Gregmal

I’ll happily eat my words and admit I am wrong if in a year or two we re still seeing real world inflation of 10%, let alone the 20 or so we saw this last 12 months which we re being told is only 8%….but it’s hard to see this getting much worse than it is and the bottom line is that the majority of capable people, normal people, have eaten this like champs and are doing very well. If the bottom rung really have a problem with $4.50 gas…well, vote for that to change. It amazes me how even here, you had smart people basically saying, Biden will be a disaster but I hate Trumps personality and let that influence their votes. While stupid, they I assume at least have their money to fall back on. Those whom are really struggling and feeling the pain of $4.50 gas? Maybe don’t be so arrogant next time you get to cast your vote? You can’t afford an EV anyway. Housing they’ll loosen lending standards and implement incentives for lower income and first time. It’ll all take a couple years but again, the answer isn’t to destroy peoples portfolios and home equity so that rich people can get cheap assets…that is ALWAYS what happens when the economy slows down. Middle class and under get screwed and those with resources just come out better off. We keep coming back to “the bottom 50%” rhetoric, but as of today, that’s hardly true. They have the most robust job market for blue collar labor that we ve ever seen and those whom own houses have tons of equity. Many are taking advantage of that. Those who aren’t can’t become the excuse to ruin it for everyone else. All the things I heard people claim will help people, in the real world, don’t actually happen to those people when the economy stops. They lose their jobs. Can’t get credit. No shot at buying a home. No savings to buy stocks….But hey, let’s make things more affordable for them while we accumulate more assets….

I mean can we at least agree that if you need more money and don’t think to look for a better job but instead come to the conclusion the solution is to vote for a candidate who’s just gonna make your problems worse that it’s kinda your fault and you’re beyond help?

I mean I get some of it, but in the other side, why did 2021 make Wall Street soook mad? Guys were livid. Even the buffets and numbers of the world, the vitriol they speak with when talking about bitcoin and GameStop? This stuff always happens to pop up when normal people happen to be doing well in the stock market. No one trashes Tiger funds or Bill Miller for buying the same stuff? There is a real animosity on Wall Street towards Main Street and it’s kind of disgusting. I don’t agree with all the speculative stuff and don’t encourage people to be wild but it’s their money. If they make money, why hate on them?

Survival of the fittest. That’s life.

I mean why are all the rich guys who are lobbying so hard already short or in cash? Isn’t it clear the system is rigged against the small guy?

Ok but the rich are always gonna be fine. Who gets hurt most when you price people out of housing? Cash buyers or people with home equity? Nope. The lower 50% have an opportunity I’ve never seen in my life with the job market. Those that ARE working and ambitious are making more money than they ever have. I have tried bidding out a $5000 tree removal job. Wait time is two months and half the contractors never even quoted. Who gets hurt when you hit the panic button on the credit and equity markets? Techies making 300k base, or the guy with the retirements savings who now sees a recession and has to worry about layoffs? Corporations always react the same way, they cut the bottom down and give some middle level 3 jobs. So the solution proposed fucks those we are claiming to “help”? Come on! If we push energy production that’s tons of new jobs. Even better for the little guy. Know nothings make $100k in the oil patch. Who got hurt by the tech bubble burst and crypto crash? Bill Miller or the mailman hoping to finally have some wealth? It’s the Melvin Capital philosophy that people like Ackman are proposing. How dare you take my short selling profits I was entitled to. You didn’t play by the establishment rules and robbed me of additional wealth I didn’t need in the first place. Punish them! I was entitled to those profits because my research is better and those idiots had no business doing what they did and getting to where they were in the first place. The biggest element? Unless you believe the worst inflation is ahead of us, which I doubt, we ve already gotten through the worst of it. Everyone needs to suck it up.

Start looking at who’s saying what by sampling interviews. Media outlets. Politicians. Folks on Twitter or whatever. Hedge fund guys. More often than not, they 1) have way more than they need 2) many multiples of what the average person has 3) a belief that raising rates will hurt the market and economy 4) they’re positioned to benefit or acquire more assets in the event things unfold the way they are lobbying. Little fucked up no? In a nutshell it’s “hey inflation is a big deal you need to kill the economy(didn’t we just hear this in February and March of 2020 as well from these weasels) and yea I’m short or predominantly in cash and hope to buy everything when it’s lower….

