mattee2264

I figure most people won't want to lose their houses and will cut spending elsewhere to make the payments. What I really don't get is this belief there is going to be a post-COVID economic boom as a lot of income and profits is going to get diverted into paying off debt which is going to mean less money to spend on consumption and investment especially if higher government spending leads to higher interest rates which will crowd out private sector spending.

I gather lots of consumers and businesses are benefiting from payment holidays on their rent and mortgages and various other loans. And for the most part moratoriums are imposed by law making it difficult for landlords to evict tenants or for banks to foreclose on loans and mortgages. Meanwhile these same consumers and businesses are getting enhanced unemployment benefits and stimulus checks and various other loans which I doubt they are necessarily putting towards making good back payments. So what happens? Will there be government funded debt forgiveness? Will we eventually see a wave of defaults and evictions? As we know the vast majority of Americans live paycheck to paycheck so even a lenient payment plan would be unlikely to give creditors/landlords much of a chance of getting whole. And if banks have all these mortgages and loans that are behind are they really going to be in a hurry to make new loans? And as the consumer economy relies on credit surely that will start to bite at some point. I'd be more worried if Republicans still have the senate. But surely there will be a limit to how long Democrats can continue handouts and enhanced benefits?

KKR and BAM invested in Great Portland Estates and British Land respectively in the autumn. I cannot remember the metrics off hand but they are around 70% NAV.

Yeah it seems pretty obvious you do the healthcare workers first, then the people in managed care facilities (you can just roll up with a ton of vaccines and knock them all out in a day) and then move on to outreach to knock off the age demographics. If you do it by age then you avoid most of the prioritization issues and you can make it first come first served.

Yup too busy putting as much pork to dilute Trump's deal as possible so that he could claim is Covid relief deal was the one that made the difference.

My guess is that Biden does not want to be accused of supporting lockdowns so is telling his Democrat governors to ease up.

Maybe he needs material for his next book?

Great read Liberty. Informative and also quite entertaining.

I think the easiest way to encourage vaccinations is to provide checks to people who get their vaccinations done. At least that will ensure there is an economic benefit to further rounds of handouts in terms of getting us quicker back to normal. Probably not particularly correct. But at least it will allow people to see the "What's in it for me?" and it compensates them partly for any risks they think they are running. Basically the same principle of paying college kids to do experimental drug trials. On a related point. What do people make of all the mutant variants? As well as the UK and South African ones another one has been identified in Japan. And they all seem to be more contagious prompting a tightening of restrictions. And we could be in for a good few months before the vaccinations and warmer weather start to turn the tide.

Very easy to play this. Just buy Alimentation Couche Tard. They already have experience with EV charging stations as they have quite a presence in Scandinavia. And the plus side of waiting to charge your car is that you will end up buying more of their fresh food offerings etc. And with a lot of mom and pop stores under pressure they can continue to consolidate the market which is still relatively fragmented. Also they will benefit once people start driving again.

Congrats you must be so proud she is a very talented young lady. She is lucky to have a father willing to support her dreams.

Around 50%. I got in early with energy and financials so up around 50-100% on those but wasn't aggressive enough and too cheap to pay up after they popped in November. I was hoping for a pullback this quarter to add more but that seems to be off the table. So kicking myself at the moment! Smaller positions in real estate, travel, media, healthcare etc. Zero exposure to US growth stocks. But some exposure to Chinese tech. Feeling rather stupid at the moment. I saw a lot of value in the summer especially in energy and financials but was very bearish on the economy and knew we were in for a very bad winter so found it hard to be too overweight stuff that got decimated in March and wanted to leave lots of room to average down. I failed to discount the possibility of early vaccine results or a stimulus deal getting done last year. Now with a fiscal tsunami coming this year and the Fed in no hurry to tighten it all seems far too obvious.

