Gregmal

Yup. Textbook vs real world. Rates rising means debt will be more expensive and therefor it will HAVE TO! dent profits…..real world? Go look at most balance sheets. Debts a non issue for most. Add in a perfect excuse to jack up prices…it was visible from afar for sure. Mostly everyone was prepared. As we discussed earlier, the ones who get fucked are the mom and pop companies. Same as COVID.

Yea there’s a lot to it and it’s never simple because usually once it gets simple, by nature, it changes, that’s just how markets work. Really, in a funny way, if everything came down to sentiments the markets would either be at zero or all time highs, all the time, with little in between due to stampede mentality that has only grown with internet and auto trading. So it’s important to pay attention, but also ignore noise. Use noise to identify extremes. Right now hardly screams extreme to me. Too many negative Nancy’s still. Too much cash built up. Too many bond bros. And again, broadly speaking, too much of the market is just meh on valuation. Good not great but hardly expensive. Last year 2H did seem extreme. Q121 to me did with spac and short squeezes. The constant “you can’t short the markets” talk which of course is always a signal you want to see if you want to short the market. Basically every time in my life little things become big things, you want to look to get on the other side of it. CPI reports, daily COVID case counts, Fed meetings, etc becoming events that move markets in massive ways….they’re just not that important in the long run so if you’re getting that price action it’s a signal. So IDK, just stick to your knitting and circle of competence and wait for things to come to you. In a way it’s why margin is sooooo helpful to me. As long as I’m over 100% invested, I can trade, hedge, scratch all those itches because it’s money that isn’t mine so I’m entitled to nothing and therefor worrying about tops and bottoms and catching all of the moves in between is irrelevant. If something goes 10-78 and I only get the 20-25 part of the move, it’s still money I wouldn’t have made if I wasn’t levered. Whereas if I was 60% stocks and 40% cash and I bought at 20 and sold at 25 I’d be fuckin pissed if it went to 78. So everyone’s just gotta roll how they see fit but finding ideas is crucial and it’s always something that can be done whether at highs or lows or whatever.

How so? Markets aren’t demonstrably higher than years ago. Lots of the real big economy stuff like Dow components for instance…Dow pre COVID was what? 30k or something? So 3.5 years later it’s 20% higher? I think the companion error is finding excuses not to invest at either the top or the bottom because it’s indicative of a strategy that probably leads one to always be underinvested or said differently, never invested. It comes back to that convo people tend to have where they state matter of factly, with perfect rear view mirror vision, that…it was so easy investing the last decade because all you had to do was follow the Fed. Low rates and money printing bubbles….blah, blah, blah. And invariably, they use that same fallacy in terms of logic to justify their position of currently “fighting the Fed” and therefore holding lots of pansy positions. But then you ask if they were levered big and super long call options since the past decades exuberance was so obvious and the answer is always…..NO! Often they were positioned….drumroll, EXACTLY the same way they’re currently positioned today! People do a lot of really weird shit to psychology remain convinced of their correctness even when there’s mountains of evidence suggesting otherwise.

I think some of this just highlights the biggest problem that many otherwise rational and intelligent market participants have…they are fully convinced that being a good investor is about “not losing money” and they quote and misquote guys like Buffett all the time and totally misread everything because they’re chickenshit scared or paralyzed by fear or search endlessly til they find a reason to convince themselves that it’s tough sledding out there. It’s masked under the guise of “risk management” but it’s stupid. You don’t go to a BBQ or buffet and then sit around trying to find excuses and reasons not to eat. Same way you don’t go to the stock market and try to find reasons not to invest. Rather you go to the stock market to make money. So priority one should not be all that other bullshit. It should be finding ways to make money. Then once you have them, you approach the risk mitigation strategies and positioning and integrate them into your overall game plan. If you can’t find ideas consistently you just shouldn’t be in the stock market. Winning isn’t for everyone.

If the recession doesn’t unfold, what’s the backdrop? An environment where the consumer is healthy, prices still steadily declining, employment strong and wages moving up, along with rate cuts probably 6-12 months out. That seems bullish to potentially wildly bullish. Rates went up to “fight inflation” and as inflation is done you better believe the Fed will acknowledge the harm it’s doing to the average citizen as far as housing goes so you won’t need “something really, really bad” to occur for rate cuts, which is what the academics are preaching…frankly I think they start cutting q1/2 2024 which will tank mortgage rates. Many of the negatives and naysayers are wayyy too academically oriented and relying on first level logic such as “every time this has happened, such and such has happened”(which totally ignores what is happening in the real world in favor of the textbooks) but this is plainly poor logic simply because markets do evolve and especially in todays era of information, much more quickly than folks think. Like everyone was and has been prepared for higher rates since what? 12-18 months ago? Corporations already wisely termed out debt. We were assured inflation would cripple profits and instead they are now expending margins. Think we just need to be flexible mentality and eb and flow with how things unfold.

Think folks are also underestimating the ability for companies to be flexible. Everyone reporting this Q is boasting about their pricing power. They won’t outwardly use the word margin…like look at Pepsi earnings, they go out of their way to avoid saying it, but all that “inflation”, at least in many of the consumer product segments, was basically price gauging. If things weaken they’ll give some of that back in return for volume.

Freed up about 10% of SPHR and 50% of CARR

Don’t worry though, because when the next 5-10% down move occurs, the guys who missed everything will have called it, will scream and tweet SUPER loudly and proudly, and be totally vindicated. Lol

Nice idea. Just put in a no look order for $5k of $210 Jan puts and got filled so seems liquid. Been searching for stuff like this if nothing else cuz VIX is super low and theres gains this year to mess with.