I mean really think about who and what is driving this “rates” discussion? Then ask yourself how raising rates fixes anything? The majority of the “inflation” is absolutely fixable and the result of stupidity. Energy, already discussed…stop being hostile and pushing this climate bullshit. Consumer products…thanks for finally ending the mask and vaccine mandates. That’s correcting now. Housing, again, fix the supply chain. Cars? For real? We re having trouble producing cars! GTFO. Rates have nothing to do with fixing these things. So why are people pushing for them? Again, who’s pushing for them? Look around. The “inflation” started COVID crap + like 6-12 months after. It’ll probably end 6-12 months after the shit stops which IMO started around February or March. And just like COVID itself, the answer is to just suck it up and deal with it, not start letting the bureaucrats interfere with things.

In a way we are regaining the American dream. If people want to work, they can and will get paid very well to do so. There is so much demand for blue collar labor there is no excuse for not being able to make a better living. We re talking putting in fences, painting, landscaping, tree removal, waiters, service/hospitality, etc. All stuff that’s accessible to everyone. In a sense, much of the recent hiccups are just elitists whining about not being able to buy things they don’t need, having to compete for stuff they already have, and being bothered about not being able to buy assets cheaper.

If you just go out into the world what’s going on is just incredible. Granted I am younger, but I’ve never seen such widespread evidence of people doing well. I live in an area that’s more middle class than high end. Nothing wild. But it’s eye popping. I’ve been all over the eastern third of the US the past 3-4 months….it’s everywhere. Some areas much hotter than others but things are good. And people continue to miss it because they’re busy looking for boogeymen that don’t exist, or relying on spreadsheets in their home office that tell them this minor change totally fucks up that, and that once that’s fucked, everything goes to hell, but that’s just not the way the world works. We ve had people begging for the consumer to collapse, making up narratives, etc, and just the opposite has been occurring. In late 2021 everyone said OMG they’re tapped out but it seemed obvious it was like “no, you guys just started doing the stupid COVID bull shit again”, and sure enough, once that nonsense stopped, things accelerated. Then it was oh the stimulus checks are done, consumer is tapped out starting in January….nope. Now it’s what? Rates went up 2 points? Who cares? Let’s look at that. First, anyone with a 30 year fixed is golden. Second, how are most companies effected? If the debt you already have was well structured, it’s not a big deal. If it wasn’t, well, that’s bad management. But can anyone point to any good companies that NEED to pile on expensive debt going forward to be relevant? If 1-3% increase hurts the company it was probably crap to begin with. The best example of this is with REITs because they all use the debt markets. Spreadsheets extrapolate these massive changes based on increased borrow costs…but what’s the reality?, rents have been growing teens and higher. Property values have exploded. Fundamentals are insane….but we re worried about paying a few million more per year in interest on slivers of the capital stack that needs refinancing? Dumb dumb dumb. As long as the entirety of the company’s debt isn’t coming due all at once and isn’t covered by a combo of cash flows and asset value…what is the big deal? And if it’s not? Why buy a price of shit like that in the first place? How is the average person effected by rates? Mortgages, not if you have one and if you need one it’s overblown as has been detailed a million times. Credit cards? Does it matter? Most consumer account rates were already 25%. Now it’s 28-30? So what, if you were using that to begin with you were already in trouble. People have tons of equity in their homes and job openings galore. The more you really dive into it you start seeing how stupid it is to magnify a few point increase in interest rates. And then there’s the whole thing too that if recession occurs then rates come back down….if most of the inflation related stuff has peaked, we re off to the races. I mean the government lies we know that. This 9% figure was really probably double that. Things will start comping those elevated figures and level off on the headlines. Supply chain driven by capitalism will moderate. Used car prices already peaked. I think it’s starting to become clear that the economic activity this summer is going to be like nothing we ve ever seen before. Party like the roaring 20s knocked up South Florida in 2005 and the kid came out and they named is summer 2022.

Anecdotally, have been to 4 different Home Depot’s this weekend. The parking lots look like tailgate parties.