Interesting to see how it plays out. But I am guessing politically there will be a lot of pressure to provide ongoing support as the pandemic wasn't anyone's fault so forebearance, enhanced unemployment benefits, government subsized loans etc will continue. I think 2022 rather than 2021 might be the year of reckoning. I think the pent up demand argument is probably a bit exaggerated. It is probably going to be limited to certain sectors e.g. travel/entertainment and to some extent will displace spending on consumer goods and speculating on stocks. And because of supply constraints these activities will probably become a lot more expensive so it will contribute towards inflationary pressures. And stock markets have already pretty much priced in a V shaped recovery to pre-COVID levels. If the bubble continues it will be because as Grantham argued there is no moral hazard. Stock prices can seemingly only go up with the Fed swooping in to reverse any sharp market declines. And a whole new generation has discovered the joys of easy money. That dynamic could go on for at least another year or two until the Fed removes the punch bowl or inflation spooks markets and undermines confidence that the Fed can keep interest rates low.

Yeah I think large budget deficits accompanied by a recovery of private sector spending could do the trick with higher commodity prices and supply constraints adding some fuel to the fire.

I think what is different this time is the money supply growth is enabling enormous budget deficits. That has a much more direct impact on aggregate demand and as capacity is still somewhat constrained I'm expecting quite significant inflation later this year (that will ease slightly as encouraged by strong demand businesses are incentivized to ramp up)

Naively I thought vaccines would allow us to vaccinate the most vulnerable reducing hospitalisations and deaths and the stress on the health system and therefore a faster return to normal. And actually re-opening would accelerate herd immunity if it allowed the virus to spread around the young and healthy who are probably the most likely to refuse vaccines. But in many parts of Europe national lockdowns are on the cards with governments seemingly terrified about mutant strains and rising case numbers in spite of existing tight restrictions. The message is "the vaccine is our only hope". If I was being cynical I would wonder whether governments are trying to scare/bully us into submission presenting us with the choice between either getting vaccinated or enduring the hell of national lockdowns for most of the year. No idea what direction USA will go under Biden. But if herd immunity via vaccinations is the aim then it will probably be seen as advantageous to keep things tight until enough people are vaccinated which could delay re-openings until the summer rather than the spring. Of course the virus could just burn out in the spring like last time. But double dip recessions seem far more likely, at least in Europe. Interesting to see if there will be any kind of reaction.

The inflation hedge argument is that historically rents have been able to keep pace with inflation supporting higher house prices (assuming of course that rental yields remain unchanged and supply remains fairly tight). The interest rate argument is that if interest rates go up significantly that impacts on housing affordability and reduces housing demand and therefore house prices. That effect can be offset somewhat if the cause of rising interest rates is strong economic growth which increases household incomes and hence housing demand. But if higher interest rates are in response to cost push inflation then most likely higher costs e.g. food, fuel are squeezing household budgets and therefore lower disposable incomes and higher interest rates will be a double whammy. And in the background rising housing prices create their own demand especially if there is a plausible rationale e.g. inflation hedge. Problem with that idea is that overvalued assets rarely hedge the way they are supposed to. Most likely the Fed will keep interest rates low for as long as possible and will ignore inflation that is moderately above their target dismissing it as temporary or a necessary evil in their attempts to prevent a depression. That will probably continue the housing boom setting us up for another housing market crash in the future.

Pretty much a round trip for me. Went into the market crash with too much economic exposure via financials/energy and minimal exposure to Big Tech. Luckily I had quite a bit of dry powder so was able to average down. Big winners: JD.com, Freeport McMoMoran, Barrick Gold, EasyJet, Melia Big losers: Alliance Data Systems, Liberty Latin America Definitely a year of thumbsucking. I was tempted to take a flyer on Bitcoin and Tesla but didn't pull the trigger. I was gearing up to put some money in a broad market index fund but the speed of the rally caught me off balance. And with the cyclicals I wanted to leave some more room to average down in case the winter got really nasty (which it did) but the vaccine developments screwed that up. Still have a lot of dry powder so hoping there will be more volatility in 2021.

He'd do a lot better if he'd stuck the $25k in Bitcoin and put his feet up.

