Gregmal

I think @maplevalue is getting at the bigger picture. To your point above, NO! The trend is already in place, which is what you want to see! I'll elaborate a little. Take your points above. Theres so much money out there, and theres your spectrum of options. You have cash at the top and IDK, crypto or equity derivatives or some shit at the bottom. Fixed income you have munis and then you have junk bonds. And everything in between. We've had a 40 year bull in rates. We're at 1.5 on the 10 year and negative most elsewhere. Its not a matter of if really, but when this market gets disrupted by the forces of nature and those things that are out of the control of central banks, etc. We've already talked on other threads how if rates stay low, theres good money to be made in a bunch of RE based stuff. But what Im getting at here, is essentially, when that rumble starts to get real and the cash/treasury crowd gets forced out the risk curve...where does the money go? I would think MBS is next on the safety ladder but those too share unfavorable dynamics and lets face it, the spreads arent even that much better. You've got a lot of good evidence out there that the foreign buyer of US MF is just emerging over the past few years. Why? Because MF housing is largely a US thing. Most overseas dont even know what the asset is because they dont have the same type of stuff over there. I have no clue why, but these mini campus type rental complexes just dont exist in lets say, Europe, the same way they do here. But in terms of profile, they are extremely attractive once one does some half assed or better DD. So I think you have a lot of pointers saying that it could be the asset class with the greatest risk/reward over the mid/long duration. I mean look at the MBS...this was a totally fringe product that only started emerging in like the late 70s. Was still off the radar of most till the late 80s. and peaked 20 years after. Today, the trends happen a lot faster, but theres a lot of overlap in terms of the bull case for these assets. If not this, any suggestions on what type of asset and risk profile becomes the next in line? Thats the trade Im looking for.

Probably somewhere in between. While some dont like the loans, this is why I love them...they pay outsized rates and most have purchase options. You'll have to shuffle with it a bit because the developers have buyout options which is were a good chunk of the one off earnings have been coming from....so that question if you want to get real granular is where the trade off is when a developer buys it out, IE theres massive profit bringing it to market, vs when the company takes the property...but no doubt its below market however I wouldnt underwrite the assumption thats its a tick over construction cost either.

So basically if you have the ability to access cash at 0 or negative rates but arent allowed to take risk. Makes sense. The inflation/deflation argument is also interesting. After a 40 year run on the side of lower rates, I know where I sit on this. But thats a good point.

Got it. Its definitely the latter on a raw basis. The land value(especially with entitlements and whatnot) does adjust as its the most supply/demand sensitive component. But it definitely doesnt cost anywhere near where the finished product trades to build one. Similar to industrial where everyone sees a shell off a rural-ish corridor and thinks WTF, how does that, plus a lease trade where it does? But there's value in the aggregate despite not being "that hard" to build.

As I said, I get the "why they buy Treasuries" argument, so while its there, the logic sucks, and instead maybe focus on an MBS...why is an MBS looked at so much different than what a MF unit offers? Side note, re: parking money in Treasuries....why even bother LOL? Like isnt it just a waste a time? Just leave it in cash...whats funny, is theres a bunch of suites out there with corner offices who actually get paid to do this... Imagine that? Just another example of how the financial system is full of waste.

Its not farfetched really, you have seen the same sort of thing play out within the industrial warehouse space over the past few years as well. The market had a certain perception of the risk profile that turned out to be totally off base. Your prime stuff in industrial was trading at like 7/8 cap. 10s weren't uncommon. Now you're at 4. I even laugh because you look at the MF run, and earlier in the year it was like OMG 3s! Then a few months later everyones like "oh fuck, 20% rent bumps! now it makes sense!"....but the force is strong on this, and the larger backdrop I think has to be given consideration. A treasury pays nothing and relies and the full faith in the government. As I said earlier, I won't argue with the "why" behind the boneheads who buy those. But a lot of the reasons even on paper are the same as why you'd buy a MF unit. But then you get to an MBS and MF? There's no comparison. Even safety of asset. In one case? well we've all seen what happens in the "one case" scenario. You've got a piece of paper and a mess and load of legal expenses should you need to enforce the contractual stuff. a MF unit? You have tenant diversification and short term leases and in a good area will always be filled, even during a crisis.

