Gregmal

Come on, let’s hear em. Most ridiculous things people are doing and thinking about doing. Always a fun exercise. A year ago I joked about $200 oil. Seems now more than an outside shot. Today, I’m not buying bonds but am getting tempted to hit up some dirty dirty junk. Maybe not some carvana but how about some of the energy companies? Transocean has some real wild ones currently hoisting bong yields. Berkshire Energy as well has duration. Where’s the biggest consensus opportunities? Meaning, where are there 10 kids all on the same side of the seesaw?

What did the Fed do today? Was at the pool for a big chunk of it and couldn’t find anything. Any idea what they’ll do tomorrow?

No problem. These Solas folks seem intent on selling so its providing a good entry point. Imagine having that size position and decided open market sales into a bad market are the way to go? Idiots. Anyway, just sold some more APTS which I was gonna wait to next Monday on, but CLPR and VRE just said hello so I couldn't resist picking up some more.

Doubled BRK today and added 25% to JOE now double digit position. How easy is the JOE story to understand here? A 5 year old could do it. Go to page 29 of the recent presentation. Press print. Take a black magic marker. Color in all “Joe land”. Then with the same marker color in “public land”….now look at what’s left? Looks like all that coloring spells “Irvine” too….

AOS starter

Good. They can join the techies lining up to hang drywall or work on a rig. Will solve the housing and energy problem!

It’s fair. When returns are backed(Fed put) it’s pedal to the metal. Was there a greater proposition the last decade than borrowing at 1-3% to buy stocks? Some still chose to short stocks or sit on cash. Now, simply, the training wheels come off. Sink or swim. But thinking the world will end or that there’s nothing worth investing in is dumb.

The savings topic actually highlights what I think will go down in history as a remarkable masterpiece of a job done by the Fed to bring the US back from the GFC. Of course the folks like my father who hate the Fed feel resentful and it’s obvious why. But the bottom line, coming out of GFC, what works better? Encouraging investment, innovation, and restoring faith in the financial markets? Or putting extra money in the pockets of people who want something for nothing and obviously got caught with their pants down assuming they’d always be entitled to enough risk free interest to live an upper middle class or better lifestyle?

In just about every instance, investing in and infusing communities and economies with growth capital is beneficial to its overall prosperity. I’ve had this conversation with the savers I’m the family and even a few clients back in the day. You’ve had things that could’ve given you 5-10% yields over the past decade. So it’s not like it isn’t there. But I don’t see how it’s wholly constructive, and largely agree with the Fed on this aspect….retirees, and in general….people who have staked their claim that they already “have enough” through no longer working(“let’s spare the 90 year olds in fixed income and talk about the other 80% for now) should be be entitled to getting more? For doing nothing? In others words give the people with with than they need, more? At least the Musks and the Bezos’ invest substantially in the form of job creation and product innovation. What does a millionaire 60 year old without a job looking to live off interest do?

Whoa, whoa, whoa…rent/housing, is not supply chain? It’s almost entirely supply chain unless I missed something. Wasn’t the bear argument last year from the bear camp they’re gonna build to much? Then they get steamrolled and the thesis was wrong so they change it to “rates!”. Lumber and windows is purely supply chain as are nails and Sheetrock. Energy is stupid politicians. And it’s tough cuz if you gotta drive you gotta drive. But not Fed fixable. Grain and food? Been to the grocery store lately? It’s annoying, sure. Shortages bounce from one category to the next. But pretending like there is some food crisis is silly. There is tons of readily available, cheap food. Still can get a loaf of store brand bread for $2 or less. God forbid folks give up the lattes though. My DD ice coffee have gone from $2.99 to $3.89 in the past year. Bummer. Wage increase are bad for corporations and good for workers. So…underneath all the noise, what’s the issue and how does the Fed have any productive mechanism to handle it? But yea the answer is to raise rates so people who literally don’t want to contribute anything to society via working or investment can make more money in their savings accounts?

Exactly. If you have time inflation at 8% for this year why would long term assets need to be priced as if this is occurring in perpetuity? To hold this belief you need to believe that the 8.6% is never coming down. Given how much of this is supply chain related….I don’t know how anyone holds that belief. Investors don’t need and aren’t entitled to real bond yields. They have had them in ages.