Makes sense. It is much easier to invest a windfall in something high risk and high reward than money you actually worked for. And it isn't as though you can go and blow it on a holiday or bottles and models. It will be interesting to see next year if there will be a lot of profit taking as people have better spending options and stop benefiting from rent and mortgage holidays. Also while a bunch of stuff has gone up 50-100% from the March lows and the more speculative stuff has gone up 5-10x 2021 will probably be a lot more boring.

Guess the question is who the smart money is...Robinhood traders or more seasoned investors representing IB's clientele.

I think there is plenty in the pipeline to keep this going e.g. a fast vaccine roll-out, a big fiscal stimulus once Biden gets in, the Fed panicking over crappy Q4 2020 and Q1 2021 data and injecting more money into the system, US hospitalizations starting to fall as the virus burns out and vaccinations start to make an impact etc etc etc.

I think there are two important aspects. The first as already mentioned is that base rates have an influence on all the other interest rates in the economy. This is indirect and for longer term rates future expectations as to interest rates are more important so for long term rates to stay low markets probably have to continue to believe that the Fed will be able to keep base rates near zero for many years. The second is demand and supply for the various interest bearing instruments. Generally you would expect all the government debt and corporate debt issuance to increase interest rates by increasing the supply of bonds and therefore depressing their price which translates into a rise in interest rates. But the Fed can influence demand indirectly by flooding the system with liquidity some of which will go towards purchasing bonds and directly by buying bonds. And of course the Fed's activities also encourage some speculative activity i.e. buying near zero interest rate bonds in the hope that prices will go even higher and the Fed won't allow them to fall. I think there will come a point at which the Fed loses credibility and markets start to anticipate they will be forced into raising interest rates. That should weaken the first effect and also the second effect by weakening private demand. The question is to what extent the Fed is prepared to override this by stepping up its purchases of debt of all varieties and flavours. The problem is that there is bound to be a huge fiscal stimulus next year which will require a lot of money printing to neutralize. So it is difficult to see any end in sight.

Good point rb. If people tried to cash out the wealth they've enjoyed during QE or if wealth effects on consumption were a lot stronger we would be seeing a lot more consumer price inflation and rates would not be able to stay this low. And of course if everyone is trying to sell their highly priced stocks and real estate that will evaporate inflated asset values. Perhaps the broadening participation in the final stages of the bull market will change things especially when things open up and people want to spend. LC, I think the short answer is you look at the equity risk premium. Historically that has been around 300 to 500 basis points. So if you are fairly optimistic about S&P 500 earnings then with interest rates around 1% an earnings yield of 4% (normalized P/E ratio of 25x) looks fairly reasonable. Within that risk premium is the risk that at some point in the future interest rates will be higher. I think the reason Viking's thought experiment hasn't yet happened is that low interest rates tend to co-exist in a deflationary/low growth world. In that world you aren't getting much growth from the vast majority of equities. So multiples in say Europe are very modest despite even lower interest rates than the USA. The difference in the USA is you have a far greater concentration of growth stocks where you are seeing very rich multiples. If the market suddenly decides that the economy can grow very fast and interest rates can stay near zero then I'd expect multiples to explode. And that could make for a crazy 2021 as the market confused catch-up growth driven by pent-up demand and fiscal stimulus with sustainable long term growth. Oh and the mutant strain has spooked European markets and oil markets today. Obviously every country is stopping flights from the UK. But the cat might already be out of the bag. And while scientists are confident the vaccine will still work against it there is still some uncertainty about this. Probably it is overhyped. But if it is a lot more contagious and scares governments into implementing even stricter lockdowns over the next few months of next year that could be enough to take markets down 10-20% especially as there is a lot of leverage and extreme positioning so a rush to the exits could be messy.

It could be a negotiating tactic but I think it is more virus related. Europe has enough troubles without a mutant strain making it over the border. I think the disruption is exaggerated. Trade patterns take some time to change so while the short term impact will be additional costs due to tariffs and additional red tape that isn't going to be the end of the world. And it will hurt both sides so in all likelihood talks will resume next year.