Gregmal

Does 50 bps over the next two years mean anything to anyone in the non WS trading world? The real economy? Total desperation move hoping to grab headlines and push back on a narrative. Calling bs.

If I was a FFH shareholder I'd be tempted to grab Prem by the ankles and shake him upside down asking repeatedly, "where's all our money" from the past decade's historic bull market.

Doesnt really matter how influential the country is IMO, as long as incremental users are added to the ecosystem. I wouldnt expect the US or a major old money establishment type regime to cede control. Imagine what kind of stimulus pickle they'd be in if we still had the gold standard or BTC type currency? How would they send poor people their stimmies? Frozen chicken packages? Gold plated coins? food vouchers funded by future tax credits? It would be hilarious. But the existing system is setup so they can retain control and influence and I agree they'll come up with something dumb, IE crypto funds terrorism or some stupid argument to ban it before they let it take over.

Trading sense wise, I actually think there's a case to be made that the worse sentiment gets the more likely $100k becomes. Sentiment just fuels the next move in the opposite direction. I mean this is still positive YTD dont forget. I already laid out my original trade, so no, not buying as theres other stuff more compelling to me here, but man this has been worth the price of admission.

Fed may try continuing to scare people out of the inflation trade, but you cant fight fate.

Its like one of those 0 gravity amusement park rides. Gets real fun when there's nothing supporting you!

Its really just the Trefalet outfit that has a big handle on control via share ownership. Otherwise there's a pretty solid record of doing the right thing with this group. I do think there is legitimacy to the concern of a stale, good ole boys club, entrenched board...but I dont care because they've been making the right moves for several years now and thats all that matter. If you go back and pull up their reports + outside analysis of the evolution and 5 year plan thats been executed since 2017-18 or whatever, its impressive.

https://www.wealthmanagement.com/multifamily/us-apartments-have-risen-top-foreign-investors-wish-lists?NL=WM-056&Issue=WM-056_20210617_WM-056_322&sfvc4enews=42&cl=article_2&utm_rid=CPG09000011488665&utm_campaign=32894&utm_medium=email&elq2=2ca6806f518c43ab80e8dd9cc74cac39&oly_enc_id=0563H6121845H6E "Currently multifamily is seen to be an extremely effective inflationary hedge, given that the leases mark to market on an annual basis. Going into what many predict will be a period of higher inflation, that is an extremely attractive investment characteristic."

The problem on the 50% decline in stocks position is that you sit on the sidelines for an entire decade waiting for an entire decade when theres plenty of easy low hanging fruit. And I am not sure its as frequent as once in a decade. Tech burst in early 2000s but quality businesses I dont think went down that much. 2008 was definitely unique, but even during covid 50% wasn't seen in most quality names. So being 50-100% in cash is IMO unequivocally dumb. There's also the fact that most of the time, those folks waste years waiting, and then when it happens are too busy screaming how they were right and its only going to get worse...rather than being opportunistic. I recall some dipshit in 2008 made the papers saying the S&P had another 20-30% to fall when it was at 700. The doomsday stuff is just a losers mentality. If something thats gone up 5 fold goes down 50%, where you really better off not buying it? A BRK B share was like $90 in 2012. Agree on the 30 yr fixed. Love em.

Yea I don't own much, and by and large its contract specific, which at least with most public companies, I am not sure is even disclosed for investors. But many times its CPI+ a few %, or the other common ones are ~10% increases every 5 years or something. One is ok and the other is not good and there's some variations in between. Was just pointing out how despite the craziness of what we are seeing today, a 20 year Chick-Fil-A or Chase NNN is currently a 3 cap asset. It makes sense lazily that a 10% inflation print should equal a 10% treasury and subsequently lets say a 12% cap rate for a good asset. But its not really that simple. What do we base 10% inflation on and come to that conclusion? I view inflation as the loss of purchasing power. But even there...where and how does this get measured? Is it CPI? What if CPI is wrong? Do investors just ignore it even though they're really predicating these rates on a faulty moniker? If CPI says 3% but its really 10...who determines the market? I mean again, everything I see looks like its at least 10% more expensive, probably even closer to 20. Local baseball stadium the other day had hiring signs up starting at $20 a hour to works the concessions. And signs at the concessions apologizing for being short staffed....So again this kind of leads me back to the idea that productivity/consumption and wage increases will really be a driver if this plays out. Which bodes really well for crude. I think if nothing else, I hope I've read wabuffos analysis largely right, at least in terms of the spigots analogy. Which makes sense. You have this kind of one time disruption and discombobulation. Its created one hell of a distortion. 10 year should probably be a good bit higher than 1. But to have this sort of hyper inflation you need more than one off stimulus making its way into the hands of the public. My expectation, which isnt worth a whole lot, is probably that we will see a good healthy sized jump in rates, and then stabilization. 2-4, maybe 5% on the 10 year type stuff.