The main takeaway off the sentiment arguments is that folks would do themselves a great service waking up to how it works. When the markets are already off, going down the "should I be concerned" path is dumb and too late. The time to do that was when you were feeling giddy and happy about your holdings. Not guessing whats to come next week. Instead over, and over we hear the Howard Marks speak. Noncommittal, it could go this way but it could go that way...the "who could have known" crap, and its like, as an investor its your job to know, especially if you charge 2/20. IDK LOL come on. Who could have seen oil? Anyone who bothered looking ahead. Who could have seen rates? Theres an entire thread with @wabuffohandholding everyone through rates all last year...Can you imagine if we played Jeopardy like this? Host: Who you like to solve the puzzle? Contestant: You know, its just not knowable. I think I"ll wait and see Host: Yes but you have most of the variables and just need two vowels Contestant: Anything can happen. I dont want to risk getting it wrong...the future is uncertain! Nobody knows! Macro provides the variables. Theyre there, interpretable, and easy to back into specific and favorable situations.

Yup. For all the brilliance on Wall Street, folks so easily forget about the basic principles of supply and demand. All the time.

LOL the Buffet x Mungerita.

We re at 3. Folks are already talking about the “huge” move in rates. Huge referring to a whopping 1.5%. If things normalize, say 4-5% treasury and 7% mortgage you’re probably looking at things slowing considerable but being propped up by lack of supply. New build matters, but who in their right mind is selling their home so they can trade in their 3% mortgage for a 7% mortgage or current market rent? If the playbook is the 1970s look at housing prices and rental rates during the 1970s. There is an incredibly beautiful mechanism with certain types of real estate that allow it to provide advantages to its owners and users in a variety of market conditions. But in general, at some point higher rates become destructive for sure, and then there will be no reason to raise them anymore. Then what? They come back down and here we go again. DugDilligence posted the Mike Burry tweet about mortgage market supposedly going no bid Friday. And it’s like “ok and…..” will it never have a bid again? Will it crash and never come back? Like what are you even getting at? Or are we just trying to panic folks about short term crap again? For all the bitching about inflation, what percentage of folks have a better quality of life today vs 2020? Or 2018? At some point the bogeymen are just exposed as frauds and stories derived from people with agendas.

I’d also add that the thing with residential real estate assets, is that as long as inflation eventually comes down, and in the meantime, rates remain below inflation, you make out like a bandit. Add in the insane supply and demand imbalance, prohibitive costs of building, and amount of capital looking for a home and I’m not sure what kind of declines I’d expect in real assets(other than public market doing the short term volatility thing). Would I own an office in a business hostile environment or a strip mall in rural America? Not a chance in hell. Rental homes in a good MSA? All day. Someone pointed me to this today…very good take on things. https://www.privateeyecapital.com/apartment-reits-are-cheap-again/

Off of this the million dollar question, and really the only thing I think worth focusing on, is how high and how long? Rates being above 5% IMO are certainly possible short term, but there s no way it’s supported for an extended period of time. Which then leads back to the same question many people bungled with COVID, which is, what is the relevance of 1 or 2 years in the course of a valuation? Answer…not terribly much.

In December some people were buying energy and oil and others were worried about Omnicron….

Yup, plenty of people saw it. Even in July of 2021. Same with rates rising. Writing was on the wall. It just wasn’t in the headlines and therefor the average investor paid attention to the COVID news and thought that was the thing to predicate your investing on. You almost never make any sort of meaningful money long term thinking and acting like everyone else. And that especially applies to getting caught up in the current flavor on the month/quarter storylines.

Not December, even earlier than that. Was obvious to anyone looking ahead. Plenty of people saw it. Key was looking out, rather than being caught up in the next COVID variant hysteria like everyone was at the time. Thats how the market works. Same as it always has, throughout the course of history.

100% of a sample survey is pretty indicative of a consensus

In a dumbed down way, something the average investor can apply, I’ve actually found the opposite to be true, almost 100% of time I can recall. The key is genuinely gauging what the “consensus” is and how widespread. But you almost always want to do the exact opposite of what it is, often times aggressively. Remember, a short 18 months ago Peloton was thought to be the Netflix of fitness and on course to earn 5x returns over the next 5 years from a $120 share price. And oh yea, you just “couldn’t short” the market.

Case in point. Felder Everyone is bearish as hell and claiming 100% chance of recession, stocks further to fall, investors asleep/complacent….but can we actually find “anyone” let alone “everyone” who is saying this? Like LOL

Quick but interesting read. https://markets.businessinsider.com/news/stocks/burry-grantham-einhorn-stock-market-outlook-bubble-crash-inflation-recession-2022-6?amp Whats weird is we keep hearing some people say the consensus is that inflation is transitory and that the market is complacent and expecting a soft landing. FYI “consensus” means “this is what everyone thinks”….huh? On Mars maybe? Only consensus amongst pretty much “everyone” is that a recession is inevitable(duh, when has that ever NOT been true) and that inflation is going to be around forever, and that the markets are doomed.