I think the Treasury argument can be made both ways. But if we want to look at an MBS, which is absolutely comparable to a treasury, theres still typically quite the difference, which was largely my point. MBS and even single mortgages are 100% correlated to treasuries and generally the tightest on any asset class in terms of spread. By why is an MBS? Probably liquidity and laziness and nothing else. Risk profile too? One is secured by essentially the same cash flows as the derived logic behind a mortgage, but diversified and marking to market every 12 months. A mortgage or subsequently MBS has fixed coupon typically and prepayment risk. I can see the textbook reasons why one would prefer an MBS, but dont think they make any sense at all in the real world. Same for a treasury. You have nothing but the guarantee the government will give you the money back. Otherwise you have nothing and get nothing for the privilege. I was reading earlier in the year that part of the massive run in MF assets has been just this though. Its fairly new phenomenon but specifically banks, insurance companies, and foreign capital. I recall even a few years back a big JLL reports on like 50% increase in foreign buyers or something like that. Theres so much of that money out there that a shift in thinking can create a massive wave. I pretty much agree. Its totally boneheaded and when you evaluate the real world benefit, liquidity is the only one. I think its far harder to gauge this today because the market dynamics have gotten a bit whacky there past year. That and the costs will obviously change depending on area. Well located Southeastern MF, offhand, pre covid(dont have anything and cant recall anything post covid documenting anything newer) you're probably looking at $80-100k an acre and $75k per unit, plus maybe another 30% for the stuff the developer/contractor handles, loosely speaking. Bringing it to stabilization would also factor in. But its very regionally sensitive. So if the basis of your question presumably relates to the attractiveness/profitability of building these, and the supply/demand effects thereof, this is potentially another argument as to the benefit of the asset class. Inflation gets really hot, and the cost to build soars, making new build much less practical. I have a few friends who do this sort of stuff in FL and even there, Im hearing how these constraints today are holdings folks back.

So I keep hearing about how obviously 3-4 cap rates on MF units is a bubble or is too frothy or how people dont understand how this can be or any of the usual nonsense. Can someone explain to me how a treasury trades where it does, with zero inflation protection, or a mortgage gets sold to investors with a 30 year fixed coupon at 2.5/3/3.5 and liquid as water....but having what is essentially a diversified income stream tied to the same underlying feature(a place to live, in many places with a better, known, and desirable location) with 12 month mark to market inflation protection not an absolutely superior asset? You can have a mortgage or MBS trade treasury + a couple points, no one bats an eye. Either this makes no sense, or the current 3.5/4 cap in multifamily is arguably a bargain...cant have it both ways. Just trying to wrap my head around how folks think these things should be trading at what? 5 caps? 6? Granted they'll never trade on par with Treasuries bc of obvious reasons, but why shouldn't these be on par with, or superior to mortgage tied investment rates?

In the face of a $600-$900 monthly subsidy, $2000 monthly rents for anything in the country near a major market all of a sudden looks quite cheap. Look at the real recovery story in NYC, IE, its NOT happening. Jobs still haven't come back. Offices are empty. But housing/rental prices? Wayyyy up. Its already a free for all and a large part of the country is totally in denial about it. Just wait til they come around.

I think its still very early. You have something like the Child Tax Credit which is putting almost $1000 a month into the pockets of a lot of folks. Some more. With the FHA loan cap something like $700k on a 30 year fixed you basically have the government covering 30-40% of a $500-600k property's monthly carry. Thats just one program and lending standards are fairly tight right now. Long way to go. Theres a reason the average home price is almost $400k now. The rest of the stuff is merely validation that inflation is here. Some might call parts of it a bubble and I wouldnt argue, but as Kuppy said, you're better off buying toasters than holding dollars. Not everyone knows how to invest LOL.

https://www.cnbc.com/2021/09/27/fed-chair-powell-to-warn-congress-that-inflation-pressures-could-last-longer-than-expected.html Guess its just gonna be this game where we say its temporary until it stops. Shits gonna get real whacky when even the dumb dumbs who believe the politicians and media realize the transitory narrative is bullshit.

