Gregmal

It’s just a funny observation how despite pretty indisputable evidence that stocks tend to have an upward bias, there is almost always this expectation that they should be going down or are “just hanging on” by some magical force that won’t last forever.

Most of the “sticking” inflation is really just pricing power. At the supermarket specifically I always found tracking French fries, canned soup, and junk snack food the most insightful. Base price on brand name fries is $4.79 vs $2.99 pre COVID. But every week there’s a “BIG SALE!” where you can get them for…..$2.99. Frito Lays stuff? $2.99-$3.49 per bag pre COVID. Now? $4.99 normal. But every week they have rolling product that’s 2/$5. It’s all really just a game amongst capitalists.

Is that really framed in your house lol? Savage but beautiful reminder.

You can appreciate it, but in order to be a good investor it has to end up being profitable lol. That’s one of the simplest ways to judge. I had a whole list of these rockstars I used to follow from like 2010-2014 or so and after awhile you’d be shocked how many have like 70%+ miss rates. Or you find out they only made money trading fluctuations and their thesis had no merit. That’s where thinking for yourself as an individual is crucial as well.

I’m personally kind of a fan of Burry. His early stuff was awesome. I just have no clue what the obsession with him by folks is. His Twitter stuff is bizarre. Although you kinda have to question anyone who’s on a place like that. But Burry especially. I mean when you look at the stuff he buys, it’s largely highly speculative junk with a bit of a retail shareholder base that also coincidentally happens to move a good bit when it gets out that “Michael Burry” is buying. As I’ve said here before, I just don’t think much of what he does is replicable or even worth following for a half intelligent investor.

I don’t consider one dimensional investors who missed one of the most prosperous decades in history being arrogant and stubborn to be good money managers.

Most appropriate summary of Burry I’ve heard is “glass eye, not crystal ball”. He’s turned into one of the “got 1/100 right but marketed it well” dudes.

Put another way, if you make the pursuit of money or material crap your career, nothing, let alone a job will ever satisfy you. If you value your time and freedom, it’s just a cog that needs to be accounted for the same way, back in the day, hunters and gatherers would just go out and do their thing when necessary but otherwise live simply and enjoyably.

Working for UPS was just an off the cuff, half drunk Saturday night example. Bottom line is, especially for a person or family thinking of retiring with kids clearly half or more through their development course, needing for more than $100k pretax means you’re not willing to make sacrifices and if you need to live lavishly and excessively then no shit you need to work more. But if $100k is the number….there’s no reason you should need to draw substantially on your assets, let alone in excess of a reasonable appreciation rate, and if you get to the point where you do, a bullshit no responsibility part time job should more than subsidize it.

I have a ton of friends and family who are doctors or high end medical people. Don’t know why. Just the way it went. Most are younger than me and every one I gave the same advice and everyone has come back and thanked me or told me it was some of the best advice they’d ever gotten despite at the time sounding super risky(a theme in my life, finding things that are safe but seem risky and are thus mispriced like hell). The advice was simply to lever yourself hard while ascending to your mid 30-40s. Everywhere and anywhere it can be done sensibly. Because in your 20s and 30s, $20k, $50k, $100k, even $500k is gonna seem like a lot of money. But by the time it matters and you really start earning what you can reliably expect to earn doing what you do? It’s gonna be peanuts. But the cool thing is you can take these later life peanuts and grow them into entire peanut farms if you start young enough. House, stocks, whatever. Own shit. Skip the starter home crap unless it’s an eventual rental. Buy big houses you plan to raise your kids in and live in for 30 years. Take your comfortable equity allocation and double it. Worst case, as long as you stay within your expected future income range…worst case, unless you’re a moron masquerading as a top 5%er or a drug addict, the cost won’t be more than whatever you woulda wasted the money on when you have your mid life crisis…base case it speeds up retirement and freedom substantially. Best case…..don’t even worry about. It will be glorious.