Also cuz you asked for pushback 1) these people don’t own homes 2) if they did, they’ve gained substantial equity 3) mortgage payments include taxes and homeowners insurance 4) you get child tax credits on the tax return 5) why do you have 2 cars? 6) I have Sprint but my phone bill for 6 is $156 a month 7) groceries again, if you’re not shopping at Whole Foods, you can still buy a days worth of food, 3 meals, for $25 or less. Eggs are $2.5 a dozen. Eggos or pancake mix are 2.50 a box. Sales on General Mills cereal are $2-3 a box. Breakfast done for the week. Mac and cheese $1 a box, chicken nuggets $3-5 a package with 5 servings, frozen veggies $2-3 a bag. Lunch done. Boxed pasta $1.50, sauce $2, head of broccoli $2, salad $3 a bag. Dinner done. Box of granola bars and fruit snacks, pretzels, $7 combined. Snacks done. It’s doable. People are just greedy and gluttonous. 8 ) Again, you can get $15-20 an hour right now working fast food. You can move your hand in the same motion you do masturbating, with a paint roller and get $40 an hour. You can cut lawn for $30 an hour riding a sit down mower. I think it’s not a crisis to put it mildly

Here’s my thing with this…hasn’t this portion of the population ALWAYS lived like this? Not trying to be an out of touch schmuck, but I mean in my recollection, they’ve always been paycheck to paycheck. They don’t really drive any real economic indicators the same way they don’t contribute to the tax haul our government receives. An upper class family paying 20% contributes infinitely more than a lower class family paying 15-20% taxes. Additionally, again, there are so many job opening for these types of people. You can paint walls for $35-45 an hour. You can dig holes for a contractor for $50 an hour. At some point they need to look in the mirror but the overall economy, IMO, has never really been driven by them. It’s driven the people above them, plus the people in that group who have ambition.

Without mentioning names, I think there’s still one remaining poster boy for the past decades investing environment which hasn’t really been hit bad relative to other stuff, with a guy you don’t want to bet against, in businesses that are pretty cool….that might be a ridiculously asymmetric short here.

Think in general you have to be careful with generalizations. How far has “the market” fallen if you back out energy from the index? My big thesis in 2020 was a blow off top in tech and then new economy leadership changes. Value rotation started in 2021. Sometimes it’s painful. But I still see that trend continuing. So yea, high multiple stuff probably has trouble. But low multiple stuff probably rerates up too.

Yea I do that sometimes. LOL we are talking about similar things but yes “the markets” and SPY, totally unattractive to me. I luckily sold all my high multiple stuff before things fell off. Luckily, you can find plenty of companies like BC, WHR, GRBK, BXC to name a few, trading at 5-10x. I think stuff like that, hinged to the real economy, robust cash flow, rather than a high multiple…..probably does ok. If not a little better than ok.

I mean can’t you simplify some of this. Forget the entire market, SPY and all that junk. I don’t invest in etf or index funds. Focus on the consumer. Folks are good right now. And if they need more money…..we’ll there’s tons of jobs available to fix that. Focus on that universe. There is hardly a scenario I can envision where all of a sudden no one is hiring anymore. If anyone sees one, please throw it out there.

I think 4% inflation is a nothing burger. People have been getting 3% raises every year just cuz. Now you have the most robust job market we’ve ever seen. Energy going higher is multi faceted, but inevitably will lead to greater energy production. Which will….further increase the demand for labor. If you had to draw up how the roaring 20s were born, it would be exactly as we are seeing it unfold. My wife the other day turned down a job offer with a 20% raise because it required driving 45 minutes to work 1 day a week. That’s happened multiple times now this year. People are gonna get paid. Don’t feel bad for the tech engineers we hear about getting laid off from the $500k a year jobs. They had their decades of excess and now it’s the middle class workers turn.

If much of the "inflation" inputs come down, doesnt that enhance profit margins in a bunch of sectors? You think NVR is lowering their building prices? Coke/Pepsi? Live Nation? Ford?