Yea IDK. Its shocking to me how scared most people are of "losing money", which in todays day and age is basically defined as "suffering" a paper loss or dealing with volatility. I dont take new investors anymore but when I did, part of the process was avoiding folks seemed too preoccupied with the idea that the stock market is dangerous and risky. As I said earlier, its a HUGE advantage going into an investment not being scared. I cant help but think this is a byproduct of the Feds grand experiment where they've more or less snuffed out volatility. Now every time we get a 2-3% decline everyone thinks "the big one is coming!"...

I'll quote the guy who's style I randomly end up finding a good comp to some of my own. Everyone likes to talk about how he blew up even though he never really blew up and they like to make a big deal about his names that didnt work like JCP, HLF, VRX but losses are just part of the game and he's once again the top dog in the biz... "Its my job to be right. If I'm wrong I deserve to be held accountable" “We size things based on how much we think we can make versus how much we think we can lose. We’ll probably be willing to lose 5-6% of our capital in any one investment.” -Bill Ackman I mean I know so many people who are terrified of losing money and cap their positions at like 2-3% and its just a head scratcher. If you cant withstand losing 5-10% I mean why even bother with stocks? If you have a real home run on your hands and its a 2% position? Who gives a fuck. Maybe it turns into 5% lol. What a waste.

Exactly. Position sizing is the single most important facet of investing. If you don't know what you're doing, invest in small size, diversify. If you anticipate a high degree of risk, size it small. If its a slow pitch down the middle, swing for the fences. Its actually quite simple. Figuring out how to optimally structure your trades and investments(aka manage your risks) is way more important than all the numbers and crap folks waste so much time fussing over. Fundamentals dont mean shit if you're wrong about others aspects of the equation.

He s gonna be right about it, although I dont think it plays out nearly as fast as it seems he's anticipating. Its funny, Kuppy says it, and its controversial. Whereas quietly, back in the spring, Tepper said the same exact shit. What the ESG nonsense is doing to top energy producers, coupled with government regulation, is a recipe for disaster. Like Joes administration is refusing to allow new production and harassing existing production and then in response to high prices begging OPEC and Saudis to pump more LOL. Like WTF. And its not like big Oil needed another excuse to allocate capital irrationally. Its like telling big tobacco to shift towards pot and ecig and then be surprised when you get a Juul or Cronos. Which again shifts back to inflation....in the real world, gas is at multi year highs, cars and houses are expensive as fuck, grocery prices have skyrocketed...but like with covid they lie and manipulate the narrative to "transitory" for their benefit but everyone can see whats going on because its hitting their bank account.

https://www.valuewalk.com/praetorian-capital-fund-2q21-commentary/ Even if theres occasional blowups, few people can make money like he's been shown to. I'd say the same thing about folks like Bill Hwang too, or Ackman. Who cares if they blew up every now and again? I wanna see what those guys are up to because theyre generally in the right ballpark. And in Kuppys case, unlike most self consumed, entitled, "Im too important" type fund managers, he'll tell you exactly what he's doing as he'd doing it which gives you great insight to the process and the rationale. I've never liked shipping stocks, nor have I liked commodities. Surprised how everyone mentions shipping but doesn't also mention he's crushing the commodity trade this year, especially of late with Uranium. Ultimately investing is both an art and a science. Each individual has to figure out their own "user settings" and then refine their process. Part of this is always learning and being open to ideas and then evolving with the times. How many guys do you see out there buying the same stupid stocks that just dont work and haven't worked simply because its fits what the textbook tells them? Thats what you dont want to be like, rather than fearing the occasional miss or loss. Everyone loses money from time to time. Nothing to be embarrassed about or afraid of. In fact, I'd gander not being afraid of losing money is a huge advantage.