I had the same problem in 7th grade Trig as I did when working with people managing money. It often goes as follows... holy shit, how did you arrive at that answer so quickly? Me? IDK, just kinda made sense to me. Did it in my head. Show your work! Why? Cuz, you have to or it doesnt count! Me? Nah...its a waste of time. I got a C in Trig and had to retake it in 8th grade because the teacher insisted showing your work was 50% of the credit. I just kinda cared about being in the right place at the end of the problem. To my knowledge he's still working....

We keep coming back to this but inflation didnt start 12-24 months ago. Theres plenty thats done well over 1/2/3 year time horizons dating back to the start of the inflation which was summer 2020. If we redefine holding periods constantly of course they'll arrive at the desired conclusion but I think it simply makes sense to start the goalposts where inflation starting spiking them and bring them to current day. Not every single year, or every single TTM holding period, in every asset class, all the time, will be positive or "the best" asset allocation decision, however its very clear what has durability and resiliency and what doesnt.

J-bills providing 15% today.

Class A trophy always wins. No matter what asset class or macro situation. If you own the best of something, anyone who is even remotely interested will want it.

We were told stocks arent a good inflation hedge and from July 2020-today the verdict is pretty clear. Real Estate at decent valuations and with certain tailwinds too. I dont even think its a debate. You just wanna own assets through the cycle. Apartments stuff I think is ok. Nice, safe alternative to bonds but still for grandmas. Awhile ago in my 2018/19 housing thesis I figured that rentals and homeownership would both go on a monstrous multi year, maybe even multi decade run, but with some see sawing where one is clearly favorable to the other. Right now you clearly wanna be on the homeowner/homebuilding/home related resources side of things after the apartment stuff just had its monstrous run.

Speaking of investments you can make with a longer term horizon...I gambled on some XRP right before it was delisted from Coinbase figuring the settlement or victory being favorable was inevitable. 3x'd that recently with the court win. Also had made several investments in Ripple preferred stock at valuations translating to $15-28 per share. Just got notice that the company is tendering for a chunk of them at more than $61 a share. None of these required anything more than a gee shucks I see lots of ways this works but dont have a time horizon and dont care if it takes awhile approach. All made possible by a higher risk tolerance due to life being secured. Whereas in 2011 I passed on pre IPO Facebook because I needed a house, car, and boat LOL.

Simple. My house, my rules lol. Boating/fishing works as my decompressor. Lets me get away from the daily grind.

Exactly. I told myself and my wife(then GF) in my early 20s that once I had a decent house, a decent car, and a boat, the rest would be easy. And it really has been. Once the aspirational shit and necessity stuff is out of the way, you're just using money you dont need and money that has a very long time horizon and runway and investing that to me has always been pretty easy.

Yup. That and I cant tell you how beneficial the financing element is as well. I knew so many people who were smart and risk averse and rushed to pay down their mortgages the pst decade, or chose to be all cash buyers, that now cry thinking about the idea of having 6-7 figures of 30 year fixed under 5% locked up.

The people who continuously have to work or be bothered by their rentals are usually cheapskates who don’t want to spend money to fix problems but rather bandaid them. I have 4 and I do virtually nothing for them. If a major appliance or something goes, I pay up to have it fixed or a quality new one brought in. That or their lease terms are dumb. If your contract states the unit must be returned in the condition it was handed over…you rarely have an out of pocket expense. My leases even state that “there is no such thing as normal wear and tear” lol. But in regard to the topic here I am simply talking about a primary home. I would imagine most here have them and yes I don’t even think it’s debatable. Another overlooked reason is the built in savings mechanism that occurs with principal pay down. When folks pay their rent they look at what’s left and make whatever decisions they need to. When you pay your mortgage you’re auto saving right off the bat.

Yea I just don’t get this sort of spreadsheeting every aspect of life mentality. But hey if folks think they can live in an ETF til they die, have at it! I’d rather own places I enjoy and have cashflow optionality and then build around that while everyone worries about termination or increase notices annually.

Yea I’m not by any means pointing this “at” @TwoCitiesCapital but mainly the logic…..but what kind of schmuck is like hmmm…should I buy myself a house, or some Bitcoin? Lol like it’s just totally lunacy. Or lives in the rear view mirror where everything they buy they go back and look up everything under the sun and if they find anything that performed better feel like they made a bad decision? I just can’t even process that. I just look to own good assets and as many as I possibly can, in a responsible way, and that’s it. No room for a perpetual loser like cash.

Totally. I could also care less about people’s performance here. It’s about the process and it’s an excellent mix with overall a very above average skew in terms of acumen. Remember when people would whine how they can’t find any good ideas here? LOLzzz And it definitely ain’t Cardboard. Forget what exactly it was but he bought a camping park around Québec or something recently that he’s busy with.

Same if I won the lottery. For the normal guy though, playing a normal risk/reward game with the side kicker being “life consideration”, checking off the shelter box greatly supersedes spreadsheets and lottery tickets. I don’t know anyone who bought speculative stuff like BTC pre popularity who wasn’t playing almost entirely with disposable money. Was pretty much the same as venture capital or pre ipo investing.

The difference is that when you buy crypto to gold or whatever, you are 100% banking on appreciation and thats it. Theres far more to it when you buy a primary home. Not everything, to everyone, is purely a financial this or that situation. How many older folks have zero fucks to give because their mortgage is paid off? Same sort of thing. If you took out a mortgage in 2010 or whenever you've just about cleared the tipping point regardless of appreciation and life is about to get much easier and more fun.

Make it $500