But then isn’t the answer to just do the current job a few years longer and keep compounding the safest? My father is a great example that has probably influenced me in ways I don’t even fully appreciate. Made good money as a pre IPO partner at a good financial firm after doing his time at GS. He assumed 5% treasuries minimum forever based on “historical” data and retired in 2005 because his company wanted to relocate him and a couple NEOs to Louisiana to run a spin-off. Said fuck it and basically kept most of the stuff in fixed income and company stock. Company(not spin-off) got crushed in 08, and then he became one of the bitter “fuck the Fed they stole my interest” poster boys the past decade. Devastated from the “drawdown” and refused to go higher than 20% equites because of “fear of loss”. Granted, he’s definitely ok. No need to feel bad. Just became a super duper cheapskate but eats well and has enough to be comfortable. But guess what happened to the guys who went to Louisiana? Company got bought out in 2011 and all his friends and even underlings made 8 figures! In addition to the six/seven figure salaries and bonus that would have easily compensated for lower rates! So look to each their own. I’ve been stupid enough to learn from the mistakes of others and autistic enough to be comfortable doing things most people are afraid of or deem too risky. If I make a long term investment I view it as such; agnostic to what it does short term unless I wanna double dip. Real estate has been a blessing and one of the things I’ve heard over the years that’s always really resonated was from wise old @thepupil in that real estate is basically a perfect hybrid of stocks and bonds. Without it I’d be an indexer or some piker rooting for higher rates so I get more free money. I just wouldn’t take for granted being young, having a long runway and a top 5% skill set. That’s what enables you to take risk others can’t.

A family friend is actually another good example. He was a doomsdayer at heart. But he wasn’t “scared”. He was “preparing”. And every time I saw him for 5 years he was buying gold. He was buying guns. He even spent six figures building a nuke proof bunker at his country house I found out. This was from 2012-2017….

I would also say that if the spending is under control, the “fear of demise” is greatly exaggerated. My parents and a couple friends are perfects examples. They claim they aren’t “scared” but rather “prepared”. Really the two are one and the same to me if the preparedness walks and quacks like a duck. Many financially dependent folks think it’s all about freedom. I agree. But so many of these folks would also view having to get a run of the mill job as wholly unacceptable. For me and the wife, if worst case scenario is the world ends and for a short period of time, one or even both of us have to go get shitty $50k a year jobs to let the investments heal….ok! So what? Even $100k which one can do now driving for UPS, is what? Equivalent to NOI on 7 figures?

Kinda but its complicated. I still have residual business income. Have some private investments that will randomly surprise with a distribution. I have income properties. My wife has a rinky dink W2 for insurance and fun money. I focus on growing the family pile full time. The key is we basically have total discretion with our spending and when necessary could drop it to the bone. All the properties I have are underlevered. So I just dont ever really need to tap into investments and if I do its just not meaningful. Jokingly I mentioned in the other thread a few weeks ago I sold a few JOE shares to pay for Watersound Membership. If we needed a new car or had a big one off Id evaluate financing options and then make a judgment call. If I buy a new property Id probably fund some with an equity sales and most with cash pulled from other properties. But mainly the lifestyle is full funded with minimal need for withdrawal. The investment landscape really determines everything else from where we allocate to how we live. As to your last sentence, I think you and a lot of smart people really short change yourself thinking like this. Sure, its true in theory. But if you're also a fan of numbers and statistics, if that happened to YOU, given where you fall on the genetically gifted/aptitude/place in the societal bell curve.....I mean how bad would it have to be for everyone else? Other call them top 1-5% folks? All the lesser thans? Let alone the average peasant? And under what scenario would things get that bad, and overall what would the implications be for the rest of the country/world? In other words, I just dont think the system is designed to every allow for, lets say 97% of the population to be totally up a shit creek without a paddle. Call it incentives, call it a bailout, call it whatever, it just doesnt happen. So being afraid of that would kind of be like being afraid of your flight crashing or getting struck by lightning. Even if shits hits the fan, folks that fall into a certain part of the bell curve will end up fine, especially in due time.