Anythings possible and I have no dog in the fight other than Ive found his instinct to be on the elite end. From a trading sense maybe on par with @SharperDingaan or @ERICOPOLY here, to at least give folks a measuring stick. Something happens, a catalyst, and inflection, boom, he's on it. As someone who trades a good bit, you want to pay attention to these things because the current market dynamic(really the dynamic present for the past decade) is that a good trend or spurt of momentum will last for a good while and give you lots of opportunities to profit from it. Largely speaking, society has gotten way too quick to write people off because "they said/think this or that". If I'm looking to make money I want to read and hear and see absolutely everything I can, take in all the different vantage points, and then process it and hope theres an actionable conclusion. Guy on the street could tell me "Hey Mr., Can I have $5 for a ride because my Uber called and said they had to go pick up someone from Hershey at the airport)...and if we're in Ohama, maybe Ive got a good lead. Maybe its bullshit. Stupid example of course but my point is that all it costs is a minute or two of my attention. In regards to what he's(Kuppy) wrote on inflation, everything IMO is spot on. There seems to be a proud public investment many folks have in the "transitory inflation" storyline....and the common theme of support for that narrative is to point out how commodity product ABC which was at X pre covid, and then went to 3 or 4 times X, has now fallen back to 2X....which is kinda bullshit but then you read another story slip out about how this sort of increase is here to stay. Or that one. Or how Costco expects freight prices to stay high... https://www.cnbc.com/2021/09/24/costco-nike-and-fedex-are-warning-theres-more-inflation-set-to-hit-consumers-as-holidays-approach.html In a conference call Thursday with analysts, Costco Chief Financial Officer Richard Galanti called freight costs “permanent inflationary items” and said those increases are combining with things that are “somewhat permanent” to drive up pressure. So at the end of the day why not listen? Who cares about the messenger although if the messenger is currently hot, take that for what its worth. But if you're trying to make money or catch a wave, you've gotten be open to everything in order to assess what makes the most sense.

Yea IDK because I'm not a big fan of following individual people and terrible and tracking the Twitterers. But in the past year of following some of his stiff he has: -called the BTC rally from 9k to 60k -then called the exact top -in between nailed the SPAC bubble top intraday His fund performance is pretty solid. Additionally he's accomplished quite a bit for a guy his age and on top of it is very down to earth and willing to engage with pretty much anyone. Overall I'd say, and please recommend others if you know of them, the single best person I know who can quickly size up a developing situation and spit out how you can make money from it....a far cry from most who just look at shit, slow as molasses, and then want to do fundamental analysis. So I dont know ones politics but I'd say its pretty irrelevant here. Personally, I have never had a problem generating actionable ideas, but if I did, his weekly idea generator newsletter is totally worth $3k annually. I dont subscribe because if it did I'd probably be like 6:1 levered which is just asking for trouble. I'd also add that anyone who bought the COVID hysteria got their shit pushed in and likely missed what may indeed have been the single greatest quick money opportunity they'll see in their lifetimes. Like you could have made 50-100% on shit like Google and Berkshire inside of a year if you weren't wrapped up in all the media nonsense.

Yea what these sons of bitches(or in some cases, just "bitches") are doing is effectively stealing from Peter Thiel, who happens to have been a critic of many of them. There is no argument that Thiel is 100% the reason for this new "rule", nor is there any doubt that his money is the target....Outrageous.

Fish in a barrel, the easiest repeated trade running for the better part of 6 months now.

Come on bro, you should wanna be like Bill Clinton.