Well yea, those levered cable cos suck anyway LOL. I generally even in normal times dont like stuff with debt unless its fixed rate and termed out. I would think bond yields normalize a bit, but not sure how we get carried away with it. If inflation tanks the economy then rates come down, no? If it normalizes, they stabilize and probably head lower from here simply because of where the rest of the world is at. So what are people betting on?

I mean even the simple concept of inflation, shouldn't really apply to first world countries due to the principles of capitalism. It happened here, because of covid, because government started screwing around with stuff. Locking people in their homes, handing out money, putting companies out of business. This isnt obvious to people? When we had black market snout protectors selling for $30 a pop...making masks was incentivized and now we have so many they are given away for free. This same thing can be applied virtually everywhere. Especially commodities which are driving the end products higher. We are basically through the covid shenanigans everywhere in the world except for China. Even there, stuff will normalize. And as it does, all this stuff comes down. Is the very picture of that chart on these inflation inputs not the overridingly dominant theme of the past two years? It doesnt just apply to Zoom stock. Down, huge spike up, then normalization. Seems simple and obvious to me.

Do people really think inflation is going to continue at 8% for the next several years? Its funny to me how last year there were like 2-3 people here tops who said this would happen, everyone else was in the transitory, camp. Now, everyone thinks its 5-10% a year in perpetuity. I guess thats why markets move and sentiment is powerful. But again, most of this "inflation", is fixable. So yea, tech stock based comp will blow for a few years. But the idea that markets need to price in 5%+ inflation OFF OF the already elevated base, seems to a little ridiculous to me. Similar to the housing market, the labor market is so tight that people ARE getting meaningful raises simply due to supply/demand imbalances. We all know the government lies about inflation. But again, theyre handling it right now, exceptionally well. Dining, travel, home improvement. AT THESE PRICES. So we can talk generally about "oh inflation"...great. Plug in x% inflation in perpetuity and get a crazy bearish picture. Tell me how stupid shit like 2x4s, automobiles, desktop computers, etc....are going to go parabolic on prices for the next half decade? I'd take the other side of that bet all day. Energy and housing will take time, but Im pretty certain policies will start shifting either soon, or starting in November to be more favorable on that front too. It just seems like we have big and popular story, and people are getting carried away with applying it to the future.

Which to me sounds like you are implying that there’s still a huge wave of folks getting big pay bumps? So they’ll be joining the new car, boat, home improvement, and travel/vacation/entertainment party as well.

Blantons on the night fishing trip.

I have a hard time seeing the market as a whole get back to highs any time soon. Energy would have to play a part in that and I think energy pushing significantly higher would be bad for everything else. Same time tech is probably fairly valued now, by and large. A lot of consumer stuff is dirt cheap based on the recession fears so my guess is that does ok cuz the real world economy is still strong. So compared to other declines I don’t think this is done per say, but I don’t see how it’s warranted to go materially deeper. Most of those other things had some sort of crisis or chaos. Here, literally nothing has happened and the underlying economy is strong. People are lazy and blame the Fed, but why? They did exactly what they’ve been telling everyone they’d do. That’s a false narrative IMO. This unwind I think really started/topped on the November 2020 vax announcement. It’s when the “world will be different” stocks, most tech stuff like ZM, PTON but even Z, NFLX, ROKU type stuff too, gapped down hard and then just whimpered and eventually got brought back to reality. Eventually the other non fundamental drivers discussed in other threads, details by muscleman among others, kicked in. Anyone see how brutally funds like Tiger have been annihilated? Nope they just focus on ARK. The confidence termites came. But there are few of those left who haven’t been punished severely. Even the crypto bros got it. Wednesday and Thursday I found myself genuinely looking at some stuff and saying wow these are unconditionally great values which I have had a hard time doing for the past year outside of select special situation stuff. So again, idk. Real world is strong. Outside of the rich schmucks like Ackman lobbying for economic destruction so they can profit personally, I don’t see anything really hurting people. They bitch about car prices but still buy new cars. Grocery bills up 30% but that’s a few hundred bucks a month for most, so what? Gas higher, maybe $20 a tank more, manageable. Housing? Well that took a generational GFC crisis and a decade of underbuilding to create and there’s no way to reverse that freight train. It’s hard to claim though that the majority of the market is massively overvalued anymore.