There is also just kinda that whole “thinking like an owner” thingy. To some I guess it’s natural, to most though I’ve gandered it’s hard to be there, mentally. The drawdowns on money you don’t need aren’t really troubling because I’m enthusiastic about my ownership in great businesses growing 10/20/1000%. Last year wasn’t troublesome at all. It was peaceful and even downright boner inducing being able to buy MSG entities at sub 10x earnings and fractions of a growing NAV. Because IDK Sphere was gonna cost $8b or something dumb. Or Joe at similarly spectacular and exciting metrics because people are land deniers or wanted to make up all these crazy things that were going to happen to one years earnings(which are shaping up to be spectacular). You look at why so many people have done so well in Berkshire and outside of the obvious, and I think it’s because it draws in people who think long term, like owners. They appreciate the good and get giddy about the bad because the bad is where and when the magic happens and the long term value gets amplified. There is this feeling I get that most people have little to no real desire to own a business that trades publicly if they think it will go down 20% in the short term. They show up to a game that is almost 100% certain to be won playing it over the long haul and then on day 2 decide they’re going to guess black or red and then hedge the green zeros. Of course they convince themselves that they don’t always do this, just on exceptional occasions(I’ve over time had to catch myself with this sort thing) but then you realize that there’s always an exceptional scenario or risk in the markets, 100% of the time.

This is pretty consistent with what I feel. Bond returns are mediocre based on historical levels. With no shortage of stocks that offer a whole lot more, it’s just hard to even consider them, let alone get excited. But like the virgin nerd who starts making six figures and realizes he can now get laid, initially it’s an exciting new world. 5-7% rates are pretty much normal. We had the housing bubble on the back of these same mortgage rates, following a tech boom/burst, and you can go back even further to see the world existed under these conditions and even higher rates, actually. Over time too, I’ve found that there’s two types of investors. Ones who can not tolerate volatility and feel like world beaters avoiding drawdowns even if they fail to participate in eventual upside, and then people who just stay the course. During COVID and in 2022 really highlighted this to me. There’s two sides to the coin of “I didn’t lose much” and “I got some really great investments”. They almost always are happening at the same time. And your perspective will really shape everything in terms of your eventual fortunes. If you like something at $100 and are ok with it there, you should be elated if it’s presented at $70 or $40. Not sobbing about “most lost” that you shouldn’t have even needed if you were investing the right way it in the first place.

Put a little different….does anyone think they have any remorse at all for what they’ve done to anyone who invested in their IPO? Is there any shame or feeling of owing something to their shareholders? Or is it just business as usual?

Yea I mean it’s just frustrating. At peak in 2021 I has a LSD position in terms of shares outstanding. The macro set the tone there. It was easy and I got my target. I’ve been very tepid buying back in and have a small 6 figure position right now with a high $5s basis. Here, it’s very different for a lot of reasons. Which then fall back on… 1) we all see how much money management extracts from the company. 2) we all see the public track record. 3) we all see the complete absence of insider purchases and share buybacks. 4) we all see the continued insistence on growing the size of the company regardless of the share price 5) we all see they’ve still got that side venture shareholders receive zero benefit from. Sooo…why should we care? At what point are they embarrassed by the IPO date and price versus todays print? Do they ever do anything about it? And more importantly, is there anything at all that changes that or if I invest am I just stuck praying for a fundamental inflection that may never come?

Curious how you are viewing Clipper here? I’m torn on this because yea it’s cheap. Yea it’s got rents finally escalating through the financials. At the same time I fear it’s just a mediocre bond substitute here because the main issues just aren’t getting addressed. I don’t like management groups the just don’t care at all about their share price. I’ve gotten nothing that disproves this. I don’t care how much money they made buying stuff for themselves decades ago. You can Google CLPR chart and then select “all” and those results are embarrassingly bad. They almost certainly aren’t open to selling the company which is a must in terms of box checking for a small cap REIT. What causes something to change? Large cap REITs are basically dead money where maybe you get 10% annualized from the better ones but so what? So it’s like ok what’s the play here? Are we just praying for an optically challenged company with complacent management to rerate? At best I kinda just think it’s a decent sardine that if you’re working with a tiny account you can monetize 5-10% liquidity fluctuations and that’s it.