50 more CLPR March 5s. 50 still on the bid at 3.35

Good stuff for sure guys and I appreciate the pushback. I dont think its anything that plays out overnight and as I mentioned, the accumulation part needs to be mindful of that along with the inherent volatility. Its not a big position for me and never will be. COMP I just started with at sub 1% and Z is ~3%. I'll take Z to maybe 5 or so if it gets into the 40-50 ish target range where even I can justify a lot of the valuation however from experience, these sort of things rarely get to price targets appealing to the stingier of investors and when they do you may not want to own them. The real push for me here was earlier, again having dejavu, where the evolution of the company was apparently and the long time bears who had regularly mouthed off since 2015 or so had all but disappeared. Its a pattern Ive seen all too often with certain types of special or disruptive companies and considered it a tipping point to stop being a pussy after stalking it(on the hunch of "potential" that we'd discussed above) for almost a decade. At ~30B its not small, but I recall vividly enough people whining about how egregiously overvalued and risky it was at $6B. Perhaps the iBuying is the significantly part of the story now(it is) but again, to have the optionality on the rest is what I think the real opportunity is. If it doesnt work out thats fine, not all do and as always you can only lose 100% of what you put in vs make many times that if you're right. The comp to financial brokerage biz is reasonable, although from personal experience I'd point out that folks have been trying to disrupt that for 3 decades and even in its current form there is still TONS of money to be made there. Everyone looks at the ticket charge(or for RE agent commissions) but if you've worked closely there you'll know that those are just a fraction of the equation. I mean eBay is as mature and "disrupted" as you can get from 20% years ago and they still take 12% of everything sold. So who knows. A lot of times you have to just settle for knowing you'll never have the exact roadmap for how things will evolve, so Ive found it more practical to simply look for companies that are best positioned to evolve and innovate rather than figure out how they'll do it.

So that's ibuying...OK, but thats just a small part of what I view the whole thing. For instance, the smallest ticket on my current refi, or on my purchase last month, was the appraisal. Appraisers need to be satisfactory to a lender. The average appraisal is about $500. Ive paid anywhere from $375 to $650 for one. 6.5 million homes sold last year and about 5 million used financing that required an appraisal. Given their algos already in place it wouldnt take much to move into this market and become the lowest cost provider at a relatively high margin. If that occurs, do you think any lender is ever going to waste time doing anything but clicking a button to order up an appraisal that can be generated in 15 minutes vs the current process which take 3-5 days and is likely to cost way more? Theres so many call options here its insane. Just need to be patient with an accumulation because depending upon how you choose to look at this its still arguably quite overvalued on some metrics. However I'd prefer not to be the value investor that gets in at 3000+ on AMZN or $250 on CRM, etc(just examples) because I didnt understand the early story and the valuation didnt make sense to me so instead of doing something I wallowed about it being overvalued. I'd rather lose a few % wading into a mid single digit position over time than leaving it on the table hoping to eventually get into the story once its cleared and pray to eke out 10-15% annual returns.

Covid distortion aside, theres an obvious different between buying a home and a car. And outside of the obvious one with regard to the long term desirability of the asset, I'd say the buying/selling process is much simpler for a car. I dont think cracking the home buying process will be easy, but you have the ingredients already. Again 39/40 doing a transaction go to Zillow at some point in the process. Thats all you need in terms of moat to kind of tinker with different stuff until you get it right. Imagine a world were you spot the home you want, apply through Zillow for financing, setup via the site a walkthrough tour either virtually on the spot or in version next day...where doors can be unlocked through the cloud, and then after exiting the property can submit a bid or buy it now? You wouldnt even need to charge a commission if you can automate all the bullshit title stuff. Almost all of it is nonsense that is hugely marked up. I'm doing a refi right now and these things are like 2% of the home price by themselves. Maybe charge a 2% total commission or 1% to each side. Then because you originated the mortgage yourself you get that $ too? Its a massive opportunity. I dont see anyone else having anything close to the footprint to do it. Also, on I-buying, look into it. Theyre not buying anything, theyre buying what the data is telling them is the best markets. And they offer like 10-20% below market in many case. Big difference from buying a used car 20% above MSRP.