sliding. Hard to know.

It's amazing how much Treasury yields have moved. The 10-year yield has basically doubled this year. 1-year Treasury now at 2%. Looking attractive on a relative basis compared to the various high-yield savings.

With respect to demand and inflation, my thinking is demand for discretionary goods and services would wane as consumers burn more income on necessities and debt service. Likewise, if rising rates push asset prices down, the equity on a consumer's balance sheet shrinks which means less to spend or borrow against. These are the things running through my mind as I try to gauge how long-lasting inflation will be. But it seems really complicated because the inflation clearly also is related to the pandemic supply chain problems and tight labor force. And it's weird that long rates are still so low despite the raging inflation. It's quite the puzzle.

This is a subject that's been on my mind. The Fed sure seems to have screwed this up. They are sooooo far behind. But that's water under the bridge. I just keep thinking about how long the high inflation is going to last especially if the Fed starts pushing rates up 50 bps every 6 weeks for a few quarters. This is going to really test the economy and the markets. You have rising prices on everything and now the cost of debt is really going to ratchet up. Seems like we're on a collision course for a significant slowdown. Consumers are going to be under a lot of pressure. Will demand wane and inflation ease? Or will inflation stay hot because of all the supply chain problems, tight labor market, etc.? I also keep wondering if long-term interest rates are going to stay relatively anchored. Yields have moved up mostly in the 1-5 year part of the curve. Will we see a big jump in the 10-30 year segment? Or does the market think think we're going to bust and revert to pre-COVID economic trend? It seems like a crazy set-up with the Fed getting very aggressive with the backdrop of stock and real estate prices that have surged in recent years; plus bond yields that are still extremely low. Looks like some extremely choppy waters lie ahead. Just a bunch of random thoughts.

I'm way late on the cigar question but my go-to yard-work/mowing the lawn smoke would be a Romeo Y Julieta 1875 or a Macanudo (Connecticut wrap for both because I like a more mild smoke). Last few summers I've gone with some "Connecticut samplers" which as worked out well.

It sure seems like we're on a track toward demand destruction. If energy stays up, and inflation stays elevated more broadly AND the Fed ratchets rates up all year, this is going to start eating into consumers.

The two-year was in the 2.3% range today. Significant move over the last few weeks.