Ok yea. Dont totally disagree. Ive been prepping for some of this stuff myself for a good bit now. But I also think the assumptions are too draconian. My analogy about the 50% decline in stocks folks wasn't meant to indicate you are saying that, as I know you're buying some stocks...but what I meant is that there's folks who get so wrapped up in such a kind of low probability event that it paralyzes them to an extent that realistically they're better off just discarding the fear as irrational. I know this because I had a German client who I had to fire because from 2013-2018 he was so negative and every 1% down day in the market got loud and obnoxious about how this was the start of the big crash. And it just got stupid and was a distraction and he has been in CDs for almost the entirety of the past decade. I think to a certain degree fearing a treasury thats currently at 1.5% going to 10 while the rest of the developed world remains between 0-1%(if not negative) is probably equally detrimental. 3% I could see. 5% I can see. While I get there are measures that claim to track this sort of stuff, what really is 10% inflation(just using a number). Year over year a pork belly or corn contract can see 10% increases. John and Jane Smith can see 10% wage growth. How does this mandate a 10% treasury? I mean again, I'm being told we're at 5-6% or whatever, which I am not sure I believe based on what my eyes are seeing, but trying to now imagine "this"(the 5-6% print and corresponding everyday prices...IE $10 2x4 and $8 12 pack of Coke) ballooning into an extended long term trend....I think the probability of that is the same as Berkshire Hathaway filing bankruptcy.... If the extreme inflation is only expected to occur for a few years, the market would price that in. Everyone always jumps to the 70s but the situations I dont think are really comparable. Right now we have a real bottleneck which is throwing prices of most everyday things out of whack. I mean theres scenarios where used cars are selling for more than the MSRPs on new ones! But I also think this pulls back and then while there is inflation, its more controlled. You can say the Fed is going to "lose control"....and thats possible. But what does that mean and how do we quantify it and what do we translate this to? There is also of course, this saying...something about not fighting the Fed...and its kind of been good advice.

How do you conclude that 10% inflation means a 10% cap rate? For instance right now people are saying theres about 5% inflation. We have a 1.45 10 year and the highest quality NNN and MF stuff trading near a 3 flat. Its been expected that year over year we see massive jumps and increases in everything simply because of how much of an outlier last year was. But you arent really saying you see consistent, 5-10% PER YEAR! inflation for a sustained stretch, are you? Let alone for so long that a 10 year fixed is in trouble? You have this as a 65% likely if I read your earlier post correctly? Im just trying to understand because I think a lot of what you're digging at is important. But I feel like it also may be getting into the category of folks who won't buy stocks because they consistently think a 50% decline is right around the corner. Perhaps a bit too extreme in terms of pessimism or assignment of odds to low probability events.

A cap rate is just a function of NOI. If you can raise rents annually to track inflation, all else should remain equal. How wouldnt you be just fine with a 5-10 year mortgage vs a 30 year in such case? In fact, your rate and also cost(as I said earlier, many 10 year mortgages are IO) would be locked in and even lower. If you unload the property before term is up, no issue there. If you refi its at a higher rate but one thats been tracked and covered by your annual NOI growth. If they keep heading higher, you continue to capture spread, and if they come back down...you can refi. There's a reason MF RE has basically been the institutional t-bill for decades. Its pretty durable in almost any situation. That said, the 10 year is currently ripping....at 1.45. I think we're closer to talking about 2 caps than we are 10s.

Most REITs/institutional RE operators dont use 30 yr mortgages. Its not the same as Joe Schmoe buying his home. Typically 10 years is the standard in CRE or with REITs, and often its 10 yr IO. Oil may not historically have a 100% correlation, but when I draw out the Venn diagram, there's more than enough overlap for me to conclude that "if this, then that", with respect to future inflation and the price of crude.