All this just seems like a market timing exercise and the results of market timing calls over the years generally wouldn’t be encouraging for an investor. Of course there’s periods where other stuff will do better than stocks. Bonds are no exception. The 70s is one example and there’s way more to it than just “oh inflation”. It’s not comparable to one year coming out of COVID where we had a knee jerk summer sell off derived from people trying to day trade CPI prints and guess what Jerry’s gone do. So I guess yea if you wanna be super actively managing stuff every few weeks or months then why not? But if your goal is to grow your pile over the long haul there just seems to be such a higher return on capital, and return on brainpower selectively buying quality stocks. Especially for investors getting started. I mean like can’t one only buy $10k of ibonds? Like that’s not even an allocation, why bother? Let alone actively jumping around.

Yup. The two unbreakable forces stand alone. Housing and energy. Not gonna be solved with rate hikes, only made worse by them.

I also don’t really think it’s debatable either how the CPI lags. Been over this a gazillion times in this and the bottom thread. So not coincidentally, April 2021 is when it started lapping. Why? Because the initial COVID shock and declines occurred in March and April 2020. From there, it was off to the races as far as inflation went. Influenced by supply chains, stimulus, and different places taking different approaches to COVID. Commodities, equities, housing, etc all began their ascent very clearly around spring/summer 2020 which is why it took til mid 2021 to reflect in the data, largely fueled by the low base, but nonetheless a base that perhaps masked what was going on to the idiots at the Fed who only seem to follow CPI and things that lag.

Because you have consistently limited the start points to first, only 2022. And now mid 2021. Inflation began in summer 2020. But even using your second starting point, the returns are positive during a period which many other things didn’t do well. So the argument here is essentially 1) 2022….occasionally stocks don’t do well(while ignoring some bonds but touting others…again cherry picking) or 2) there was this other 2.5 year stretch where stocks only did 7% and that’s awful but it’s been a good year in fixed income with 0-5% returns?

Right so the goal “compounding capital as fast as possible” is somewhat contradicted by only seeking “absolute returns”, especially when the absolute returns pale in comparison to readily available alternatives. Like if the objective was to compound capital fast, and one hugely accessible, diversified and liquid option does 20% and the other does 0-5%….how is that anything but a failure? Or is that when we stretch the goalposts again? Historically, stocks are what compound capital the fastest over a medium to long term period of time. There’s numerous reasons as to why and most are sustainable phenomena in places like the US. Short term, if it ain’t obvious by now, people are just guessing and only with hindsite and a conveniently picked start and end date does the crystal ball exist. This year is evidence of that.

Because this largely isn’t true and short term cherry picked datapoints can be manipulated to say pretty much whatever one wants. If we pinch the timeline in here, then discard that, then only talk this subsector of an asset class, and then discredit that leg of the rally…..I mean it’s just all a little too far fetched and unproductive. I mean bottle all this up and summarize it and it’s basically “don’t own stocks cuz occasionally there’s short term periods where they do poorly or something else in the universe does better and every once in a while you get a big decline”….I mean just up thread you’re kinda of downplaying how poorly bonds have done because “they’re up across all accounts” and the goal is absolute returns, and then a few points later it’s like “oh 6.7% over a tough two year stretch sucked compared to other things”…wouldnt the consistent logic dictate that single digit bond returns are awful because you should’ve owned the Nasdaq for 2023? So again it all just kinda comes back to this generally obvious idea that unless you are hyper focused on the short term guessing games that likely don’t have probability of desired outcome any more favorable than casino games…stocks are what you wanna own?