I don't think you need to be loaded with 30 year mortgages to own real estate. Multi family, Single Family, mobile home operators should all do well regardless with the ability to annually raise rents. Having long duration debt would be a strength, but its hardly necessary. Just avoid anything in a rent controlled area and you're good. I'd say 3-5% is definitely much more likely than 5-10%. The latter being pretty outrageous and really only something that occurs in unstable third world countries. Sustained inflation IMO would have to be driven by wage increases, which if that occurs there's a playbook for how to handle it. Bring it on.

+1 on Third Ave. Also, while an attention seeking baby sometimes...Jon Litt/Land & Buildings is usually pretty on point.

^ @Castanza yea thats kind of what I'm trying to get at. Will earmark this for a weekend watch. But basically, you need the most responsive yo-yo here. Its a somewhat tricky landmine to navigate and the last thing one wants is to be the next Peter Schiff who screamed about the GFC well in advance and then it turns out his investors got smoked because he invested in the wrong stuff. I see a lot of people like gold, and I dont disagree its poised to do well. However dont see how crude isnt a superior hedge in every aspect.

What would be the preference for gold vs crude? I think the commentary we've seen recently, highlighted by Tepper the other day is spot on. The environment is hostile to these companies. Demand will increase almost certainly if the factors driving inflation take place, probably even if it doesnt. Meanwhile supply is hamstrung. "He added the day Exxon Mobil Corp. added activist investors to its board was the time to buy oil stocks -- because it signaled drilling will eventually decrease over time, and with it supply." This occurred a couple weeks ago and prices arent too far off. If we want store of value, IMO it helps having a use for the store of value. You can do plenty with crude....gold on the other hand pivots back towards the "its worth what someone will pay for it" and BTC is better/equal or well you can make jewelry with it arguments which Ive always felt have merit.

Been shorting Jan 22 puts ~30-50% OTM on CLF, SLB, RIG and buying Jan 23 calls ~50-100% OTM. Also small adds to ALCO, JOE, MSGS

Why'd you leave Fidelity? I would probably have everything there if they had better margin rates. IBKR is low quality IMO but serves a purpose. Although they've seemingly gone from being the lowest cost option to now a more expensive than peers, nickel and dime operation with abysmal customer service.

Wow this of the surface seems pretty cool. I'll have to look into it but is there any real info on the beta? IE how kind of allocation would be suitable per lets say $100k? An ETF I'd imagine is fairly low, but it the fund holds options it could be pretty gnarly. Thanks in advance if anyone has answers or just wants to throw shit against a wall and guess.

While thats one take, the other side is that basically all of their other investments required a batshit crazy market/event in order to work. If we give them the benefit of the doubt for being "prudent" here, they deserve quite a bit of the other side of the coin for all the other stuff thats been done over the years. Ultimately, it seems like this was exited for what is ultimately a rather insignificant sum for FFH...which begs the question, why was it necessary at all? Meanwhile they have very meaningful, long held, turdco positions that they refuse to monetize. Which I cant help but think is another "look how smart I think I am" move by Prem....aka more of the same behaviors of the past.

shorted a few CLF 6/25 $20 puts

Hi Ray, Thanks for mentioning the VIC writeup, I cant believe I hadn't seen it before but was a good read. I dont really think there's a specific writeup I can point to. I've followed the company for years and one of the beauties of a company like this is that its pretty static. Once you familiarize yourself with the assets there's not a whole lot of upkeep you need to do on your thesis outside of fairly simple stuff like listening/reading transcripts. What lead me to conclude this is now a good IRR type investment this winter and especially this spring was several things. 1) Its failed to participate in any sort of appreciation seen by most assets/companies despite the fact that there hasn't been any value destruction here. 2) Management now has a multi year track record of solid decision making and is now starting to do IR work. 3) FL and Sun Belt RE, especially land, has gotten so hot its inevitable that it starts bleeding into this valuation. Because of 2) you can get confident that it will be capitalized on. 4) All else fails you have such a margin of safety(even still at $34 IMO) that its unlikely you lose anything but opportunity cost..which in a fickle market isnt too much of a concern to me.

Yea if you arent with the movement, your civil rights are free to be violated. Its a real shame.